Cooperation and innovation under production risk: evidence from a lab-in-the-field experiment

Purpose - This study analyzes the role of cooperative behavior in facing the risk of encouraging innovative agricultural production projects by small-scale farmers in the context of farmers in developing countries. Design/methodology/approach - A within-subjects field experiment was conducted with small-scale Colombian panela cane farmers. The authors used the collected data to run the regression analyses. Findings - The results suggest that when small farmers can follow cooperative behavior by joining a group and pooling resources to face risk, they are more willing to invest in a novel and profitable alternative, albeit riskier. However, the possibility of cooperating with a group to invest in a novel production project depends on its expected risk level. Research limitations/implications - These results will help develop agricultural policies for sustainable development. Establishing informal networks for small-scale farmers to deal with unpredictable risks may aid in developing innovative systems. Social implications - Agriculture is highly vulnerable to climatic impacts, which, combined with the inherent risk of innovation, may reduce small farmers' willingness to adopt innovation. Cooperation appears to be a mechanism for pooling resources and facing risk. Originality/value - Research has focused on experimentally testing the effect of cooperative behavior when facing risk. The authors contribute to the literature by demonstrating the impact of the ability of small-scale farmers in rural areas to collectively manage risk on investment in innovative projects.