Efficiency in Employee-Owned Enterprises:An Econometric Case Study of Mondragon

We provide the first econometric study of efficiency for a member of the Mondragon group ofworker cooperatives. Eroski is a retail distribution chain and, most unusually, there are twodistinct types of hypermarkets: (i) cooperatives with significant employee ownership andvoice; and (ii) GESPAs with modest employee ownership and limited voice. Forsupermarkets the chain includes conventional firms with no employee ownership as well. Ourkey data are a panel of monthly observations from February 2006 through May 2008, a totalof 9,800 observations for supermarkets and 2,150 for hypermarkets. By estimating firstdifference models we find that hypermarket stores with cooperative ownership grow salessignificantly faster than GESPA stores. For supermarkets overall we find no significantdifference in performance among the three types of stores. However, for a particular segmentof the supermarket called SUPERMARKET CITY (a subgroup of small supermarkets forwhich having “better customer service” employees is particularly important), cooperatives arefound to outperform conventional stores. To investigate mechanisms that help explain whycooperatives are better performers we provide additional evidence that takes account of therole of the more extensive opportunities for employee involvement and training, and strongereconomic incentives that exist in cooperatives. Finally, while cooperative members are betterpaid than their peers in comparable firms, individual-level data also show that job satisfactionis actually lower for workers in cooperatives than for GESPA workers. Though this may be asimple reflection of high worker expectation in cooperatives, cooperatives may well be indeeda “high-stress work system.” The overall assessment of cooperatives will need to benuanced....