Quality choice: Does it matter which workers own and manage the cooperative firm?

The information age and the spread of information technology has implications for organizational structure. Accordingly, the age-old issues of product and service quality are put into new perspective. It is this new perspective that compels analysis and contrast of the joint quality and output choice of a labor-managed firm with those of its entrepreneurial twin. It is shown that the labor-managed firm's behavior regarding quality and quantity depends on which workers own and manage the firm and on the way that marginal profit with respect to output is influenced by quality. Similarly, the effects of increases in either fixed costs or demand depend on who owns and manages the labor-managed firm and on the relationship between marginal profit and quality. Thus, whether a cooperative will outperform or under perform its entrepreneurial counterpart depends on the particulars of the situation.