Determinants of the differences in the downstream vertical integration and efficiency implications in agricultural cooperatives

Abstract

This study investigates the explanatory variables affecting the agricultural cooperatives decision of downstream vertical integration into the transformation of the products supplied by their members. The study also analyses the effect of the vertical integration decision on the efficiency obtained. This analysis has been carried out by means of a two-step methodology suggested by Heckman (1979) over a sample of Spanish agricultural cooperatives belonging to the Qualified Denomination of Origin La Rioja. The results obtained show that those cooperatives, which have adopted Actualisation Mechanisms of social capital, high dedication to agricultural activity, and high rate of capacity utilization are more likely to integrate within the cooperative another stage of the production cycle. Furthermore, the results show that the most efficient cooperatives are those with a higher level of downstream vertical integration. Copyright © 2011 The Berkeley Electronic Press. All rights reserved.