This special issue of Journal of Rural Cooperation has its origin in an eRNAC
(electronic Research Network of Agricultural Cooperatives) conference held in
Helsinki, Finland, June 14-16, 2012. The general theme of the conference was
Cooperative Values in Internationalized Operations. The operations in the
agro-food industry are becoming so large that operational areas grow larger
than national borders. Many agro-food firms are global. Agricultural
cooperatives are obliged to follow the development. However, cooperatives’
internationalization turns out to be problematic. How to deal with members and
non-members in different countries? Who is entitled to the residual? Are old
principles such as equal treatment and democratic decision-making still
applicable?
In the process of internationalization the relations between various actors in
the cooperative organizations come into focus. In addition to more
heterogeneous membership, relations between members and managers and
between members and internal as well as external investors financial issues
become more complex. Not all those conflicting interests can be managed
through economic arguments. Also social factors play a role.
Daniela Maria Pozzobon, Decio Zylbersztajn, and Jos Bijman analyze
decision-making relations between members and managers. Their starting
point is that when democratic costs increase, agency costs of monitoring hired
management decrease. The cooperative members’ active participation reduces
the costs for monitoring the management. This argument also functions other
way around. The research question is: How is a cooperative’s ability to control
both democratic and agency costs related to the level of member participation?
One finding is that cooperatives are more inclined to reducing the opportunity
agency costs (member participation) rather than opportunity democratic costs
(e.g. incentive payments to the managers).
The horizon problem’s influence on cooperative financing is analyzed by
Murray Fulton and Konstantinos Giannakas. The horizon problem has a
direct connection to the open membership policy. Upon the establishment of a
cooperative the first generation of members may not have an incentive to support the next generation through an open membership policy. The first
generation may want the second generation to invest more than they have done
themselves. Even though there would be an incentive to restrict new members,
the vaguely defined property rights may, however, make an open membership
policy plausible.
The horizon problem also plays a role in Jeffrey Royer’s analysis of why
cooperatives are seldom integrated in down-stream value-added markets.
Royer presents a wide range of reasons why access to capital, characteristics in
cooperative decision-making and cooperative managers’ behavior prevent
cooperatives from expanding their activities to value-added markets.
Cooperatives’ limited access to equity capital together with memberships’ riskaversion
seem to act as barriers to expansion in down-stream activities, which
usually are more capital intensive than up-stream operations. Royer suggests
that “member investment in food and agribusiness stocks may provide an
effective way to hedge against business risk while capturing some of the
benefits of retained ownership without an extension of ownership interest.”
Gregory McKee and Ryan Larsen focus on cooperative members’ and
managers’ decision-making concerning financing issues. If retained patronage
refunds can be regarded as a primary source of capital, the question arises how
much to pay to members and how much to reserve for future investments in the
cooperative. This issue may create conflicts between members and the
management. The authors use member-controlled and manager-controlled
variables to analyze the effect on risk, debt and investment behavior. They find
that relatively small cooperatives have a larger potential to improve their risk
management and optimal borrowing.
Fabiana Cherubim Bortoleto and Davi Rogério de Moura Costa
examine the meaning of loyalty and social responsibility to agricultural
cooperative members. The starting point is the notion that members’ loyalty
towards their cooperatives is crucial for cooperative success, and social
responsibility is an important factor in increasing the cooperatives’ value from
both members’ and external parties’ point of view. The data originates from a
sample of Brazilian cooperatives. Results indicate that better capacity to
provide services increases members’ loyalty. However, no significant
relationship between social responsibility and loyalty is found.
Daniel May investigates whether also non-economic drivers influence
farmers’ incentives to cooperate. He compares farmers’ incentives to cooperate
prior to a major policy reform (stable business environment) and their
incentives after it (turbulent business environment). Day finds that the noneconomic
drivers influencing willingness to collaborate are different in a stable
business environment than in a turbulent one. In a pre-reform environment clarifying joint business goals and objectives influenced to joining together, as
well as cooperative being a means to be in a closer contact with suppliers and
buyers. In post-reform conditions such factors as cooperation as a means of
maintaining or supporting farming life style become important.
Tursinbek Sultan and Axel Wolz compare the development of agricultural
cooperatives in China and Vietnam after the decollectivization. Compared to
the Western world, the development of cooperatives has been different in
socialist and former Soviet Union countries. The authors provide a description
about newly established cooperatives as well as converted state farms in the
environment of farmers’ reluctance and local authorities’ control. Despite of
cooperatives’ relatively small role their importance in securing both up- and
downstream markets is expected to increase.
Writers in this issue: Jerker Nilsson, Petri Ollila, Daniela Maria Pozzobon, Decio Zylbersztajn, Jos Bijman, Murray Fulton, Onstantinos Giannakas, Jeffrey Royer, Gregory McKee, Ryan Larsen, Fabiana Cherubim Bortoleto, Davi Rogério de Moura Costa, Daniel E. May, Tursinbek Sultan and Axel Wolz.
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