The challenges of managing across borders in worker cooperatives: Insights from the Mondragon cooperative group

Highlights

• The case of Mondragon is analyzed to explore the challenges that worker cooperatives face when they operate and manage people across borders.

• Internationalization entails extraordinary challenges for worker cooperatives to stay faithful to their hallmark principles and values.

• No Mondragon foreign subsidiary has been converted into a co-op or has comprehensively introduced the cooperative model’s practices.

• Institutions, power relations, and co-op owner-members’ interests play a key role in constraining extension of the cooperative model overseas.

• The Mondragon corporate discourse about the promotion of cooperativism overseas is clearly dissociated from the real practices and policies.

Abstract

This article explores the challenges that worker cooperatives face when they operate and manage people across borders. Drawing on qualitative research on two Mondragon multinational co-ops based on longitudinal data and in-depth interviews, we address the dilemmas raised by the multinationalization of co-ops through the establishment of subsidiaries abroad, and show the tensions surrounding the ‘cooperativization’ of foreign subsidiaries, that is to say, the reproduction of the cooperative organizational formula and the transfer of its idiosyncratic policies and practices to foreign subsidiaries. The main finding of the research is that, behind the instrumentalization of various institutional barriers by the managerial technostructure of the parent co-ops to justify the non-cooperativization of foreign subsidiaries, lie factors stemming from headquarters-subsidiary power relations, as well as from core co-op owner-members looking to protect their own interests. Indeed, a clear dissociation has been found between the Mondragon corporate discourse about the promotion of participation and democracy overseas, and the real practices that are operational within the foreign subsidiaries. The article also draws some practical implications for multinational co-ops wishing to extend the cooperative model to their overseas subsidiaries.

Introduction

The latest cyclical crisis of the capitalist system and the growing debate around the hegemony of the investor-owned firm model have prompted renewed attention to worker cooperatives (WCs) as feasible alternative forms of organization in today’s globalized economy (Parker, Cheney, Fournier, & Land, 2014). WCs are usually depicted as small-sized member-owned businesses that operate exclusively at the domestic level (Williamson, Imbroscio, & Alperovitz, 2003), and are regarded as the highest expression of workplace democracy since decisions are taken on a ‘one member/one vote’ basis (Thompson, 2015). However, as mounting empirical evidence demonstrates (e.g., Novkovic & Sena, 2007; McMurtry & Reed, 2009; Siebel, 2016), globalization pressures have pushed many co-ops to go global through the setting-up of subsidiaries, thus turning into multinational companies (MNCs). In this context, a burgeoning literature about multinational co-ops has emerged, chiefly focused on business issues such as the degree of internationalization (Bijman, Pyykkönen, & Ollila, 2014; Heyder, Makus, & Theuvsen, 2011), strategies followed to access foreign markets (Bijman et al., 2014; Pérez-Suárez & Espasandín-Bustelo, 2014; Elo et al., 2014; Pérez-Suárez, Sánchez-Torné, & Espasandín-Bustelo, 2017), enhanced economic performance and competitiveness (Amat & Perramon, 2011; Heyder et al., 2011), or organizational and commercial innovations achieved through global expansion and networking (Juliá, Meliá, & García-Martínez, 2012; Pérez-Suárez & Espasandín-Bustelo, 2014).

By contrast, as claimed by Kasmir (2016), the scholarly literature about multinational co-ops usually lacks a deep, critical account of the contradictions raised by internationalization and tends to neglect day-to-day organizational life and employment practices in foreign subsidiaries and to marginalize workers’ experiences. This research is paramount bearing in mind that WCs are people-centered enterprises in which international expansion may entail unique challenges to stay faithful to their hallmark democratic values and worker-centric practices (Bretos & Marcuello, 2017). As noted by Flecha and Ngai (2014): 667), WCs are expected to ‘maintain cooperative values and not to negatively affect employment conditions in their newly created subsidiaries; [and] consequently, they are urged to explore alternative forms of organization that can respond to society’s economic, social, and democratic needs’. Indeed, several authors have called for exploration of the potential dilemmas involved in the multinationalization of WCs and the tensions surrounding reproduction of the cooperative model and its idiosyncratic practices in foreign subsidiaries (Bretos & Marcuello, 2017; Carruthers, Crowell, & Novkovic, 2009; Cheney, Santa Cruz, Peredo, & Nazareno, 2014).

In view of the above discussion, our research aims to shed light on the challenges that WCs face when they operate and manage people across national and cultural boundaries. Drawing on a qualitative study of two multinational co-ops belonging to the well-known Mondragon Cooperative Corporation (MCC), we examine the multinationalization process of these WCs, the dynamics of central control and subsidiary autonomy, and reproduction of the cooperative formula and transfer of its characteristic human resource (HR) practices to foreign subsidiaries. Our findings reveal that multinationalization can lead to the formation of a global labor hierarchy, in which the interests of the co-op members in the headquarters (HQ) prevail over those of an international workforce that is deprived of cooperative membership rights and benefits, and where key business decisions over the fate of overseas factories are centralized in the co-op HQ. What is more, we found evidence of a clear dissociation between the MCC managerial discourse about extension of participation and democracy overseas, on the one hand, and the real decisions and practices that are implemented within the foreign subsidiaries, on the other. In fact, our research illustrates how institutional constraints and issues of power and interests impede not only the conversion of foreign plants into WCs, but also promotion of substantial employee participation, wage solidarity, job security, and other HR practices associated with the cooperative model.

Following this introduction, the next section provides a brief review of the literature about internationalization and human resource management in MNCs. The third section details the research methodology. The fourth reports on the key empirical findings. The final section highlights the main conclusions of the research and draws some practical implications for WCs in the dissemination of cooperative values and practices in their subsidiaries.