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Influence Costs in Agribusiness Cooperatives: Evidence from Case Studies

Listed author(s):
  • Iliopoulos, C.
  • Hendrikse, G.W.J.
Registered author(s):

    This article addresses the influence costs problem in the governance structure ‘agribusiness cooperative.’ Influence costs are higher in cooperatives than in investor-oriented firms due to the unique governance structure of the former. Hypotheses are formulated and tested regarding the relationship between influence costs and seven variables: membership size, member heterogeneity, average member age, singleness of purpose, managerial power over members, level of managerial compensation, and professional versus inside management. The main results are that heterogeneous member preferences, older average member age, and investment in multiple product lines all contribute to higher influence costs. At the same time, cooperatives with well-paid, powerful and professional managers incur lower influence costs. The impact of membership size on the level of influence costs is undetermined.

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    File URL: https://repub.eur.nl/pub/12872/ERS-2008-040-ORG.pdf
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    Paper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam in its series ERIM Report Series Research in Management with number ERS-2008-040-ORG.

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    Date of creation: 15 Jul 2008
    Handle: RePEc:ems:eureri:12872
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    1. Hendrikse, George W. J. & Veerman, Cees P., 2001. "Marketing cooperatives and financial structure: a transaction costs economics analysis," Agricultural Economics, Blackwell, vol. 26(3), pages 205-216, December.
    2. Appelbaum, Elie & Katz, Eliakim, 1987. "Seeking Rents by Setting Rents: The Political Economy of Rent Seeking," Economic Journal, Royal Economic Society, vol. 97(387), pages 685-699, September.
    3. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
    4. Lucian Arye Bebchuk & Jesse M. Fried, 2003. "Executive Compensation as an Agency Problem," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 71-92, Summer.
    5. King, Robert P. & Trechter, David D. & Cobia, David W., 1998. "Managerial Compensation in Midwestern Cooperatives: Results from a Follow-up Study," Journal of Cooperatives, NCERA-210, vol. 13.
    6. Fabio R. Chaddad & Michael L. Cook, 2004. "Understanding New Cooperative Models: An Ownership–Control Rights Typology," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(3), pages 348-360.
    7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    8. Peter Bogetoft & Henrik B. Olesen, 2002. "Influence Costs in Heterogeneous Cooperatives: A Formal Model of Sales Distortion," CIE Discussion Papers 2002-05, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    9. Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 2001. "Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 138-190, February.
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