Cooperatives have been found to be more resilient than conventional businesses, on average, according to a growing body of evidence from studies conducted in the United States and elsewhere. These models go beyond just collective ownership of property and aim to foster community self-reliance, community-led development, and the redistribution of power from exploitative systems.
Survival of Worker Cooperatives Compared to Conventional Businesses
There are a number of reasons cooperatives are more resilient than conventional businesses. A few are:
- profit is not their primary objective so they can remain flexible with economic turbulence,
- worker-owners are more committed to their workplaces than traditional employees, and
- worker co-ops have a productivity advantage over other businesses.
- Worker cooperatives were less likely to close down than regular firms in the countries studied.
- Both worker cooperatives and regular firms have a harder time in the beginning, but worker cooperatives tend to do better after 2 or 3 years, while regular firms struggle most in their first year.
- Early survival and median lifespan of WCs meet or exceed that of CFs
- WCs appear to have comparable long-term survival rates to CFs
Converting to a Worker Cooperative
Another study in France showed when regular businesses became worker cooperatives, they had a high chance of staying open for three years – between 80-90%! This is much better than regular businesses in France, which only had a 66% chance of staying open for three years. Even when worker cooperatives were started from scratch, they still had a higher chance of staying open for five years than regular businesses in France – between 61-82% compared to just 50%.
Resilience of employee-owned companies
Co-ops increase the resilience of BIPOC communities
We know that the current system is not working for all communities. What is needed is a model that changes the paradigm, a future of work that transforms industries from exploitative into those that foster empowerment, are more resilient, and cultivate racial equity. In marginalized communities, co-ops offer opportunities for economic self-sufficiency, as members collectively own and manage enterprises, ensuring that profits benefit the community rather than external shareholders. A report on Latinx Co-op Power says, “there is power in Latinx people using the cooperative model to create stronger, more vibrant economies and communities.”
Employee Stock Ownership Plan (ESOP)
The most notable (and studied) form of employee ownership in the United States is the Employee Stock Ownership Plan (ESOP). A 2005 study found that US businesses that were 100% employee-owned were one third as likely to fail, compared to publicly traded companies. Studies also show that employee-owned companies are more productive and have less employee turnover.
ESOPs should be distinguished from worker co-ops, however: while ESOPs allow employees to share in company profits, they usually do not convey 100% ownership, nor the democratic control of the business that characterize worker co-ops. But 30-40% of the 12,000 ESOP companies in the US are 100% worker-owned, and their success rate shows the general success of employee ownership. Additionally, the tax incentives that have encouraged employers to offer ESOPs are available for cooperative conversions as well.
Global Studies of Cooperative Resilience
Canadian Cooperative Survival Rates:
In a 2011 study conducted in British Columbia, Canada, the five-year survival rate of cooperatives between 2000 and 2010 was an impressive 66.6%, with 100 out of 150 cooperatives sustaining themselves. This contrasts sharply with the 43% and 39% five-year survival rates reported for conventional Canadian businesses in 1984 and 1993, respectively.
Alberta Cooperative Resilience:
Research from the BC-Alberta Social Economy Research Alliance revealed that Alberta cooperatives established in 2005 and 2006 exhibited a remarkable three-year survival rate of 81.5%. In contrast, conventional businesses in the province reported a significantly lower survival rate of 48% during the same period.
Quebec’s Cooperative Survival Rates:
A 2008 study in Quebec emphasized the resilience of cooperatives, reporting a five-year survival rate of 62% and a ten-year survival rate of 44%. In comparison, other businesses in Quebec faced lower survival rates, with 35% and 20% for the respective time frames.
European Perspective – CECOP- CICOPA Study:
The European Confederation of Workers’ Cooperatives, Social Cooperatives, and Social and Participative Enterprises (CECOP- CICOPA) conducted a comprehensive study in 2012. The findings indicated that worker cooperatives and social cooperatives in Spain and France displayed greater resilience than conventional enterprises during the economic crisis. Moreover, Italian cooperatives exhibited a lower mortality rate and incidence of bankruptcy when compared to their conventional counterparts.
German Cooperative Insolvency Rates:
In Germany, a 2005 study revealed a striking difference in insolvency rates between cooperatives and conventional businesses. While 1% of German businesses were declared insolvent, cooperatives faced a significantly lower statistic of less than 0.1%, underscoring the remarkable stability of the cooperative model in the face of economic challenges.
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