Conceptualisation of family farms’ flexibility

Agricultural enterprises in transition countries face dynamic changes in the prevailing economic, legal and political conditions. The success of an enterprise depends on its ability to adjust its farming system in response to these changing conditions. To meet this challenge, flexible and adaptable production technology is required. Thus, the farm’s choice of technology is an important decision which determines its future performance. Although the concept of a firm’s flexibility is widely analysed in microeconomics literature, there is no comprehensive framework to facilitate the analysis of family farms’ flexibility, especially considering market imperfections and other obstacles associated with the transition process. In this paper we formulate the theoretical framework for flexibility analysis in order to investigate the impact of farm-specific characteristics on optimal flexibility design and to explain the differences between farms using different production technologies. In a simplified formal model, a competitive risk-averse firm producing one product is assumed to face fluctuating demand under uncertainty. By choosing the level of flexibility, the decision-maker determines the technology of the firm, expressed by the cost function. The optimal level of flexibility will be found by backward induction in the two-stage decision-making process, including ex ante technology decision and ex post output level decision. Using comparative statics and existing theoretical literature, some hypothesis about the relationship between flexibility and other firm characteristics will be formalised. Some possible model extensions that account for specific characteristics of the family farm business in transition countries, as well as future empirical analysis are discussed.flexibility, output price risk, family farms, Farm Management,

Farm Heterogeneity and Efficiency in Polish Agriculture: A Stochastic Frontier Analysis

This paper deals with the estimation of a random coefficient model. The virtue of this approach is that it considers firm heterogeneity, which conventional SFA models do not. Applying the model to Polish farms, the results indicate that the conventional random and fixed effect models overestimate the inefficiency score. In addition, the reasons for inefficiency are analysed. It is shown that despite the fragmentation of Polish agriculture, there is no evidence for scale inefficiency. Moreover, inefficiency could partly be attributed to factors that affect management input and requirements on farms.SFA, random component model, Poland, agriculture, management, Productivity Analysis,

Incentive Compatible Pricing and Quality Adoption: The Case of the Polish Dairy Sector

We construct a model to identify determinants of the diffusion rate of standards in a food chain. We argue that adoption decisions in the food chain are determined by farmers and processors economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors.product quality, standards, EU enlargement, industrial organization., Industrial Organization, Livestock Production/Industries,

Farm Heterogeneity and Efficiency in Polish Agriculture: A Stochastic Frontier Analysis

This paper deals with the estimation of a random coefficient model. The virtue of this approach is that it considers firm heterogeneity, which conventional SFA models do not. Applying the model to Polish farms, the results indicate that the conventional random and fixed effect models overestimate the inefficiency score. In addition, the reasons for inefficiency are analysed. It is shown that despite the fragmentation of Polish agriculture, there is no evidence for scale inefficiency. Moreover, inefficiency could partly be attributed to factors, which affect the management input and requirements on farms.SFA, random component model, Poland, agriculture, management, Farm Management,

CHAIN QUALITY MANAGEMENT IN CO-OPERATIVES

This paper investigates the relationship between the chosen quality strategy and the vertical co-ordination mechanism of a focal company by using new institutional economics, as well as strategic management approaches. The theoretical findings are tested using evidence from 19 of the largest Polish dairy cooperatives, surveyed in spring 2006. The results show that all co-ops recognise the changing market requirements and are treating food quality as more than plain food safety and the ability to continuously reproduce an ex ante defined set of attributes. However, compared to investor-owned dairies, co-ops are disadvantaged in quality-based competition due to their lower flexibility and access to financial and qualified human resources. To overcome this intense competition, co-ops modify their production profile, which leads to market segmentation. Moreover, the choice of quality strategy is an economic activity, guided by the co-op's profit expectations within the selected market. The chosen quality strategy determines the design of the vertical co-ordination mechanism. Thus, the higher the requirements for the final product, the further quality management systems go beyond a firm's boundaries, and the higher is the intensity of the relationships between the intermediary stages in the dairy chain.Network theory, Relationship management, Quality management, Cooperatives, Poland, Institutional and Behavioral Economics,

Explaining Quality Differences at the Procurement Stage in the Polish Milk Sector

The challenge of implementing EU quality and safety standards for food production and trading is one of the driving forces behind the restructuring of the agrofood chains in Central and Eastern European Countries (CEEC). The progress made in the compliance process not only varies amongst sectors and countries, but also among particular chains due to differences in their internal structure and strategies, and features of their political and economic surroundings. We construct a models to identify determinants of the diffusion rate of standards in a food chain under pre-accession conditions. We argue that adoption decisions in the food chain are determined by farmers' and processors' economic considerations. Factors such as pricing behavior, compliance costs and market structure, all of which influence the adoption of standards, are identified and discussed in the paper. The findings are used to test an econometric model utilizing data on Polish milk processing firms in the period between 2000 and 2002. The results indicate that input and output prices have a significant influence on the diffusion rate of standards. The dominance of large-scale holdings in the relevant procurement market significantly increases, whereas high compliance costs decrease the diffusion. Small cooperatives were found to face significant problems in procuring high quality raw materials compared to their competitors. The material in the paper will be converted into a single sheet, as recommended in the conference instructions for preparing a poster presentation. Please find attached the rough layout of our poster presentation.product quality, standards, EU enlargement, industrial organization, Livestock Production/Industries, Marketing,

Quality Management in Strategic Networks - Is there any Relevance in the Polish Dairy Sector?

The most striking consequence of recent food scares was that food quality is no longer the concern of a single firm, but instead the whole food chain has to work together in order to deliver the new quality. For the agri-food business there is evidence that the majority of these more highly co-ordinated chain organisations are organised as vertical networks. The aim of the paper is to determine the degree of influence which the chosen quality strategy exerts on the vertical co-ordination mechanism. A theoretical framework has been developed based on new institutional economics and strategic management theory. The findings are used to analyse the Polish dairy sector and elaborate on the relevance of quality management for this sector.network theory, relationship management, quality management, Polish dairy market, Livestock Production/Industries,

What does the 'New Quality' mean in view of Polish dairy cooperatives?

This paper investigates the relationship between the chosen quality strategy and the vertical co-ordination mechanism of a focal company by using new institutional economics, as well as strategic management approaches. The theoretical findings are tested using evidence from 19 of the largest Polish dairy cooperatives, surveyed in spring 2006. The results show that all co-ops recognise the changing market requirements and are treating food quality as more than plain food safety and the ability to continuously reproduce an ex ante defined set of attributes. However, compared to investor-owned dairies, co-ops are disadvantaged in quality-based competition due to their lower flexibility and access to financial and qualified human resources. To overcome this intense competition, co-ops modify their production profile, which leads to market segmentation. Moreover, the choice of quality strategy is an economic activity, guided by the co-op's profit expectations within the selected market. The chosen quality strategy determines the design of the vertical co-ordination mechanism. Thus, the higher the requirements for the final product, the further quality management systems go beyond a firm's boundaries, and the higher is the intensity of the relationships between the intermediary stages in the dairy chain.network theory, relationship management, quality management, cooperatives, Poland, Agribusiness, Livestock Production/Industries,

Quality Management in Supply Chain Networks - The Case of Poland

In this article we suggest that rising quality requirements are key factors for the redesign of food chains. We argue that the food supply proceeds through pyramidalhierarchical strategic networks coordinated by powerful focal firms. These firms choose a quality strategy and employ chain quality management concepts by exerting managerial discretion to achieve the super-ordinate network aims. We introduce and elaborate upon two types of chain quality management: strategic and operative. The theoretical findings have been tested using evidence from the Polish dairy market. Semi-structured interviews were conducted across the various hierarchical levels of the 19 largest Polish dairy cooperatives during the spring of 2006. The results show that the firms’ activities are generally aligned with current market opportunities for optimal enterprise performance. Thus, we determined that manufacturers of well-branded products create an advanced network structure and apply strategic quality management. Networks that have a focal company acting as an external customer of a processor use operative quality management. Some Polish dairies are still not embedded in any supply chain networks; no chain quality management concepts can be installed in these chains because they have no powerful focal firm.chain quality management, dairy cooperatives, network theory, Poland, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Farm Management, International Development, Livestock Production/Industries, Production Economics,

Modeling heterogeneity in production models: empirical evidence from individual farming in Poland

This discussion paper deals with the estimation of a random coefficient model. The virtue of this approach is that it considers firm heterogeneity, which conventional SFA models do not. Applying the model to Polish farms, the results indicate that the conventional random and fixed effect models overestimate the inefficiency score. In addition, the reasons for inefficiency are analyzed. It is shown that despite the fragmentation of Polish agriculture, there is no evidence for scale inefficiency. Moreover, inefficiency could partly be attributed to factors, which affect the management input and requirements on farms. -- G E R M A N V E R S I O N: Das vorliegende Diskussionspapier befasst sich mit Schätzung von Random Parameter Modellen in Rahmen von Frontier Analysen. Ein wesentlicher Vorteil dieses Ansatzes liegt darin, dass er im Gegensatz zu den konventionellen SFA die Heterogenität der Untersuchungseinheiten berücksichtigt. Die empirische Analyse bezieht sich auf landwirtschaftliche Betriebe in Polen. Die Ergebnisse deuten darauf hin, dass die konventionellen Random und Fixed Effect Modelle das Niveau der Inneffizienz überschätzen. Weiterhin wurden die Ursachen der Ineffizienz untersucht. Obwohl die polnische Landwirtschaft sehr zersplittert ist, lieferten die Ergebnisse keinen statistisch gesicherten Beweis für Vorliegen von Skalenineffizienzen. Die Ursachen der Ineffizienzen liegen dagegen in Faktoren, welche auf unternehmerische Fähigkeiten des Betriebsleiters sowie betriebsorganisatorische Aspekte zurückgeführt werden können.random component model,Poland,management,SFA,Random Parameter Modell,Polen,Management