Abstract
The value-added diversification strategy provides an option for guaranteeing the sustainability of small farms. This study examines how factors related to managerial strategy and socio-environmental sustainability influence the efficiency of diversification initiatives. For this purpose, we use a novel and unique database of value-added ventures implemented by 49 dairy farms located in northern Spain. We construct a production frontier using a Data Envelopment Analysis (DEA) model to estimate technical efficiency. The mean technical efficiency of the initiatives was 0.56 and 0.59 for the constant and variable returns specifications, respectively. Determinants of efficiency are analyzed with a two-step procedure with a double bootstrap. We find that the elaborations of more complex products other than fresh milk are negatively associated with efficiency. However, specialization in one product with different variants and direct sales both have a positive association with efficiency. In terms of socio-environmental variables, there is a positive association between efficiency and the use of quality schemes such as ‘protected designation of origin’ (PDO), the use of organic labelling and the farmer having university education, and a negative association with the percentage of family labor. Our findings support the idea that value-added diversification contributes to more resilient pathways of development and underlines the importance of good quality management of marketing and operational factors.
Highlights
The increasing market orientation of the Common Agricultural Policy (CAP) provides a role for value-added diversification strategies as an alternative for ensuring the economic viability of small farms [1]
This work sheds light on the level of efficiency of value-added ventures implemented in the dairy sector in Spain, as well as identifying a series of factors that determine this efficiency
Our results are in line with previous studies that conclude that diversification and economies of scope contribute significantly to more resilient pathways of development [1,18]
Summary
The increasing market orientation of the Common Agricultural Policy (CAP) provides a role for value-added diversification strategies as an alternative for ensuring the economic viability of small farms [1]. This is a pressing need, as illustrated by the rapid abandonment of dairy farmers in Asturias, one of the regions taken into account in this study, since the start of this century. The abandonment of agricultural activity can have social costs, such as rural depopulation, and negative environmental impacts [3,4] In this context, the efficiency of diversification initiatives could be an important condition to guarantee the sustainability (economic, social and environmental) of the farms that adopt them [5]. The question arises as to how different marketing strategies and environmentally friendly initiatives for adding value to agri-food products influence the economic success of on-farm diversification
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