Ownership, governance, and the diffusion of HRM practices in multinational worker cooperatives: Case‐study evidence from the Mondragon group

• Published date: 01 January 2018
• Date: 01 January 2018
• Author: Anjel Errasti,Carmen Marcuello,Ignacio Bretos
• DOI: http://doi.org/10.1111/1748-8583.12165

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ORIGINAL ARTICLE

Ownership, governance, and the diffusion of HRM

practices in multinational worker cooperatives:

Case‐study evidence from the Mondragon group

Ignacio Bretos

1

|Anjel Errasti

2

|Carmen Marcuello

1

1

Management Division, University of Zaragoza

2

Institute of Cooperative Law and Social

Economy, University of the Basque Country

Correspondence

Ignacio Bretos, Management Division,

University of Zaragoza, Paseo Gran Via 2,

50005 Zaragoza, Spain.

Email: ibretos@unizar.es

Funding information

Programa Operativo Feder Aragon 2014–

2020, Grant/Award Number: S64‐GESES,

Grupo de Estudios Sociales y Económicos del

Tercer Sector

Abstract

Drawing on a qualitative study of one Mondragon multinational

worker cooperative (WC) based on longitudinal data and in‐depth

interviews, our research evidences the contradictions that

internationalisation poses in WCs, both through privileging

managerial control at the expense of worker–member participation

and through the setting‐up of capitalist subsidiaries in which

employees are excluded from ownership and decision‐making. It

further shows how institutions, power relations, and interests shape

transfer in WCs, supporting the diffusion of certain human resource

management (HRM) practices on grounds of efficiency but

hampering the implementation of core cooperative practices. We

make a threefold contribution: first, to a strand of inquiry focused

on the influence of corporate governance on HRM; second, to the

field of international HRM by analysing the cross‐national diffusion

of HRM practices in WCs; and third, to ongoing debates on the

challenges that WCs face when striving to balance the economic

and social dimensions in globalisation.

KEYWORDS

cooperatives, employee voice, HRMin MNCs, international human

resource management, Mondragon, participation

1|INTRODUCTION

Worker cooperatives (WCs), which can be defined essentially as businesses owned and managed by their employees,

are arousing renewed attention as a promising organisational alternative where business governance and ownership

are concerned (Cheney, Cruz, Peredo, & Nazareno, 2014). Emanating from their shared principles (voluntary and open

membership; democratic member control; member economic participation; autonomy and independence; education,

training, and information; cooperation among cooperatives; and concern for community), WCs have been traditionally

portrayed as small local firms that represent the highest expression of participation, because all employees contribute

both capital and labour (Webb & Cheney, 2014). However, since the mid‐1990s, some cooperatives have been forced

Received: 19 August 2016 Revised: 16 June 2017 Accepted: 17 June 2017

DOI: 10.1111/1748-8583.12165

76 © 2017 John Wiley & Sons Ltd Hum Resour Manag J. 2018;28:76–91.wileyonlinelibrary.com/journal/hrmj

to grow internationally due to the pressures of globalisation, and many of them have done so through the setting‐up

of capitalist subsidiaries abroad (McMurtry & Reed, 2009).

This scenario raises two important questions, which define the objectives of the article: (a) How do

internationalisation and the associated setting‐up of capitalist subsidiaries affect the cooperative nature of WCs?

(b) What tensions do the conversion of foreign subsidiaries into WCs and the cross‐national diffusion of the

cooperative model's characteristic human resource management (HRM) practices involve? Bearing in mind that

multinational co‐ops are expected to retain cooperative values and practices, as well as spread them to their

subsidiaries (Flecha & Ngai, 2014), some scholars have stressed the importance of addressing these questions

(e.g., Bretos & Marcuello, 2017; Cheney et al., 2014). To this end, we provide a qualitative study based on

longitudinal data and 23 in‐depth interviews conducted in Fagor Ederlan, one of the flagships of the well‐known

Mondragon group.

This article makes a threefold contribution. First, it adds to a recent strand of inquiry focused on the shaping

influences of corporate governance on HRM. Although, as noted by Pendleton and Gospel (2013), this literature

has hitherto been dominated by national‐level studies that have neglected organisational diversity within countries,

our research provides firm‐level evidence on the relationship between corporate governance and HRM within

WCs. Second, drawing on a renewed political perspective on multinational companies (MNCs) (Dörrenbächer &

Geppert, 2011), our research contributes to the field of international HRM (IHRM) by analysing how the interplay

of institutional factors, power relations, and the interests of different actors shape the cross‐national transfer of

employment practices within MNCs. Lastly, drawing upon insights from the “degeneration thesis”(Cornforth, Thomas,

Lewis, & Spear, 1988), which suggests that cooperatives are compelled to adopt the same organisational forms and

priorities as capitalist firms if they are to survive, this article also sheds new light on ongoing debates concerning

the challenges that WCs face when striving to balance the economic and social dimensions under the requirements

imposed in global markets (Storey, Basterretxea, & Salaman, 2014).

We illustrate how internationalisation can intensify the inherent tensions in WCs between economic efficiency,

on one hand, and employee voice and job security, on the other hand. Theses tensions are fuelled by several dynamics,

such as the premium on managerial expertise at the expense of workers' participation, the reshaping of cooperative

values and practices in line with managerial priorities of efficiency, and the annexation of capitalist organisational

structures in which cooperative membership rights and benefits (e.g., participation in company‐level decisions and

job security) are restricted for workers.

The article is divided into six sections. The next section provides the theoretical framework of the research. The

third section introduces Fagor Ederlan and the Mondragon group. The fourth details the methods and data used.

The fifth accounts for the main results of the research, and the final section is devoted to discussion and

conclusions.

2|THEORETICAL FRAMEWORK AND LITERATURE REVIEW

A recent strand of inquiry has focused on exploring how ownership and governance affect HRM. In contrast to the

myopic dominant view on corporate governance, exclusively focused on the relationship between shareholders and

top managers and on issues such as board composition and the pay of top managers, this literature broadens the focus

of corporate governance by including other key stakeholders—particularly labour—and by considering “who owns and

controls the firm, in whose interest the firm is governed, and the various ways …whereby control is exercised”(Gospel

& Pendleton, 2005: 3). It is argued that the impact of corporate governance on HRM stems from the requirements of

the dominant stakeholder and the role of HRM in achieving these requirements (Konzelmann, Conway, Trenberth, &

Wilkinson, 2006). Accordingly, the identity, objectives, and activities of those involved in governance affect the

management of the organisation, thus influencing several labour management “outcomes”concerning job tenure,

training, remuneration, work organisation, and so on (Pendleton & Gospel, 2013).

BRETOS ET AL.77

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