Influence Costs in Agribusiness Cooperatives

Abstract

This paper addresses the influence costs problem in the governance structure "agribusiness cooperative." Influence costs are higher in cooperatives than in investor-oriented firms due to the unique governance structure of the former. Hypotheses are formulated and tested regarding the relationship between influence costs and seven variables: membership size, member heterogeneity, average member age, singleness of purpose, managerial power over members, level of managerial compensation, and professional versus inside management. The main results are that heterogeneous member preferences, older average member age, and investment in multiple product lines all contribute to higher influence costs. At the same time, cooperatives with well-paid, powerful, and professional managers incur lower influence costs. The impact of membership size on the level of influence costs is undetermined.

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