Paper published in INUSSUK. Arctic Research Journal 1, 2001:137-146

 

 

 

                           Co-operative and Training dimensions in entrepreneurship.

                      A study of the methodology of the Saiolan Centre in Mondragon.

                                                                                                                        by Gurli Jakobsen[1]

 

Saiolan is a centre for training of entrepreneurship and the development of new entrepreneurial ventures, within the Mondragon Cooperative Corporation (MCC)[2].  In this paper  I present their educational model and analyse the notion of entrepreneurship practised here. This experience underlines the importance of cultural and co-operative dimensions in what is often seen as a rather individual phenomenon - becoming an entrepreneur. The analysis is guided by two questions: What role does co-operation play in this entrepreneurship process? and: How is the relation between education and the idea of a new entrepreneurial venture? Finally the paper looks at the role of the Saiolan Centre itself as an example of social entrepreneurship.

The practice at Saiolan, although being co-operative, does not necessarily lead to the formation of co-operatively owned firms. This brings up the rather tricky question of the relationship between co-operative ownership and co-operative culture in business, asking: what are the relevant empirical experiences when researching co-operative entrepreneurship? Co-operative entrepreneurship is often understood to be about the formation of co-operatively owned enterprises. In this study, the co-operative aspects will be related to the entrepreneurial process itself, i.e. before the constitution of the actual enterprise, and not to the particular ownership structure being established.

Entrepreneurship is understood as the capacity of seeing and realising innovative business projects by combining technology, capital, production and market in new ways. In this respect it is close to the Schumpeter formulation. But more than a quality situated with the singular specially talented individual, or as a function in the development of the capitalist economy (Schumpeter 1934, 1944), entrepreneurship is here understood as a capacity that can be associated with management and leadership and most important: which can be learned.  

 

Entrepreneurship in the Mondragon Co-operatives


During the 1970=s the Mondragon Co-operative Experience developed a remarkable capacity for setting up new co-operatives and helping weak ones Aback on track@  A special department >division empresarial= was created  within the Co-operative Bank (Caja Laboral Popular)[3]. The strategy for growth and development, during that period, was to create co-operative firms in the various regions of the Basque provinces. Some 50 co-operative companies were set up or helped during those years (Ormaechea 1990), and a systematic approach to new co-operative business ventures was developed - Asocialisation of entrepreneurship@ as the method was labelled. (Ellerman 1982). By the middle of the 1980=s this strategy came to a halt, and has become replaced by one of growth through joint ventures and wholly owned subsidiaries (Clamp 1999). >Division Empresarial= ceased as a special department within the Bank in 1990, and the activities relating to enterprise and engeneering consultancy were continued in a new co-operative LKS S.Coop. During the same period the Saiolan founders started developing their method at the Politechnical School in Mondragon.

 

 

ASaiolan tries to create a dynamics that promotes professional self-motivation and gives a basis for strengthening the ability of self-government as well as developing initiatives, where a willingness to risk oneself is present. One of our motivations behind this is that, according to recent investigations,  80% of our young people have as their life goal to become functionaries. They expect security for the rest of their life and not to take responsibility.@

              Armin Isasti,  director and founder of  Saiolan,  in T.U. no.302, April 1987. (translated from Spanish)

 

The social-economic background for this new experience in the mid-1980'ies  was the economic crisis that hit Spain at the time,  with unemployment figures of more than 20% in the Basque provinces. Saiolan pursued simultaneously two aims: 1) create work by the creation of new firms, and  2) support young newly graduated students (and other entrepreneurs) in  developing  the skills necessary for transforming a business idea into a business activity. Saiolan actually means Aexperiment with work@.  The purpose was explicitly to contribute to the development of entrepreneurial culture and  counteract the wage-earner mentality prevai­ling in the higher educational milieus. With time this method has become a strategy for developing entrepreneurial ideas and energies in the region, including in the MCC-co-operati­ves.

Since the start in 1985,  Saiolan has been the >catalyser= of 48 companies that gave work to over 500 people in 1999. The unusual information here is that they have a high survival rate. Failures seem to have been screened out during the process  before they get founded.  Saiol­an is situated at the premises of the old Polytechnic al School, now Mondragon University. It has a staff of 5-7 monitors or teachers and, more or less permanently, some 25-30 students work­ing on business projects. Most of the participants are postgraduates, and a few are experienced entrepreneurs. The students are recruited yearly from all the Basque provinces.

During later years a good number of the business projects at Saiolan have been  Aspin off=s@ from co-operative firms within the Mondragon Cooperative Corporation (MCC), but many are >new starts= or >joint ventures= with firms not directly affiliated with the MCC. 23 companies are run by previous postgraduates (Table 1). In all 185 have worked at Saiolan, of which 88 have created or been the co-creator of a new business venture. The new business >typically= begins as a small enterprise with only the entrepreneurial team working, and eventually grows. In the case of >joint ventures= the entrepreneur or team of entrepreneurs, who was/were trained through the development of the business project  normally  become the manager(s) of the new venture. Some are formed legally as co-operatives, but it is not many. The law on co-operatives requires at least five people to start as a cooperative, and many of the Saiolan-projects initiate their business with fewer people, and then get settled in another enterprise type. .  

 

 Table 1: Number of firms started from Saiolan 1985-1999, and number of employed. Ultimo 1999.

 

Entrepreneur

 

Firms generated in Saiolan

 

Number of work posts,

ultimo 1999

 

Post graduates

 

             23

 

                  128

 

Experiences entrepreneurs

 

              5

 

                    61

 

In collaboration with other firm (spin off)

 

             10

 

                  217

 

Diversification of existing firm

 

             10

 

                  102

 

Total

 

             48

 

                  508

Source: Saiolan

 

The educational/entrepreneurial  process  

The educational program at Saiolan lasted between 18 months and 2 years the first years of existence, but in later years the period has been reduced to  in average 12-14 months for a project to become developed. Technically it is a postgraduate program after a completed university level degree. Through the program the entrepreneurship students learn to identify suitable business ideas, choose one and develop it into a real busi­ness project. The more traditional conceptualisation of  education does not work for this type of activity. Entrepre­neurship is learned in practice, and de­pends strongly on the capability of self-learning.

The Saiolan approach appears as one of the possible frames for taking the first real steps in a learning environment rather than on the market as is the case for most entrepreneurs­hip learn­ing. The following characteristic of the Saiolan educational program con­centrate on the co-operative aspects that I have found striking compared to other programs of entrepre­neurial training.

New business idea is a common concern.  Contrary to many entrepreneurship courses, most of the students at Saiolan do not bring with them a specific business idea. The business idea is considered something which is developed in a social process. It is a shared responsibility to find appropriate business ideas. Both personal at Saiolan, contacts in local business and people from other institutions may contribute to this process. Of the 48 successful business ideas, half have been generated in Saiolan and half by students or existing enterprises. As the method becomes known, relatively more ideas are provided by people and busi­nesses from­ outside Saiola­n.  


Work in teams Saiolan develops managers/owners of new enterprises or business units who have been exposed to co-operation towards the inside/internally in several aspect­s. Part of the educational tasks occur as work in groups. It is quite common that 2 or 3 join to develop one business idea.  Moreover, the 16 students which start the program at the same time have their desk, and do their work in the same big room. In this sense it approaches more a common work­place. They are not placed in individual offices, as would be the case in e.g. science parks.

Openness. Exchange of knowledge and information of relevance to the business projects is encouraged as a part of developing fruitful relations of collaboration. The fear and risk of some­body stealing your idea or other forms of distrust is handled in an open and a social situation and not behind locked doors.

This point may be helped by the fact that Saiolan is situated in an educational context, and not in a private, for-profit consultancy milieu. Moreover Saiolan is situated in the heart of a co-operative business milieu with a tradition of a high degree of openness and exchange of knowledge and innovative ideas, with relatively easy access to information, and in the Politechnical School where many technical projects have been developed through the years on petition from the industrial co-operatives. 

Co-operation towards the outside is favoured. Very early in the educational program the students have to contact and link up with existing enterprises within the field of the chosen business idea. They learn how to cope concretely with competition and co-operation within a specific business sector while they are at SAIOLAN. They learn to use available centres of knowledge and information for their project, and thus gradually establish a useful network of knowledge, contact, and co-operation for their specific business idea, parallel to the theoretical development of the business project.

Monitoring or tutoring is carried out with a co-commitment to the success of the chosen business idea. The >property right= to the idea, however, remains with the student, or is shar­ed with a company in the case of a joint venture. This function differs both from classical university tutoring and normal business consultancy.

It is a training as a generalist not a specialist. The educational program on a whole can be said to have a holistic approach. The coming leaders of a new venture are expected to have both the technical, and the economic, and the organisational insights necessary to understand and run the planned enterprise, and they have become trained in making and using a  development strategy for their business venture as well (>plan de gestion=). 

The Aexam@ consists in actually getting the new business venture going. There is no formal exam to mark the end of the program. The aim is to create enterprise leaders with entrepreneurial capabilities, not professional project makers, nor firm owners afraid of growth.

 

Phases in the educational process


The mission statement of Saiolan underlines the individual attention to the particular entrepreneur and the project idea all the way through to its realisation as a new business. Even so certain tasks, processes, and phases are identified as common to all. The process roughly has three phases, whose duration vary with the characteristics and dynamics of the particular project. After a few months during which the entrepreneur students develop a study of a particular technology, types of products, or economic sector, a specific business idea is chosen by the student, the Saiolan tutors, and eventually local business people together. Then the student and the project are assigned a tutor from Saiolan, and through the next year and a half a prototype of the product is elaborated, a feasibility stud­y, and a business plan. During this phase the student might take specific courses in order to acquire the necessary technical competence for the business in question. This phase may last 1 year. Before finally starting the business formally  the prototype product is tested in the market.  

 

Table 2:  The sectors and numbers of firms which originated in Saiolan and were functio­ning by the end of 1996

 

                                                Period of start-up

Sector of start-up

 

1986-1990

 

1991-1995

 

1996

 

Total

 

Information technology

 

       1

 

      3

 

      1

 

      5

 

High technology products

 

       7

 

      1

 

      1

 

      9

 

Service, consultancy, educative, artisanary

 

       2

 

     16

 

      2

 

     21

 

Total number of start-ups

 

     10

 

     20

 

      5

 

     35

Source: Saiolan

 

The types of enterprises which have originated from Saiolan are shown in Table 2. The range goes from Information technology to production within metal works and high technology to various business services, artisan production, and educational and consultancy services, as well as firms within the social enterprise sector.  An interesting type of new firm projects has been developed in later years. They  are community development projects which combine a commercial enterprise in the urban milieu with an artisan producer enterprise in a rural district, within the same value chain (brand of products). Another new area of projects originate in environmental concerns. Some have been constituted as co-operatives, but since many initiate their business with few people[4], most have private ownership or in the case for bigger projects: stock ownership.

 

 

 

A.. Saiolan functions in the crossroad between the firms that produce and sell their products, the research centres that contribute with their tech­nology, the Mondrag­on University and other centres of business development and consultancy, like the LKS. In synthesis, it forms an all-together which could be named Aknowledge on enterprise creation and work@, a raw material which is intangible, but maybe the most necessary one, and also the most scarce one when it comes to creating enterprises, new business opportunities and new jobs@

                                                                                                           Conference-paper by José María Ormaechea (1999)

                                                     Co-founder of the first Mondrag­on Co-operative, director of Caja Labor­al 1960-87

 

MCC and Saiolan


The MCC created a couple of years ago (1997) a fund with the purpose to give financial support to innovative initiatives within the Mondragon co-operatives.  This fund offers to cover the costs of development when member co-operatives address Saiolan with a business idea that they would like to develop into a new Aspin off@ project. In case of success of the project  the financial support will be paid back to the fund, whereas in case of failure the fund will cover the loss. This reform has made possible a very interesting innovative form of co-operation between the particular co-operative enterprise and Saiolan. Saiolan offers to select the students that will be the entrepreneurs of this project (it happens in consensus with the firm­, naturally). On its side, the firm in question, assigns a person to follow the project and accepts that these students, eventually, become the managers of this new venture in case it prospers. Saiolan commits itself to monitor the project development by assigning one or more of its tutors and teachers to participate actively in the successful development of the project until completion. In the 2-3 years, since this agree­ment has been signe­d in 1997, 6 entrepre­neurial projects in joint venture with MCC-cooperatives have been developed and beco­me new cooperative business units.

   

Community/social entrepreneurship 

Saiolan has acquired an important function locally as a place that develops new knowledge on viable projects and methods in the community. Through time it accumulates experience about conditions and methods for developing new business ventures in the region. This function was apparent when I did my first study in 1990 but has since become much more pronounced. The Saiolan approach has been influential on the way the public authorities in the province look at promotion of and support to the creation of new employment. Since 1997 the ideas and methodology of Saiolan have become integrated as one of the ways that the MCC officially promotes for the creation of new jobs in the co-operatives. Sociologically speaking  one might characterise the work of Saiolan as a form of   >community entrepreneurship= and its personnel as  >social entrepreneurs=  in the sense that their work can be seen as contributions to the  formation of entrepre­neurial energy and processes for local business at community level. (Johannison 1986 and 1989­).   

The role of the Saiolan Centre in generating a viable business idea, the participation of the mon­itor in the process, and the combination of education and enterprise generation are the three most spe­cific features of this methodology. These features are not necessarily specific to a co-operative development, but it happens to be very much in the tradition of the Mondragon Co-operative Experience which time and again has generated new organisational ideas from the educational sphere, and whose instigator, the priest Don José Arizmendarietta emphasised and practised the constant close connection between learning and work -i.e. between educa­tion, enterprise, and com­munity.  In this sense the Saiolan Centre is one more result of ideas realized by people who are socially and economically embedded in a co-operative business culture. It gives substance to a hypothesis that under conditions of a  right mix of both social and economic cultural forces (competences and wills) co-operative values in business are not only no hindrance for success of a combined efforts of business economic growths and social developmental concerns, practising these values even facilitate such development, also in year 2000.   

 

 

 

REFERENCES

 

Clamp, Christina: AThe internationalization of Mondragon@. Paper presented at the ICA research conference in Quebec 1999.

Ellerman, David (1982):  AThe socialization of Entrepreneurship. The Empresarial Devision of the Caja Laboral Popular@. Sommerville M.A.; U.S.A.

Ellerman, David (1984): AEntrepreneurship in the Mondragon Co-operatives@ Review of Social Economy. Vol. XLII, :272-294.

Gartner, W.B (1985): AA conceptual framework for describing the phenomenon of new venture creation@. Acadamy of Management Review. Vol.10, no.4.

Jakobsen, Gurli (1990):  Uddannelse i Virksomhedsivœrksœttelse. En analyse af uddannelsesmodellen på Saiolan-Centret, Mondragon Spanien. Copenhagen Business School  Copenhagen. 62 pages.

Johannison, Bengt(1986):  AA territorial strategy for encouraging entrepreneurship. Progress report from field research into stagnating Swedish communities@ Paper presented in Masachusetts, USA

Johannison, Bengt and Nilsson,A. (1989): ACommunity Entrepreneurship - networking for local development@ in Journal of Entrepreneurship and local Development. 1(1):1-19.

Kent, C.A, Sexton, and Vesper (eds.) (1982): Encyclopedia of entrepreneurship. Englewood Cliffs: Prentice Hall.

Larrañaga, Jesus (1998):  El cooperativismo de Mondragon. Interioridades de una Utopia. Azatza (Otalora). Bilbao

Ormaechea, José María (1997) . Orígenes y Claves del Cooperativismo de Mondragón Otalora, Aretxabaleta.

Ormaechea, José María (1999):  AEl Empleo en la AExperiencia@ Cooperativa de Mondragón@. Paper for conference in Colombia,  January. (manus)

Saiolan (1997): ACentre for Forming Entrepreneurs and Development of new Business Activiti­es@ Mondragon. (manus)

Schumpeter, Joseph (1983/1934): Theory of Economic Development. New Brunswick, New York 

Schumpeter, Joseph (1975/1942): Capitalism, Socialism, and Democracy. Harper and Row publishers. New York.

Shapiro, A and Sokol, L (1982):  AThe social dimensions of entrepreneurship@ in Kent, Sexton and Vesper (eds). Encyclopedia of entrepreneurship. Englewood Cliffs: Prentice Hall.

 


[1]  This paper draws on the conclusions from an earlier study of Saiolan (Jakobsen 1990) which have been evaluatd and compemented in view of new information from later revisits - the latest one in 1998. A shorter version has been published in Review of Interna­tional Cooperation, vol. 93. No.1, 2000.

 

[2]  MCC  is a corporation of more than 100 co-operatives within machine-industry,  domestic appliances, daily consumer goods distribution, IT- technology, finance, education and rese­arch. It employs almost 50.000 people. MCC originates and has its center in Mondragon in the Basque country in Spain, but has to-day affilated co-operatives also in Catalunia and Valencia, and has acquired or opened enterprises and filials  in various European, Asian and Latin American Countries.

[3] Caja Laboral Popular is a cooperative bank whose membership is shared between the co-operatives in the MCC and the worker-members of the bank. The elected board is composed of 50% representing the cooperative member-firms and 50% representing the members working in the bank. 

[4] Often the new firms start out with less people than would be required by law to set up as a workers= cooperative legally.