The Boundary of Agricultural Marketing Cooperatives in Africa: A Conceptual framework and empirical evidence from Ethiopia

Abstract

Informed by the boundary of the firm, this paper explains the concepts, determinants and importance of boundary in cooperative organizations. In a marketing cooperative context, we define boundary as the type and number of marketing activities or services that a cooperative organization provides to its members. Using a mix of theory from transaction cost economics, industrial organization and collective actions, the conceptual analysis predicts the importance of the type of goods (being a club good or not) the cooperatives generate to their members, as opposed to market imperfection per se, to define a competitive boundary. We then empirically tested if the observed weak performance of marketing cooperatives in Africa is explained by the strategic failure of engaging in markets where they do not have the competitive and comparative advantages using a unique data set from Ethiopia. The empirical tests proofed that the competitiveness of a cooperative in attracting and committing its members is positively and significantly related to the likelihood of a cooperative providing a club good. However, significant number of cooperatives in Ethiopia engaged in services for which the markets are not convincingly imperfect. Furthermore, they participate in markets that generate public goods rather than club goods. Acknowledgement :