Theoretical Framework
Cooperatives have non-commercial character (Ramanauskas, et al., 2017)
in which they are organized in order to attain the member’s collective
aspirations. While they operate business, they are guided by cooperative
principles that were drawn from the historical roots of the cooperative
movement. Such principles were provided by International Cooperative
Alliance (ICA) (1995) to serve as guidelines in order for cooperatives
to practice cooperative values such as self-help, self-responsibility,
democracy, equality, equity and solidarity. These cooperative principles
are: (1) voluntary and open membership; (2) democratic control; (3)
member economic participation; (4) autonomy and independence; (5)
education, training and information; (6) cooperation among cooperatives;
and (7) concern for community. These principles will guide the members
of cooperatives on their operation, governance and behavior. These
principles are powerful that allowed the members to work collectively to
achieve their goals which could not be attained when they are alone
(Simkhada, 2017). Although cooperatives do commercial activities, they
are geared towards attaining collective goals. In general they operate
businesses that are in-line with the needs of the members who are mostly
belonging to vulnerable groups or societies. Cooperatives would offer
goods and services that are often affordable for the members and in case
there is a surplus (i.e. profit in business perspective), this will be
given back to society and as patronage refunds or dividends for the
members. Additionally, cooperatives has the capacity to enhance their
weak members (Lecoutere, 2017); promote better economic decision-making
(Nippierd, 2002); and create equitable growth in wealth through the
patronage and cooperation of the members (Altman, 2015). Through this,
the members can improve themselves economically and further pursue their
social and political aspirations.
Cooperatives have been instrumental in transforming several economies
and societies because of their governance structure that embraces the
social and political aspects. Because of this, most countries provide
taxation privileges for cooperatives since they complement the countries
or states in terms of promoting human development in various aspects. In
terms of social aspect, the members of cooperatives can express their
feelings of ownership in an organization that cares for them which could
eventually encourage them to be involved in the cooperatives’ activities
Borgström (2013). The cooperative movement represents the individuals’
aspirations to become part of a collective action and to be secured and
better off than being alone. The members organized themselves and follow
democratic governance in order to pursue their individual and collective
interests. They operate on the basis of trust (Jensen-Auvermann, et al.,
2018; Mazzarol, et al., 2013) and members’ involvement becomes an
important norm (Nogueira, et al., 2018). Literatures provided that in
terms of social goals, cooperatives provide opportunities for
interactions among the members and their officers in order to
effectively maintain their autonomy and independence (Sumelius, et al.,
2015; Borda-Rodriguez & Vicari, 2014). They have also improved the
social benefits of their members by providing education and trainings
(Oczkowski, et al., 2013) and the opportunity to participate in meetings
and to become officers (Majurin, 2012).
Cooperatives have been considered effective avenues for members to
express their aspirations for better governance in the pursuit of a
better political state. They are self-governing institutions that are
not allowed to be influenced by external forces, nor are interfering
with state affairs. The practice of governance is held internally, where
members can express their desires for self-government. The governance of
cooperatives follows the concept of Triandis (2001) on horizontal and
vertical collectivism. Unlike other business forms whose affairs are
managed by professional managers, cooperatives highly depend on
collective action wherein the members are equally contribute resources
and efforts to pursue their goals. Horizontal collectivism in
cooperative context specifies that the members would have to work and
collectively contribute monetary interest in order for them to procure
resources that they will manage and patronize. On the other hand,
vertical collectivism is the process wherein the members would have to
elect functioning officers (e.g. BODs and management) to oversee the
business operation and enable them to reach their goals and aspirations.
The elected officers and managers are given authorities and
accountabilities wherein individuals in the cooperative have to submit
and monitor as well. Hence, cooperatives in all aspects are highly
dependent on collective action (Morris, et al., 1993) and their success
can only be realized if the members themselves are much interested in
their own cooperative (Dayanandan, 2013). In practice, the members would
have to patronize their products and services, and elect functioning
officers (Harris, et al., 1996) who emanated among them, and guarantee
their participation by paying the subscribed shares (Mikami, 2015). In
some instances, the members are not only member owners who invest
monetary interest but they can also become employees, suppliers, and/or
customers in order to support their cooperative (Ramanauskas, et al.,
2017).
The survival of the cooperative movement could be attributed to the
cooperative principles and collectivist culture that were passed on by
the early founders and members of cooperatives. They have shown that
through cooperation and promotion of their welfare, they can provide
their needs and attain better living standards. Yet, there are
organizations that were formed adopting the principles of cooperation,
they eventually failed. The failures of these cooperative actions could
have been due to lack of commitments of the cooperative actors (members
and officers) to collectivist culture. Hence, it is worthwhile to
revisit the theoretical and historical foundations of cooperatives that
emerged from collective actions.