Does a Democratic Management Model Enhance Performance through Market Orientation? Empirical Evidence from the Mondragon Industrial Group

Abstract

A management model is a set of choices made by a firm’s leadership regarding how objectives are defined, efforts are motivated, activities are coordinated and resources allocated, in short, regarding how the company will be run. Just as other types of businesses do, cooperatives need to create sustainable competitive advantages by adopting market-oriented management approaches. Mondragon Corporation achieves this in an alternative way relative to the conventional organizational and governance model, combining commitments to democratic principles, solidarity and competitiveness. Inspired by changes in the expectations of worker-members, new technological capabilities and the strategies of new competitors, Mondragon Corporation has designed a distinctive management model that can itself be a key driver of its competitiveness. The research presented here is focused on market orientation (MO), its relationships with a set of internal factors found in Mondragon cooperative enterprises, and their subsequent impact on business performance. Empirical results suggest that (1) Mondragon’s management model increases organizational commitment, facilitating the adoption of MO and (2) a positive impact of MO on business performance. Practical and research implications are discussed.