Typology of contract farming arrangements: a transaction cost perspective

Innocent Mugwagwa*, Jos Bijman, Jacques Trienekens

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

2 Citations (Scopus)

Abstract

This paper proposes an alternative typology of contract farming arrangements (CFA) based on transaction cost theory. To construct the typology, we first surveyed managers of agribusiness firms and contracted farmers in Zimbabwe to understand the provisions in their contracts, the motivations for their inclusion and the level of transaction attributes, particularly the sub-categories of asset specificity and uncertainty. We then developed a two-by-two matrix of contract types based on the interaction of transaction attributes. The results show that four contract types can be distinguished: total, group, lean and market contracts. Furthermore, CFAs that are misaligned with transaction attributes have problems of side-selling and inefficiency. Our new empirically based categorisation can help managers and policymakers to design CFAs that match with underlying transaction attributes, thus enhancing the stability and efficiency of CFAs.

Original languageEnglish
Pages (from-to)169-187
JournalAgrekon
Volume59
Issue number2
Early online date9 Mar 2020
DOIs
Publication statusPublished - Jun 2020

Keywords

  • Contract farming arrangements
  • contract types
  • typology
  • Zimbabwe

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