The nature of the cooperative is viewed as a composite picture of three facets: (1) the unique structure, organization, governance, equity financing, and operation of cooperatives; (2) the market performance of cooperatives; and (3) the relations of cooperatives to other market participants through their roles in transaction governance. The third facet is the focus of this study, through the lens of transaction cost economics. The results complement the first two facets to present a clearer picture of the nature of the cooperative. Cooperatives adapt to transaction governance structures for economizing on transaction costs, just as other types of businesses do. The unique nature of the cooperative is also reaffirmed. Dairy cooperatives are used as an example. Other kinds of cooperatives are briefly assessed as “variations on a theme.”