Survey evidence of members’ willingness to invest in agricultural hybrid cooperatives

Abstract

Abstract Agricultural producer organisations face tight competition in global food and agricultural markets. The opportunities for cooperatives to acquire growth capital are restricted to member contributions, which poses a financial handicap in competition against investor-owned firms. Innovative cooperative structures have emerged as a response to the competitive pressures. For many, gaining access to growth capital from investors has been the reason for departing from the traditional cooperative organisational structure. This study examined whether farmers, as members and owners of agricultural producer cooperatives, are willing to invest in cooperative growth. By using the members of two large Finnish meat producer cooperatives as a sample we were able to utilise the variability in investor-owned firm structures, in which the members have both direct and indirect ownership in two layers of the agricultural producer organisation. A questionnaire study was conducted, including a contingent rating task in which farmers stated the point in the hybrid organisation chain at which they preferred to invest. The results indicated that the majority of farmers were willing to invest and the tendency increased with farm size. The average investment sum is considerable relative to the current capital contribution of an average member. The most preferred form was traditional cooperative capital, while a comparison of investment alternatives suggested that farmers are not yet receptive to new transferable cooperative shares. Retaining control appears important to producers. Farmer commitment erodes when the firm is in financial difficulties. Less member capital is available to save the firm from a cash crisis compared to a scenario of investments improving competitiveness.