The Firm as a Common . Non-divided Capital 2 Ownership , Patrimonial Stability and Longevity of 3 Co-operative Enterprises 4

Contemporary literature dealing with the governance and exploitation of common-pool 9 natural resources was initiated by Elinor Ostrom in 1990, and has been growing fast ever since. On 10 the contrary, within the same research stream, the study of the presence and economic role of 11 common resources in entrepreneurial organizations is, to date, under-researched. This work 12 endeavors to fill some gaps in this research perspective by: (i) spelling out a new-institutionalist 13 framework for the analysis of the accumulation and governance of common capital resources within 14 organizational boundaries; (ii) considering co-operative enterprises as the organizational form that, 15 on the basis of historical record, and of behavioral and institutional characteristics, demonstrated to 16 be most compatible with a substantial role for common and non-divided asset-ownership and with 17 its governance thereof; (iii) evidencing and explaining the strong connection between cooperative 18 longevity and the presence of non-divided asset ownership. The economic forces influencing the 19 optimal level of self-financed common capital resources in co-operatives are enquired. Conclusions 20 to the paper evidence the main reasons why the new approach can better explain than preceding 21 ones the economic sustainability and longevity of cooperative enterprises. 22


Introduction
Following the growing evidence on the necessity to accomplish environmentally sustainable economic development, the study of the governance and exploitation of natural resources gained prominent role in economics and the social sciences, ever since Elinor Ostrom's seminal contribution in 1990 [1][2][3][4][5][6].Common goods are deductible and non-excludable, hence characterized by high degree of rivalry in consumption and/or utilization and, at the same time, by a low degree of excludability for the whole collection of subjects interested in or allowed to use and /or consume the good.
Common goods appear as private goods to outsiders, but are common goods for insiders.
Common-pool natural resources (CPRs) are studied to highlight the necessity to limit exploitation of fringe and flow resources to a level that does not damage the productive potential of the stock, or core resource.Institutional mechanisms identified in rules regulating access and management are needed to enforce appropriation rights and their limits [7].This research stream came to concentrate on self-managed common property regimes, which cannot be simply equated either to public or to private ownership, but share some features of both, and have been understood as the most typical way in which natural resources are managed and exploited [1].More recent literature concentrated on forms of communitarian ownership generating positive externalities as they concern knowledge/cultural commons [3], and urban spaces [8][9].
Mechanisms governing the use and exploitation of common resources and the resolution of conflict thereof have been studied and devised to overcome tragedy of the commons situations, as in Garret Hardin classical statement of the problem [11].Given the rival and non-excludable nature of such resources, conflict over their appropriation and over-exploitation are to be considered endemic due to collective action failure [12].The technology used and the governance structure are functional to adequately regulating appropriation, by limiting the risk of opportunism and conflict and by punishing the violation of rules of appropriation [12,13].Governance, besides limiting the risk of opportunism by the involved parties, is also functional to the coordination of collective action in terms of improved information flows and alignment of expectations [14].Adequate coordination can be achieved not only by controlling and punishing defectors, but also through proper involvement and deliberation processes based on membership rights and other consultative and participative practices, through improved information circulation, and the creation of organization specific knowledge, culture and social capital [15][16][17].
The analysis of the governance of common resources has been applied to the organizational realm to a notably limited extent.Some streams of literature in law and economics did start this field of enquiry, by defining business corporations as a form of "team production" [18] and by enlarging the concept of corporate governance to include a wide array of mechanisms mitigating risk and uncertainty in contractual relations [19], and to represent the multi-stakeholder corporate embodiment of the social contract [20].Some authors got as far as identifying corporate dimensions that can be likened to common goods, and business enterprises have been explicitly understood as "commons" themselves .Other authors explicitly consider team production and collective action as founding principles of entrepreneurial action and innovation processes in new business environments, highlighting also the special role of intrinsic and prosocial motivations in innovation and growth processes [22][23].However, to the best of the author's knowledge, no contribution has systematically analyzed the corporate patrimony within the common property approach, and explicitly discussed, in this line of enquiry, the specific features, sustainability and longevity of "alternative" or "heterodox" enterprise forms, such as co-operative and social enterprises [24][25][26].
Few exceptions of approaches similar to the one followed in this paper are found in some works concerning capital resources in worker co-operatives [27], and co-operative finance [28].This work is directed to widen the existing literature, evidencing the analogies between business corporations and their patrimony with common goods, to study the features and economic functions of common property systems in the study of entrepreneurial ventures, and to evidence the specificities of co-operative enterprises as the organizational form best suited to accumulate commonpool capital resources. 1    1 Also the working of other organizational dimensions in co-operatives enterprises can be interpreted following the model of common property regimes developed by Ostrom, for example their governance and distributive patterns, but this work concentrates on self-financed accumulation and use of capital only.This paper concentrates on common or non-divided asset ownership as common-pool resource.Cooperative enterprises are identified as privileged organizational contexts since, both in their historical origin and institutional evolution, they have been characterized in most countries by the presence of capital resources that are non-divided and non-divisible among their members.Especially, the nondivisibility of capital is connected with the longevity and sustainability of cooperative enterprises.As it shall be evidenced, incentive alignment and intertemporal solidarity between different generations of members in cooperatives are understood as the main drivers of financial stability and sustainability in the medium to long run.
The strategy of the paper is as follows: Section Two deals with the definition, economic relevance, pattern of emergence and optimal dimension of non-divided capital funds in both investor owned companies and co-operative enterprises.In Section Three, the origin and spread of common capital resources in co-operatives is analyzed within a new institutionalist frame by comparing their costs and benefits, both transactional and productive, with the costs and benefits of individually held capital resources.Section Four discusses for better financial sustainability and firm longevity induced by the presence of non-divided capital resources, especially discussing incentive alignment and intergenerational solidarity.Section Five concludes.

Common Resources in Investor Owned and in Co-operative Enterprises
One initial key question in this study concerns the reasons why the analysis of common pool capital resources is largely absent in contemporary economics and organization literatures.The proposed answer concerns the dominant system of property rights, whose concentration and exclusivity limits the economic and organizational relevance of communalities in the ownership of enterprises. 2    The accumulation of owned capital is observed in all enterprise forms since it is functional to financing investment programs, buffering the organization against negative unpredicted events, and serving as collateral required as guarantee of loan repayment.Also, capital resources can be characterized by a positive degree of communality in all ownership forms (public, private and cooperative) when the relevant operative and strategic decisions are taken by a collectivity of controlling patrons (e.g.diffused share-ownership in joint stock companies and publicly listed corporations), since in this case the use of capital resources may not be easily made excludable and the "exit" option can be costly.The utilization of a limited and rival stock of assets coupled with a low degree of excludability in strategic decision making can engender a "tragedy of the commons" situation characterized by free riding in contribution (e.g.distribution of dividends is preferred to reinvestment of residuals) and over-exploitation (e.g.resources are used beyond the collectively optimal point).However, the diversity of organizational forms in terms of control rights and governance can induce important differences in the analysis of the presence and modalities of utilization of common resources.The paper briefly considers investor owned companies (IOFs hereafter) first, and then introduces the case of co-operative enterprises. 2Since priority is given to the analysis of the private sector, only investor owned companies and cooperative enterprises are considered in this paper.Occasional references to publicly owned organizations has is introduced for the sake on exemplifying role only.

Common Capital Resources in Investor Owned Companies
The strictly private nature of capital resources in IOFs strongly reduces as a norm, and often eliminates the relevance communality, since shares are saleable and, in most cases, ownership is concentrated in a few hands.Decision-making becomes exclusive, and excludability in utilization is perfect after contractual constraints have been fulfilled.This is the standard observed solution in small to medium sized firms, and in family businesses, which are dominant in numbers in all contemporary economies.
However, even in the case of IOFs, capital resources can acquire a relevant degree of communality when the firm is constituted as joint stock.More specifically, as the number of stockholders increases, and no stockholder achieves dominant position (ownership is dispersed), costly exit due to sunkness of capital resources and investments and to asset specificity can induce a high degree of rivalry in the utilization of resources and in the appropriation of the surplus.In the same situation, nonexcludability in decision making, in the utilization of assets, and in the distribution of value added is likely to be high as well. 3s said, a high degree of rivalry and non-excludability is to be considered, in IOFs, as exception, not as the rule, due to concentrated ownership.Furthermore, even in the presence of a high degree of non-excludability in decision making and capital utilization, the "exit" option represented by the sale of stocks can allow stockholders to recoup the value of their financial investments.In other words, the sale of owned stocks can be the preferred choice whenever non-excludability in decision making leads to a "tragedy of the commons" situation in which individual preferences conflict with collectively optimal choices, and organizational costs are inflated by the growth of decision making costs.Conversely, stockholders may in many situations prefer concentrated to dispersed ownership since the former solution allows for the elimination of inefficient and costly collective choices when asset specific and non-recoupable investments make the exit option costly.These remarks can explain the prevalence of concentrated ownership in IOFs in most contemporary economies.At the other extreme of the spectrum, sole-proprietorship or closely-held joint-stock are found. 4

Common Capital Resources in Co-operative Firms
Co-operative enterprises are here understood as mutual benefit organizations characterized by membership rights that are not assigned on the basis of financial investments, but instead to individuals (e.g. in worker co-operatives) or to economic activities (e.g. in producer co-operatives) on the basis of the "one member, one vote" rule [29][30].Indivisible or common reserves of capital in cocapitalist property rights [71,72].operatives, when they are present, are owned by the organization itself and cannot be shared among individual members, who enjoy a form of usufruct of the assets, but cannot appropriate them. 5The accumulation of indivisible reserves, or asset lock, has the primary function to self-finance investment programs, to create collateral guarantees protecting external financial supporters, and to insure the membership against negative unpredicted events .Democratic and participative governance (engendering non-excludability from strategic choices), coupled with the presence of non-divisible, but scarce and deductible capital resources, leads to the emergence social dilemmas that are typical of the utilization of common resources: conflicting objectives in collective decision making can entail substantial governance costs.Costs depend both on rivalry (alternative uses of assets and appropriation of incomes streams may not be mutually compatible, leading to overexploitation of limited resources and conflict) and on non-excludability (since all members have the legal right to participate on an equal basis, collective decision making can become complex, lengthy and contested.

Ownership Models in Co-operative Enterprises
There are three main ownership system-models of co-operative enterprise corresponding to three different theoretical streams.The first model corresponds to private co-operatives in which membership rights are saleable [33][34][35].The second model corresponds to co-operatives in which the assets are publicly owned, and members have the usufruct of the capital of the organization.This model broadly corresponds to the institutional system of the former Republic of Yugoslavia.
Alternatively, the cooperative can be completely externally financed, without any ownership in the assets it uses [36][37].While the Jugoslav system corresponds, in the theory of worker co-operatives, to the so-called Worker Managed Firm (WMF), the externally financed version corresponds to the model of the Labor Managed Firm (LMF).The theory of both model, the WMF and the LMF, was initially developed by Vanek [38] and perfected by Jossa .The third model corresponds to less well defined typologies of ownership rights, which some authors have identified in communitarian, or co-operative ownership, and are usually categorized as lying in between public and private ownership [30].In most variants of this ownership system, which spread especially in continental Europe, the assets of the organization are owned neither publicly, nor by individual members, but by the organization itself, or by the community of reference.The behavioral implications of this their models still await finer definition and enquire.6 This paper is set to analyze the problem of accumulation of capital in the third model and in those hybrid systems that include relevant elements of the third model.The main reason is that, among non-state owned models of co-operative enterprises, only non-privately owned co-operatives demonstrated to be compatible with nondivided asset ownership.

Legal Constraints in Western Countries
Institutional models loosely correspond to, but do not coincide with the three theoretical models presented in the previous section.While public ownership of co-operatives is barred by law and by the ICA seven principles, the market for membership shares, even when not excluded by law like in the US, is rarely implemented or excluded by co-operatives' bylaws.On the other hand, several national legislation do not set special constraints against the possibility of the sale and demutualization of cooperatives.Finally, a partial non-profit distribution constraint and the asset lock era required in several countries, for example Italy and Finland, to strengthen patrimonial stability.These are the reasons why existing institutional systems are to be prevalently considered hybrids, which mix to different extents different features of the three theoretical models.
In western countries, three main institutional models for the accumulation of capital resources in cooperative enterprises can be singled out. 7In the first model, which mainly lies within the common law tradition, reserves of capital are, as a norm, divisible among members.Forms of common ownership are not mandated and, in some cases, excluded by law.The second and the third models are, instead, mainly found within the civil law tradition of continental Europe.In the second model, which includes France and Spain as national cases, law requires the creation of reserves of capital that cannot be shared by members while the organization is active.Such reserves, however, can be appropriated upon dissolution, sale, or conversion of the enterprise.In the third model, which is found mainly in Finland and Italy, compulsory accumulation of net residuals into indivisible reserves is coupled by the prohibition for members to cash in the residual value of the organization also upon its dissolution, sale, or conversion.The two civil law models share similarities, but also important differences.The former is characterized, comparatively, by stronger financial incentives for members, since these can appropriate the residual value of the organization.However, at the same time, the patrimony is less stable since divisibility in case of dissolution or conversion can represent, by itself, the incentive to stop operation and cash in any residual value of the organization [40].Conversely, the latter model can suffer from too weak financial incentives, as evidenced in the undercapitalization hypotheses by Furubotn and Pejovich  [41], and Vanek [42].At the same time, this model has been showing a high degree of patrimonial stability since it does not offer incentives to demutualize or sell the organization.In both civil law systems, however, net operating losses can be imputed to indivisible reserves.This possibility can, in principle, weaken patrimonial stability since it is liable to mismanagement and unlawful appropriation. 9Finally, in the US context, a similar legal categorization exists, though in this case the main divide is drawn between co-operatives and non-profit organizations.Only the latter are characterized by capital indivisibility, even if legislation does not forbid indivisibility in to mutual benefit organizations [43].
One final question that has crucial bearing on the working of the institutional system for capital accumulation relates to the ownership of net residuals.In the first institutional system, ownership is clearly attributed to the membership, which has to devise proper rules to distribute or to reinvest it, at its will, in shareable reserves of capital.On the other hand, the second and third system are compatible with the idea that the ownership of residuals, both positive and negative, is attributed to the co-operative as organization.Distribution, which can be limited by law, needs to be deliberated by the elected bodies (the Board of Directors), while the default solution is that residuals are reinvested in the organization in indivisible reserves.While the UK represent an example of the former solution, Italian legislation has instead followed the latter solution, which is more strongly connected with the presence of assets-as-common resources in co-operative enterprises.

Divisible and Indivisible Reserves of Capital
This section goes beyond specific institutional constraints and introduces a new-institutionalist account of the economic motivation and process of formation backing non-divided forms of capital ownership in co-operatives.Building on the framework developed by Hansmann [44][45][46][47], the basic category of transaction costs is sorted into the two sub-categories of the net costs of (i) the governance of common resources; (ii) individual ownership of the shares of capital by the members of the cooperative.The costs attached to the two sub-categories are compared in order to single out the optimal level of common resources.
Co-operative enterprises can self-finance themselves in two fundamental ways: capital shares individually owned by members; or by resorting to non-divided and non-divisible reserves of capital derived by reinvested positive residuals, which take the form of the asset lock. 10In the former case, individually owned financial instruments have, in different national contexts, pronouncedly different regulatory features, since they can be differentiated on the basis of yearly yields, dividend distribution and reimbursement rights.Reimbursements rights can take different forms, since such instruments can: (i) be perpetual (not redeemable) and not refundable by the enterprise.In this case they pay annuities to incumbent members [48] and may, under specific circumstances, be sold on the market for membership rights [32,33,31]; (ii) be refunded when the member-owner quits the 9 The system of capital accumulation in the former Republic of Yugoslavia can be interpreted a radical version of the third civil law system.Under Yugoslav self-management legislation all positive net residuals had to be reinvested in invisible reserves, whose function was to absorb operating losses in the presence of a strict capital maintenance requirement (CMR).The CMR prevented any reduction of the net book value of capital [36,74]. 10For the sake of simplicity, such intermediate forms of common ownership, in which indivisible reserves exist, but can be appropriated by members upon dissolution or conversion, are not considered.organization; (iii) be refunded independently of the position as incumbent member under looser temporal constraints [32,33,49].Finally, members can finance their organization also by subscribing member loans or bonds.
Members' individual ownership of capital leads to capital variability whenever: (i) the shares need to be paid back to quitting or incumbent members (a situation common in most national systems of co-operative legislation); (ii) the shares are transformed into debt capital upon quittance of the member; (iii) members can sell their shares on the market to non-members, In all these cases (refund, sale or transformation into debt capital of individual shares) the total amount of owned capital is reduced upon quittance.The intensity of capital variability is proportional to the percent of total capital individually held by members, and to the rate of members' turnover.Insofar as it can reduce and/or make uncertain the total dimension of the patrimony and its availability as collateral guarantee, variability can represent a limit to investment processes and to the ability of the organization to borrow from financial intermediaries [31,40].By constituting indivisible reserves, locked assets effectively counteract capital variability. 11    A second function of non-divided ownership is found in the necessity to counteract the risk of demutualization, that is the termination of a co-operative venture through the sale of assets, or through conversion into a IOF.When a large share of total capital is individually owned, its variability, as moderated by the intensity of members' turnover, can lead to undercapitalization: the co-operative would have to refund or transform into bonds or loans substantial shares of owned capital, thus leading to increased dependence on external finance, higher leverage and lower collateral guarantees [31,40].When this problem becomes severe, the co-operative can be forced to demutualize in order to increase owned capital (equity) and reduce leverage.Furthermore, cooperative members individually owning large shares of capital can also decide to demutualize in order to cash in the value of their individual assets.They can also acquire unusual and undue lobbying power over strategic decision making processed.This problem is especially severe in best and worst performing co-operatives.In the former case, high value added co-operatives are characterized by market value of individual shares that can far exceed nominal value.This difference 11 In Italy, all typologies of cooperative enterprises (worker, consumer, producer, user, and social cooperatives) are required by law to reinvest at least 30% of their net residual earnings into indivisible reserves of capital, which cannot be shared among members both during the life of the organization, and also upon its dissolution or conversion.This constraint is increased to 70% in the case of cooperative banks.Any residual value is to be transferred to national or regional funds controlled by co-operative associations, which finance the start-up of new co-operative ventures.Empirical evidence shows, however, that a dominant proportion of Italian cooperatives reinvests close to 100% of net residuals into locked assets.That is, legal requirements are not nearly binding.This evidence supports the idea of the existence of an endogenous process of formation of locked assets in cooperatives [27].Considering a second example, in the Mondragon group of worker co-operatives ,net residuals are partly distributed to incumbent members (about 70%, though this percentage has been varying over the years), who are mandated to reinvest their individual shares in internal capital accounts as long as they are members.The remaining share of net residuals (30%) is reinvested into indivisible reserves [31,49,57].Due to shares being paid back when members quit or retire, the total amount of the group assets held in indivisible reserves is, to date, about 50% [75].can represent a powerful incentive to sell out to investors and liquidate the market value of shares. 12    In the latter case, the risk of economic crisis and demutualization can create financial incentives favoring demutualization itself.When the organization fares negative economic and financial conditions, members may be induced to sell out shares or demutualize to reduce expected financial losses, this way accelerating the process of the crisis.These remarks evidence that individual ownership, though it can strengthen financial incentives, is likely to substantially increase patrimonial instability.
Demutualization is more common just in those institutional contexts in which individualized members' ownership of capital is dominant, especially in common law, Anglo-Saxon countries (cfr. for example Battilani, Balnave and Patmore [50], on Australia).The relatively smaller number and diffusion of co-operatives in common law compared to civil law countries is better explained by larger numbers of conversion into IOFs, than by higher failure rates [55]. 13To exemplify, one wellknown demutualization wave of co-operatives, mutual insurance companies, building societies and credit unions took place in the United Kingdom during the '80ies and the early '90ies of last century.
In continental Europe, instead, where much larger diffusion of (legally mandated) non-divided reserves of capital is recorded, demutualization has less often been observed, and this fact has better supported the sustainability and longevity of co-operatives. 14

Undercapitalization, Common Ownership, and Diffusion of Co-operatives
While in civil law countries the accumulation of indivisible reserves is, as a norm, required by law, common law countries, for example the UK, are witnessing in recent years a new trend favoring the diffusion of non-divided forms of capital ownership.Constraints on divisibility, reimbursement and sale of individual shares are often introduced in the bylaws of co-operatives, social enterprises and employee owned companies by conferring either part or the whole patrimony of the organization into locked assets or trust funds [51,8].The spontaneous emergence of forms of (partial or complete) common ownership in institutional contexts in which they are not mandated or even favored by law testifies in favor of their substantive economic relevance and of the potential for wider diffusion.
The legally imposed accumulation of indivisible reserves showed to be effective in preventing demutualization, but has been repeatedly accused to lead to dynamically inefficient investment choices, implying under-investment and under-capitalization [36,40,41].Undercapitalization due to suboptimal reinvestment of net residuals into locked assets and limited access to financial markets (due to absence of tradable shares) have been taken as implying the self-selection of co-operatives into low-capital, high-labor intensive sectors [52][53][54][55].They have also been taken to explain the low 12 This has been the reason for the disappearance of the well-known group of lumberjack plywood cooperatives in the US pacific North West: the high market value of the members' financial stakes made the sale of these organizations to external investors more convenient than the sale on the market for membership rights to new incoming co-operators. 13The small total number of co-operatives, economy-wide, is also explained by small numbers of creation of new ventures, not by their short lived active existence, which is indeed longer than the average duration of investor owned companies [55]. 14In Italy, demutualization is allowed by law only after the demutualizing co-operative renounces the whole value of its asset, which is to be paid out to national funds financing new co-operative start-ups.rate of creation of new co-operative ventures due to limited financial support to new start-ups.On the other hand, the (partial) presence of common ownership in some co-operative forms, especially agricultural and producer co-operatives, that survived and prospered in many countries, and some successful co-operative experiments, such as the Mondragon group speak to the contrary of such interpretation.This counter-evidence leaves open the, possibility to pursue new enquiry on models of co-operative finance that are at least partly based on common ownership ( [56], cfr.also the works by Jossa [36,39] on models of externally financed worker co-operatives under public ownership).

The Emergence of Common Capital Resources in a New Institutionalist Perspective
The foregoing arguments can be better systematized by analyzing the economic forces, which favor the emergence of an optimal amount of indivisible capital reserves.These forces need to underpin the stability of accumulated capital and of entrepreneurial processes, without renouncing financial incentives to invest optimally and increase productivity.In this, it should be noted, in the most notable and competitive examples of co-operative enterprises and employee owned firms, mixed forms of capital ownership are found.Individualized, non-divided, and mixed forms of capital ownership can be singled out in specific cases.In the Mondragon group, non-divisible reserves of capital coexist with large shares of capital held directly by members in internal capital accounts [49,57].In the John Lewis Partnership, one of the largest and oldest employee owned firms in the UK, employees' appropriation rights are strictly regulated and limited by the patrimony of the partnership being held in trust funds, which cannot be shared among partners at any time, but which entitle incumbent partners to receive annual dividends.In many employee owned companies, not all the patrimony is held in trust, and the presence of both individually owned shares and trust funds is detected [51].This evidence suggests that capital in such ownership forms can be decomposed into different parts, which contribute in different ways to the financial health of the organization.The different parts have different functions: while non-divided ownership is mainly geared to guarantee stability to investment processes and collateral guarantees, individual ownership improves financial incentives and performance.
In a new-institutionalist perspective it is necessary to ask what are the costs attached to the transactions involved in each of the two forms of ownership, and their optimal dimension thereof.
As already anticipated, individual financial instruments are characterized by high transaction costs connected to members' turnover, which in turn depend on members' different temporal horizons of permanence as incumbent members and on heterogeneous members' preferences.When members show homogeneous temporal horizons and preferences, transaction costs connected with membership rights and with individual financial positions are low since homogeneity simplifies and lowers the costs of collective decision making, this way limiting conflict and turnover.These elements favor the permanence of individual ownership, due to the strong match between individual financial incentives and returns [58].The well-kwon examples of professional partnerships and of the group of worker owned plywood co-operatives in the US Pacific Northwest in the XXth century share the features of the presence of a highly homogeneous membership performing similar professional and work tasks, and having similar educational levels and personal features [32,33,45,59,60,61].In such cases, non-divided ownership may not be observed, since owned capital and organizational processes are stable even in its absence and members would aim at maximizing financial returns by means of individual ownership [32,33].In the framework presented in this paper, members' homogeneous preferences imply that rivalry in the utilization of capital and non-excludability in collective decision making are more easily managed.Since the tasks performed by different members are similar, the number of different uses to which capital can be put is limited and rules governing utilization of resources and the equitable sharing of the surplus are more easily devised and monitored.As complexity and dimension increase, homogeneity fades away, members' objectives become heterogeneous and more difficult to reconcile, this way fostering both organizational and financial instability [45].Different preferences concerning investment processes, organizational models and distributive patterns, and different temporal horizons make collective decision making less straightforward and more costly, this way increasing governance costs, members' turnover and the risk of demutualization.
Insofar as it allows the organization to internalize, control and reduce, by means of administrative procedures, the costs engendered by individual ownership, non-divided ownership represents one possible remedy, which can take back stability to mutualistic financial structures in the presence of complexity and heterogeneity of preferences [28 ].However, non-divided ownership can engender costs and inefficiencies of its own.
As previously anticipated, underinvestment due to members' truncated temporal horizon, which arises when the median member's horizon is lower than the optimal duration of investment programs, represents the most classical problem concerning non-divided ownership.This problem may be especially serious in worker co-operatives, due to high members' turnover, especially when the median temporal horizon is short and the median age of members is high.It engenders lower than optimal investment schedules and higher then optimal distribution of income and dividends to members, this way leading to under-capitalization and dissolution [38,40,41,42,62].
Under-capitalization due to non-divided ownership can be effectively counteracted in at least four cases: (i) when the rate of return on marginal investment programs is sufficiently high, and/or their temporal duration is limited; (ii) when the temporal horizon of the median member is sufficiently long and new younger members are constantly associated to the co-operative; (ii) when ownership is mixed and individual shares of capital are found side by side with common ownership.In this case, individual shares would finance the marginal (short-term) components of capital [31,40]; (iii) when members' and/or directors' decisions are informed by social preferences that weigh positively the welfare of future generations of members.In this case, optimal investment schedules are the result of intergenerational reciprocity among different generations of members, since each incumbent generation is favored by the stock of capital bequeathed by previous generations, and favors future generations in a similar way, by bequeathing the existing stock of capital [30].One further crucial element that can justify the introduction of non-divided ownership, even in the presence of a truncated temporal horizon, has again to do with stability: by reducing the transaction costs connected with individual ownership, non-divided ownership can end up reducing turnover and prolonging the median temporal horizon, this way weakening the impact of the horizon problem. 15    15 This result can be modelled in game theoretic terms by the trust game [76].In this interpretation, the present generation of members (trustee or second mover) has to decide how much to keep for itself, and how much to Among the weaknesses of common capital resources, besides the highlighted presence of weak financial incentives and risks of under-investment, the costs and inefficiencies deriving from the spread of conflict over utilization and from opportunistic behaviors, as evidenced in the literature on "the tragedy of the commons", need to be considered as well [10].These costs can be high in the absence of adequate regulation [1].Therefore, non-divided ownership can represent an effective institutional device substituting individual ownership only if the new emerging costs of governance are properly controlled through administrative procedures and other working rules, and through managerial decisions.

The Optimal Amount of Non-Divided Capital Resources
In order to single out the optimal or preferred amount of non-divided resources, the advantages deriving from common ownership need to be compared with their costs, and with the corresponding costs and benefits attached to individual ownership.
The comparison of costs and benefits is complex as it requires analysis of transactional, operational, and welfare generating or depleting dimensions.However, this comparison offers a vantage point from which empirical research can depart.The equilibrium between common and individual ownership derives from the balance between two categories of net costs attached to the two different ownership regimes: 16(i) costs deriving from the governance of common resources (excess of utilization and depletion of assets, monitoring, conflict and decision making costs), plus efficiency losses in terms of suboptimal investment decisions (horizon problem) and absence of highly powered financial incentives.Costs of governance include lengthy and inconsistent decision making processes, conflict over rules governing and decisions concerning use of resources and distribution of proceedings, monitoring activities, inefficient choices which privilege the median voter preferences over average preferences, costs of lobbying by dominant groups of members; (ii) costs deriving from contractual imperfections attached to individual ownership, which can engender organizational impasse due to absence of agreement on collective choices, high turnover leading to disinvestments processes, and de-mutualization.Absence of agreement can derive from conflict over strategic decisions concerning alternative investment plans and their temporal horizon, resource allocation and utilization, trade-offs between individual appropriation of proceedings and collective decisions concerning investment plans.
When the balance between these two categories of costs leads to the emergence of a relevant amount of common capital resources, governance becomes the crucial organizational dimension regulating the internalization of contractual costs and control over the emerging governance costs [63][64].It also bears relevant implications on the alignment of members' preferences with organizational objectives.
The non-divisibility and non-salability of common assets, when decision-making and conflict costs are kept under control, can lead to better alignment, and have empowering effects on collective action.
Alignment, in the case, is the result of reconstitutive downward effects that tend to modify and refine individual preferences to make them compatible with collective ones. 17    In an evolutionary interpretation, common ownership represents an emergent feature of collective action by members associated in co-operative ventures.This emerging institutional solution overcomes individual ownership and the attached contractual costs in the presence of complex and heterogeneous members' preferences.In more general terms, the interpretation of entrepreneurial action as exclusively attached to and explained by individual behavior and preferences is not granted and more, but it is instead overcome in favor of new emerging forms of collective entrepreneurial action [65][66][67]. 18

Sustainability and longevity
One of the most salient consequences of the introduction of capital indivisibility is better financial and economic sustainability due to patrimonial stability, and increased longevity of co-operatives.
Contrary to the predictions of the best-known models in economic theory [38,41], capital indivisibility does not lead to short termism, degeneration, and dissolution.Indeed, co-operatives have been shown to last longer than IOFs [55].Instead, and in line with prevalent empirical evidence [55,73], the exclusion of the possibility to demutualize and sell the assets of the organization, the internalization of and control over costs deriving from contractual imperfections, and the better alignment between individual preferences and organizational objectives appear to favor longer term resilience.Better sustainability and resilience is especially evidenced during periods of crisis, since in the last ten years, in several countries, co-operatives withstood the strong downturn in demand better than IOFs.They also laid-off less workers than IOFs, thanks to fluctuating wages and to the insurance function played by the non-divisible component of capital [27,68,69,73].
The arguments of this paper showed that indivisibility of capital is likely to lead to better stability of the patrimony, since common capital resources cannot be shared by members and are to be considered ownership of the organization itself.The prohibition of members' appropriation profoundly changes incentives, expectations and behaviors.When new members enter the cooperatives, they know they cannot appropriate its patrimony.Different institutions cause differential ex-ante selective processes: members desiring to appropriate the economic value of the organization are likely not to join this kind of associative venture in the first stance.Existing members (new and incumbent) accept a fundamental associative pact, a social contract, in which appropriation of the patrimony is excluded.By subscribing the associative pact, they only expect economic (monetary and non-monetary) remuneration deriving from mutual benefit, but not financial remuneration attached to capital shares.The associative pact also implies acceptance of 17 On the concepts of reconstitutive downward causation and reconstitutive downward effects, cfr.Hodgson [78].This argument, of course, does not exclude effects running in the opposite direction, since individual members' preferences in co-operatives can influence organizational objectives through participation in decision making processes and other organizational patterns. 18A non-reductionist interpretation of collective action and institutions as emergent social dimensions, which cannot be explained in terms of individual behavior alone, but are nonetheless anchored to individual behavior, is found in prominent contributions to institutional and evolutionary economics [1,77].intergenerational solidarity.Incumbent members know that the existing patrimony was accumulated by previous generations of members, and that future generations will enjoy similar benefits after their own quittance.The ex-ante working of the associate pact in cooperatives guarantees static and intertemporal stability, which is closely connected with longevity.Co-operatives that do not undergo economic crisis and financial distress can expect their patrimony to be preserved, virtually without limitation, even in the presence of internal heterogeneity of preferences.In turn, the impossibility to appropriate the patrimony in case of internal dispute lowers the probability of disputes arising in the first stance, since no individual member or group would obtain any monetary advantage from it.

Concluding Remarks
This work represents an attempt to reformulate the problem of the ownership of capital in cooperative enterprises by analyzing it in a new perspective, which looks at how common or nondivided capital resources can, when properly regulated, bear productive and welfare increasing potential, and not necessarily represent an anomaly in or obstacle to the correct development of entrepreneurial organizations.This new viewpoint can allow taking some steps towards in overcoming well-known negative results (e.g.concerning under-investment and undercapitalization, demutualization and dissolution), which did not advised to date the spread of this kind of similar institutional solution.
The paper strived to explain, within the new-institutionalist frame of analysis, the pattern of emergence and spread (both spontaneous and legally mandated) of non-divided reserves of capital, interpreted as deductible and non-excludable assets, and to identify the main economic forces defining their optimal level.The answer has been found in the complex comparison between the transactional and operational costs attached to individualized vis à vis common reserves of capital.
A strong compatibility and linkage between collective entrepreneurial action in co-operative enterprises, and the emergence of non-divided forms of ownership has been evidenced.
The main implication of this work is that common resources, when tragedy of the commons-like social dilemmas are overcome, can represent a fundamental and empowering tool allowing members to achieve higher welfare, both monetary and non-monetary, and empowerment.As already evidenced in the literature analyzing the collective governance of common-pool natural resources, members (appropriators) and their representatives are in the best position to work out the most effective governance solutions, due to better information, knowledge and experience concerning the specific circumstances of the resource.While the paper focuses on the similarities between the governance of CPRs and the governance of non-divided capital in co-operatives, differences should not be forgotten as well in its implementation, since they can help identifying critical institutional elements, and welfare increasing dimensions that are absent in the case of natural resources.The main directions for future research seem to relate to the development of the legal definition and regulation of common property systems in co-operative form of ownership, including both nondivisible and divisible capital reserves [56].
The main implication of the study concerns the impact of common ownership on patrimonial stability and on the sustainability and longevity of co-operatives.While existing models are not able to explain in a satisfactory way the survival, diffusion and longevity of organizational forms characterized by common ownership, this paper has found strong connection between these two elements.The connection is substantiated by the better patrimonial stability in co-operative characterized by the presence of non-divided and non-divisible capital resources.