A Study on Determinants of Performance of Contract Farming by Agricultural Cooperatives

Abstract

Purpose - This study examines the factors that influence the performance of contract farming by agricultural cooperatives from the agency theory and resource-based view of the firm. Design/methodology/approach - This study collected 1,090 data related to a sample of contract information between agricultural cooperatives and producers from national agricultural cooperatives federation. In order to examine the performance of contract farming, we use the multiple regression analysis. Findings - Incentives may reduce agency problems by increasing producers’ motivation and discouraging their opportunistic behavior. Total asset size and education expenses function like resources that lessen the risks coming from environment uncertainty, and also facilitate the contract farming between producers and agricultural cooperatives. Research implications or Originality - By analyzing the factors that influence on the performance of contract farming between producers and agricultural cooperatives, we propose that incentives, and resources may improve the performance of contract farming between agricultural cooperatives and producers. Overall, the contract farming can co-create the economic efficiency and effectiveness while minimizing risks and uncertainty.