Stakeholder Participation in Co-operative Capital in Western Agricultural Co-operatives

Abstract

The last two decades witnessed the emergence of various innovative capitalization methods for co-operatives in Europe, the United States, and Oceania (Cook and Iliopoulos 1999; Gijselinckx and Develtere 2008; Iliopoulos 2009; Zhao et al. 2009). Such innovations range from amendments to co-operative legislation and bylaws to allow non-member, stakeholder investment in co-operatives or other, co-operatively owned entities, to radically new ownership structures designed to attract growth capital from members (for example new generation co-operatives). Several scholars argue that it was the need to ameliorate a set of property-rights-related constraints that fuelled these developments (for example Cook and Burress 2009; Iliopoulos and Hendrikse 2009). Structural changes in the global food and fibre system have turned farmer-controlled vertical integration into probably the only means to secure the sustainability of farming (Nilsson 1999; Fernández-Guadaño 2006). Rapidly decreasing international commodity prices contrasted with constantly increasing prices of food products, made it clear that farmer investment in the production of branded, value-added food items was the only way to turn farming into a viable business. Given the significant required investment in both physical and intangible assets, farmers could integrate vertically only through some form of collectively owned business. However, the ownership structure of traditional agricultural co-operatives discourages members from investing significant amounts of risk capital, while it gives rise to collective decision-making inefficiencies (Cook and Iliopoulos 2000).