ENHANCING COOPERATIVE PERFORMANCE THROUGH GOOD COOPERATIVE GOVERNANCE AND MEMBER PARTICIPATION: IMPLICATIONS FOR INCLUSIVE LOCAL ECONOMIC DEVELOPMENT

Abstract

Cooperatives are not only business entities but also member-based economic organizations rooted in solidarity, democratic participation, and equitable benefit distribution. In the Indonesian context, cooperatives are expected to contribute to inclusive local economic development by improving members’ welfare and strengthening community-based economic activities. However, such contributions depend substantially on the quality of cooperative governance, member participation, and cooperative performance. This study examines the effect of good cooperative governance on cooperative performance and member participation, as well as the effect of member participation on cooperative performance. Using a quantitative explanatory approach, data were collected from cooperative managers and members through a questionnaire measured on a five-point Likert scale. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS. The results show that good cooperative governance has a positive and significant effect on cooperative performance and member participation. However, member participation does not significantly affect cooperative performance. These findings indicate that governance is a key factor in improving cooperative performance and encouraging member involvement. Nevertheless, member participation must be substantive rather than merely administrative to contribute meaningfully to cooperative performance. This study contributes to cooperative governance literature by emphasizing the importance of governance quality in strengthening cooperative organizations and provides practical implications for improving cooperatives as instruments of inclusive local economic development.