FARMERS’ WILLINGNESS TO INVEST IN NEW COOPERATIVE INSTRUMENTS: A CHOICE EXPERIMENT

Eeva Alho

Annals of Public and Cooperative Economics, 2019, vol. 90, issue 1, 161-186

Abstract: Globalization of agricultural markets put pressures on producer cooperatives to invest in expansion and growth to safeguard their competitiveness. Availability of capital is limited if farmers do not have incentives to increase their capital contribution. Cooperative literature recognizes the residual rights, transferability, and the appreciation potential of the investment as the potential solutions for the problems that may impede cooperative investments. The objective of this study is to understand farmer preferences regarding investment attributes and the potential for attracting investment capital from members and non‐members. We employ a choice experiment method to test new cooperative investment instruments. The data consist of a questionnaire conducted with 406 Finnish dairy farmers. Random parameter latent class logit model is used in the estimation of the data. The results indicate that most of the respondents regard the new investment instruments positively. However, farmers prefer restricting ownership rights to members. Incentives for members to participate in financing cooperative growth could be designed with capital‐based residual rights, mechanisms for transferability and for the appreciation of firm value. Estimation that considered choice difficulty improved model fit, which highlights the need to address respondent burden also in future studies of hypothetical investments in order to produce unbiased estimates.

Date: 2019
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