On the performance of worker-managed firms: Does participation only exert “technical” effects?

We consider those studies of worker-managed firms that estimate production functions augmented to include indexes of worker participation. We argue that, when output is measured by value added, participation can affect output not only via technical effects, as usually interpreted, but also via distinct economic effects. We formalize a situation in which the choice of product type and the expected profitability of the firm depend on the amount of collective reserves and the proportion of workers that are members.