The relationship between the financial structure of a marketing cooperative (MC) and the requirement of the domination of control by the members is analysed from a transaction costs perspective. A MC receives less favourable terms on outside equity than a conventional firm because the decision power regarding new investments is not allocated to the providers of these funds. This is a serious threat to the survival of a MC in a market where efficient investments are characterised by an increasing level of asset specificity at the processing stage of production. A MC is predicted to be an efficient organisational form when the level of asset specificity at the processing stage of production is at a low or immediate level compared to the level of asset specificity at the farming stage of production.

financial structure, marketing cooperatives, transaction costs,
ERIM Article Series (EAS)
Agricultural Economics
Erasmus Research Institute of Management

Hendrikse, G.W.J, & Veerman, C.P. (2001). Marketing cooperatives and financial structure: a transaction costs economics analysis. Agricultural Economics, 26(3), 205–216. doi:10.1016/S0169-5150(00)00122-5