MONDRAGON - ADAPTING COOPERATIVE STRUCTURES TO MEET THE DEMANDS OF A CHANGING ENVIRONMENT

The Mondragon co-operatives of the Basque region of northern Spain are currently adapting to changing market conditions in Europe, pursuing a strategy of scale within priority sectors. This article outlines the strategic development of the co-operatives, then juxtaposes the exper ience of the co-ops with four major theoretical issues arising from th e economic literature on co-operatives: (1) the potential for employme nt restriction; (2) underinvestment; (3) inadequate market discipline of self-financed co-ops; and (4) the danger of sell-off by members. Th e hypothesis is advanced that the co-operative group has developed com petitive advantages via institutions that were originally designed to conserve social priorities. Institutions forming the finance system of the group are examined in more detail, and current changes to the fin ance system and other group institutions are discussed and questions r aised as to the effects of these institutional changes on economic per formance.