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State Formation, Ideological Competition, and the Ecology of Israeli Workers' Cooperatives, 1920-1992 - Statistical Data Included

Administrative Science Quarterly, March, 2000 by Paul Ingram, Tal Simons

We investigate the effect of community-wide political and ideological interests on the failure rate of Israeli workers' cooperatives. Political order may be provided by the state or through membership in a federation. Independently, both conditions should reduce organizational failure, but when they coexist, the influence of the state should dominate due to its comparative advantages as a supplier of order. Organizations that represent rival ideologies cause ideological competition, which should increase failure, while organizations that represent shared ideologies cause ideological mutualism, which should decrease failure. The context of Israeli workers' cooperatives provides a natural laboratory for testing these ideas, as it spans the formation of the Israeli state. It also includes a powerful federation, the Histadrut, to which many cooperatives belonged, as well as significant populations of organizations representing both capitalist and socialist ideologies. The analysis supports all of the above argume nts, indicating the relevance of interdependence, broadly defined, for the evolution of organizational populations. [*]

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Interdependence between organizational populations is an understudied topic (Astley, 1985; Baum, 1996; Hunt and Aldrich, 1998). What research there is has tended to focus on economic and technological interdependencies (e.g., Barnett, 1990; Carroll and Swaminathan, 1992; Hunt and Aldrich, 1998), to the exclusion of political and ideological ones (Carroll, Delacroix, and Goodstein, 1990). Yet both political structures and ideologies can have dramatic effects on organizational outcomes. These effects are illustrated throughout history, for example, by the marked economic improvements that accompanied the reordering of power between the Parliament and the king in Englands Glorious Revolution of 1689. Those changes have been attributed both to efforts to build a more economically effective structure of state power (North and Weingast, 1989) and to religious rivalry (Carruthers, 1990). Contemporary illustrations are also available, such as the differences in organizational behavior and performance that result from changes in and variance among political and ideological regimes in the transitioning economies of Eastern Europe (Stark and Bruszt, 1998).

The state, and federations of organizations that perform some of the same political functions, plays an important role in generating the ordered institutional framework that is necessary for organizations to flourish. Exchanges with the environment that organizations rely on are facilitated by an institutional framework that improves the efficiency and surety of transactions, generally speaking, order, and such a framework can be provided by the state or a federation. When a state and a federation compete to provide order, however, the effectiveness of the federation will be undermined.

Interdependence on the ideological dimension is also important. Other organizational populations can have an effect on the failure rate of a focal population as a function of the similarity or dissimilarity of their dominant ideologies. An ideology is a set of beliefs about how the social world operates, including ideas about what outcomes are desirable and how they best can be achieved. Just as organizations are used by participants to pursue economic goals, they are also used to pursue ideological goals. One way an organization can pursue its ideological goals is to discourage organizations that represent rival ideologies, suggesting that failure may increase as a function of the growth of organizational populations with rival ideologies.

In this paper, we investigate how political and ideological interdependencies affect the failure rate of Israeli workers' cooperatives. [1] The context of our analysis, spanning the period of state creation in Israel, amounts to a natural laboratory for examining the effect of state and federation on organizational stability. We can compare the failure rates of coops that experienced ineffective and effective institutional control provided by the state, the federation, or both. Building on past accounts that commercial banks generate ideological competition for cooperatives, we examine the effect of the growth of the bank population in Israel on coop failure. We also examine the mutualistic effect of the growth of populations that share the focal population's ideology. These populations can pursue their ideologies by buoying organizations of the focal population so that as they grow, the failure rate of the focal population will decrease. In the case of the coops, we look to credit cooperatives and to the kib butzim as sources of this ideological mutualism.

INTERDEPENDENCE AND COOP FAILURES

Workers' Cooperatives in Israel

Workers' cooperatives are enterprises that engage in production, transportation, and service and that are based on utopian-socialist (from now on, socialist) ideology. In Israel, coops historically have accounted for between 1 and 2 percent of the nonagricultural workforce, a figure second only to Italy in the Western world (Russell, 1995). Israeli coops include or have included a number of organizations of great economic, cultural, and political significance, such as the dominant bus cooperatives, Egged and Dan, the influential national newspaper, Ha'Aretz, the Israeli Opera, the national theater company, Habima, and distinguished schools like Tichon Chadash. Coops in Israel are part of a broad cooperative sector that also includes credit, housing, and consumer cooperatives and the famous cooperative agricultural settlements, kibbutzim and moshavim.

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State Formation, Ideological Competition, and the Ecology of Israeli Workers' Cooperatives, 1920-1992 - Statistical Data Included

Administrative Science Quarterly, March, 2000 by Paul Ingram, Tal Simons

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