The Boundary of Smallholder Producers’ Cooperatives: A Conceptual and Empirical Analysis

Abstract

In this study we explain the concepts, determinants and imperatives of boundary in smallholder producers' cooperatives both conceptually and empirically. The conceptual framework indicates the importance of the type of goods (being a club good or not) and range of activities that a cooperative provides to its members in defining a competitive boundary. Using unique organisational and market level data from Ethiopia, we then test empirically whether the observed (weak) performance of producers' cooperatives in Africa is explained by their organisational boundarythe type and range of goods or services they provide to members. The empirical results confirm that the competitiveness of producers' cooperatives is significantly correlated with the type and number of servicesi.e. cooperatives that provide club goods and a limited range of services are found to be more competitive. The results also suggest that a considerable number of cooperatives in Ethiopia engage in markets where they do not have competitive advantage. Overall, we demonstrate the importance of properly defining a viable boundaryproper selection of services (or markets) and limiting the range of servicesfor improving the competitiveness of membership-based producer cooperatives in Africa.

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“…organic fertiliser and improved seeds) and connecting them with ‘big markets’ (e.g. supermarkets, restaurants and international markets) (Ma et al ., 2018; Liu et al ., 2019; Tadesse et al ., 2019). Farmers are less likely to abandon cropland when they can benefit from the farming activity.…”

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“…Yet, governments and donors have tended to focus on the provision of support packages, economic incentives and subsidies but have overlooked the managerial capital deficit that affects the competitiveness of farmer-owned organizations. This oversight can be partly attributed to the paradigmatic boundaries that have historically and geographically separated agricultural production processes from management theory as well as to the propensity of donors and governments to favor direct financial assistance over capacity building and organizational strengthening [8][9][10][11]16,[19][20][21][22]31]. To sum up, the history of collective action in rural Africa thus involved the rise of community-based organizations, their take-over by the colonial administration and parastatals and the ultimate loosening of governmental control and regeneration.…”

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