Transaction costs and inter-organizational relations between farmers and farm product buyers in Ghana

Abstract

PurposeThe purpose of this paper is to provide an understanding of what motivates farmers to participate in inter-organizational relationships with farm product buyers. Interest in inter-organizational relationships in the Ghanaian agri-food sector has been stimulated in recent years by policies seeking to reduce farmers’ market risks while improving buyers’ access to commodity inputs. The decision of how to sell farm produce is an economic imperative for the farmer; therefore, the coexistence of spot markets and inter-organizational relationships suggests that the farmers who use them must be having some gains from them.Design/methodology/approachThis study employed binary logit regression using both qualitative and quantitative data and the transactions cost theory to understand the Ghanaian farmers’ motivation for participating in inter-organizational relationships.FindingsThis study found that a farmer having better information regarding product buyers’ needs was an important motivator for participation. The farmers’ certainty about the price they would get and the quantity they would sell were also major factors that motivated farmers’ participation. Again, the motivation to engage in inter-organizational relationships with processors was also influenced by the nature of the crop. Fruit farmers, for example, were 3.7 times more likely to participate in these relationships than non-fruit farmers.Research limitations/implicationsThis study considered analysis at the farmer level. However, some farmers produced multiple crops. This means that the farmers who participate in inter-organizational relations with buyers for one crop enterprise may be nonparticipant with the other crop(s). Future studies could target analysis at the crop level while accounting for the associated transactions costs.Originality/valueThis study explores how a combination of transaction costs theory and the different crops that farmers produce explains farmers’ decision to participate in inter-organizational relationships.