Performance heterogeneity and strategic orientation: An analysis of small farmers of an agrarian reform project in Brazil

The main objective of this paper is to investigate the phenomenon of firm heterogeneity among entrepreneurs who started their business with a similar initial endowment. The information collected for analysis came from a unique sample of 105 small farmers, who were settlers of an agrarian reform project in the state of São Paulo, Brazil. These farmers were granted similar resources (plot of land, housing, and capital) in the 1980s. About thirty years later, they were observed to have different performances in terms of production value. This article provides a test of explanatory variables for their differing performance, under the lens of strategic orientation. Data envelopment analysis (DEA) was used to obtain economic efficiency scores as proxies for performance. These scores were used in a second-stage Tobit regression model, in which the effects of three strategic orientations (profit orientation, social network orientation, and innovation orientation) on farms’ efficiency were tested. The results revealed that efficiency scores ranged from 0.02 and to 1, with a mean of 0.646 and standard deviation of 0.29, showing that the economic performance among beneficiaries is heterogeneous. In the Tobit model, the parameter for “profit orientation” was significant to explain performance differentials, while the parameters for the other strategic orientations were not. Parameters for control variables “off-farm income”, “access to rural credit”, and “access to government price policy” were also significant. These results are relevant to the theoretical debate on heterogeneity, as well as to the design of land reform policies.