1. 1 FIRST INTERNATIONAL CONFERENCE ON HIGHER EDUCATION AND ECONOMIC REGENERATION. Cape Town, 2002 CO-OPERATIVE FIRMS: AN APPROPRIATE WAY OF ENCOURAGING ENTREPRENEURIAL SPIRIT IN DEVELOPING COUNTRIES Alfonso VARGAS SÁNCHEZ (Head of Management and Marketing Department. University of Huelva, Spain)

2. 2 ENTREPRENEURSHIP FOUNDATIONS Education and Training Creation of a fostering environment for setting up new businesses Higher Education (University) Social Economy (Co-ops) ECONOMIC REGENERATION Developing countries and economies in transition to a capitalist system

3. 3 THE ROLE OF EDUCATION Global Entrepreneurship Monitor (GEM). General conclusions: In the long term, the maintenance of the entrepreneurial activity needs a substantial commitment of investment in education to post-graduate levels. In the long term, the maintenance of the entrepreneurial activity needs a substantial commitment of investment in education to post-graduate levels. The development of the skills and aptitudes demanded to initiate a business must form a specific part of the whole educational and professional formation, at all levels. The development of the skills and aptitudes demanded to initiate a business must form a specific part of the whole educational and professional formation, at all levels. Without taking into account the level of education, emphasis should be put on developing the individual aptitude to recognize and to take advantage of opportunities. Without taking into account the level of education, emphasis should be put on developing the individual aptitude to recognize and to take advantage of opportunities.

4. 4 THE ROLE OF EDUCATION Global Entrepreneurship Monitor (GEM). 2001 Report. South Africa: In the past, the education system was one of the key issues which hindered entrepreneurship, actively discouraging creativity and independence, and damaging self-esteem. In the past, the education system was one of the key issues which hindered entrepreneurship, actively discouraging creativity and independence, and damaging self-esteem. The general basic education is poor for a large proportion of the population. A lack of basic literacy and numeracy, as well as more technical skills, continue to exert a serious constraint. The general basic education is poor for a large proportion of the population. A lack of basic literacy and numeracy, as well as more technical skills, continue to exert a serious constraint.

5. 5 THE ROLE OF EDUCATION Global Entrepreneurship Monitor (GEM). 2001 Report. South Africa. Policy implications: The primary challenge is to expand the pool of potential entrepreneurs. The key policy lever for achieving this long-term project is education. The primary challenge is to expand the pool of potential entrepreneurs. The key policy lever for achieving this long-term project is education. Primary and secondary education lay the basis for an entrepreneurial society, both in terms of basic skills and entrepreneurial mindset. In fact, the new school curriculum has a strong focus on entrepreneurship and management skills. Primary and secondary education lay the basis for an entrepreneurial society, both in terms of basic skills and entrepreneurial mindset. In fact, the new school curriculum has a strong focus on entrepreneurship and management skills. Tertiary education can provide valuable additional entrepreneurial capacity. Bear in mind that survival rates among start-ups are roughly double for tertiary-educated metropolitan entrepreneurs; also, tertiary education increases the likelihood that someone will perceive good opportunities for starting a business. Tertiary education can provide valuable additional entrepreneurial capacity. Bear in mind that survival rates among start-ups are roughly double for tertiary-educated metropolitan entrepreneurs; also, tertiary education increases the likelihood that someone will perceive good opportunities for starting a business.

6. 6 THE ROLE OF EDUCATION Global Entrepreneurship Monitor (GEM). 2001 Report. Spain: It was not until the late 1990s that an entrepreneurial culture really began to take root, especially among young adults. However, there is still a high level of aversion to risk, and there is still little acceptance of entrepreneurial success. It was not until the late 1990s that an entrepreneurial culture really began to take root, especially among young adults. However, there is still a high level of aversion to risk, and there is still little acceptance of entrepreneurial success. As a consequence, traditionally, university education has not been focused on entrepreneurship. As a consequence, traditionally, university education has not been focused on entrepreneurship.But...

7. 7 THE ROLE OF EDUCATION This is changing in Spain. For instance: Subjects about entrepreneurship are increasingly more frequent in the universities’ study plans. Subjects about entrepreneurship are increasingly more frequent in the universities’ study plans. Subjects about social economy firms, especially co-ops, are becoming more and more frequent as well, promoting among students the setting up of these types of companies. Subjects about social economy firms, especially co-ops, are becoming more and more frequent as well, promoting among students the setting up of these types of companies. Some universities have started business incubators. Some universities have started business incubators. In many universities students run a “junior enterprise”, as part of a pan-European network. In many universities students run a “junior enterprise”, as part of a pan-European network.

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9. 9 THE ROLE OF SOCIAL ECONOMY Why co-ops? 1.-Democratic organizations. The most essential feature of co-operatives is its democratic member control. Therefore, the participation in these types of organizations is converted, not only into an entrepreneurs' school, but into a democrats' school, because there the democracy is put into practice. They are one more element of learning to consolidate the democratic values in a society, specially in young democracies and in those still in transition. 1.-Democratic organizations. The most essential feature of co-operatives is its democratic member control. Therefore, the participation in these types of organizations is converted, not only into an entrepreneurs' school, but into a democrats' school, because there the democracy is put into practice. They are one more element of learning to consolidate the democratic values in a society, specially in young democracies and in those still in transition.

10. 10 THE ROLE OF SOCIAL ECONOMY Why co-ops? 2.-A useful tool. They are alternative companies to the conventional capitalist ones, which have arisen to give a more social response to employment creation, with bigger member participation, and to foster economic and social development of local and regional areas. They are very flexible companies, they contribute to the formation of a managerial spirit, and, by their own principles, they must invest in the education and training of their human capital and take decisions in a participative manner. 2.-A useful tool. They are alternative companies to the conventional capitalist ones, which have arisen to give a more social response to employment creation, with bigger member participation, and to foster economic and social development of local and regional areas. They are very flexible companies, they contribute to the formation of a managerial spirit, and, by their own principles, they must invest in the education and training of their human capital and take decisions in a participative manner.

11. 11 THE ROLE OF SOCIAL ECONOMY Why co-ops? 3.-A universal phenomenon. The United Nations estimated in 1994 that the livelihood of nearly 3 billion people, or half the world's population, was made secure by co-operative enterprises. More than 800 million individuals are members of co-operatives, which provide an estimated 100 million jobs. In a number of countries in Africa, the cooperative movement has become the second largest employer, surpassed only by the State. In this region, the majority of jobs have been created through the activities of agricultural cooperatives (production, marketing, and processing). 3.-A universal phenomenon. The United Nations estimated in 1994 that the livelihood of nearly 3 billion people, or half the world's population, was made secure by co-operative enterprises. More than 800 million individuals are members of co-operatives, which provide an estimated 100 million jobs. In a number of countries in Africa, the cooperative movement has become the second largest employer, surpassed only by the State. In this region, the majority of jobs have been created through the activities of agricultural cooperatives (production, marketing, and processing).

12. 12 THE ROLE OF SOCIAL ECONOMY Why co-ops? 4.-An outstanding phenomenon. Examples of the economic significance of cooperatives in developing countries can be seen by the market shares they hold. In Burkina Faso, agricultural cooperatives are the largest producers of fruit and vegetables for the national market, and in Ivory Coast they are responsible for 77% of the cotton production. In Uruguay, cooperatives process 90% of the national milk production and export 70% of the surplus wheat production. In 1997, the contribution of cooperatives to Gross Domestic Product (GDP) in the Philippines was 16%. In South Korea 40% of local agriculture was marketed through cooperatives... 4.-An outstanding phenomenon. Examples of the economic significance of cooperatives in developing countries can be seen by the market shares they hold. In Burkina Faso, agricultural cooperatives are the largest producers of fruit and vegetables for the national market, and in Ivory Coast they are responsible for 77% of the cotton production. In Uruguay, cooperatives process 90% of the national milk production and export 70% of the surplus wheat production. In 1997, the contribution of cooperatives to Gross Domestic Product (GDP) in the Philippines was 16%. In South Korea 40% of local agriculture was marketed through cooperatives...

13. 13 THE ROLE OF SOCIAL ECONOMY Co-ops. Potential weaknesses. Enough evidence exists to indicate the following as principal reasons for the failures of these companies: Enough evidence exists to indicate the following as principal reasons for the failures of these companies: Lack of member commitment. Lack of member commitment. No professional management. No professional management. Misinterpretation of some co-operative principles, or even non application of some of them. Misinterpretation of some co-operative principles, or even non application of some of them.

14. 14 THE ROLE OF SOCIAL ECONOMY Co-ops. Potential strengths: They are firms of participation. They are firms of participation. The double (or triple) role of member/supplier and/or member/consumer. The double (or triple) role of member/supplier and/or member/consumer. The orientation to the person and the values of cooperativism. The orientation to the person and the values of cooperativism. The democratic condition of their leaders. The democratic condition of their leaders. The balance among stakeholders’ interests (members, suppliers, customers, society). The balance among stakeholders’ interests (members, suppliers, customers, society).

15. 15 THE ROLE OF SOCIAL ECONOMY How does a co-operative basically differ from a conventional capitalist enterprise? Unlike a conventional capitalist enterprise, in a co-operative the member participates in all the ebbs and flows of his/her organisation: physical (supplying the products and consuming inputs), financial (bringing capital and receiving his/her part of the results) and information- decision (taking part in the business side). This is why a co-operative society can be defined as an enterprise of participation. The following picture might compare the rules that apply in both types of companies.

16. 16 THE ROLE OF SOCIAL ECONOMY PARTICIPATION CONVENTIONAL CAPITALIST SOCIETY COOPERATIVESOCIETY IN CAPITAL Not connected with the company ’ s production-distribution process. The status of member is acquired by participating in the capital. Connected with the company ’ s production- distribution process. The status of member is acquired by participating in this process. IN PROFITS Based on the capital brought to the company. Based on the activity carried out in the company. IN MANAGEMENT Based on the capital brought to the company (one share, one vote). Democracy (one member, one vote).

17. 17 THE ROLE OF SOCIAL ECONOMY The role of cooperativism in South Africa is weak. The role of cooperativism in South Africa is weak. NCASA (National Co-operative Association of South Africa): 600 co-ops; 30,000 membres. NCASA (National Co-operative Association of South Africa): 600 co-ops; 30,000 membres. SACCOL (Savings and Credit Cooperative League of South Africa): 28 Credit Unions; 12,252 members; 0.07% of penetration rate (according to the World Council of Credit Unions,WOCCU, 2001 Statistical Report). SACCOL (Savings and Credit Cooperative League of South Africa): 28 Credit Unions; 12,252 members; 0.07% of penetration rate (according to the World Council of Credit Unions,WOCCU, 2001 Statistical Report).

18. 18 MEMBERS -Need. -Commitment. -Autonomy and independence. -Credibility of/Trust in Board of Directors. PROFESSIONAL MANAGEMENT -Tuning with the idiosyncrasy of cooperative formula. Management based on: -Quality. -Training and Education. -Planification. MANAGER-MEMBERS RELATIONSHIP -Social discipline (rules agreed by consensus procedure). -Personal contact, closeness to members. -Information, transparency. -Mutual communication and trust. SUCCESS KEYS

19. 19 FINAL CONCLUSIONS Although the market has proved to be the most powerful wealth generating mechanism, it leads to great inequalities in wealth distribution that sow the seeds for social conflict if they are not mitigated or rectified. Although the market has proved to be the most powerful wealth generating mechanism, it leads to great inequalities in wealth distribution that sow the seeds for social conflict if they are not mitigated or rectified. An area of social and economical needs, which is becoming broader and broader, is met neither by governmental action nor by conventional capitalist enterprises. An area of social and economical needs, which is becoming broader and broader, is met neither by governmental action nor by conventional capitalist enterprises. This is causing a proliferation of substitute organizations, such as Non-Govermental Organizations, Non-Profit Organizations, etc., in general Social Economy organizations, including co-ops. This is causing a proliferation of substitute organizations, such as Non-Govermental Organizations, Non-Profit Organizations, etc., in general Social Economy organizations, including co-ops.

20. 20 FINAL CONCLUSIONS There are many examples of co-operative success, such as Rural Development Co-operatives in Benin, Dairy Co-operatives in India, Agricultural Co-operatives in South Korea, Savings and Credit Co-operatives in Sri-Lanka or Utility Co- operatives in South America. There are many examples of co-operative success, such as Rural Development Co-operatives in Benin, Dairy Co-operatives in India, Agricultural Co-operatives in South Korea, Savings and Credit Co-operatives in Sri-Lanka or Utility Co- operatives in South America. All social economy firms, co-ops and others, have to be viable businesses; this is the only way to achieve their social purposes, taking into account that: All social economy firms, co-ops and others, have to be viable businesses; this is the only way to achieve their social purposes, taking into account that:

21. 21 FINAL CONCLUSIONS Their aim is more to provide services to their members and the community than to achieve profits. Their aim is more to provide services to their members and the community than to achieve profits. Their decision-making process is democratic. Their decision-making process is democratic. Their distribution of profits or surpluses gives priority to persons (members) rather than capital. Their distribution of profits or surpluses gives priority to persons (members) rather than capital. Their management is autonomous with respect to both the public sector and the profit-making private sector. Their management is autonomous with respect to both the public sector and the profit-making private sector.

22. 22 Departamento de Dirección de Empresas y Marketing Management and Marketing Department. University of Huelva, Spain