Mondragon: Adapting Co-operative Structures to Meet the Demands of a Changing Environment

Abstract

The Mondrag6n co-operatives of the Basque region of northern Spain are currently adapting to changing market conditions in Europe, pursuing a strategy of scale within priority sectors. This article outlines the strategic development of the co-operatives, then juxtaposes the experience of the co-ops with four major theoretical issues arising from the economic literature on co-operatives: (1) the potential for employment restriction; (2) underinvestment; (3) inadequate market discipline of self-financed co-ops; and (4) the danger of sell-off by members. The hypothesis is advanced that the cooperative group has developed competitive advantages via institutions that were originally designed to conserve social priorities. Institutions forming the finance system of the group are examined in more detail, and current changes to the finance system and other group institutions are discussed and questions raised as to the effects of these institutional changes on economic performance.