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The impact of cooperatives' risk aversion and equity capital constraints on their inter-firm consolidation and collaboration strategies-with an empirical study of the European dairy industry

Author

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  • Dirk van der Krogt

    (Department of Economics, Swedish University of Agricultural Sciences, SE-75007 Uppsala, Sweden)

  • Jerker Nilsson

    (Department of Economics, Swedish University of Agricultural Sciences, SE-75007 Uppsala, Sweden)

  • Viggo Høst

    (School of Economics and Management, University of Aarhus, DK-8000 Aarhus C, Denmark)

Abstract

This article concludes that cooperative firms' choice of interfirm consolidation and collaboration strategies can be explained by two attributes, inherent in the cooperative business form, namely, risk aversion and equity capital constraints. Empirical data originate from the 15 largest EU dairy firms during a 5-year period (1998-2002). In total 198 activities are identified. They are classified into six categories: (a) mergers, (b) acquisitions, (c) strategic share holdings, (d) joint ventures, (e) licensing, and (f) general collaboration agreements. It is shown that cooperative firms prefer mergers, collaboration agreements, joint ventures, and licensing. All of these are relatively low in terms of both performance risks and relational risks, and they demand limited amounts of equity capital. Investor-owned firms focus on take-over strategies-acquisitions and share holdings. Other indicators of risk aversion are that cooperatives tend to collaborate with other cooperatives and that they prefer partners in their own home market. [EconLit: Q130; P130; L200.] © 2007 Wiley Periodicals, Inc. Agribusiness 23: 453-472, 2007.

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  • Dirk van der Krogt & Jerker Nilsson & Viggo Høst, 2007. "The impact of cooperatives' risk aversion and equity capital constraints on their inter-firm consolidation and collaboration strategies-with an empirical study of the European dairy industry," Agribusiness, John Wiley & Sons, Ltd., vol. 23(4), pages 453-472.
    • Handle: RePEc:wly:agribz:v:23:y:2007:i:4:p:453-472
    DOI: 10.1002/agr.20140
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    References listed on IDEAS

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    1. Royer, Jeffrey S., 1999. "Cooperative Organizational Strategies: A Neo-Institutional Digest," Journal of Cooperatives, NCERA-210, vol. 14, pages 1-24.
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    3. Adesoji Adelaja & Rodolfo Nayga & Zafar Farooq, 1999. "Predicting mergers and acquisitions in the food industry," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 1-23.
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    6. Darren Hudson & Cary W. Herndon, 2002. "Factors influencing probability and frequency of participation in merger and partnership activity in agricultural cooperatives," Agribusiness, John Wiley & Sons, Ltd., vol. 18(2), pages 231-246.
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    Cited by:

    1. Elena MELIÁ MARTÍ & Ma Pía CARNICER ANDRÉS, 2015. "Organizational models for the major agri-food cooperative groups in the European Union," CIRIEC Working Papers 1506, CIRIEC - Université de Liège.
    2. Juan Juliá-Igual & Elena Meliá-Martí & Gabriel García-Martinez, 2012. "Strategies developed by leading EU agrifood cooperatives in their growth models," Service Business, Springer;Pan-Pacific Business Association, vol. 6(1), pages 27-46, March.
    3. Jasper GRASHUIS & Ye SU, 2019. "A Review Of The Empirical Literature On Farmer Cooperatives: Performance, Ownership And Governance, Finance, And Member Attitude," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 77-102, March.
    4. Grashuis, Jasper & Cook, Michael, 2016. "Capital, Ownership, and Governance: Analyzing the Structure of U.S. Farmer Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235677, Agricultural and Applied Economics Association.
    5. Shaoze Jin & Xiangping Jia & Harvey S. James, 2021. "Risk attitudes within farmer cooperative organizations: Evidence from China's fresh apple industry," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 173-205, June.
    6. Salavou, Helen E. & Sergaki, Panagiota, 2013. "Generic Business Strategies in Greece: Private Food Firms versus Agricultural Cooperatives," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 41(1), pages 1-17.
    7. Vidal García, Raúl & Ribal Sanchis, Javier & Blasco Ruiz, Ana, 2021. "Stock market multiples in the valuation of unlisted agrifood companies. || Múltiplos de mercado en la valoración de empresas agroalimentarias no cotizadas," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 31(1), pages 198-225, June.
    8. Jos BIJMAN & Markus HANISCH, 2020. "Understanding the heterogeneity among agricultural cooperatives," CIRIEC Working Papers 2013, CIRIEC - Université de Liège.
    9. Mateos-Ronco, Alicia & Guzman-Asuncion, Sandra, 2018. "Determinants of financing decisions and management implications: evidence from Spanish agricultural cooperatives," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(6), July.
    10. George Hendrikse & Li Feng, 2013. "Interfirm cooperatives," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 26, Edward Elgar Publishing.
    11. Hohler, J., 2018. "Reconstruction of empirical strategies using content analysis - an application to the dairy industry," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277123, International Association of Agricultural Economists.
    12. Nilsson, Jerker & Svendsen, Gert Tinggaard, 2011. "Free Riding or Trust? Why Members (do not) Monitor their Cooperatives," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 39(2), pages 1-20.
    13. Charlebois, Sylvain, 2016. "Policy-change Triggered Environmental Uncertainty in a Dairy Cooperative: The Case of Mila in South Tyrol," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 7(3), pages 1-13, July.
    14. Declerck, Francis, 2015. "Financial Instruments and Conflicts of Interest: Application to French Agricultural Co-operatives," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 6(4), pages 1-13, December.
    15. Royer, Jeffrey S., 2012. "Implications of the Cooperative Organizational Form for Vertical Expansion," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 40(2), pages 1-20.

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