Cooperative Trading Mode: A Case Of Apple Growers And Their Cooperatives Institution Based On Transaction Cost

With the Chinese government putting much efforts promoting the development of farmhousehold cooperation, regulating cooperative institution, several serious issues occurred inthe process of cooperative institutional innovation involving lower operation, such as loweroperational efficiency, higher transaction costs, weak cooperative sense, etc. Meanwhile, astream of cooperative researchers and policy makers suggest to establish farm household—supermarket trade mode, to develop family farms, as well as to advocate professional farmersfor the purpose of solving the above mentioned issues especially referring great transactioncost, lower productivity efficiency, and disecnomics of scale. On the other hand, a bounch ofscholars are more prone to establish a vertical integrated cooperative system on the core ofagricultural cooperatives. Therefore, promoting the cooperative system reforms, leading away for farm households connecting with other market players by agricultural cooperatives toget rid of the above bottlenecks, are one of the key issues needing to be solved by Chinesegovernment.In order to deepen the transaction principles theory, in the grasp of the basis of theinstitutional and economic background of the emergence and development of farm householdcooperatives, taking the transaction institution between apple growers and apple specializedcooperatives as an example, the dissertation summaries and establishes analytical frameworkof cooperative trading institution when small scale farm household entering the agriculturalmarket from transaction costs perspective applying the approaches from Infra-MarginalAnalysis and the transaction cost comparison analysis, employing empirical models referringmean test, binary Probit model, Tobit model, two stage DEA-Tobit model, and ordered Logitmodel.The primary aimes of the dissertation are to establish cooperative transaction costestimation institution, to measure and make comparison between cooperative andnon-cooperative market trading modes from the transaction cost perspective. The text alsointend to improve the transaction costs estimation approach, to build the performanceevaluating models on farm households’ productivity efficiency, thereafter to analyze the issueson sustainable development of cooperatives from the views of cooperative members. In a word, the basic purpose of the dissertation is to build the choice willingness modeland the select behavior analitical framework of High Value Agricultural Product producersbased on transaction cost economics. The content of the dissertation basically covers fourparts including totally nine charpters on account of the research objectives. The logisticanalytical relationship of the nine charpters follow as literature review, research hypothesis,theoretical analysis, empirical analysis, conclusions, and policy suggestions.The first part is the Introduction which includes Charpter1. In this part, we introducedthe research background, promoted the research questions, and desighed the research project.Specifically, it covers research background, research questions, literature review, researchobjectives and implications. We also mentioned the major issues occured in the developmentof cooperation system, the abroad and domestic literature reviews, the research ideas andmethods used in the text. Hereafter the research innovation are listed.The second part is the Theoretical Framework which covers Charpter2and Charpter3.Specifically, the systematical analysis of transaction cost of small-scale farm households isdenmenstrated in Charpter2. We also categorize the transaction cost into information cost,negotiation cost, enforcement cost, and transportation cost according to its function. InCharpter3, taking High Value Agricultural Product producers as example, we establish atheretical framework of transaction cost analysis based on the study involving trading subjects,trading objects, trading channels, and trading models. Particularly, the detail statisticaldescriptions of field survey are also indicated in this Charpter. Thereafter, we propose thebasic hypothesis of this research which is the transaction cost of growers choosing thecooperation institution (being a member in cooperatives and trading with cooperatives) islower than that for growers not in the cooperation institution (not being a member incooperatives and trading with market partners except cooperatives).The third part is the Empirical Analysis ranging from Charpter4to Charpter8.Particularly, in Charpter4, the impact factors of growers’ willingness to participate incooperatives are analyzed by employing binary Probit. In Charpter5, the text investigate theinfluents affecting growers transaction behavior using Tobit model based on transaction costtheory. In Charpter6, we promote a quantifying estimation framework of grower’s transactioncost, and make a comparison between members and non-members in cooperatives. InCharpter7, a two stage DEA-Tobit model is applied to estimate the technical efficiency, costefficiency, scale efficiency, as well as the allocation efficiency of growers, and compare thedistinctions of cost efficiency between members and non-members in cooperatives. We alsoexamine the factors affect members’ investment willingness to figure the problems ofcooperatives sustainable development in Charpter8. The fourth part is the Conclusions and implications of the research covering the finalCharpter. On account of the successful experiences in developed countries, i.e. the UnitedStates, the European Union, Janpan, etc., and in combination with the specific characteristicsof Chinese farm households operation, such as small planting scale, lower mobility, as well asamateur production, valuable theoretical thoughts and policy suggestions are promotedinvolving improving farmer’s productivity efficiency, reducing transaction costs, upgradingfarmers’ cooperative awareness, strengthening farmers’ trust in cooperatives, regulating theoperating institution of cooperatives, giving full play of the role as a bridge connectingfarmers and agricultural market, improving the market competitiveness of small farmhouseholds, and promoting the further development of cooperatives.On the whole, the key conclusions cover the following six aspects in serial of thetheoretical and empirical analysis:1. The mathematical models designed in the dissertation verifies that farmersparticipating in cooperatives would cut the number of middleman, and thus to reduce thetransaction costs in the process of agricultural production and sales.2. Taking apple growers and apple specialized cooperatives institution as an example, theanalytical results of the impact factors on growers’ willingness to participate in cooperativesreveal that the probability of grower’s willingness to participate in cooperatives issignificantly related to the apple plant areas, the difficulties with road condition and obtainingagricultural loan, as well as their expectations on cooperative services such as apple package,apple processing, and fresh apple storage etc. In terms of transaction cost related variables, theProbit results show that the higher negotiation cost and enforcement cost are, the strongerwillingness to participate in cooperatives of grower is.3. On account of transaction cost economic theory, we category the transaction cost intofour subtypes including information cost, negotiation cost, enforcement cost, andtransportation cost. Then, we examine the factors affect grower’s cooperative choice behavior.The estimation results verify the hypothesis proposed in the Charpter3, which is thetransaction cost of growers joining in cooperatives is lower than those not join in cooperatives.Meanwhile, the Tobit regression results also illustrate that the negotiation cost relatedvariable-apple grading time-has significantly positive effect on the product volume growersselling through cooperatives, the enforcement cost related variables-the delay of being fullypaid-also positively affect grower’s sales volume to cooperatives, whereas the expenditure ontreating buyers, which belongs to enforcement cost, has a negative relation with grower’ssales amount to cooperatives.4. According to the theoretical framework of transaction cost of High Value Agricultural Product producers, we employ Tobit model and calculate the marginal effect to estimate theimpact. The estimation and comparison results of transaction costs between members andnon-members in cooperatives verify that members in cooperatives can significantly decreasethe transaction costs including transportation cost (about800yuan), lower the lost caused bybuyer’s breaking the contract (averagely190yuan) and save apple grading times belonging tothe negotiation cost (approximately8.1hours). Meanwhile, the data also shows that growerswith larger apple orchard would save more transaction costs after participating in cooperativesthan growers with small apple plant size.5. In Charpter7, we apply two-stage DEA-Tobit approach to evaluate the productivityefficicency of apple growers. The measurement and comparison results of productivity andcost efficiency between members and non-members in cooperatives demonstrate that thetechnical efficiency, cost efficiency, and scale efficiency of members in cooperatives areclearly higher compared with non-members. The transaction costs of non-members areapparently greater than members. The findings can be interpreted as that growers under thehelp of cooperatives can effectively drop their transaction costs and increase their technical-,cost-, and scale-efficiency.6. Given the theoretical framework and the empirical analysis, the results confirm that thegrower-agricultural cooperatives transaction mode apparently help farm households to lowertransaction costs occurred in the production and sales process, increase agriculturalproductivity efficiency, and thereafter improve their farm income. Thus, in the final empiricalcharpter, the thesis also studies the factors affect grower’s willingness to invest for thepurpose of sustainable development using ordered Logit model. The results show thatfarmer’s apple planting area, cooperatives’ service ability to apple price, the operation scale ofcooperatives, and the development potential of cooperatives have statistically positive relationto members’s willingness to invest in the sustainbale development of cooperatives.On the whole, the research establishes a normative analytical framework applyingtheoretical analysis to promote hypotheses, and thus employs empirical models to validate thehypotheses. Our study systematically analyzes the positive impact of establishing cooperationsystem centered by agricultural cooperatives on correcting market behavior and reducing thetransaction costs of small-scale growers. The text also empirically verify that establishing thevertical integrated cooperation system centered on cooperatives is one of the effective way topromote small-scale farm households to realize scale-economy.Above all, continuously promoting the development of cooperative institution is not onlythe key step in the process of building the modern agricultural industrial organizationinstitution in China, but also the dominant approach to achieve the development of multifunctional direction of agricultural industrialization involving diversification, scaleeconomy, organization-and service-oriented.