The Power of Networks: Integration and Financial Cooperative Performance

**:  The purpose of this paper is to perform a cross‐country survey of the level of integration of systems of financial cooperatives (FC) and its effect on measures of performance. We develop a classification scheme based on a theoretical framework that builds on published work using transaction cos...

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Bibliographic Details
Published in:Annals of public and cooperative economics 2005-09, Vol.76 (3), p.307-354
Main Authors: Desrochers, Martin, Fischer, Klaus P.
Format: Article
Language:English
Subjects:
Business economics
Co-operatives
Cooperatives
Cross-national analysis
Economic integration
Economic networks
Economic performance
Economic theory
Efficiency
Financial performance
Financial services
Integrated approach
Polls & surveys
Studies
Transaction costs
Transactional analysis
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Summary:**:  The purpose of this paper is to perform a cross‐country survey of the level of integration of systems of financial cooperatives (FC) and its effect on measures of performance. We develop a classification scheme based on a theoretical framework that builds on published work using transaction cost economics (TCE) to explain integration of large numbers of financial cooperatives into networks. We identify three critical levels of increasing integration we call respectively atomized systems, consensual networks and strategic networks. Further, we test some of the propositions that result from the theoretical framework on an international sample of financial cooperative systems. Based on this analysis we can conclude that: (i) Integration is less (more) important in developing (more developed) countries and for very small (large) financial cooperatives as a determinant of efficiency. However, integration tends to reduce volatility of efficiency and performance regardless of development. (ii) Integration appears to help control measure of managers’ expense preferences that tend to affect performance of FC. (iii) Despite high costs of running hub‐like organizations in highly integrated system, these systems economize in bounded rationality and operate at lower costs than less integrated systems.
ISSN:1370-4788
1467-8292
DOI:10.1111/j.1370-4788.2005.00281.x