Social Capital and Financial Capital in Chinese Cooperatives

Abstract

For the rural districts of China to get an economically and socially sustainable development, the strengthening of agricultural cooperatives is essential. This study aims at presenting a model about how social capital within the cooperatives can be converted into financial capital to the benefit of both the cooperative and the members. Case studies of four cooperatives serve as illustrations. There is a large amount of social capital in these cooperatives, with their operations simple enough to allow members to be involved. The supplying members (common members) are few and well acquainted with one another. They have close relationships with those individuals (core members) who have the dominating ownership and who run the cooperatives. These case cooperatives were chosen because they have innovative financial solutions. For example, members let their private assets and those of the cooperative constitute joint collateral when money is borrowed from financial institutions. In another case, the members trust each other sufficiently for there to be a mutual fund that lends money both to members and their cooperative. Yet another model involves members having low demands concerning capital returns when lending to their cooperative.

The impact of the cooperative structure on organizational social capital

“…A decentralized, fine-grained structure of small-scale branches originally kept the bank close to its members, but over time its increasing size was accompanied by internal centralization and the loss of local autonomy. These results are consistent with the theoretical assumption that solving collective action problems is easier in smaller and relatively homogeneous groups and communities, as interaction is more direct, face-to-face and therefore of better quality (Olson, 1965; Douglas, 1986; Ostrom, 2004), which has been confirmed in studies on cooperatives (Fonteyne, 2007; Valentinov, 2007; Majee and Hoyt, 2010; Ruben and Heras, 2012; Jones et al , 2016; Yu and Nilsson, 2019). The empirical evidence, in our case, showed that the overall cooperative score on levels of organizational social capital increased where the size of the group decreased.…”

Does Participation in Agricultural Cooperatives Affect Farm Sustainability? Empirical Evidence from Taiwan

“…Finally, we provide additional evidence justifying the long-run sustainability of agricultural cooperatives. Recent literature has studied the enduring survivability of these organizations based on institutional theories, organizational adaptions, and social capital [33][34][35]. We argue that farm profitability is an especially useful proxy for sustainability, as it is a static indicator that considers both revenues and costs for producers.…”

Reducing the Risk of Co-Optation in Alternative Food Networks: Multi-Stakeholder Cooperatives, Social Capital, and Third Spaces of Cooperation

“…While cooperatives with far-reaching horizontal and vertical integration may be more efficient due to economies of scale, this model does not seem to result in higher social capital within the membership [23]. When cooperatives begin to replicate the strategies of investor-owned firms, their members no longer feel as associated with them [10,22,24]. In turn, the geographical and social proximity among members, and between members and leadership appears to foster social capital [22].…”

“…The literature indicates how the performance of farming cooperatives is strongly affected by their ability to establish and maintain trust, confidence, and commitment among members [6]. For this reason, many authors agree that, since by design, agricultural cooperatives are network organisations formed with the motivation of mutual benefit and the expectation of collective actions among members, they are highly dependent on social capital [7][8][9][10][11]. In turn, lack of trust, reciprocal relationships, transparency, and other elements of social capital can lead to failure of the cooperative [11].…”