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Farmer Cooperatives as Systems of Attributes: An Analysis of Ownership and Investment Complementarities

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Management and Governance of Networks

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

Abstract

The long-term economic viability of the farmer cooperative mode of organization is often assumed to be jeopardized by an equity constraint. To inform possible solutions, the farmer cooperative is conceptualized as an independent firm comprising a system of attributes, thus facilitating a better understanding of the dual function of organized farm producers as both patrons and capitalists. We place emphasis on the hybrid assignment and configuration of claim rights to find possible complementarities between ownership and investment so as to loosen the equity constraint. Based on survey data on US farmer cooperatives, we analyze multiple configurations of membership access, ownership transferability, equity redeemability, preferred stock provision and ownership, and upfront capital contribution in relation to the desire to patronize and the obligation to capitalize the cooperative. Thus, we inform constitutional responses to rapid developments in the agri-food industry, which force farmer cooperatives to find additional equity for necessary growth in scale and scope.

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Notes

  1. 1.

    Cooperative law mandates the formation of a board of directors.

  2. 2.

    Confusingly, Nilsson (1999) applied the term member-investor cooperative to the new generation cooperative and the public limited company. In the present chapter, member investor is defined as in Chaddad and Cook (2004).

  3. 3.

    Subsidiary formation is not exclusive to the comaker structure. However, the defining characteristic of the comaker cooperative is combined member and investor ownership, not full member ownership as is applicable to other structures with vertical investment (Cook and Chaddad 2004).

  4. 4.

    In reference to Südzucker, the German sugar producer, Filippi et al. (2012) used the term cooperative investor-owned firm to describe its ownership structure. Südzucker is traded on the public market, but majority ownership is held by Süddeutsche Zuckerrübenverwertungs-Genossenschaft (SZVG), the sugar producer cooperative.

  5. 5.

    For example, see the Wyoming Processing Cooperative Statute, the Minnesota Cooperative Associations Act, the Iowa Cooperative Associations Act, and the Tennessee Processing Cooperative Law.

  6. 6.

    For a full description of the survey data, see Grashuis and Cook (2017).

  7. 7.

    Closed membership is arguably the key characteristic of the new generation cooperative, as discussed by Cook and Iliopoulos (1999) and Nilsson (1999). Because of its closed membership, the new generation cooperative is hypothesized to offer greater incentive to invest member equity.

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Authors and Affiliations

  1. University of Missouri, 125C Mumford Hall, Columbia, MO, 65211, USA

    Jasper Grashuis & Michael L. Cook

Authors
  1. Jasper Grashuis
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  2. Michael L. Cook
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Correspondence to Jasper Grashuis .

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Editors and Affiliations

  1. Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands

    George W. J. Hendrikse

  2. CREM, University of Rennes 1, Rennes, France

    Gérard Cliquet

  3. Institute for Strategic Management, University of Münster, Münster, Germany

    Thomas Ehrmann

  4. Department of Business Administration, University of Vienna, Vienna, Austria

    Josef Windsperger

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Grashuis, J., Cook, M.L. (2017). Farmer Cooperatives as Systems of Attributes: An Analysis of Ownership and Investment Complementarities. In: Hendrikse, G., Cliquet, G., Ehrmann, T., Windsperger, J. (eds) Management and Governance of Networks . Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-319-57276-5_8

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