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The impact of cooperatives' risk aversion and equity capital constraints on their inter‐firm consolidation and collaboration strategies—with an empirical study of the European dairy industry
Author(s) -
van der Krogt Dirk,
Nilsson Jerker,
Høst Viggo
Publication year - 2007
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.20140
Subject(s) - econlit , consolidation (business) , business , agribusiness , risk aversion (psychology) , equity (law) , mergers and acquisitions , industrial organization , equity capital , marketing , economics , microeconomics , finance , capital market , financial economics , expected utility hypothesis , ecology , medline , political science , law , biology , agriculture
This article concludes that cooperative firms' choice of interfirm consolidation and collaboration strategies can be explained by two attributes, inherent in the cooperative business form, namely, risk aversion and equity capital constraints. Empirical data originate from the 15 largest EU dairy firms during a 5‐year period (1998–2002). In total 198 activities are identified. They are classified into six categories: (a) mergers, (b) acquisitions, (c) strategic share holdings, (d) joint ventures, (e) licensing, and (f) general collaboration agreements. It is shown that cooperative firms prefer mergers, collaboration agreements, joint ventures, and licensing. All of these are relatively low in terms of both performance risks and relational risks, and they demand limited amounts of equity capital. Investor‐owned firms focus on take‐over strategies—acquisitions and share holdings. Other indicators of risk aversion are that cooperatives tend to collaborate with other cooperatives and that they prefer partners in their own home market. [EconLit: Q130; P130; L200.] © 2007 Wiley Periodicals, Inc. Agribusiness 23: 453–472, 2007.