Behavioral patterns influence decision-making in agricultural cooperation

They have mapped out the factors that influence when cooperative enterprises expand their operations - but do not always achieve economic success. Filiz Kinikli has combined survey data from Swedish farmers with in-depth interviews from cooperatives in the grain, dairy, and forestry sectors.

-The results show that members’ perceptions of success are shaped more by behavioral patterns such as over-optimism, herd behavior, and a tendency to continue investing in previous ventures, rather than by actual profitability, she says.

Funded by Mellby gard

The study has been funded by Rune Andersson, Mellby Gard AB, a private entrepreneur with many years of experience in, among other things, agricultural business. He has a particular interest in understanding why cooperative enterprises choose to engage in value-added production, known as vertical integration, which does not always lead to success.

The purpose of the study is to understand decision-making under uncertainty, by examining the behavioral barriers faced by Swedish cooperatives.

When a cooperative enterprise seeks to grow, there are two possible paths: either by increasing the number of members and the volume of handled products, or by moving further up the value chain, i.e., through vertical integration. The company then develops value-added production through retail or possibly direct marketing to consumers. However, the outcome does not always yield the expected profitability, and criticism - both from members and from external stakeholders - can become intense.

Increasing challenges

As the organization grows, management challenges increase, largely because members differ in their goals, expectations, and attitudes toward risk. This can lead to inefficiencies, strategic inconsistencies, and departures from the cooperative’s core values.

Integrated cooperatives tend to be more professionalized and data-driven than non-integrated cooperatives, which base their decisions on experience and member voting. Paradoxically, however, the less integrated cooperatives are often perceived by members as more successful, despite the integrated ones having a stronger market presence. The explanation lies in the fact that integrated cooperatives create greater social distance between members and management.

Different mindsets dominate

The study also showed that different mindsets dominate different groups.

Members show more status quo bias than managers. Members may prefer keeping things as they are, while managers are more willing to consider strategic changes or innovations.

Also, members demonstrate a stronger present focus—they concentrate more on short-term benefits such as annual payments rather than on long-term planning. Furthermore, they are more influenced by herd behavior and tend to follow group opinions rather than make independent decisions. The fear of losses is considerably stronger in non-integrated cooperatives.

Behavioral factors influence the future

Vertical integration is not merely an economic or structural decision; it is also strongly influenced by behavioral factors. 

-The results of the study highlight the need for both researchers and policymakers to more extensively consider cognitive and social drivers when making strategic decisions about the future of cooperatives. To remain successful, cooperatives need to balance economic efficiency with social cohesion, maintain transparent communication between members and management, and approach vertical integration with careful consideration of its social consequences says Filiz Kinikli.