Cooperative Values in Internationalized Operations
Article first published online: 2 JAN 2013
© 2013 Wiley Periodicals, Inc.
Special Issue: Cooperative Values in Internationalized Operations
Volume 29, Issue 1, pages 1–2, Winter 2013
How to Cite
Nilsson, J. and Ollila, P. (2013), Cooperative Values in Internationalized Operations. Agribusiness, 29: 1–2. doi: 10.1002/agr.21322
- Issue published online: 10 JAN 2013
- Article first published online: 2 JAN 2013
This special issue of Agribusiness, An International Journal, contains a selection of articles that were presented at the conference “Cooperative Values in Internationalized Operations” held in Helsinki, Finland, June 14–16, 2012, under the auspices of eRNAC (Electronic Research Network of Agricultural Cooperatives).
The theme of this journal issue is the same as the theme of the conference. The international competition in agrofood industries is intensifying; so agricultural cooperatives have to change their strategies. The marketing strategies that are well suited to the new competition require changes in governance and financial solutions, member relations in both commercial and organizational respects, and structural changes such as mergers and acquisitions. The articles presented in this issue cover a wide range of these issues. At the same time, the various articles are closely linked to each other so they constitute a coherent whole.
Fabio Chaddad and Constantine Iliopoulos focus on the changes that agricultural cooperatives are undergoing in relation to governance, board composition, and ownership structures. Due to changing market conditions, cooperatives are becoming increasingly large and have more complex business operations, which mean increasing needs for quick and powerful decision making. Hence, the farmer members and their elected representatives tend to delegate more power to the salaried management. The authors present theoretical explanations for the mechanisms behind this development.
Cooperatives’ market orientation versus their production orientation is treated in the contribution by Qiao Liang and George Hendrikse. The authors present a theoretical account of what happens when one of the members of a cooperative serves as the CEO compared with when the CEO is an outside professional. The system with member CEOs is commonplace in Chinese agricultural cooperatives. As the two types of CEOs have different incentive structures, one would expect them to execute this task differently, depending on the circumstances.
The topic of different organizational setups for agricultural cooperatives, as well as members’ reactions to these organizational structures, is the focus for Andrei Cechin, Jos Bijman, Stefano Pascucci, and Onno Omta. On the one hand, farmers may be committed to their cooperatives if these are well adapted to the conditions of the farmers, thereby providing member influence and social relationships. On the other hand, the farmers may appreciate if their cooperative is well adapted to the buyer markets, as that gives an opportunity to get profitable business for the benefit of the farmers. These two types of commitment may be related to the cooperative's governance structures in relation to the farmers. Governance may take the form of market relations, hierarchical structures, community, and democratic control. The hypotheses concerning links between the commitment types and the governance classes are tested on a sample of Brazilian cooperative members. The results show that both market and hierarchical governance is positively related to both types of commitment. If the cooperatives’ relationships with members are characterized by community or by democracy, there is commitment to collective action, whereas the relations with customer-orientation commitment are not clear.
The separation of ownership and control gives rise to control and influence cost problems. However, in some Brazilian cooperatives this is not the case—decision rights have been delegated to certain members. Davi R. de Moura Costa, Fabio Chaddad, and Paulo Furquim de Azevedo investigate the determinants of separation between ownership and decision management. Eight theoretically underpinned hypotheses are tested empirically through a survey among 77 Brazilian cooperatives. The findings indicate that the difference in governance models is related to the practice of patronage dividend distribution, the intensity and efficacy of monitoring by the board, and the potential private benefits of control. Other factors are market uncertainty, and cooperative size and location.
As competition is becoming increasingly intense, many agrofood cooperatives are experiencing problems in remaining competitive. In the hope of strengthening their organizations, a number of cooperatives have abandoned the traditional organizational form and have chosen other cooperative models involving more individual ownership, external finance, and other nontraditional measures. Nikos Kalogeras, Joost M.E. Pennings, Theo Benos, and Michael Doumpos present an empirical analysis of whether the new cooperative models perform better than the traditional ones. The supporting data originate from 14 major agricultural cooperatives in the Netherlands during the period 1999–2010. The focus is on the most prominent financial ratios. The authors conclude that there is no clear evidence that the financial models used to attract more member investments or external equity perform better than the traditional models. Hence, the cooperatives’ ownership structure is not a decisive factor for their financial success.
Sebastian Hess, Lena W. Lind, and Se Liang investigate the members’ reactions to a cooperative conversion. The case concerns a Swedish slaughterhouse cooperative that was converted into a hybrid form, with ownership split between two societies of farmers and external investors. The farmers have the choice of delivering to their former cooperative or to various investor-owned firms. Based on empirical data collected among pig farmers, the authors find that a group of farmers perceive that their former cooperative has some cooperative traits even after the transition. However, most farmers think that the hybrid cooperative has no ability to reduce the farmers’ transaction costs.
The fact that cooperatives have member control is sometimes said to be a disadvantage in the competition with investor-owned firms, as there are high costs. Others say that the member democracy is a competitive strength: The cooperatives thereby act in the interests of the farmers and the farmers are more strongly linked to their processing firm. Daniela Maria Pozzobon and Decio Zylbersztajn address the issue of democratic costs both theoretically and empirically. The empirical data were collected through a survey of 12 Brazilian cooperatives. The authors conclude that many cooperatives have unnecessary costs for their member democracy without reaping any corresponding benefits. For example, they tend to have boards of directors, which do not represent the membership well, and are unreasonably large. There are also problems with under- and overrepresentation in many instances.
The internationalization of Agribusiness puts major strain on the operations of agricultural cooperatives. The articles presented in this journal issue cover a wide range of measures that cooperative firms are undertaking to maintain their strengths in the increasingly competitive environment. These measures concern, among others, financial solutions, management structures, member control, board functioning, and investment strategies. Such reorganizational measures may imply that some attributes of traditional cooperative organizational form are replaced by attributes typical of investor-owned firms. Thereby new cooperative models are evolving. The cooperative business form is becoming increasingly diverse.