Organizational economics and the food processing industry
01 Jan 2004-
TL;DR: In this article, the authors examine the two prevalent organizational theories, Transaction Cost Economics and Agency Theory, through a study of the food processing industry and make predictions from each theory regarding the aspects of capital structure and firm expansion.
Abstract: OF THESIS ORGANIZATIONAL ECONOMICS AND THE FOOD PROCESSING INDUSTRY The food processing industry is dominated by large corporations. These firms play a critical role in forming the derived demand faced by agricultural producers, but little is understood about how these companies make strategic choices. Organizational economics provides a framework for exploring the firm’s decision process. However, several theories exist in this discipline, operating in fundamentally different ways. This paper examines the two prevalent organizational theories, Transaction Cost Economics and Agency Theory, through a study of the food processing industry. This sector is thoroughly analyzed in order to make predictions from each theory regarding the aspects of capital structure and firm expansion. With accounting data for a sample of food processing firms, these predictions are then tested empirically using an ICAPM model in a cross-section of expected stock returns. Our results indicate that Agency Theory is the relevant organizational model for food manufacturers, making it the appropriate tool for evaluating the actions of these firms in agricultural markets.
Citations
More filters
[...]
01 Jan 1997
TL;DR: If you are one of the people love reading as a manner, you can find golden parachute as your reading material and help you to overcome something to better.
Abstract: In wondering the things that you should do, reading can be a new choice of you in making new things. It's always said that reading will always help you to overcome something to better. Yeah, golden parachute is one that we always offer. Even we share again and again about the books, what's your conception? If you are one of the people love reading as a manner, you can find golden parachute as your reading material.
24 citations
Posted Content•
TL;DR: In this article, the authors compare the economic organization of agriculture in the United States and the European Union and highlight the interaction between the institutional environment and the arrangements established to govern agricultural transactions.
Abstract: This paper outlines a research program comparing the economic organization of agriculture in the United States and European Union. Both have highly developed agricultural sectors but their organizational arrangements vary widely. Comparative analysis not only provides a broad set of firms and industries to compare, but also highlights the interaction between the institutional environment and the arrangements established to govern agricultural transactions. We first assess the common trend toward consolidation and vertical integration, turning next to the economic organization of formal and informal networks. While history and path dependence explain some of the variety among U.S. and European practices, other local conditions are important as well. We conclude by assessing the policy implications of recent changes in economic organization.
16 citations
References
More filters
TL;DR: A simple operational framework that can assist in framing a company's strategic plan, which concentrates on the likelihood of being unable to meet fixed financial charges, is presented.
Abstract: Among the important elements of a company's strategic plan is its decision about the degree of financial leverage it elects to imbed in its capital structure. A simple operational framework that can assist in framing that decision, which concentrates on the likelihood of being unable to meet fixed financial charges, is presented. The model is tested empirically, and support for its potential usefulness in the financial planning process is found.
36 citations
"Organizational economics and the fo..." refers background in this paper
...As we have discussed, the financial structure of the firm not only 31 contributes to the operation of the firm, but also to the way it is organized and managed (Sandberg et al. 1987, 15)....
[...]
Posted Content•
TL;DR: In this article, a company changing to more customer-driven manufacturing is studied, where a frame is developed and applied to find and balance market and process characteristics to help decide which products should be made to order and which made to stock.
Abstract: Food processing industry copes with high logistical demands from its customers. This paper studies a company changing to more customer (order) driven manufacturing. In order to help decide which products should be made to order and which made to stock, a frame is developed and applied to find and balance market and process characteristics. The frame is based on the well-known Decoupling Point concept and adapted to the needs of the food processing industry. The application in the company helped management in deciding and implementing customer-driven manufacturing. The main results were lower inventories and less obsolescence, while dependability remained the same. Further research should develop the frame, along with general decision rules for locating the Decoupling Point.
30 citations
TL;DR: A frame is developed and applied to find and balance market and process characteristics of the food processing industry and the main results were lower inventories and less obsolescence, while dependability remained the same.
Abstract: The food processing industry copes with high logistical demands from its customers. This paper studies a company changing to more customer‐ (order‐) driven manufacturing. In order to help decide which products should be made to order and which made to stock, a frame is developed and applied to find and balance market and process characteristics. The frame is based on the well‐known Decoupling Point concept and adapted to the needs of the food processing industry. The application in the company helped management in deciding and implementing customer‐driven manufacturing. The main results were lower inventories and less obsolescence, while dependability remained the same. Further research should develop the frame, along with general decision rules for locating the Decoupling Point.
29 citations
TL;DR: The authors argue the importance and value of these features to advance both theory and empirical research, and illustrate how they are being addressed and incorporated in current research programs at the Contracting and Organizations Research Institute.
Abstract: Organizational and contract economics have achieved an increasingly important role in analyses of the food, agribusiness, and agricultural sectors. In particular, formal theoretical models of contract design and firm integration have begun to appear in the leading agricultural economics journals. Although the introduction of organizational economic theory has allowed scholars to begin addressing the changing nature of the food, agribusiness, and agricultural sectors, empirical research in these sectors is less well developed. What empirical research does exist tends to focus on specific contracts or transactions in isolation of the surrounding economic and institutional environments, or to be based on limited samples of unique contract types. Despite recent advances, much work remains. We believe this future work will be characterized by three features: a continued accumulation of empirical studies of contract design and organizational structure, an increasing focus on the interdependencies between organizational and contract structures linking the overall value chain, and an increasing integration of theories from a variety of social science disciplines. This suggests a need for an accessible collection of contracts as data for these studies, a more holistic theory of economic sectors as systems rather than series of discrete blocks, and a forum for interdisciplinary interaction whereby the cross-fertilization of ideas across disciplines might occur more rapidly. In this paper, we argue the importance and value of these features to advance both theory and empirical research, and illustrate how they are being addressed and incorporated in current research programs at the Contracting and Organizations Research Institute.
27 citations
TL;DR: In this paper, the authors explore the dynamic process of adoption of organizational economics or new institutional economics as applied to food economics, agribusiness management, and agricultural economics, and view the rapid agroindustrialization of the global food system as fertile ground for adoption of transaction cost, property-rights/incomplete contracting, and agency approaches to understand the significant changes currently affecting the sector.
Abstract: The past three decades have seen significant advances in the field of organizational economics. By endogenizing "institutions" into their analysis, organization economists have enriched and extended the study of economic behavior. This paper explores the dynamic process of adoption of organizational economics or new institutional economics as applied to food economics, agribusiness management, and agricultural economics. The authors view the rapid agroindustrialization of the global food system as fertile ground for adoption of transaction cost, property-rights/incomplete contracting, and agency approaches to understanding the significant changes currently affecting the sector. Numerous research centers and data collection efforts have emerged to expand the organizational economics analytical approach. This paper also serves as an introductory umbrella for the three subsequent papers which document the progress of conceptualization and empirical work in organizational economics applied to food, agribusiness, and agriculture.
25 citations