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Does a Democratic Management Model Enhance Performance through Market Orientation? Empirical Evidence from the Mondragon Industrial Group

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  • Izaskun Agirre
  • Pedro Reinares
  • Fred Freundlich

Abstract

A management model is a set of choices made by a firm’s leadership regarding how objectives are defined, efforts are motivated, activities are coordinated and resources allocated, in short, regarding how the company will be run. Just as other types of businesses do, cooperatives need to create sustainable competitive advantages by adopting market-oriented management approaches. Mondragon Corporation achieves this in an alternative way relative to the conventional organizational and governance model, combining commitments to democratic principles, solidarity and competitiveness. Inspired by changes in the expectations of worker-members, new technological capabilities and the strategies of new competitors, Mondragon Corporation has designed a distinctive management model that can itself be a key driver of its competitiveness. The research presented here is focused on market orientation (MO), its relationships with a set of internal factors found in Mondragon cooperative enterprises, and their subsequent impact on business performance. Empirical results suggest that (1) Mondragon’s management model increases organizational commitment, facilitating the adoption of MO and (2) a positive impact of MO on business performance. Practical and research implications are discussed.

Suggested Citation

  • Izaskun Agirre & Pedro Reinares & Fred Freundlich, 2015. "Does a Democratic Management Model Enhance Performance through Market Orientation? Empirical Evidence from the Mondragon Industrial Group," Review of Radical Political Economics, Union for Radical Political Economics, vol. 47(3), pages 345-367, September.
    • Handle: RePEc:sae:reorpe:v:47:y:2015:i:3:p:345-367
    DOI: 10.1177/0486613414542770
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    References listed on IDEAS

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    More about this item

    Keywords

    cooperatives; market orientation; participation; management model; economic democracy;
    All these keywords.

    JEL classification:

    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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