Marketing Cooperatives and Financial Structure
19 Pages Posted: 3 Feb 2003
Date Written: December 2000 5,
The relationship between the financial structure of a marketing cooperative (MC) and the requirement of the domination of control by the members is analysed from a transaction costs perspective. A MC receives less favorable terms on outside equity than a conventional firm because the decision power regarding new investments is not allocated to the providers of these funds. This is a serious threat to the survival of a MC in a market where efficient investments are characterized by an increasing level of asset specificity at the processing stage of production. A MC is predicted to be an efficient organizational form when the level of asset specificity at the processing stage of production is at a low or immediate level compared to the level of asset specificity at the farming stage of production.
Keywords: marketing cooperative, finance, transaction costs economics
JEL Classification: M, M10, L2, D2, G3
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