66 CHAPTER 5
tests to verify that social activities are in effect not directly correlated with marketing performance. Accordingly, we cannot reject the exogeneity of our instruments at any reasonable confidence level. Overall, these results tend to support the claim that a wide scope of activi- ties may significantly affect membership structure. This structure may in turn impinge on the organization’s capacity to effectively provide marketing ser- vices to its members. Governance structure may help mitigate these effects, as we explore in the next section.
Governance Structure
Under the Federal Cooperative Agency’s guidance, efforts to promote coop- eratives in Ethiopia are designed to follow the principles set down by the International Cooperative Alliance and are meant to replicate global best practices. Use of such guidelines introduces a certain degree of standardiza- tion in the design of cooperative governance, management, and membership. The reforms are meant to ensure that cooperatives are governed in accordance with standard bylaws that provide for the regular election of chairpersons and management committees, and voting based on the principle of one member– one vote. For example, to receive a registration certificate from the regional BoCP, a cooperative must demonstrate that it has at least 10 members, is owned by its membership, and has put in place certain bylaws that govern the election of leaders, management of cooperative affairs, and so on. Thus, for example, ECS (2006) data show that in 99 percent of cases, all members are authorized to vote in their cooperative’s election for chairman, and in 97 percent of cases, the vote is organized on a one-member–one-vote basis. How- ever, anecdotal evidence suggests that beyond elections, members are some- times left with little influence on the direction taken by the cooperative. These divergences may be related to the possible existence of trade-offs between the various dimensions of inclusiveness, on the one hand, and the organization’s performance, on the other. For instance, a cooperative may choose to explicitly or implicitly exclude new members to maintain cohesive- ness among its existing members, minimize transaction costs that result from participatory decisionmaking, and ensure effective performance. Alterna- tively, cooperatives may choose to cast their membership more widely and allow both the size and the interests of the membership to expand. Increased size and diversified interests may lead to an expansion of the cooperative’s portfolio of activities, and may incur higher transaction costs for the coopera- tive’s participatory decisionmaking processes.
We empirically investigate the decisionmaking process in Ethiopian coop- eratives through participation indicators, based on a series of questions meant
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