IDEAS home Printed from https://ideas.repec.org/p/ags/kuliwp/31867.html
   My bibliography  Save this paper

Up- And Downstream Restructuring, Foreign Direct Investment, And Hold- Up Problems In Agricultural Transition

Author

Listed:
  • Gow, Hamish R.
  • Swinnen, Johan F.M.

Abstract

Reform in the transitional economies can be characterized by large falls in agricultural output and by strong decapitalization of the agricultural production system. A key factor has been the disruption caused by the breakup of the pre- reform, vertically integrated, centrally planned, contracting system within the agri- food supply chain. This paper analyses how restructuring in the up- and downstream levels of the agrifood chain is affecting the production level, particularly the impacts of hold-up problems usually seen as excessively long delays in the payment for delivered product. Standard institutional solutions used to overcome hold- up problems, including supply contracting, cooperatives and vertical integration, have problems as short- to- medium term solutions. Empirical evidence indicates that FDI in the processing level can solve these hold- up problems, as well as produce important positive spillover effects within the sector and across adjacent sectors. Empirical observations indicate strong output, yield, and investment responses when hold- up problems are solved. This suggests that solving these problems should be a priority for stimulating growth, efficiency and profitability in Central and Eastern European agriculture.

Suggested Citation

  • Gow, Hamish R. & Swinnen, Johan F.M., 1998. "Up- And Downstream Restructuring, Foreign Direct Investment, And Hold- Up Problems In Agricultural Transition," PRG Working Papers 31867, Katholieke Universiteit Leuven, LICOS - Centre for Institutions and Economic Performance.
  • Handle: RePEc:ags:kuliwp:31867
    DOI: 10.22004/ag.econ.31867
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/31867/files/prg-wp12.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.22004/ag.econ.31867?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Swinnen, Johan F. M. & Gow, Hamish R., 1999. "Agricultural credit problems and policies during the transition to a market economy in Central and Eastern Europe," Food Policy, Elsevier, vol. 24(1), pages 21-47, February.
    2. Masten, Scott E. (ed.), 1996. "Case Studies in Contracting and Organization," OUP Catalogue, Oxford University Press, number 9780195092523.
    3. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    4. Gérard Roland & Thierry Verdier, 1999. "Transition and the output fall," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March.
    5. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    6. Lall, Sanjaya, 1980. "Vertical Inter-Firm Linkages in LDCs: An Empirical Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(3), pages 203-226, August.
    7. Pirrong, Stephen Craig, 1993. "Contracting Practices in Bulk Shipping Markets: A Transactions Cost Explanation," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 937-976, October.
    8. Jason G. Hartell & Johan F.M. Swinnen, 1998. "Trends in Agricultural Price and Trade Policy Instruments Since 1990 in Central European Countries," The World Economy, Wiley Blackwell, vol. 21(2), pages 261-279, March.
    9. Swinnen, Johan F M, 1998. "Economic Transition and the Distribution of Policy Rents: The Case of the Wheat-Flour-Bread Chain in Bulgaria," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(2), pages 243-258.
    10. H. Christopher Peterson & Bruce L. Anderson, 1996. "Cooperative strategy: Theory and practice," Agribusiness, John Wiley & Sons, Ltd., vol. 12(4), pages 371-383.
    11. Richard J. Sexton, 1986. "Cooperatives and the Forces Shaping Agricultural Marketing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(5), pages 1167-1172.
    12. Macours, Karen & Swinnen, Johan F. M., 2000. "Causes of Output Decline in Economic Transition: The Case of Central and Eastern European Agriculture," Journal of Comparative Economics, Elsevier, vol. 28(1), pages 172-206, March.
    13. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    14. Michael L. Cook, 1995. "The Future of U.S. Agricultural Cooperatives: A Neo-Institutional Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1153-1159.
    15. Sachs, J.D. & Woo, W.T., 1994. "Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union," Papers 94-01, California Davis - Institute of Governmental Affairs.
    16. Blomstrom, Magnus & Kokko, Ari, 1997. "How foreign investment affects host countries," Policy Research Working Paper Series 1745, The World Bank.
    17. Harris, Andrea & Stefanson, Brenda & Fulton, Murray E., 1996. "New Generation Cooperatives and Cooperative Theory," Journal of Cooperatives, NCERA-210, vol. 11, pages 1-15.
    18. Lawrence, John D. & Rhodes, V. James & Hayenga, Marvin L., 1997. "Vertical Coordination in the U.S. Pork Industry: Status Motivations, and Expectations," Staff General Research Papers Archive 5003, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. World Bank, 2005. "The Dynamics of Vertical Coordination in Agrifood Chains in Eastern Europe and Central Asia : Implications for Policy and World Bank Operations," World Bank Publications - Reports 8806, The World Bank Group.
    2. Gow, Hamish R. & Swinnen, Johan F.M., 1998. "How Foreign Direct Investment Has Stimulated Growth In The Central And Eastern European Agri-Food Sectors: Vertical Contracting And The Role Of Private Enforcement Capital," PRG Working Papers 31879, Katholieke Universiteit Leuven, LICOS - Centre for Institutions and Economic Performance.
    3. Ortmann, Gerald F. & King, Robert P., 2006. "Small-Scale Farmers in South Africa: Can Agricultural Cooperatives Facilitate Access to Input and Product Markets?," Staff Papers 13930, University of Minnesota, Department of Applied Economics.
    4. Gorodnichenko Yury & Grigorenko Yegor & Ostanin Dmytro, 2006. "Relative property rights in transition economies: Can the oligarchs be productive?," EERC Working Paper Series 06-04e, EERC Research Network, Russia and CIS.
    5. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    6. Ortmann, Gerald F. & King, Robert P., 2007. "Agricultural Cooperatives I: History, Theory and Problems," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(1), pages 1-29, March.
    7. Woodruff, Christopher, 2002. "Non-contractible investments and vertical integration in the Mexican footwear industry," International Journal of Industrial Organization, Elsevier, vol. 20(8), pages 1197-1224, October.
    8. George Hendrikse & Li Feng, 2013. "Interfirm cooperatives," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 26, Edward Elgar Publishing.
    9. Miguel Espinosa, 2021. "Labor Boundaries and Skills: The Case of Lobbyists," Management Science, INFORMS, vol. 67(3), pages 1586-1607, March.
    10. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    11. Marianne Rubinstein, 2001. "Gouvernement d’entreprise et innovation," Revue d'Économie Financière, Programme National Persée, vol. 63(3), pages 211-229.
    12. Peter G. Klein & Michael E. Sykuta, 2010. "Editors’ Introduction," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 1, Edward Elgar Publishing.
    13. Ola Kvaløy & Trond E. Olsen, 2009. "Endogenous Verifiability and Relational Contracting," American Economic Review, American Economic Association, vol. 99(5), pages 2193-2208, December.
    14. Borgen, Svein Ole, 2011. "Product differentiation and cooperative governance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(3), pages 327-333, May.
    15. Nathan H. Miller, 2008. "Competition When Consumers Value Firm Scope," EAG Discussions Papers 200807, Department of Justice, Antitrust Division.
    16. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    17. Stefano Ciliberti & Angelo Frascarelli & Gaetano Martino, 2020. "Drivers of participation in collective arrangements in the agri‐food supply chain. Evidence from Italy using a transaction costs economics perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(3), pages 387-409, September.
    18. W. Bentley MacLeod, 1997. "Complexity, Contract and the Employment Relationship," Boston College Working Papers in Economics 342., Boston College Department of Economics.
    19. Inés Macho‐Stadler & Noriaki Matsushima & Ryusuke Shinohara, 2021. "Organizational Structure and Technological Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 785-816, December.
    20. Klaus Heine & Maximilian Kerk, 2017. "Conflict resolution in meta-organizations: the peculiar role of arbitration," Journal of Organization Design, Springer;Organizational Design Community, vol. 6(1), pages 1-20, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:kuliwp:31867. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/licosbe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/licosbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.