Commitment, characteristics of the cooperative, and financial performance: a panel analysis with agricultural cooperatives in São Paulo

Abstract

Many papers have discussed the importance of a higher degree of commitment between a cooperative and its members, prompting empirical studies on the subject. This paper joins this current by investigating what conditions behavior of higher commitment, and what is its influence on the cooperative's financial performance. The two main contributions of this paper are: while earlier papers focused their analyses on the members' characteristics, we explore what are the most important characteristics a cooperative can possess to improve members' commitment - this approach offers different policy implications. We also use unbalanced panel data about agricultural cooperatives in São Paulo state to test our hypotheses: with this data, it is possible to apply techniques that can reduce selection bias and give results that are representative for a larger group. The results are consistent with some hypotheses suggested by the literature about the costs and benefits of collective action. The commitment behavior is positively correlated with the size of the cooperative (collection action benefits) and negatively correlated with both the number of members and the heterogeneity of members' interests (proxies for coordination costs). Unfortunately, the impact of commitment behavior on the cooperative's financial performance is inconclusive, because there are no good instrumental variables available in that data.