Social Capital and Diversification of Cooperatives

Abstract

This thesis contributes to two research streams of the literature regarding agricultural cooperatives, namely, social capital and product diversification of cooperatives. First, the thesis examines the nature of a marketing cooperative by considering both its economic and social attributes. Several formal models are formulated to address the interaction between cooperative governance structure and the different dimensions of cooperative social capital. The cooperative’s social and economic attributes are viewed as the equilibrium outcome of this interaction, while the social context of the cooperative community affects the equilibrium that the cooperative will choose. Second, the governance structure of cooperatives has an impact on the product diversification. An agent-based simulation shows that the single origin constraint of a cooperative creates a centralization effect in its product portfolio evolution, resulting in a lower diversification level and a larger output of the cooperative. Empirical evidence from the Netherlands shows that cooperatives are less diversified than publicly listed firms in 2001. However, the diversification level of cooperatives is comparable to that of publicly listed firms in 2012. It is concluded that, by making a change in the governance model in response to changes in the competitive environment, cooperatives may actually behave not differently from other types of enterprises in terms of product diversification.