Economists have traditionally paid little attention to the question what motivates people to join economic organization. A notable exception is the work on the determinants of union membership. The key insight from the literature is that the determinants of union membership could be analyzed in the rational choice framework, where potential union members compare benefits of unionization to the costs of unionization. In this paper we extend this heuristic framework to another important type of economic organization, namely co-operatives.

We emphasize that there are both economic and non-economic motivations to join co-operatives. This is consistent with the notion that co-operatives are self-governed economic organizations, where the benefits are both economic and associational. The economic motivations might be such that they accrue to the individual (e.g. dividends paid on membership) or they might benefit both the individual and broader community (e.g. continued provision of banking services within a community). The associational benefits include social prestige from participation in co-operative governance and utility from participating in governance process where goals are shared within the community. These goals must be weighted against the monetary costs of membership and potential psychological costs of participation.

In this paper, we use empirical data from the Finnish co-operative banks within the OP Group for a cross-section of over 200 independent co-operative banks to analyze these issues within a regression analysis framework. The data comes from the year 2005, just prior to important structural changes within the group. We use two types of dependent variables, membership per general population and membership per individual customers. This is the first study that explicitly compares these two measures.

The main results emerging from the regression analysis are: 1) There is a robust negative relationship with the membership ratio and the size of the pool of eligible members. 2) Membership rates are positively associated with transaction intensity. 3) Competition is negatively associated with the members per population ratio, but it has no statistically significant association with the members per customer ratio. We do not find any evidence that membership rates are responsive to social capital, measured by participation rates in municipal elections. As such, the results lend more support to individualistic motivations to join co-operatives than collectivistic motivations (such as concern for community).