FIRST INTERNATIONAL CONFERENCE ON HIGHER EDUCATION AND ECONOMIC REGENERATION. Cape Town, 2002

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FIRST INTERNATIONAL CONFERENCE ON HIGHER
EDUCATION AND ECONOMIC REGENERATION. Cape Town,
2002

• CO-OPERATIVE FIRMS
• AN APPROPRIATE WAY OF ENCOURAGING ENTREPRENEURIAL
  SPIRIT IN DEVELOPING COUNTRIES

Alfonso VARGAS SÁNCHEZ (Head of Management and
Marketing Department. University of Huelva, Spain)
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ENTREPRENEURSHIP FOUNDATIONS
Developing countries and economies in transition
to a capitalist system
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THE ROLE OF EDUCATION

• Global Entrepreneurship Monitor (GEM). General
  conclusions
• In the long term, the maintenance of the
  entrepreneurial activity needs a substantial
  commitment of investment in education to
  post-graduate levels.
• The development of the skills and aptitudes
  demanded to initiate a business must form a
  specific part of the whole educational and
  professional formation, at all levels.
• Without taking into account the level of
  education, emphasis should be put on developing
  the individual aptitude to recognize and to take
  advantage of opportunities.

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THE ROLE OF EDUCATION

• Global Entrepreneurship Monitor (GEM). 2001
  Report.
• South Africa
• In the past, the education system was one of the
  key issues which hindered entrepreneurship,
  actively discouraging creativity and
  independence, and damaging self-esteem.
• The general basic education is poor for a large
  proportion of the population. A lack of basic
  literacy and numeracy, as well as more technical
  skills, continue to exert a serious constraint.

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THE ROLE OF EDUCATION

• Global Entrepreneurship Monitor (GEM). 2001
  Report.
• South Africa. Policy implications
• The primary challenge is to expand the pool of
  potential entrepreneurs. The key policy lever for
  achieving this long-term project is education.
• Primary and secondary education lay the basis for
  an entrepreneurial society, both in terms of
  basic skills and entrepreneurial mindset. In
  fact, the new school curriculum has a strong
  focus on entrepreneurship and management skills.
• Tertiary education can provide valuable
  additional entrepreneurial capacity. Bear in mind
  that survival rates among start-ups are roughly
  double for tertiary-educated metropolitan
  entrepreneurs also, tertiary education increases
  the likelihood that someone will perceive good
  opportunities for starting a business.

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THE ROLE OF EDUCATION

• Global Entrepreneurship Monitor (GEM). 2001
  Report.
• Spain
• It was not until the late 1990s that an
  entrepreneurial culture really began to take
  root, especially among young adults. However,
  there is still a high level of aversion to risk,
  and there is still little acceptance of
  entrepreneurial success.
• As a consequence, traditionally, university
  education has not been focused on
  entrepreneurship.
• But...

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THE ROLE OF EDUCATION

• This is changing in Spain. For instance
• Subjects about entrepreneurship are increasingly
  more frequent in the universities study plans.
• Subjects about social economy firms, especially
  co-ops, are becoming more and more frequent as
  well, promoting among students the setting up of
  these types of companies.
• Some universities have started business
  incubators.
• In many universities students run a junior
  enterprise, as part of a pan-European network.

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THE ROLE OF SOCIAL ECONOMY

• Why co-ops?
• 1.-Democratic organizations. The most essential
  feature of co-operatives is its democratic member
  control. Therefore, the participation in these
  types of organizations is converted, not only
  into an entrepreneurs' school, but into a
  democrats' school, because there the democracy is
  put into practice. They are one more element of
  learning to consolidate the democratic values in
  a society, specially in young democracies and in
  those still in transition.

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THE ROLE OF SOCIAL ECONOMY

• Why co-ops?
• 2.-A useful tool. They are alternative companies
  to the conventional capitalist ones, which have
  arisen to give a more social response to
  employment creation, with bigger member
  participation, and to foster economic and social
  development of local and regional areas. They are
  very flexible companies, they contribute to the
  formation of a managerial spirit, and , by their
  own principles, they must invest in the education
  and training of their human capital and take
  decisions in a participative manner.

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THE ROLE OF SOCIAL ECONOMY

• Why co-ops?
• 3.-A universal phenomenon. The United Nations
  estimated in 1994 that the livelihood of nearly 3
  billion people, or half the world's population,
  was made secure by co-operative enterprises. More
  than 800 million individuals are members of
  co-operatives, which provide an estimated 100
  million jobs. In a number of countries in Africa,
  the cooperative movement has become the second
  largest employer, surpassed only by the State. In
  this region, the majority of jobs have been
  created through the activities of agricultural
  cooperatives (production, marketing, and
  processing).

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THE ROLE OF SOCIAL ECONOMY

• Why co-ops?
• 4.-An outstanding phenomenon. Examples of the
  economic significance of cooperatives in
  developing countries can be seen by the market
  shares they hold. In Burkina Faso, agricultural
  cooperatives are the largest producers of fruit
  and vegetables for the national market, and in
  Ivory Coast they are responsible for 77 of the
  cotton production. In Uruguay, cooperatives
  process 90 of the national milk production and
  export 70 of the surplus wheat production. In
  1997, the contribution of cooperatives to Gross
  Domestic Product (GDP) in the Philippines was
  16. In South Korea 40 of local agriculture was
  marketed through cooperatives...

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THE ROLE OF SOCIAL ECONOMY

• Co-ops. Potential weaknesses.
• Enough evidence exists to indicate the following
  as principal reasons for the failures of these
  companies
• Lack of member commitment.
• No professional management.
• Misinterpretation of some co-operative
  principles, or even non application of some of
  them.

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THE ROLE OF SOCIAL ECONOMY

• Co-ops. Potential strengths
• They are firms of participation.
• The double (or triple) role of member/supplier
  and/or member/consumer.
• The orientation to the person and the values of
  cooperativism.
• The democratic condition of their leaders.
• The balance among stakeholders interests
  (members, suppliers, customers, society).

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THE ROLE OF SOCIAL ECONOMY

• How does a co-operative basically differ from a
  conventional capitalist enterprise?
• Unlike a conventional capitalist enterprise, in a
  co-operative the member participates in all the
  ebbs and flows of his/her organisation physical
  (supplying the products and consuming inputs),
  financial (bringing capital and receiving his/her
  part of the results) and information-decision
  (taking part in the business side). This is why a
  co-operative society can be defined as an
  enterprise of participation. The following
  picture might compare the rules that apply in
  both types of companies.

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THE ROLE OF SOCIAL ECONOMY
PARTICIPATION CONVENTIONAL CAPITALIST SOCIETY COOPERATIVE SOCIETY
IN CAPITAL Not connected with the companys production-distribution process. The status of member is acquired by participating in the capital. Connected with the companys production-distribution process. The status of member is acquired by participating in this process.
IN PROFITS Based on the capital brought to the company. Based on the activity carried out in the company.
IN MANAGEMENT Based on the capital brought to the company (one share, one vote). Democracy (one member, one vote).
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THE ROLE OF SOCIAL ECONOMY

• The role of cooperativism in South Africa is
  weak.
• NCASA (National Co-operative Association of South
  Africa) 600 co-ops 30,000 membres.
• SACCOL (Savings and Credit Cooperative League of
  South Africa) 28 Credit Unions 12,252 members
  0.07 of penetration rate (according to the World
  Council of Credit Unions,WOCCU, 2001 Statistical
  Report).

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MEMBERS -Need. -Commitment. -Autonomy and
independence. -Credibility of/Trust in
Board of Directors.
PROFESSIONAL MANAGEMENT -Tuning with the
idiosyncrasy of cooperative formula. Management
based on -Quality. -Training and
Education. -Planification.
SUCCESS KEYS
MANAGER-MEMBERS RELATIONSHIP -Social discipline
(rules agreed by consensus procedure). -Persona
l contact, closeness to members. -Information,
transparency. -Mutual communication and
trust.
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FINAL CONCLUSIONS

• Although the market has proved to be the most
  powerful wealth generating mechanism, it leads to
  great inequalities in wealth distribution that
  sow the seeds for social conflict if they are not
  mitigated or rectified.
• An area of social and economical needs, which is
  becoming broader and broader, is met neither by
  governmental action nor by conventional
  capitalist enterprises.
• This is causing a proliferation of substitute
  organizations, such as Non-Govermental
  Organizations, Non-Profit Organizations, etc., in
  general Social Economy organizations, including
  co-ops.

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FINAL CONCLUSIONS

• There are many examples of co-operative success,
  such as Rural Development Co-operatives in Benin,
  Dairy Co-operatives in India, Agricultural
  Co-operatives in South Korea, Savings and Credit
  Co-operatives in Sri-Lanka or Utility
  Co-operatives in South America.
•  All social economy firms, co-ops and others,
  have to be viable businesses this is the only
  way to achieve their social purposes, taking into
  account that

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FINAL CONCLUSIONS

• Their aim is more to provide services to their
  members and the community than to achieve
  profits.
• Their decision-making process is democratic.
• Their distribution of profits or surpluses gives
  priority to persons (members) rather than
  capital.
• Their management is autonomous with respect to
  both the public sector and the profit-making
  private sector.

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Departamento de Dirección de Empresas y Marketing
Management and Marketing Department. University
of Huelva, Spain