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Contract Farming as Part of a Multi-Instrument Inclusive Business Structure: A Theoretical Analysis

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  • W.O. Chamberlain
  • W. Anseeuw

Abstract

Contract farming (CF) agreements are presently being restructured to form part of more complex Inclusive Business (IB) set-ups. Additional instruments, alongside CF, are implemented to overcome the challenges of CF and to adapt to the policy environment in which the different stakeholders operate. This paper develops a theoretical framework that gives insight into how these complex entities are structured and operate in a developing country context. This theoretical analysis takes a holistic approach by adopting elements of existing theories to form a new critical research paradigm: (i) Resource Dependence Theory to incorporate the wider operating environment in which the two cases operate, (ii) Transaction Cost Economics to explain the internal efficiency of the different models, and (iii) Agency Theory to account for the safeguard mechanisms. This new framework is then tested on two complex IBs that aim to integrate smallholder farmers into the commercial value chain, but which have each implemented a different institutional set-up developed around CF arrangements. It finds that a high dependence by the offtaker in the first case study stimulates a higher level of commitment and investment by this stakeholder in the contract arrangement. In turn, this increases the asset specificity aspect, which then requires safeguards to ensure the smallholders adhere to the contractual agreement. A higher dependency in this particular study also resulted in a higher number of smallholders being engaged in the contract, requiring mechanisms to efficiently monitor and coordinate them.

Suggested Citation

  • W.O. Chamberlain & W. Anseeuw, 2017. "Contract Farming as Part of a Multi-Instrument Inclusive Business Structure: A Theoretical Analysis," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 158-172, April.
    • Handle: RePEc:taf:ragrxx:v:56:y:2017:i:2:p:158-172
    DOI: 10.1080/03031853.2017.1297725
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    References listed on IDEAS

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    1. Phil Simmons, 2002. "Overview of Smallholder Contract Farming in Developing Countries," Working Papers 02-04, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    2. Simmons, Paul, 2002. "Overview of smallholder contract farming in developing countries," ESA Working Papers 289109, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
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    Citations

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    Cited by:

    1. Celina Schelle & Benno Pokorny, 2021. "How Inclusive Is Inclusive? A Critical Analysis of an Agribusiness Initiative in Kenya," Sustainability, MDPI, vol. 13(19), pages 1-17, October.
    2. Van der Borght, Kim & Milian Gómez, Jorge Freddy, 2024. "Public and common interest in sustainable contract farming," World Development Perspectives, Elsevier, vol. 33(C).
    3. Schoneveld, George C. & Weng, Xiaoxue, 2023. "Smallholder value creation in agrifood chains: Value network approach," Land Use Policy, Elsevier, vol. 131(C).
    4. Tshidzumba, Ratsodo Phillip & Chirwa, Paxie Wanangwa, 2022. "Forest-based land reform partnerships in rural development and the sustenance of timber markets. Learning from two South African cases," Forest Policy and Economics, Elsevier, vol. 140(C).
    5. Chamberlain, Wytske & Anseeuw, Ward, 2019. "Inclusive businesses in agriculture: Defining the concept and its complex and evolving partnership structures in the field," Land Use Policy, Elsevier, vol. 83(C), pages 308-322.
    6. James Wangu & Ellen Mangnus & A.C.M. (Guus) van Westen, 2020. "Limitations of Inclusive Agribusiness in Contributing to Food and Nutrition Security in a Smallholder Community. A Case of Mango Initiative in Makueni County, Kenya," Sustainability, MDPI, vol. 12(14), pages 1-23, July.
    7. Al Ruqishi, Badria Hamed & Gibreel , Tarig & Akaichi, Faical & Zaibet, Lokman & Zekri, Slim, 2020. "Contractual Agriculture: Better Partnerships Between Small Farmers and the Business Sector in the Sultanate of Oman," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society (AESS), vol. 10(01), January.
    8. Wytske O. Chamberlain & Ward Anseeuw, 2018. "Inclusive Businesses and Land Reform: Corporatization or Transformation?," Land, MDPI, vol. 7(1), pages 1-17, January.
    9. Elizabeth Eldridge & Marie-Eve Rancourt & Ann Langley & Dani Héroux, 2022. "Expanding Perspectives on the Poverty Trap for Smallholder Farmers in Tanzania: The Role of Rural Input Supply Chains," Sustainability, MDPI, vol. 14(9), pages 1-34, April.
    10. James Wangu & Ellen Mangnus & A. C. M. (Guus) van Westen & Alphons de Vocht, 2021. "Inclusive Business for Smallholders’ Household Food and Nutrition Security: Disconcerting Results from an Analysis of a French Bean Agri-investment in Kenya," Journal of Development Policy and Practice, , vol. 6(1), pages 108-127, January.
    11. Badria Hamed Al Ruqishi & Tarig Gibreel & Faical Akaichi & Lokman Zaibet & Slim Zekri, 2020. "Contractual agriculture: better partnerships between small farmers and the business sector in the sultanate of Oman," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 10(1), pages 321-335, June.
    12. Richard Kwasi Bannor & Yaw Gyekye, 2022. "Unpacking The Nexus Between Broiler Contract Farming and Its Impact in Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 2759-2786, December.

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