AGRICULTURAL

ECONOMICS
Agricultural Economics 33 (2005) 305314
Modeling determinants of agricultural production cooperatives
performance in Iran
Ezatollah Karami

, Kurosh Rezaei-Moghaddam
Department of Agricultural Extension, College of Agriculture, Shiraz University, Shiraz, Iran
Received 9 December 2002; received in revised form 1 July 2003; accepted 27 May 2004
Abstract
The purpose of this article is to identify the fundamental factors that are key determinants in promoting effective operation of Agricultural
Production Cooperatives (APCs). A theoretical framework determinants of APCs performance was used to analyze the links between the
webs of factors. A survey method was used to collect data from two southern provinces in Iran. Data were collected from 52 managers and 260
member farmers in 52 APCs using a stratied random sampling method. It is concluded that the theoretical model can to a great extent predict the
performance of APCs. Cooperative structure and government support factors are the most important factors explaining the performance of APCs.
Also, policy strategies need to focus on conditioning variables that affect the performance of APCs.
JEL classication: Q01, Q13
Keywords: Production cooperatives; Iran; Performance; Modeling
1. Introduction
Fromearly on the harsh conditions of agricultural production
in Iran required farmers to cooperate. The well-known tradi-
tional agricultural production cooperative in Iran, Buneh, was
an independent organization for agricultural production com-
posed of a team of sharecroppers who cultivated the land coop-
eratively (Lahsaeizadeh, 1990). The major function of Buneh
was efcient exploitation of the land and careful use of scarce
water resources. Buneh lost its functionality after the land re-
form of 1962 when the new rural social and power structures
were no longer conducive to its operation.
The modern Agricultural Production Cooperatives (APCs)
were established in Iran in early 1970s in order to increase
the production of the large number of small and fragmented
production units that were the consequence of the 1962 land re-
form. The number of agricultural producers had increased from
1.8 million in pre-land reform phase in 1960 to 2.6 million in
1991. This is in contradiction with the experience of other coun-
tries, where development resulted in a decline in the number
of agricultural producers and a rise in the size of production
units (Abdollahi, 1998). After the Islamic Revolution of 1978,

Corresponding author. Tel.: +98 711 228 6179; fax: +98 711 628 9017.
E-mail address: ekarami@shirazu.ac.ir (E. Karami).
some rural production cooperatives were dissolved. However,
after 1996 the establishment of APCs became a major strategy
of the Ministry of Agriculture in its efforts to achieve agricul-
tural development and increase production. Therefore, in terms
of sheer numbers APCs grew rapidly. For example, in Fars, a
leading province in terms of agricultural production, where the
eldwork for this research was conducted, 128 of 162 APCs
were established in, 20 after, and only 14 were in existence
before 1996.
According to the laws and regulations governing APCs, they
are established with the aims of consolidating the land of volun-
tary farmers who become members, increasing the productivity
of soil and water resources by providing modern irrigation in-
frastructure, leveling of agricultural land, familiarizing farmers
with modern methods of production and harvesting, efcient
use of agricultural machinery, facilitating establishment of agri-
cultural industry, and nally improving the income and living
conditions of rural households.
The literature on the impacts of APCs in Iran is summarized
in Table 1. Recent studies show that APCs were unsuccessful
in achieving land consolidation and group work, which were
the main reasons for their establishment. The new APCs are not
as successful as their predecessors were, because due to the
rapid expansion, the government has not been able to provide
as much support and leadership to themas it did to earlier APCs.
306 E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314
Table 1
Summary of literature on APCs in Iran
Research Location Findings
Effective in Ineffective in
Niazi et al., 1975 National Increasing income Purchasing products
Satisfying technical Timely distribution
and economic needs of inputs and services
Noorozi, 1975 Kerman Province Increasing production
Increasing income
Land consolidation
Ag. Mechanization
Noorozi, 1976 Fars Province Increasing income Decreasing cost
Increasing yield Preventing migration
Anoshervani et al., Kerman Province Yield Increasing
1982 cultivation area
Increasing cultivation
area
Increasing income
Anoshervani et al., Esfahan Province Increasing net income
1985
Central Cooperation National Reducing production cost
Organization, 1986 Increasing yield
Increasing income
Satisfying farmers needs
Reducing hedging
Masoomi, 1988 Fars Province Increasing employment
and capital
Land consolidation
Promoting innovations
Anoshervani, 1994 Khorasan Province Land consolidation
Promoting adoption
of technology
Reducing cost
Increasing production
Promoting agriculture-
related industry
Rouhani, 1997 Hamedan Province Increasing mechanization Land consolidation
Improving irrigation Group work
methods
Increasing productivity
Promoting improved seeds
Improving production practices
Darvishinia, 2000 Mazandaron Province Distribution of fertilizers Mechanization
and pesticides Land consolidation
Extension services
Post production services
Source: Karami and Rezaei-Moghaddam (forthcoming)
Theoretically, agricultural cooperatives are considered the
backbone of agricultural development in many countries. By
pooling individual holdings, cooperatives should logically yield
a surplus far in excess of what an individual holder is able to
produce in a tiny plot. From an economic point of view, coop-
erative farming is expected to increase production, increase the
protability of farming, and satisfy the needs of its members
and society at large. From a social point of view, production
cooperatives are expected to raise the professional and cultural
qualications of their members. However, it remains controver-
sial whether the cooperatives have achieved these development
objectives in reality.
The success of over 200 cooperatives in the Basque province
of Spain has surpassed all expectations (Hanna et al., 1992).
However, in Grenada among three different models of farming
(state, private, and cooperative), cooperatives are the least suc-
cessful (Benoit, 1991). The general experience with the work-
ing of credit cooperatives in many countries of the world has
been a matter of much disappointment to members, societies,
governments, and promotional agencies (Mustafa, 1994). The
equalizing effect of cooperatives is also questioned by many
authors (Huizer, 1985; Lahsaeizadeh, 1990; Mustafa, 1994).
Evidence gathered on cooperatives in Africa points to a more
or less dismal failure. In fact, the disappointing performance of
E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314 307
cooperatives in Africa appears to be the rule rather than the
exception (Hunter, 1993;Okoye, 1997). Okoye (1997) supports
the thesis that the inappropriateness of the administrative and
management setup of Nigerian cooperatives contributes con-
siderably to their ineffectiveness. He suggests a considerable,
if not complete, deregulation of the cooperative sector by the
state. Others (Huizer, 1985) have stated that cooperatives in
many developing countries are not really cooperatives but rather
pseudo-cooperatives, as they are imposed fromthe above by of-
cial development agencies.
Most of the existing cooperatives in the Asia-Pacic region
have not been able to achieve self-reliance, partly due to so-
cioeconomic constraints and partly due to poor management.
However, the Deedar cooperative village development society
in Bangladesh (Paudyal, 1992) and the Gambhira cooperative
farming society in India, which has been successfully function-
ing since 1953 (Kumar, 1990), are among the few cooperatives
in the Asia-Pacic region that are often cited as success stories
in promoting rural development through peoples participation.
Deedars success is due to a comprehensive village develop-
ment strategy, a exible approach, and leadership. According
to Kumar (1990), the striking success of the Gambhira cooper-
ative is due to enlightened leadership, a homogeneous group of
members, systematic incentives to work hard, a just distribution
of benets, efcient management, a productive resource base,
and ownership of very fertile land.
Factors contributing to success and failure of cooperatives
are not limited to those mentioned above; other explanations
have also been offered. Munkner (1976) argues that coopera-
tives can only be successful if their members are engaged in
economic activity prior to the formation of the cooperative so-
ciety. The membership of the cooperative and the volume of
business must be large enough to serve as a basis on which
the enterprise can be built. In addition, there should be persons
among the membership who are willing and able to manage the
cooperative. Landless people (whose incomes are low because
of limited employment opportunities and low productivity of
labor) and those with inadequate land are least likely to bene-
t from the cooperative movement in its present form (Benoit,
1991).
Membership patronage and participation in governance are
central to building strong and successful cooperatives. Lasley
and Baumel (1996) argue that membership loyalty should be
viewed as a product of sound business ethics which, in turn, cre-
ates a climate of trust within the cooperative. Sidhu and Sidhus
(1990) analysis indicates that successful cooperative societies
are characterized by honest and dedicated management result-
ing in loyal members; dishonest and inefcient management is
shown to be the main cause of failure of cooperative societies.
Given the efforts and budget allocated to establishing APCs
in Iran, and lack of solid evidence on what contributes to
their performance, the aim of this article is to determine the
factors that contribute to the effective operation of APCs in
Iran. This article also tries to shed some light on the rela-
tionship between the performance of APCs and sustainable
agriculture.
2. Theoretical framework
The cooperative model in rural development programs
(Ladele et al., 1994) is a relatively comprehensive model. This
model assumes that if a set of agricultural input is channeled
through a cooperative medium, it results in an improved level of
living among cooperators, while the same set of inputs owing
through farmer households devoid of cooperatives results in a
depressed level of living. Given the objectives of this study,
the cooperative model in rural development programs was
considered inadequate.
Therefore, based on literature, experience, and observation,
a theoretical framework was developed. This model determi-
nants of APCs performance is illustrated in Fig. 1. This model
assumes that cooperative performance can be measured by the
degree to which the APCs are able to satisfy the needs of farm-
ers at different stages of the production process (pre-cultivation,
cultivation, husbandry, harvest, post-harvest, and extension ser-
vices). APCs, like any other organization, have a hierarchy of
objectives. The success of any agricultural cooperative can be
measured in terms of achieving nal objectives such as in-
creasing members income, providing risk management, food
security, and sustainability. However, except for measuring the
relationship between the performance of APCs and some di-
mension of sustainability, this study is not concerned with other
nal objectives. Instead, this study was designed to determine
the effectiveness of APCs in achieving their intermediate objec-
tives. The main reason for establishing APCs is to facilitate the
production process by meeting the needs of farmers. Therefore,
this is the focal point of this study and its theoretical model.
Whether achievement of intermediate objectives will contribute
to the nal success of APCs is a major question for future re-
search.
It is important to distinguish between efciency and effec-
tiveness (Israel, 1987). The concept of effectiveness of APCs
includes their capacity to achieve appropriate operational objec-
tives. Appropriateness of APCs activities is measured relative
to farmers needs. On the other hand, efciency refers to the
way in which the available resources are used to achieve objec-
tives. Efciency implies that input resources should be arranged
and utilized in such a way that no other method would produce
as protable a return. At this stage of APC development, pol-
icy makers are primarily concerned with their impact on the
production process. However, a question for future research
on APCs will be to consider their efciency in achieving this
impact.
The model (Fig. 1) assumes that following factors inuence
the performance of APCs:
2.1. Social factors
Cooperation is a social activity; therefore, the social envi-
ronment in which the APCs operate is of signicance. The
social factors included in this model are, the degree of solidar-
ity among members and the attitudes of members toward the
308 E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314



























Solidarity
Attitude toward manager
and board member
abilities
Annual rainfall
Loan
Government aid
Free machinery
Coop specification
Number of members,
cultivation area, initial
capital, age, infrastructure
facilities
Manager characteristics
Job satisfaction,
education, knowledge of
coop principles
Degree of trust among
members
Cooperative


Pre-cultivation:
Land consolidation,
leveling, improving
canal lining, irrigation,
drainage, water
resources, farm roads,
cropping pattern, and
increasing cultivation
area
Cultivation:
Providing tractor, seed,
fertilizers, planter, seed
distributor, fertilizer
distributor, rotation, and
group farming
Husbandry:
Pest and disease control,
biological control,
mechanical weed
control, and providing
herbicides
Harvesting:
Wheat harvester, other
crops harvesters,
transport, and thresher
Post-harvest:
Transport, storage,
packaging, processing
industry, marketing,
collective marketing
Extension services:
Diffusion of knowledge
and technology
Sustainable
agriculture
Social
Natural
Government
support
Trust
Coop
structure
Factors
Performance
Fig. 1. Theoretical model of determinants of APCs performance.
ability of the APC manager and board members. According to
this model, higher solidarity and more favorable attitude will
result in higher performance of APCs.
2.2. Natural factors
Since agricultural development depends on biological pro-
cesses, this model assumes that a favorable natural environ-
ment will result in better performance by APCs. The amount
of rainfall was the only environmental indicator included in the
model. The logic beyond this selection is the importance of
rainfall for biological processes in arid and semiarid regions
and the possibility of its precise measurement.
2.3. Government support factors
APCs are a result of planned efforts by the government.
The Ministry of Agriculture plays a prominent role in their
establishment and operation. Therefore, this model assumes
the higher the government support the better the performance
of APCs. Government support factors include the amount of
loans, aid, and free machinery provided to APCs.
E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314 309
2.4. Trust factors
Theoretical and empirical research supports the idea that
cooperation is the result of trust between members and trust is
based on societys ethic. This model assumes that the degree of
trust between members and managers and board members is a
major contributing factor to the performance of the APCs.
2.5. Cooperative structure factors
The model assumes that the structure of APCs (coop spec-
ication and manager characteristics) is a determinant of its
performance. Cooperative specication includes the number of
members, the area under cultivation, the amount of initial capi-
tal, the availability of agricultural machinery, the APCs age and
infrastructure facilities. Manager characteristics ( job satisfac-
tion, education, and knowledge about cooperative principles)
are assumed to be the second part of cooperative structure
factors.
2.6. Cooperatives and sustainable agriculture
This theoretical framework hypothesizes a link between the
performance of APCs and sustainable agriculture.
3. Methodology
An evaluation research methodology and survey technique to
collect data are used to test the theoretical model. The study area
consisted of Fars and Bushehr, two southern provinces of Iran.
Fars is a leading province in terms of agricultural production,
while Bushehr is a small province along the Persian Gulf with
a warmer climate and less rainfall.
Stratied random sampling was used to select APCs. The
two provinces were used as strata. A simple random sample
of APCs was selected from each stratum (6 out of 12 from
Bushehr and 47 out of 142 from Fars). Only APCs that were
established during and before 1996 were included in the sample.
In each APC, interviews were conducted with ve randomly
selected farmers and the manager. Data were collected from
52 managers and 260 member farmers in 52 APCs. Structured
questionnaires were used for eld interviews. The denition,
measurement, and descriptive statistics of the variables used in
the model are presented in Table 2.
The theoretical model of determinants of APCs perfor-
mance was empirically tested using a total performance in-
dex (TPI) to measure the performance of APCs:
TPI =

i=1
PERFORM

6,
where
TPI is the total performance index of APCs. PERFORM
1
. . . PERFORM
6
is the performance of APCs in satisfying
farmers needs in pre-cultivation, cultivation, husbandry, har-
vest, post-harvest stages, and extension services.
The total performance of APCs (TPI) was rather low. The
mean total performance was 16.1 on a scale of 0 to 100 (standard
deviation = 9.6). Hierarchical regression analysis was used to
validate the theoretical model. In each stage of analysis, a set
of predictor from the determinants of APCs performance
model entered into the regression equation.
4. Results and discussion
4.1. Predictors of APCs performance
The results of the hierarchical regression analysis will be
presented according to the stage of factor entrance into the
model.
4.1.1. Social factors
The theoretical model hypothesizes that social factors includ-
ing solidarity among members and attitude of members toward
the ability of the manager and board inuence the performance
of APCs. The ndings regarding the entrance of social factors
were:
TPI = 3.0 10
5
+0.847 SOLID +0.197 ATTITUDE,
R
2
= 0.049,
where SOLID is solidarity among members, and ATTITUDE
is attitude toward ability of manager and board.
The R
2
at this stage of analysis reveals (Table 3) that the en-
trance of social factors into the model provides little predictive
power. In other words, only 4.9% of the variance in the total
performance of APCs was explained by the two social variables.
This nding does not support the conclusions by Kumar (1990)
and Sidhu and Sidhu (1990) regarding the role of social factors
in the success of cooperatives. Kumar (1990) held homoge-
nous group of members that preserve the spirit of group efforts
and harmony among the members to be responsible for the
performance of the Gambhira cooperative. According to Sidhu
and Sidhu (1990), the dominance of large farmers who were di-
vided into two strong opposing groups resulted in conict and
failure of a cooperative case they studied in India.
4.1.2. Natural factors
Variation in the amount of rainfall (indicator of natural fac-
tors) was expected to have a signicant inuence on the perfor-
mance of APCs. The amount of rainfall (RAIN) in areas where
APCs were located was added to the model at this stage:
TPI = 3.0 10
6
+0.883 SOLID
+0.143 ATTITUDE +0.013 RAIN,
R
2
= 0.069.
310 E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314
Table 2
Denition of variables used in the APCs performance model
Short Denition and measurement x Standard
form deviation
TPI See text 16.0 9.6
PERFORM
1
=

9
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs in pre-cultivation stage, where X
i
= Degree of need for 9 activities (Fig. 1) was measured using an ordinal 4-category
scale ranging from no (0) to high (3). Y
i
= degree of APCs success in
satisfying each need, was measured on a 4-category ordinal scale ranging from no
(0) to high (3).
5.8 7.6
PERFORM
2
=

8
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs in cultivation stage, where X
i
=
Degree of need for 8 activities (Fig. 1) was measured using an ordinal 4- category
scale ranging from no (0) to high (3). Y
i
= degree of APCs success in
satisfying each need, was measured on a 4-category ordinal scale ranging from no
(0) to high (3).
27.7 14.4
PERFORM
3
=

4
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs in husbandry stage, where X
i
=
Degree of need for 4 activities (Fig. 1) was measured using an ordinal 4-category
scale ranging from no (0) to high (3). Y
i
= degree of APCs success in
satisfying each need, was measured on a 4-category ordinal scale ranging from no
(0) to high (3).
28.1 12.5
PERFORM
4
=

4
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs in harvesting stage, where X
i
=
Degree of need for 4 activities (Fig. 1) was measured using an ordinal 4-category
scale ranging from non (0) to high (3). Y
i
= degree of APCs success in satisfy
each need, was measured on a 4 category ordinal scale ranging from non (0) to
high (3).
7.3 17.9
PERFORM
5
=

6
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs in post-harvest stage. Where: X
i
=
Degree of need for 6 activities (Fig. 1) was measured using an ordinal 4-category
scale ranging from non (0) to high (3). Y
i
= degree of APCs success in satisfy
each need, was measured on a 4 category ordinal scale ranging from non (0) to
high (3).
3.8 7.0
PERFORM
6
=

9
i=1
X
i
Y
i
Performance of APCs in satisfying farmers needs to extension service. Where: X
i
=
Degree of need for 9 extension programs was measured using an ordinal 4-category
scale ranging from no (0) to high (3). Y
i
= degree of APCs success in satisfy
each need, was measured on a 4 category ordinal scale ranging from no (0) to
high (3).
25.4 18.4
SOLID A scale measuring perceived solidarity: summation of agreement with 9 items
(friendship, empathy, unity, mutual goal, etc.). Each item ranging from agree (2),
relatively agree (1) to disagree (0).
10.2 2.1
ATTITUDE A scale measuring attitude toward ability of manager and board member: summation
of response to 14 items (knowledge of farmers situation, understanding farmers
problem, communication skills, leadership, etc.). Each item ranging from no
ability (0), low ability (1) to high ability (2).
25.02 2.9
RAIN Amount of annual rainfall in APC area in mm/year. 248.4 105.3
AID Amount of cash aid provided to APC by government in Tomman (800T=1US$). 13,365,023 42,964,259
MCHNVLU Value of free machinery provided to APC in Tomman. 8,543,478 20,540,971
LOAN Total amount of loan provided to APC in Tomman. 41,615,692 9,4881,411
TRUST A scale measuring members trust toward manager and board members: summation of
response to 14 items (honest, just, trustworthy, reliable, etc.). Each item ranging from
no (0), low (1) to high (2).
24.3 3.3
LAND Area under cultivation in APC in hectares. 3560.1 2736.7
BUILDING Ofce, storage, workshop, and other related buildings of APCs in square meters. 356.7 619.4
CAPITAL Initial capital of APC in Tomman. 2,334,994 2,910,206
MEMBER Number of APC members. 288.3 189.5
SELFREL Degree of self-reliance, measured in terms of ratio of number of employees whose
salary was paid by APC to total number of employee (APC + Government paid).
0.71 0.35
MCHNUBR Number of machines that the APC possesses. 9.7 10.9
YEARS Age of APC, measured in years. 6.1 4.3
SATIS A scale measuring job satisfaction of an APC manager: summation of response to 8
items (interesting, enjoyable, etc.). Using an ordinal 5-category type scale ranging
from no (0) to very high (4).
21.6 5.2
EDUC Years of manager education. 15.1 1.8
COOPRNC Manager knowledge of principles of cooperative, measured based on the score to an
open question asking managers to list all principles of cooperative.
5.6 1.8
E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314 311
Table 3
Summary results of hierarchical regression of performance of APCs
Model R R
2
Adjusted Standard error Change
R
2
of the estimate in R
2
1
a
0.221 0.049 0.010 9.5698 0.049
2
b
0.263 0.069 0.011 9.5639 0.021
3
c
0.561 0.315 0.224 8.4739 0.246
4
d
0.569 0.324 0.216 8.5145 0.009
5
e
0.866 0.750 0.655 5.6457 0.426
6
f
0.871 0.758 0.637 5.7956 0.008
a
Predictors: (Constant), SOLID, ATTITUDE.
b
Predictors: See Model 1, RAIN.
c
Predictors: See Model 2, AID, MCHNVLU, LOAN.
d
Predictors: See Model 3, TRUST.
e
Predictors: See Model 4, LAND, BUILDING, CAPITAL, MEMBER,
SELFREL, YEARS, MCHNUBR.
f
Predictors: (Constant), See Model 5, SATIS, EDUC, COOPRNC.
Dependent variable: TPI.
Summary ndings in Table 3 show that addition of natural fac-
tors (RAIN) to the model improved the predictive power only
by 2.1%. This contradicts the results of Kumar (1990), who
concluded that the very fertile land owned by the Gambhira
cooperative accounted for its success. However, there are dif-
ferences in the research methods and natural resource indicators
(rain versus soil fertility) used in this study and in that of Ku-
mar (1990). The ndings of this study reveal that APCs from
regions with higher rainfall were not more effective than those
from lower rainfall regions.
4.1.3. Government support
Based on the theoretical model, it is expected that government
support contributes to the effective performance of APCs. Gov-
ernment support including amount of loan, aid, and the value
of farm machinery provided to APCs, when introduced into the
model at the third hierarchical stage, provided the following
regression equation:
TPI = 0.013 + 0.95 SOLID +0.407 ATTITUDE +0.014
RAIN + 4.4 10
9
AID +1.2 10
7
MCHNVLU
+ 3.9 10
8
LOAN,
R
2
= 0.315,
where AID is amount of money provided to an APC as aid,
MCHNVLU is value of free machineries provided to an APC,
and LOAN is the amount of loan provided to an APC.
In contrast to social and natural factors, government support
variables improve the predictive power of the model consider-
ably. Government support variables explain an additional 24.6%
of the variance in the performance of APCs (Table 3). This nd-
ing corroborates that of Kumar (1990) in India regarding the
importance of nancial resources and that of Sidhu and Sidhu
(1990) about the effect of economic problems on cooperatives.
However, other researchers have criticized government support
of cooperatives on the ground that it will make them pseudo-
cooperatives (Huizer, 1985). While the importance of external
support to nurture cooperatives in crucial formative years to
prepare them for take-off has been emphasized, too much gov-
ernment support has been blamed for agricultural cooperative
failure (Akwabi-Ameyaw, 1997).
4.1.4. Trust factors
Building trust between members and their cooperative lies at
the heart of maintaining strong agricultural cooperatives. The
degree of APC members trust toward managers and board
members (TRUST) was measured and introduced into the re-
gression model,
TPI = 0.012 + 0.628 SOLID +0.184 ATTITUDE +0.013
RAIN + 6.7 10
9
AID +1.1 10
7
MCHNVLU
+ 3.8 10
8
LOAN +0.445 TRUST,
R
2
= 0.324.
The ndings (Table 3) reveal that the impact of trust on effective
performance of APCs is negligible (R
2
changes by 0.009). The
literature emphasizes that trust and commitment to ethical busi-
ness practices provide the basis for cooperation and are essential
for people to join and work together for a mutual goal (Lasley
and Baumel, 1996; Sidhu and Sidhu, 1990). The existence of
a relatively similar level of trust (small variability) among dif-
ferent APCs ( x = 24.3, SD = 3.3) might explain the above
nding. Therefore, it should not be interpreted as meaning that
cooperatives could be successful in an environment of distrust
and lack of commitment.
4.1.5. Cooperative structure
At this stage of model development, cooperative structure
factors were divided into two groups. First, the cooperative
characteristic variables: the number of members, area under cul-
tivation, initial capital, age of an APC, number of machines, in-
frastructure facilities (area under ofce, storage, workshop. . .),
and degree of self-reliance were included in the model.
TPI = 0.032 + 0.973 SOLID +0.489 ATTITUDE +0.009
RAIN 4.0 10
8
AID +1.1 10
7
MCHNVLU
+ 4.4 10
8
LOAN +0.112 TRUST +0.0001
LAND + 0.008 BUILDING +5.7 10
7
CAPITAL
0.006 MEMBER 8.560 SELFREL
0.281 YEARS +0.179 MCHNUBR,
R
2
= 0.75,
where LAND is area under cultivation, BUILDING is infras-
tructural facilities (area under ofce, storage, workshop. . .),
CAPITAL is initial capital, MEMBER is number of members,
SELFREL is degree of self-reliance, MCHNUBR is number of
machineries, and YEARS is age of APC.
312 E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314
Table 4
Regression coefcient for nal model of determinants of APCs performance
Unstandardized Standard Standardized t-value P (t-value) Condition
coefcients error coefcients index
(Constant) 0.033 0.804 0.041 0.967 1.00
ATTITUDE 0.415 0.417 0.127 0.994 0.327 1.11
SOLID 0.790 0.597 0.174 1.323 0.195 1.26
RAIN 9.405 10
3
0.009 0.103 1.074 0.290 1.41
AID 3.922 10
8
0.000 0.175 1.025 0.313 1.47
MCHNVLU 1.116 10
7
0.000 0.238 2.346 0.025 1.66
LOAN 4.514 10
8
0.000 0.445 2.834 0.008 1.75
TRUST 0.264 0.456 0.089 0.579 0.567 1.77
LAND 2.115 10
4
0.000 0.060 0.593 0.557 1.89
BUILDING 7.717 10
3
0.003 0.497 2.354 0.024 2.07
CAPITAL 6.065 10
7
0.000 0.184 1.928 0.062 2.25
MEMBER 4.906 10
3
0.006 0.097 0.876 0.387 2.53
SELFREL 7.768 3.205 0.282 2.424 0.021 2.68
YEARS 0.203 0.377 0.091 0.539 0.593 2.96
MCHNUBR 0.155 0.149 0.177 1.042 0.305 3.67
SATIS 0.100 0.192 0.055 0.522 0.605 4.26
EDUC 0.435 0.582 0.083 0.748 0.460 5.14
COOPRNC 0.493 0.602 0.093 0.819 0.419 5.62
R
2
= 0.758
F = 6.262 (p < 0.000)
Dependent variable: TPI, model 6
White heteroskedasticity test: F = 1.64 (p = 0.11).
The ndings indicate that including the rst group of
cooperative structure factors improved the predictive power of
the model considerably (R
2
increases by 42.6% to 0.75). The
APCs characteristics were the most important set of variables
in explaining their performance, followed by government sup-
port factors with 24.6%. Manager characteristics, the second
part of cooperative structure factors were introduced in the last
stage of the analysis. These variables included job satisfaction
(SATIS), education (EDUC), and knowledge of cooperative
principles (COOPRNC). Inclusion of these variables into the
model improved its predictive power by less than 1% (Table 3).
This is contrary to the hypothesis that manager characteristics
have an inuence on the performance of cooperatives. Russo
et al. (2000), for example, argue that cooperatives characterized
as having powerful managers have a capital structure that is
signicantly different from that of non-powerful manager
cooperatives. The role of efcient management in determining
cooperative success has been emphasized by others (Kumar,
1990; Okoye, 1997). The negligible effect of managers char-
acteristics on the performance of APCs reported in this study
may be due to the limited variation in these variables. For ex-
ample, 75% of the managers are college graduates with a mean
job satisfaction of 21.6 and a standard deviation of 5.2.
Entrance of all cooperative structure variables into the equa-
tion provided the nal model presented in detail in Table 4.
The hypothesis that all regression coefcients of this model are
equal to zero was rejected (F =6.26, p < 0.000). The standard-
ized coefcients (Table 4) reveal that one standard deviation
change in amount of loan (LOAN), infrastructural facilities
(BUILDING), self-reliance (SELFREL) and the value of ma-
chinery owned (MACHNVLU), respectively, results in 0.44,
0.49, 0.28, and 0.23 standard deviation changes in the perfor-
mance of APCs. The t-values of these variables are signicantly
different from zero at the 0.05 level. The negative sign of self-
reliance indicates that any increase in this variable would result
in a decrease in the performance of APCs. Given the contradic-
tion between self-reliance and government support, the negative
effect of self-reliance is understandable.
The results presented in Table 4 indicated that the nal model
had no heteroskedasticity (F=1.64, p =0.11). However, an ini-
tial evaluation found evidence of multicollinearity. One way to
reduce multicollinearity is to center the variables (Motulsky,
2002), i.e., to calculate the mean of variables in the regression
model and then replace each value with the difference between
it and the mean. This solution was adopted because it solved
the multicollinearity problem, while allowing us to keep all the
variables in the model. The condition indices in Table 4 reveal
that the model as estimated does not have a multicollinearity
problem.
4.2. Performance and sustainable agriculture
The term ecological services is used for all the direct and
indirect benets people derive from the biosphere. Sustainable
agriculture refers to the capacity of farmers to maintain the
ecological services of the land. Life itself is the most important
ecologic service (Roling, 1997). The question then is whether
E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314 313
the changes brought about by the activities of APCs contribute
to sustainable agriculture. The APCs have the mission to help
rural communities to live and work more sustainably within
their ecological opportunities. In the following this question is
investigated from two perspectives. First, the impact of APCs
in reducing overuse of chemical fertilizers, and second, the
adoption of sustainable agricultural practices are studied.
There was no signicant correlation between the perfor-
mance of APCs and the use of chemical fertilizers by farmers
(r = 0.01). Therefore, it could be concluded that APCs did
not have any impact on reducing chemical fertilizer (over-)use
(Karami and Ebrahimi, 2000). Although APCs facilitate the
supply of fertilizers, they did not have any impact on increasing
their use either. This lack of impact on overuse of fertilizers re-
quires increased attention by APCs to promote more sustainable
integrated soil nutrient management among members.
Next, we consider the relationship between the performance
of APCs and the adoption of sustainable agricultural practices
(crop rotation, manure, green manure, crop residues, protective
tillage, use of legumes in the crop rotation, biological control,
and soil conservation). The degree of adoption of these practices
was measured using a 4-point scale ranging from 0 (do not use)
to 3 (always use). Total adoption index of these practices was
constructed by summation of all these points for each farmer.
The correlation between the performance of APCs and use of
these practices by farmers is positive and signicant (r = 0.43,
p = 0.01). This illustrates that in more effective APCs these
practices are used at a higher level. Since this coefcient does
not indicate a causal effect, farmers attitudes regarding the im-
pact of APCs on the use of these practices were investigated.
Farmers evaluated the role of APCs in promoting sustainable
practices as very weak: 81.5, 85.3, and 94.2% of the farm-
ers believed that APCs did not have any impact on the use of
rotation, manure, and green manure, respectively. Regarding
preserving crop residues and protective tillage, corresponding
shares are 84.2 and 84.1%, respectively. About 94, 97, and 91%
of farmers consider that APCs have no impact on the use of
legumes in rotation, biological control, and soil erosion mea-
sures, respectively. In general, it can be concluded that despite
the positive correlation between APCs performance and the
adoption of more sustainable agricultural practices, the nd-
ings suggest that performance does not have a direct impact.
Our results do not support the ndings regarding credit cooper-
atives in Sudan, where Muneer and Musa (1995) found that the
farmers who received more credit expanded their area of cul-
tivation and therefore had a negative impact on environmental
conservation.
5. Conclusions and recommendations
Using a model to focus on the key determinants of the perfor-
mance of APCs will help agricultural development policy mak-
ers and experts to make the best use of the facilitating factors
that might improve these local organizations. It is important
for policy design that the behavior of the model and its em-
pirical relevance are fully understood. The determinants of
APCs performance model presented in this article is not
overly complex, although it incorporates the essential ingre-
dients that provide a general framework for affecting an APC
system change. This research was based on identifying the
fundamental factors that were key determinants in promoting
effective operation of APCs. Since many factors affect per-
formance, this article focused on structuring the factors in its
theoretical model. The collection of performance factors can
be interpreted and used as a checklist. Managers should think
about the relevance of each factor within their own APCs.
The theoretical framework of this study can to a great extent
predict the performance of APCs. Among the determinant fac-
tors in the model, social factors that include solidarity among
members and attitudes toward managers and board members
abilities did not have much inuence on the performance of
APCs. The same was true of natural factors measured by
the amount of rainfall. However, the government support fac-
tors that were measured using the amount of loan, aid, and the
value of machinery provided by the government were among
the important factors in predicting the performance of APCs:
APCs that received more government support were more ef-
fective. This nding is especially understandable in light of the
conditions under which APCs are established in Iran. Estab-
lishment of these cooperatives is the result of planned effort by
the Ministry of Agriculture. At least in the early stages, farm-
ers view APCs as organizations through which they can claim
and receive more government resources, and not as voluntary
organizations for collective and group action to make better
use of their own resources. Although government assistance
is assumed to be important to jump-start APCs in the take-off
stage, too much government support can be criticized on the
ground that it will make APCs dependent. Any program that
perpetuates dependency is inimical to the efforts at sustainable
development. The government already has a growing problem
in using this factor to improve APCs performance. As the num-
ber of APCs increases, government support per APC decreases.
While government support is recommended at the initial stage
to prepare for take-off, there needs to be less state paternalism
to make APCs work in the long run.
Despite the strong theoretical support regarding the role of
trust between members and managers and board members, this
factor does not have a signicant impact on our empirical anal-
ysis. Since the level of trust is relatively equal and high in all the
APCs in our sample, any generalization of this nding should be
done with caution. That is, if the level of trust declines sharply
in an APC it may become a factor that limits effective perfor-
mance. The rst set of cooperative structure variables including
the number of members, the area under cultivation, initial capi-
tal, the age of the APCs, the number of machines, infrastructure
facilities, and self-reliance were the most important factors in
explaining the performance of APCs. Focusing on the use of
these facilitating factors will have a determining result on ef-
fective performance. Among these variables, the infrastructure
314 E. Karami, K. Rezaei-Moghaddam/ Agricultural Economics 33 (2005) 305314
variable is the most important, because in addition to being a
facilitating factor it provides identity and institutionalizes the
APC. Provision of infrastructural facilities is recommended as a
policy to achieve effective performance. The second set of coop-
erative structure variables included job satisfaction, education,
and knowledge of the cooperative principles with the manager.
These did not contribute to the prediction of the performance
of APCs.
The importance of sustainability for the development of
national and international policy has increased over the last
decade. Sustainability is now a core element of governmental
policies and strategies. Therefore, monitoring the consequences
of APCs efforts on the sustainability of agricultural production
systems would have great practical utility. The conclusion of
our analysis is that the APCs have not contributed to the sustain-
ability of agriculture. The lack of correlation between perfor-
mance and the use of chemical fertilizers (which are overused)
is an indication of this conclusion. Farmers perceived APCs
to have very little impact on the adoption of sustainable agri-
cultural practices. Sustainability should be viewed as a priority
in future planning of APCs. APCs activities should adhere to
a denition of sustainable agriculture that would include pro-
motion and use of technology and practices that (a) maintain
and/or advance the quality of land and water resources and (b)
substitute biological for chemical technology.
Acknowledgment
The eldwork for this article is based in part on the re-
search carried out with nancial support from the Center for
Agricultural Planning and Economic Studies of the Ministry of
Agriculture, Iran, which is gratefully acknowledged.
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