Why do agribusiness firms simultaneously source from different contract farming arrangements? Evidence from the soybean industry in Malawi

This paper describes and analyzes the rationale for concurrent use of different contract farming arrangements (CFAs) by a large agroprocessor. We postulate that plural governance is determined by ambiguity over the best mode of coordination, complexity of transactions and strategic behavior by the agroprocessor. We carried out an in-depth case study of an agroprocessor that has multiple CFAs in the soybean industry in Malawi. We find that ambiguity explains the formation of plural governance structures, but strategic behavior is the main motivation for their persistence. Hence, the study findings unite hitherto opposing schools of thought on the stability of plural forms. The results imply that the incentives and disincentives of agribusiness firms to source through different CFAs should be considered in designing policies and programmes to promote contract farming.