Constitutional Design and Investment in Cooperatives and Investor‐Owned Enterprises

Abstract This paper studies the role of the corporate governance system in cooperatives and in investor‐owned enterprises. We abstract from all possible differences between the two systems except the type of majority needed to take decisions: this is one‐head‐one‐vote for cooperatives and proportional to capital invested in investor‐owned firms. We show that the institutional form chosen matters for the initial investment decision of the agents: in particular we find that members of a cooperative invest less than they would in an investor‐owned enterprise.