Identifying risks inherent in farmer cooperatives in China

Abstract

Purpose – The purpose of this paper is to investigate risks faced by farmer cooperatives in China, using farmer cooperatives in Zhejiang province as a case. Specifically, the authors identify risks inherent in two primary types of farmer cooperatives in China (traditional and modern ones) when the external environment changes, the cooperative size expands and heterogeneity in membership widens. Design/methodology/approach – The authors assume that the “uncertainty of the external environment” and the “deviation of organisational adaptation” constitute the two dynamic factors that generated risks for farmer cooperatives. A survey of 158 farmer cooperatives is obtained in Zhejiang province in 2010, and factor analysis is employed to identify the risks and their critical degrees of traditional and modern cooperatives. Findings – The results indicate that two types of cooperatives in China face drastically different sets of risks. Traditional cooperatives face larger competitive and human resources risks, whereas modern cooperatives face larger decision-making and behavioural risks. Product market risk, macroeconomic policy risk and financial risk are common critical risks faced by both types of cooperatives. Originality/value – In this paper, risks in China's farmer cooperatives were empirically studied and systematically discussed. The paper offers a typology to identify risks inherent in two primary types of farmer cooperatives in China (traditional and modern ones) according to property rights arrangements and governance structure.