International Conference On Food And Agricultural Economics

Current research has found that farmers’ incentives to innovate are influenced by non-economic and social-psychological factors. This research, however, has not explored whether these drivers remain robust through different business environments (i.e. stable vs. turbulent business environments). In addition, related works that have study innovation in turbulent environments have only considered turbulence caused by technological changes but not by changes in policies that affect the agricultural sector. The objective of this article is to fill this gap by analysing farmers’ incentives to innovate before and after a policy shock referred to as the Sugar Regime reform. Before the reform sugar beet farmers in Shropshire faced a stable business environment because they knew ex-ante the price that they would receive for their sugar beet production. However, after the reform the environment became very unstable because the sugar beet factory where the farmers used to sell their production was closed. In order to explore the effect of this change of business environment on farmers’ incentives to innovate, a probit econometric model was adopted and run with data obtained from a questionnaire supplied to ex-sugar beet farmers in Shropshire, UK. The results revealed that drivers of innovation may change under different business environments. Based on this result it is proposed in this article that farmers reach a steady state in stable environments where they have few incentives to innovate in order to favour long run goals. In contrast, in turbulent business environments this steady state is broken and short run drives of innovation are triggered.