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Typology of contract farming arrangements: a transaction cost perspective

Author

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  • Innocent Mugwagwa
  • Jos Bijman
  • Jacques Trienekens

Abstract

This paper proposes an alternative typology of contract farming arrangements (CFA) based on transaction cost theory. To construct the typology, we first surveyed managers of agribusiness firms and contracted farmers in Zimbabwe to understand the provisions in their contracts, the motivations for their inclusion and the level of transaction attributes, particularly the sub-categories of asset specificity and uncertainty. We then developed a two-by-two matrix of contract types based on the interaction of transaction attributes. The results show that four contract types can be distinguished: total, group, lean and market contracts. Furthermore, CFAs that are misaligned with transaction attributes have problems of side-selling and inefficiency. Our new empirically based categorisation can help managers and policymakers to design CFAs that match with underlying transaction attributes, thus enhancing the stability and efficiency of CFAs.

Suggested Citation

  • Innocent Mugwagwa & Jos Bijman & Jacques Trienekens, 2020. "Typology of contract farming arrangements: a transaction cost perspective," Agrekon, Taylor & Francis Journals, vol. 59(2), pages 169-187, April.
    • Handle: RePEc:taf:ragrxx:v:59:y:2020:i:2:p:169-187
    DOI: 10.1080/03031853.2020.1731561
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    Citations

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    Cited by:

    1. Stefano Ciliberti & Simone Del Sarto & Angelo Frascarelli & Giulia Pastorelli & Gaetano Martino, 2020. "Contracts to Govern the Transition towards Sustainable Production: Evidence from a Discrete Choice Analysis in the Durum Wheat Sector in Italy," Sustainability, MDPI, vol. 12(22), pages 1-14, November.
    2. Zhuo Wenjun, 2023. "Circulation Expectations, Farmer Trust, and Farmers’ Contract Choice Behavior," Land, MDPI, vol. 12(8), pages 1-15, August.
    3. Zuomiao Xie & Shiqi Yuan & Jinjing Zhu & Weiming Li, 2023. "Contract farming led by a seed enterprise and incentives to produce high quality: Which contract design performs best?," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 1173-1198, October.
    4. Bachev, Hrabrin, 2022. "A framework for assessing the governance efficiency of agricultural farms," MPRA Paper 113696, University Library of Munich, Germany.
    5. Arouna Dissa & Jos Bijman & Maja Slingerland & Ousmane Mama Sanogo & Ken E Giller & Katrien Descheemaeker, 2022. "Growing cotton to produce food: Unravelling interactions between value chains in southern Mali," Development Policy Review, Overseas Development Institute, vol. 40(5), September.
    6. Bachev, Hrabrin, 2024. "Основи На Икономиката На Аграрните Договори [Fundamentals of economics of agrarian contracts]," MPRA Paper 121889, University Library of Munich, Germany.
    7. Hanna Ihli & Ronja Seegers & Etti Winter & Brian Chiputwa & Anja Gassner, 2022. "Preferences for tree fruit market attributes among smallholder farmers in Eastern Rwanda," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 5-21, January.
    8. Bachev, Hrabrin, 2022. "Как Да Оценим Управленческата Ефективност На Българските Земеделски Стопанства [How to assess the governance efficiency of Bulgarian agricultural farms]," MPRA Paper 113590, University Library of Munich, Germany.
    9. Xiuling Ding & Qian Lu & Lipeng Li & Apurbo Sarkar & Hua Li, 2023. "Does Labor Transfer Improve Farmers’ Willingness to Withdraw from Farming?—A Bivariate Probit Modeling Approach," Land, MDPI, vol. 12(8), pages 1-27, August.
    10. Angelo Frascarelli & Stefano Ciliberti & Gustavo Magalhães de Oliveira & Gabriele Chiodini & Gaetano Martino, 2021. "Production Contracts and Food Quality: A Transaction Cost Analysis for the Italian Durum Wheat Sector," Sustainability, MDPI, vol. 13(5), pages 1-12, March.
    11. Viet Hoang & Vinh Nguyen, 2023. "Determinants of small farmers' participation in contract farming in developing countries: A study in Vietnam," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 836-853, July.
    12. Wei Zhang & Long Gao & Mohammad Zolghadr & Dawei Jian & Mohsen ElHafsi, 2023. "Dynamic incentives for sustainable contract farming," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2049-2067, July.
    13. Francisco Benitez‐Altuna & Valentina C. Materia & Jos Bijman & Daniel Gaitán‐Cremaschi & Jacques Trienekens, 2024. "Farmer–buyer relationships and sustainable agricultural practices in the food supply chain: The case of vegetables in Chile," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 3-30, January.
    14. Bachev, Hrabrin, 2024. "Economic framework for studying and assessing agrarian contracts," MPRA Paper 121504, University Library of Munich, Germany.
    15. Bhanot, Disha & Kathuria, Vinish & Das, Debabrata, 2021. "Can institutional innovations in agri-marketing channels alleviate distress selling? Evidence from India," World Development, Elsevier, vol. 137(C).

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