Innovation and Worker-Ownership

Yesterday I published a post about the new book, Jackson Rising, edited by Kali Akuno and Ajamu Nangwaya, and while I was researching Nangwaya to see if I could find his homepage, I stumbled across a short article he wrote about “Labor Entrepreneurship” that discusses some of the central themes of this blog, so I thought I would share it here.

Nangwaya’s article examines the role of innovation in the cooperative economy. One of the principal arguments in favor of capitalism is that it is an exceptionally innovative economic system. In a capitalist economy, you can make money by selling solutions to problems, so entrepreneurs have a strong profit motive to continually innovate, and in general, this is a clear social good. So if it can be shown that worker-ownership is not as innovative an economic system as capitalism, then that would be a fairly strong argument against expanding the cooperative sector of the economy.

So do worker-owners innovate? Is entrepreneurship more common in a capitalist economy, or are there ways to promote entrepreneurship in worker-owned firms?

As we saw earlier, there is some evidence that in times of economic crisis, cooperatives may be less likely than capitalist firms to invest in research and development. And in his article, Nangwaya cites a 1999 think-piece by the economist, Andrew Hindmoor, who argues that most of the Mondragon cooperatives’ success is based on copying innovations from capitalist firms, that Mondragon is “free riding off capitalism” in this respect:

If it is to be argued that an economic system based upon the use of co-operatives will be as efficient as capitalism then it must be shown that they are capable of the kind of innovation that has underpinned economic growth in capitalist countries. Yet this is precisely what the Mondragon example does not show. (221)

While Hindmoor doesn’t produce much data in his paper to back up his claim that Mondragon is not as innovative as similar capitalist conglomerates, I really like the fact that Nangwaya nonetheless confronts the question of entrepreneurship in worker-owned firms head-on, rather than waving it away. While Nangwaya doesn’t agree that entrepreneurship is only for capitalists, he does acknowledge that fostering innovation in worker-owned firms is critical for the success of the cooperative model:

First: worker cooperatives must develop a workplace culture that emphasizes innovation, creativity, product or market leadership, competitiveness, and risk-taking. I look at the obscene development of entities such as Trader Joe, United Naturals, and Whole Foods, and view these capitalist companies as representing the failure of cooperatives (the consumer and worker forms) to be entrepreneurial. Cooperatives and collectives created and grew the natural foods market from the 1960s to the 1990s, but today many of them are shaking in their boots from the competitive pressure of these large natural food companies. Cooperatives should have anticipated changes in consumers’ expectation about their shopping experience, and grew to a size that would have been a barrier to entry by non-cooperative firms.

It’s a great short article. You can read the whole thing here.

Ajamu Nangwaya 2004 Is Entrepreneurship Intrinsically Capitalist? Why We Need Labor EntrepreneurshipGrassroots Economic Organizing Newsletter Vol 1., issue 66.

Hindmoor, Andrew (1999). Free Riding off Capitalism: Entrepreneurship and the Mondragon ExperimentBritish Journal of Political Science, 29(1), 217-224.

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