Changing asset endowments and smallholder participation in higher value markets: Evidence from certified coffee producers in Nicaragua

This paper examines the capacities of smallholders in Nicaragua to exploit new linkages to certified coffee markets following the coffee crisis. Data on livelihood assets were collected from 292 households, which were clustered to test how differences in outcomes (asset building) reflect variations in initial asset endowments. The results suggest that most households built particular elements of their asset base and increased their resilience to future shocks. However, households struggled to make effective use of the gains for intensifying their livelihoods. Of the least-endowed households, few made investments in the scale or productivity of coffee, and most continued to depend heavily on subsistence production and seasonal off-farm income for survival. In conclusion, improved market access alone, even under relatively favorable market conditions and with considerable external support, will have uncertain impacts on rural poverty if the underlying constraints on household assets and investments are not addressed concurrently.     

Smallholder market participation: Concepts and evidence from eastern and southern Africa

This paper reviews the evidence on smallholder market participation, with a focus on staple foodgrains (i.e., cereals) in eastern and southern Africa, in an effort to help better identify what interventions are most likely to break smallholders out of the semi-subsistence poverty trap that appears to ensnare much of rural Africa. The conceptual and empirical evidence suggests that interventions aimed at facilitating smallholder organization, at reducing the costs of intermarket commerce, and, perhaps especially, at improving poorer households’ access to improved technologies and productive assets are central to stimulating smallholder market participation and escape from semi-subsistence poverty traps. Macroeconomic and trade policy tools appear less useful in inducing market participation by poor smallholders in the region.     

Collective action for smallholder market access

The opportunity for smallholders to raise their incomes increasingly depends on their ability to compete in the market; yet there are many failures in rural markets in developing countries that make it difficult for them to do this. Understanding how collective action can help address the inefficiencies, coordination problems or barriers to market access is particularly important. This paper draws on the case studies in this special issue and on other literature to examine the conceptual issues and empirical evidence on the role of collective action institutions in improving market access for the rural poor. Applying insights from studies of collective action in natural resource management, the paper examines what conditions facilitate effective producer organizations for smallholders’ market access, with special attention to the characteristics of user groups, institutional arrangements, types of products (staples, perishables and other commodities), markets (local, domestic and international), and external environment. The paper also identifies policies and interventions that facilitate collective action for market access among smallholders, and examines whether the public sector, private sector and/or civil society is best positioned to provide such interventions.     

Export and domestic sales: their interrelationship and determinants

We examine the interrelationship between export and domestic sales. Our expectation is that they are simultaneously determined, and as such should not be examined in isolation. We also investigate how firm factors—such as R & D and advertising investments—and external factors—such as market growth and exchange rate changes—impact export and domestic sales. Using a non‐recursive system of equations, we test our arguments on a representative sample of Spanish manufacturing firms between 1990 and 1997. We find significant interrelationships between export and domestic sales with striking differences between Spanish‐owned firms and foreign‐owned firms operating in Spain. For Spanish‐owned firms, domestic and export sales are complements. These firms appear to focus on the domestic market and strength in the domestic market drives their export sales. In contrast, domestic and export sales are substitutes for foreign‐owned firms. These firms' export strategies appear subsumed under strategies of managing a multinational network in which the focus is sales outside of Spain. We discuss the importance of these findings for understanding and managing export strategies. Copyright © 2005 John Wiley & Sons, Ltd.     

Fertilizer market liberalization and private retail trade in Kenya

This paper examined the factors influencing the entry and sales decision of private traders in fertilizer retail trade in a liberalized market using survey data from Kenya. A two-stage econometric model is used to examine traders’ entry and sales decision. The results provide insights into factors that are associated with private retail traders’ entry and sales decisions in an era of liberalized fertilizer markets. It shows substantial entry into fertilizer retail trade following market liberalization. Relatively limited investments in trading assets and equipment are predicted to hold back firm expansion. Implications drawn from the study provide insights into likely research and policy interventions.     

The character of demand in mature organic food markets: Great Britain and Denmark compared

We investigate the organic food market in two selected European countries, Great Britain and Denmark, identifying main differences and similarities. We focus particularly on consumer perceptions and priorities, labelling schemes, and sales channels as a basis for assessing market stability and prospects for future growth. We employ a unique set of household panel data that includes information on stated values and concerns as well as registered purchasing behaviour. Most organic food on both markets is produced and processed by large-scale industrialised units and distributed through mainstream sales channels, consumer confidence being sustained at present by organic labelling schemes that appear to function well. However, a parallel market, based on the supply of goods through various direct sales channels to heavy users, prevails. We find that organic food purchase decisions are primarily motivated by ‘private good’ attributes such as freshness, taste and health benefits, attributes that may be perceived as being compatible with modern production and sales structure. Mature markets for organic foods nevertheless appear to be vulnerable to consumer dissatisfaction, particularly among heavy users of organic food products.     

Contract farming configuration: Smallholders’ preferences for contract design attributes

While Contract Farming (CF) can enhance smallholders’ income in developing countries, empirical research on the motivation of smallholders to participate in CF is scarce. This paper explores farmer preferences for particular contract design attributes. We combined analytical hierarchy process and discrete choice experiments to investigate the importance of contract design attributes. On the basis of data collected among potato farmers in Ethiopia, we found that input market uncertainty is more important than output market uncertainty in smallholders’ decision to participate. Farmers tend to minimize their risk by opting for the buyer firm above the state and NGOs as providers of seed, inputs, and technical assistance. The results imply that the success of a CF scheme depends on the willingness of the firm to incorporate the preferred contract design attributes. Institutional intervention in the input market could induce agribusiness firms to offer attractive contracts for smallholders.     

The benefits of geographic sales diversification: How exporting facilitates capital investment

Many strategic investments require firms to make upfront outlays to generate profits at a later date. When firms have limited access to external capital, they have to rely on internally generated funds for these investments. In this case, their strategic investments are constrained by cash flow. I predict that by geographically diversifying sales (i.e., exporting), firms can relax this constraint because exporting signals more stable expected cash flows and firm quality, which can increase external capital providers' willingness to fund investments. Examining a representative sample of Spanish manufacturers from 1990 to 1998, I find support that exporting mitigates investment liquidity constraints allowing firms to make strategic investments they would not otherwise be able to make. This highlights how diversification can be a strategy to create and maintain competitive advantage. Copyright © 2011 John Wiley & Sons, Ltd.     

Do farmers’ organizations enhance the welfare of smallholders? Findings from the Mozambican national agricultural survey

Farmers’ organizations have been used as a tool to improve the living conditions of farmers in many countries by improving market access, access to information and capacity to increase production. I employ panel data from Mozambique to investigate how membership in farmers’ organizations impacts smallholders’ welfare. Using difference-in-difference estimators that control for unobservable selection bias, I find a positive impact of membership on the marketed surplus (25%), the value of agricultural production (18%) and on total income (15%, and more than 20% for those whose main source of cash income is the agricultural sector).     

Smallholders' perceptions and preferences for market attributes promoting sustained participation in modern agricultural value chains

Connecting smallholder farmers to modern agricultural value chains (henceforth high-value markets [HVMs]) represents a credible pathway to improving the welfare of farmers in developing countries. Smallholder exit rates from HVMs remains high, raising concerns about their sustained participation of smallholders in HVMs. We conduct a Best-Worst Scaling choice experiment with horticultural farmers in Kenya to understand their perceptions and preferences for market attributes that could promote sustained participation in HVMs. A unique feature of our study examines smallholders' best or worst choice consistency as means to further understand their thought process. Our results reveal that smallholders mostly expressed preference for a flexible incentive-based pricing option and long-term formal relationships with their buyers. Delayed payments and high investment requirements were the worst market attributes chosen by smallholders. Preference heterogeneity was driven by the farming experience, gender, income and location of the farmers. We find that smallholders are well aware of conditions that might motivate exit from HVMs relative to conditions that facilitate participation in HVMs. Our findings demonstrate the relevance of various key market attributes central to participation in HVMs, while teasing out the various coordination roles cooperatives, non-governmental organisations can play in facilitating sustained smallholder participation in HVMs.     

Exploring Mediating and Moderating Influences on the Links among Cycle Time,Proficiency in Entry Timing,and New Product Profitability*

Development cycle time is the elapsed time from the beginning of idea generation to the moment that the new product is ready for market introduction. Market‐entry timing is contingent upon the new product's cycle time. Only when the product is completed can a firm decide whether and when to enter the market to exploit the new product's window of opportunity. To determine the right moment of entry a firm needs to correctly balance the risks of premature entry and the missed opportunity of late entry. Proficient market‐entry timing is therefore defined as the firm's ability to get the market‐entry timing right (i.e., neither too early nor too late). The literature has produced divergent evidence with regard to the effects of development cycle time and proficiency in market‐entry timing on new product profitability. To explain these disparities this study (1) explores the mediating roles of development costs and sales volume in the relationships among development cycle time, proficiency in market‐entry timing, and new product profitability, respectively; and it (2) explores the moderating influence of product newness on the relationship between development cycle time and development costs and that of new product advantage on the link between proficiency in market‐entry timing and sales volume. The results from a survey‐based study of 72 manufacturers of industrial products in the Netherlands suggest that development costs mediate the relationship between development cycle time and new product profitability and that sales volume mediates the link between proficiency in market‐entry timing and new product profitability. In addition, the findings indicate that new product advantage strengthens the positive relationship between proficiency in market‐entry timing and sales volume. The results provide no evidence for a moderating effect of product newness. These results have important implications because to maximize new product profitability managers need to distinguish between costs and demand side effects of development cycle time and market‐entry timing on new product profitability. Keeping this distinction in mind should help them to better determine the relative profit impact of investments in cycle time reduction or improved entry timing. Moreover, the findings suggest that highly advantaged products that enter the market at the right time may have a highly attenuated sales volume. It also implies that new products with lower advantage may have very little leeway in hitting the “sweet spot” in market. The message is that “doing the right thing” (i.e., to develop a highly advantaged new product) may be at least as important as correctly balancing the risks of premature entry and the missed opportunity of late entry.     

Access regulation,entry and investments in telecommunications

This paper presents a model of competition between an incumbent and an entrant firm in telecommunications. The entrant has the option to enter the market with or without having preliminary invested in its own infrastructure; in case of facility based entry, the entrant has also the option to invest in the provision of enhanced services. In the case of resale based entry the entrant needs access to the incumbent network. Unlike the rival, the incumbent has always the option to upgrade the existing network to provide advanced services. We study the impact of access regulation on the type of entry and on firms’ investments. We find that without regulation the incumbent sets the access charge to prevent resale based entry and this generates a social inefficient level of facility based entry. Access regulation may discourage welfare enhancing investments, thus also inducing a socially inefficient outcome. We extend the model to account for negotiated interconnection in the case of facilities based entry.     

Strategic Investment under Open Access: Theory and Evidence

We examine the incentives of access‐regulated firms to invest in infrastructure facilities they must share with competitors. We show that investment incentives can be decomposed into a non‐strategic and a strategic part. The non‐strategic part implies that investment depends positively on market size. The strategic incentives imply that investment also depends on market composition, namely, the market shares of the facility owner and its competitors. Using a dataset of regulated electric utilities in the United States, we find evidence that transmission investments are indeed made strategically. Ceteris paribus, utilities are less likely to invest, and investment levels are lower, when competitors occupy a larger share of the market.     

Assessing the impact of improved agricultural technologies on household income in rural Mozambique

In many areas of Africa, rural livelihoods depend heavily on subsistence farming. Using improved agricultural technologies can increase productivity in smallholder agriculture and thus raise household income and reduce poverty. Data from a nationally representative rural household survey from 2005 is used to assess the impact of four technologies – improved maize seeds, improved granaries, tractor mechanization, and animal traction – on household income in Mozambique. To ensure the robustness of the results, three econometric approaches were used: the doubly-robust estimator, sub-classification and regression, and matching and regression. The results show that, overall, using an improved technology did not have a statistically significant impact on household income. This may be associated with a widespread drought that occurred in 2005. Despite drought, distinguishing between households based on propensity score quintiles revealed that using improved technologies, especially improved maize seeds and tractors, significantly increased the income of those households who had better market access. Thus, to allow households to benefit from the use of improved technologies, policy makers need to reduce structural impediments to market participation by ensuring adequate road infrastructure and enabling access to markets.     

Network investment,access and competition

This paper analyzes the role of different contract types and access regulation on innovation and competition in telecommunications in the context of Next Generation Access Networks. Within a standard duopoly model, it is shown that ex-post access contracts lead less often to the duplication of investment, but to a wider roll-out compared to a market in which such contracts cannot be offered. In comparison to such ex-post contracts, ex-ante contracts lead to an even wider roll-out, but to a less frequent duplication of investments. Ex-ante contracts in particular, but also ex-post contracts, can be used to dampen competition.     

Intangible sales team resources: Investing in team social capital and transactive memory for market-driven behaviors,norms and performance

Complex offerings and evolving customer needs increase the demand for market-driven salespeople. Yet many of today's managers struggle to effectively deploy this selling approach. In light of this reality, we develop and test a multi-level market capabilities framework to examine team-level drivers and boundary conditions of market-driven salesperson behaviors, norms, and performance. Data collected in a lagged, multi-source, cross-level field study of 246 salespeople nested within 54 sales teams provide evidence that investments in team social capital (ITSC) support the self-correcting, customer-centric, learning behaviors needed for performance. Results show that managers' ITSC are positively associated with team goal monitoring, commitment to service quality, and learning effort. Further, goal monitoring and learning effort increase commitment to service quality, which helps drive sales performance. We also find that transactive memory systems (TMS) can be an efficient team knowledge resource that strengthens the learning effort-to-performance and service quality-to-performance relationships.     

Contractual arrangements and enforcement in transition agriculture: Theory and evidence from China

This paper empirically investigates the relationship between contractual arrangements and their enforcement in Chinese agriculture. Based on an analysis of a survey of 100 agribusiness firms engaged in contract farming in Zhejiang province of China, we find that private contract enforcement mechanisms play an important role in influencing smallholders’ decisions to breach or fulfill contracts. Contract arrangements such as floor pricing, or requiring smallholders to make specific investments facilitate self-enforcement and significantly improve the smallholder’s contract fulfillment rate. This is particularly important in Chinese agriculture since the business environment is characterized by an absence of effective public enforcement institutions.     

Legal unbundling can be a golden mean between vertical integration and ownership separation

We study an industry in which an upstream monopolist supplies an essential input at a regulated price to several downstream firms. Legal unbundling means in our model that a downstream firm owns the upstream firm, but this upstream firm is legally independent and maximizes its own upstream profits. We allow for non-tariff discrimination by the upstream firm and show that under quite general conditions legal unbundling never yields lower quantities in the downstream market than ownership separation and integration. Therefore, typically, consumer surplus will be largest under legal unbundling. Outcomes under legal unbundling are still advantageous when we allow for discriminatory capacity investments, investments into marginal cost reduction and investments into network reliability. If access prices are unregulated, however, legal unbundling may be quite undesirable.     

Aid,collective action and benefits to smallholders: Evaluating the World Food Program's purchase for progress pilot

Agricultural commodity markets in developing countries often operate in a constrained environment of prohibitive transaction costs. Consequently, smallholder farmers are only partly integrated into these markets, a situation that keeps them in a lower level of development equilibrium (poverty trap). Although cooperative institutional alternatives such as Farmers’ Organizations (FOs) may reduce transaction costs and revitalize agricultural production and commercialization, they rarely have been successful in fully delivering on these promises. Against this backdrop, the World Food Programmed (WFP) has recently implemented a multi-year and multi-country pilot to increase smallholder participation in commodity markets. The projects involved investing in physical and human capacities of Farmer Organizations (FOs) to aggregate commodities and add value, as well as locally purchasing food aid from the same. The combination of interventions was expected to increase the relative price of agricultural products, particularly staple crops. In this study, using Ethiopian panel survey data, we estimated the causal income and investment effects of the Ethiopian P4P intervention among smallholders. Using an entropy balancing (EB) model and semi-parametric difference-in-difference (DID) model, we show that the P4P intervention has increased per capita consumption by smallholders. Our additional analysis confirms that this effect is heterogeneous owing to elite capture within Farmer Organizations. We also find evidence of increased food consumption scores, increased investments in child schooling, and increased asset holding among program-participating smallholders relative to comparison farmers. Policy implications are discussed.     

Do Article 22 exemptions adequately stimulate investments in European gas markets?

Stimulating investments whilst introducing competition is a major policy issue for European gas markets. The current Article 22 exemptions regime, which is an application to the gas market of the access holiday theory, is designed to address this issue. Though useful, the access holiday theory provides an incomplete picture. In order to adequately analyze the exemptions regime, this paper incorporates the real options theory of investments into the analysis. Combining both theories provides the properties of an exemptions regime that better stimulates investments in gas. The current exemptions regime has some shortcomings, in particular regarding its risk criterion. A better exemptions regime would grant less exemptions, but if it does, allows higher profits during the exemption. Revised version of a paper presented at the European Doctoral Seminar on Natural Gas, State University, Moscow, November 24, 2007. I would like to thank the participants, especially Martin Gilman and Franz Hubert, as well as Koen Caminada, Ben van Velthoven and a referee of this journal for their comments and suggestions.