Long-term Financing in US and European Agricultural Co-operatives: Emerging Methods for Ameliorating Investment Constraints

Constantine Iliopoulos

No 31804, 2003 Annual Meeting, October 29 from NCERA-194 Research on Cooperatives

Abstract: During recent years, dramatic changes in the world food system have led to unprecedented competition between agribusiness firms. To compete in this environment, agricultural cooperatives should invest substantially in long-term activities such as R&D and advertisement. Co-operatives have a difficult problem in acquiring equity capital because the residual claimant (benefactor) is the patron of the firm, not the investor. This organizational design poses to cooperatives three investment constraints: a) the free rider problem, b) the horizon problem, and c) the portfolio problem. Empirical analysis utilizing a latent variable structural equation model and a large dual response survey suggests that in the U.S. member-patrons are more likely to invest in co-operatives which adopt well defined property rights policies and structures than traditional co-operatives characterized by vaguely-defined property right structures. Agribusiness co-operatives in the European Union are gradually adopting long-term financing methods that possess one or more of the characteristics found in successful U.S. 'New Generation Cooperatives.' However, it seems that they have paid less attention in designing their organizational structures (e.g., membership policies). This may inhibit their efforts to gain a competitive advantage over investor-owned firms.

Keywords: Agribusiness; Agricultural Finance (search for similar items in EconPapers)
Pages: 15
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/31804/files/20 ... nesnceracp03Li14.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:ncerth:31804

DOI: 10.22004/ag.econ.31804

Access Statistics for this paper

More papers in 2003 Annual Meeting, October 29 from NCERA-194 Research on Cooperatives Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().