Efficiency of Cooperatives and Investor Owned Firms Revisited

TLDR

Dairy cooperatives pursue different objectives than investor‑owned firms, yet studies often evaluate them with identical performance metrics. The study compares the performance of dairy cooperatives and investor‑owned firms across major European dairy‑producing countries. The authors employ a traditional input‑oriented efficiency analysis and two alternative methods that incorporate cooperatives’ distinct objectives. Under the input‑oriented method cooperatives lag behind IOFs, but when evaluated with objective‑aligned methods they outperform IOFs.

Abstract

Abstract The objectives of dairy processing cooperatives differ from those of investor‐owned firms (IOFs). However, the literature usually assumes the same performance measures for cooperatives vis‐a‐vis IOFs. This study compares the performance of dairy cooperatives and IOFs in major European dairy producing countries. A traditional input oriented approach is used and two alternative approaches are used to account for the differential objectives of cooperatives. Cooperatives’ performance differs across the two approaches from being outperformed by IOFs using the input oriented approach to outperforming them when using an approach that is more in line with cooperatives’ objectives.