Transcript Non-agricultural Cooperatives in Rural Development

Using Cooperatives to
Create Rural Development
UWCC Brown Bag Seminar
September 25, 2003
Kim Zeuli
UWCC
“Cooperatives are a valuable tool for
rural community development.”
Why?
Economic impacts:
Job creation
Investor returns
Provision of goods and services
Correction of market failure
Social impacts
Self-help vehicle
Are they really a tool?
In rural areas, we mostly see unintentional
or passive community development.
Vast majority of co-ops are agriculture.
Do cooperatives ever act as the driving
force behind rural community development;
i.e., intentionally focus on development?
Why would they?
There is a need.
Vanishing Main Street stores
Increasing non-farming population
Decreasing acceptance of manufacturing plants
Rural development is still the ugly step-child of
farm policy
Existing studies
The relationship between cooperatives and
communities is a neglected research issue.
Most studies focus on impacts of agricultural
cooperatives.
Non-agricultural cooperatives treated mostly
anecdotally (especially in the US).
A few unique cases (Mondragon, Evangeline,
etc.) treated largely as unique cases.
Theory
Fulton and Ketilson (1992) provide some
theory to explain cooperative behavior in
communities.
Wilkinson and Quarter (1996) describe
theory of co-op/community development
process.
Classic paradigm: cooperatives are either
unifunctional or multifunctional
Methodology
Objectives: (a) identify non-ag. cooperatives that
play an intentional role in rural development; and
(b) identify challenges/factors for success.
Team:
Myself
David Freshwater, University of Kentucky
Ron Shaffer, UW—Madison
David Barkley, Clemson University
Deb Markley, Policy Research Group, N. Carolina
Methodology
Conducted case studies of 14 cooperative
organizations across the US in 2001-2002.
Site visits
Interviews with co-op managers, board
members, and key community individuals.
Case study criteria:
Location (different regions in US)
Innovation (non-agricultural, non-service sector)
Success
Results—Framework
Two cooperative entry points into community
development:
1. Unintentional
a) Business related
b) Structure related
2. Intentional
a) Extrinsic
Planned and Reactive Investments
b) Inherent
c) Community cooperatives
Extrinsic Community Development
Flathead Electric Cooperative, Montana
(Evergreen Rail Industrial Park)
Pee Dee Electric Cooperative, South Carolina
(Pee Dee Electricom)
Central Iowa Power Cooperative, Iowa
(Iowa Capital Corporation)
Rural Electric Cooperative, Oklahoma
(Country Living Homes)
Flathead and Pee Dee
Co-ops interested in developing industrial
parks for business recruitment.
Created subsidiary development
corporations.
Given permission by city/county
governments because of their strong ties to
community, “pure” motives.
Partner with university/community colleges
for business recruitment.
Central Iowa Power
Operates a comprehensive economic
development program: recruitment, land
development and construction.
Partnered with another power co-op and
state government to create venture capital
firm (ICC).
Bought out partners because of conflicting
objectives.
Central Iowa Power
Manages ICC to maximize internal rate of
return, not to maximize development.
Uses returns to cover losses at parent co-op.
Management of ICC would like to use
returns for growth, so conflict with co-op.
Rural Electric
Created housing construction company (CLH) to
increase business attraction (affordable housing in
short supply).
Initially developed CLH with 7 other co-ops, but
abandoned group effort.
Other co-ops were driven by membership
concerns regarding the investment (their capital).
Also changed focus to high-end, custom homes
(more profitable market). Successful.
Extrinsic—Reactive Investments
Northern Electric Cooperative, Montana
Purchased Granrud’s Lefse Shack in 1997
No other local buyer
27 jobs
Profitable
Inherent Community Development
The North Coast Co-op, California
A full service grocery store with strong
community commitment
Farmers
Community residents
Rural Wisconsin Health Cooperative
Provides services to member hospitals and
promotes rural health care at state and national
level.
Community Cooperatives
Garrett Rural Information Cooperative,
Maryland
Internet service provider created by local
community college for students and to
attract “virtual” employees from DC area
Struggles with member commitment and
advances in technology (capital).
Community Cooperatives
Foodworks Culinary Center, California
A kitchen incubator created by community
economic development corporation to
capture comparative advantage
Failed as co-op.
Findings
Community support is key
Co-op may have advantages
If entering a competitive area, may not
Not necessarily automatic
Finding support within cooperative can be difficult
Conservative decisions about handling member equity
Diverse memberships may not share support
Members may want return from investment (especially
if not community residents)
Findings
Community cooperatives are great examples
of self-help community development.
Top down initiatives hard to sustain.
Individual interests tend to overwhelm
community interest.
Need to be innovative and adaptive
Can be constrained by co-op structure
Need knowledge about business taking over
(unless leaving it alone).
Conclusion
Co-op model still unknown; new
opportunities for growth in rural areas.
Many practical reasons why co-ops may not
pursue community development objectives
Relationship between cooperatives and
communities is complex—
interdependencies.