We compare the strategic behavior of cooperatives to alternative organizational forms (for-profit and state-owned organizations) in the pursuit of community-based benefits beyond profits. Specifically, we examine credit cooperatives, where clients (borrowers) are owner-members, and analyze their responses to the increased digitalization of the banking sector. We hypothesize that client ownership amplifies the importance of in-person relational channels, prompting cooperatives to retain more physical branches even as digitalization accelerates. We also posit that the propensity of cooperatives to keep those branches increases in vulnerable markets and when cooperatives are organized as single vs federated organizations. To test our hypotheses, we focus on the context of credit provision in Brazil, where cooperatives have significantly increased their market share in recent years. Our analysis tracks the presence of 46,143 bank branches nationwide from 2012 and 2021 and their reactions to a regulatory change that accelerated digitalization in the financial sector. Consistent with our predictions, credit cooperatives keep a stronger physical presence than other organizational forms following the regulatory change, particularly in vulnerable areas. This strategic response to the digitalization shock enables both single and federated cooperatives to leverage their relationship-based business models effectively. However, contrary to our expectations, cooperative federations expand more than single ones during this period, benefiting from their improved scale and governance structures designed to support new entries. Overall, this study sheds light on the role of cooperatives as a relevant yet understudied organizational form in which clients exert a more pronounced strategic influence in comparison to other organizational forms competing in the same markets, yielding critical implications for organizational strategy and value allocation.
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