Essays on the Governance of Agricultural Products: Cooperatives and Contract Farming

Dit proefschrift analyseert besluitvormingsprocedures en de toewijzing van besluitvormingsrechten in twee beheersstructuren in de landbouw sector: cooperaties en contracten. De belangrijkste onderzoeksvragen hebben betrekking op de wijze waarop zeggenschap de keten verticaal coördineert in verscheidene beheersstructuren in een transitie economie (China), en onder welke omstandigheden een bepaalde beheersstructuur efficiënt is. Het theoretisch onderzoek richt zich op de rol van de Raad van Commissarissen in coöperaties, terwijl het empirische onderzoek gericht is op de organisatorische en strategische attributen van Chinese land- en tuinbouwcooperaties en de contractuele arrangementen in de Chinese fruit- en groente sector. In het theoretisch onderzoek is vastgesteld dat de Raad van Commissarissen waarde toevoegen in coöperaties vanwege het tweemaal beoordelen van investeringsvoorstellen. Het niveau van het beoordelingscriterium is gekarakteriseerd als een strategisch substituut. Het tweede resultaat is dat Chinese coöperaties worden bestuurd door zowel kernleden als niet kernleden, waarbij relaties en capaciteiten van de bestuurders een grote rol spelen. Specifiek menselijk kapitaal, in de vorm van het bewerkstelligen en onderhouden van relaties, en toegang tot markten blijkt een grotere rol te spelen dan specifiek fysiek kapitaal om de keuze van beheersstructuur te verklaren in de huidige Chinese institutionele omgeving. In de derde plaats, vele besluitvormingsrechten zijn van boeren naar verwerkers verschoven in contracten. Kwaliteit, reputatie en specifieke investeringen door ondernemingen bepalen het aantal besluitvormingsrechten dat wordt toegewezen aan ondernemingen, terwijl marktmacht en specifieke investeringen van boeren geen rol blijken te spelen in de toewijzing van besluitvormingsrechten.This thesis studies decision making procedures and decision rights allocation of two governance structures in agricultural sectors: cooperatives and contract farming. The main research questions are how authority coordinates upstream and downstream activities within various governance structures in a transitional institutional setting (China), and under what conditions one particular governance structure is efficient. The theoretical research focuses on the role of the board of directors in agricultural cooperatives, while the empirical research focuses on the organizational and strategic attributes of Chinese farmer specialized cooperatives and the contracting arrangements in the Chinese fruit and vegetable industry. It is found that, firstly, the board of directors adds value to cooperatives because of its dual screening characteristic. The screening levels are strategic substitutes. Secondly, the Chinese farmer specialized cooperatives are co-governed by both core members and non core-members based on relations and abilities. Human asset specificity in terms of establishing and maintaining relations and access to markets seems to be more important than physical asset specificity in accounting for governance structure choice in the current institutional setting. Thirdly, under contract farming, many decision rights are shifted from farmers to firms. Quality, reputation and specific investments by firms positively influence the number of decision rights allocated to agri-business firms, while monopsony-oligopsony power and specific investments by farmers do not play a role in allocating decision rights.Yamei Hu was born in Dezhou, China on 24 January, 1976. She studied Economic and Trade English from 1993 to 1995 at Yantai University. After two years’ working experience in a foreign trade company, she went to study Economics as a postgraduate student in Shandong University in 1997. In 2000, she received her MA in Economics from Shandong University with a thesis on von Hayek’s economic thoughts. She went on to study Economics in Renmin University of China. In 2003, she defended her PhD thesis on the deregulation of China’s financial markets and received her PhD in Economics. In July 2003, Yamei joined the Ph.D. program in the Department of Organization and Personnel Management at Erasmus University Rotterdam. Her research interests cover the theory of the firm, governance structures, industrial organization, institutional changes in developing countries, and transition economics. For her PhD thesis, she focused on the governance of agricultural products and conducted both theoretical and empirical research. The research of this thesis has been presented at International Society of New Institutional Economics, Economics and Management of NETworks, International Association of Agricultural Economists, European Association of Agricultural Economies, EURESCO seminar in Chania, University of Missouri, and Wageningen University. Parts of the thesis are published already

Allocation of Decision Rights in Fruit and Vegetable Contracts in China

We empirically examine the determinants of the allocation of decision rights in the context of fruit and vegetable contracting. The main conclusion is that under contract farming, many decision rights are shifted from farmers to firms. Quality, reputation and specific investments by firms positively influence the number of decision rights allocated to agri-business firms under contract farming, while monopsony-oligopsony power and specific investments by farmers have no effect on the allocation of decision rights

Organization and Strategy of Farmer Specialized Cooperatives in China

A description and analysis of China’s Farmer Specialized Cooperatives is presented. Data is presented regarding the historical development of farmer cooperatives in China, the membership composition of a sample of 66 farmer cooperatives in the Zhejiang province, and the various attributes (governance, quality control system, and strategy) of a watermelon cooperative in this province. Many cooperatives are being transformed in organizations with a market orientation. These cooperatives exhibit substantial heterogeneity, in terms of farmers being member and skewness in the distribution of control rights. Human asset specificity in terms of establishing and maintaining relations and access to markets seems to be more important than physical asset specificity in accounting for governance structure choice in the current institutional setting