Avoiding lock-in: Cooperative creameries in Denmark, 1882-1903

Abstract

The paper investigates the initial phase of the cooperative organisation of agricultural processing firms in Denmark. It argues that the variations observed can be explained within the framework of the theory of industrial organisation. The focus is on the success of cooperative creameries. In 1903, twenty years after the first establishments, the owners of about 80 per cent of all Danish milch cows supplied their product to a cooperative. The success of cooperatives within other fields of production was smaller by comparison. The point is that dairying cooperatives, given the existing technology of gathering information and of preserving and transporting a perishable product, were ideally suited to overcome the problems of potential lock-in and of asymmetric information.

Strategies and effects of milk producers' organisations in the Czech Republic

“…The specific characteristics of the dairy sector have influenced the governance of the dairy sector and in some cases; they positively contributed to the development of dairy cooperatives (Henriksen 1999). The dominant role of cooperatives in some industries and the co-existence of cooperatives and investor-owned companies in others (Hendrikse 1998) suggest that cooperatives must have comparative advantages in some dimensions that can dominate or at least outweigh their disadvantages in others (Bogetoft 2005).…”

The evolution of the Dutch dairy industry and the rise of cooperatives: a research note

“…Ireland (O'Grada, 1977) and Denmark (Henriksen, 1999). In the Dutch case, the co-existence of private and cooperative factories, however, has not been universal but restricted to the provinces north of the Rhine, where almost 30 percent of all factories that ever existed were private (Willemsens and De Wit, 1995).…”

“…Economic historians have extensively studied the dairy sector, because few other sectors have shown such a rapid and wide diffusion of cooperatives (O'Grada, 1977;Van Zanden, 1994;Henriksen, 1999;O'Rourke, 2006). Among historians, consensus has grown that the success of cooperatives can be attributed mainly to their capability to solve the 'transactional' problem between farmers and factory owners.…”

Exploring the Sustainability of the Cooperative Model in Dairy: The Case of the Netherlands

“…The rise of dairy cooperatives in Europe has been explained by both technological and institutional innovations [1][2][3]. The crucial technological innovation has been the mechanical cream separator, invented in 1878, which allowed butter to be produced more efficiently on a scale that exceeded the individual farm.…”

“…Why would farmers not sell their milk to private factories? Economic historians have claimed that the rise and rapid growth of cooperatives in the dairy industry was a response to the need to reduce transaction costs and strengthen bargaining power [1][2][3][4]. Selling to private factories entailed high transaction cost due to the high risk of opportunistic behavior by those buyers.…”