Development strategies in small-scale rural businesses

What determines why some firms develop by diversifying their activities outside their core business, while others develop by specializing within a single enterprise? These are questions we are studying in the project ‘Development strategies in small-scale rural businesses’. More precisely, we are interested identifying why some farm businesses choose to diversify outside conventional agriculture whereas others choose to specialize in a single farm enterprise.

One important issue in this project is what is being meant by a diversified farm business. There is a comparatively large scientific literature that is interested in understanding how and why farm businesses diversify outside conventional agriculture. A consensus from this literature is that a diversified farm business uses its agricultural resources to produce something that is not food or fiber, or that production is done in a way that implies that value is added to own products. The latter may be about farm-based processing of products. Examples include own dairies where the milk is processed and marketed as locally produced, own processing of cheese, jams, marmalades etc. The definition of a diversified farm business is thus somewhat different from what is normally encountered in the general business administration literature. In this literature, a firm with several enterprises (irrespective of what enterprises these are) would be considered diversified.  Furthermore, in the general business administration literature, firms with own processing of products would not be considered diversified.

In this project we are interested in how the occurrence of specialization and diversification in the farm sector is currently developing and what determines the development. With respect to the latter question, we have studied the following aspects: the business itself and its financial situation, the decision-making of the farm manager (including attitudes), and in what context the farm exists when it comes to professional and social networks. We have also studied what goals underlie decisions to diversify outside conventional agriculture and how these were dependent on the situation of the family owning the farm. We have found that the significant dependence on the family that is generally seen in agriculture significantly impacts on the goals underlying the decisions to diversify outside conventional agriculture.

This project is relevant for rural policy. Especially farm diversification is often considered a way in rural policy to stimulate rural economic growth. To reach the goals policy is intended to reach it would be necessary to understand what is behind the decision of the individual farmer to diversify outside conventional agriculture.

Project team

Associate Professor Helena Hansson (project manager)

PhD Richard Ferguson

Professor Christer Olofsson

Duration: 2008 – 2012

Financer: Formas