The Relative Survival of Worker Cooperatives and Barriers to Their Creation

This paper argues the conjecture that worker cooperatives (WCs) are rare because of competitive disadvantages relative to conventionally-owned firms (CFs) is not supported by existing research. It surveys research on the survival and failure of WCs and CFs and estimates the nonparametric hazard and survival functions for CFs in the US. Because the rarity of WCs cannot be attributed to performance it must result from a low formation rate. This is traced to wealth and credit constraints, entrepreneurial rents, and collective action problems, but since the conversion of existing firms to WCs can overcome these factors this explanation remains incomplete.