Does farmers' trust towards buyers drive their entrepreneurial orientation?

Purpose - In contexts of transition economies generally characterized by weak formal institutions, a rich literature remarks the important role of informal institutions in fostering entrepreneurial ecosystems. Nevertheless, in the agricultural context, little is known yet about how and why institutions shape farmer entrepreneurship. To better understand how informal institutions shape farmer entrepreneurship, this paper investigates how farmers' trust towards their buyers influence their entrepreneurial orientation (EO) in the rural context of a transition economy. Design/methodology/approach - A structured survey was conducted in June–July 2017 with Albanian dairy farmers. In total, 238 milk producers were interviewed. Confirmatory factor analysis (CFA) is employed to develop measures for the latent variables of the study (e.g. farmers' trust, EO), and an instrumental variable (IV) approach is employed to estimate the effect of farmers' trust towards the buyer on their EO, by using farmers' reciprocity as a suitable IV. Findings - Empirical findings reveal that innovativeness, risk-taking and proactivity represent effective dimensions of farmers' EO also in the rural context of a transition economy. Furthermore, farmers' trust towards their buyers shapes their EO, and, at the same time, younger and wealthier farmers are more likely to have higher levels of EO. Research limitations/implications - The results show that there is an association between farmers’ wealth and their EO. This relationship can go both ways. However, cross-sectional studies are not appropriate to investigate feedback loops. Originality/value - This study addresses a knowledge gap in the institution–entrepreneurship literature in transition economies, by making two contributions. First, it tests the measurement model for farmers' EO, an established psychological antecedent of farmers' entrepreneurial activity. Second, it tests the hypothesis that farmers' trust towards their buyers may influence their EO.