Communication and Innovation in Cooperatives

Journal of the Knowledge Economy, Sep 2016

Cooperatives differ in their intensity of horizontal and vertical communications, their innovation policies, and their centralization of decision-making power. We aim to establish relationships between these communication, innovation, and decision-making aspects of cooperatives, and to identify the circumstances when a particular configuration adds most value. Horizontal and vertical communications are analyzed in a decentralized and centralized cooperative. Horizontal communication (HC) is characterized as the exchange of information between farmers in the society of members. It is associated with process innovation. Vertical communication (VC) is the exchange of information between a member and the CEO of the cooperative enterprise. It is associated with product innovation. The CEO decides regarding the deliveries of the member and the level of vertical communication in the centralized cooperative, while these decisions are taken by the members in the decentralized cooperative. We establish that the decentralized cooperative is efficient at an intermediate level of the VC cost coefficient and when the HC cost coefficient is above a certain level, while the centralized cooperative is efficient in the other cases.

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Communication and Innovation in Cooperatives

Communication and Innovation in Cooperatives Xiao Peng 0 1 George Hendrikse 0 1 Wendong Deng 0 1 Xiao Peng 0 1 0 Department of Organization and Personnel Management , Burgemeester Oudlaan 50, 3062PA Rotterdam , Netherlands 1 Rotterdam School of Management, Erasmus University , Rotterdam , Netherlands Cooperatives differ in their intensity of horizontal and vertical communications, their innovation policies, and their centralization of decision-making power. We aim to establish relationships between these communication, innovation, and decision-making aspects of cooperatives, and to identify the circumstances when a particular configuration adds most value. Horizontal and vertical communications are analyzed in a decentralized and centralized cooperative. Horizontal communication (HC) is characterized as the exchange of information between farmers in the society of members. It is associated with process innovation. Vertical communication (VC) is the exchange of information between a member and the CEO of the cooperative enterprise. It is associated with product innovation. The CEO decides regarding the deliveries of the member and the level of vertical communication in the centralized cooperative, while these decisions are taken by the members in the decentralized cooperative. We establish that the decentralized cooperative is efficient at an intermediate level of the VC cost coefficient and when the HC cost coefficient is above a certain level, while the centralized cooperative is efficient in the other cases. Agricultural cooperatives; Communication; Innovation; Decentralization Introduction The organizational communication literature establishes that communication is one crucial element of organizational governance (Christensen and Cornelissen 2011; Jablin and Putnam 2001) . White (1997) states that organizations can themselves be regarded as communication structures. Organizations cannot exist without communication, i.e., they come into existence in the interaction that takes place between organizational members and as a result of the communication between them. The wholeness of an organization shows a consistent and coherent image of what the organization is. Communication brings every part of the organization to the same level of understanding and therefore allows the organization to achieve consistency and coherence (Schultz et al. 1994) . This paper analyses communication in cooperatives. A cooperative is an enterprise collectively owned by a society of members having a transaction relationship with it (Helmberger and Hoos 1962; Hendrikse and Feng 2013; Robotka, 1947) . The cooperative’s main function is to process the products from its members and then sell them to the customers. However, members are themselves business enterprises and economic units. An agricultural cooperative is therefore an enterprise collectively owned (vertical relationship) by an association of many independent upstream agricultural producer enterprises (horizontal relationship). Communication is essential to keep the cooperative working in the members’ interests. Members who lack understanding of its practices are likely to have a negative attitude towards their cooperative, and this may cause poor performance (Goodman 1994). Not only the communication among the members themselves but also the communication between the members and the cooperative management is important (Cechin, Bijman, Pascucci, and Omta 2013) . Cremer, Garicano, and Prat (2007 ) and Garicano and Wu (2012) provide an organizational economics explanation of communication within an organization. They distinguish HC and VC. HC is defined as peer-to-peer communication among specialists with common codes, or overlapping knowledge, to share information in order to solve problems efficiently which cannot be done by a single specialist with limited knowledge. VC is defined as communication between the peers and an external higher up Btranslators.^ Only when the knowledge is beyond the field of the specialists and costly to codify, does VC become necessary to facilitate the matching between problems and solutions. Patrucco (2008) also mentioned that the technical communication between the internal investments in R&D and the technologies provided by an external party is a crucial strategy for increasing returns in the production of knowledge. These two types of communication have an impact on different parts of the supply chain. HC is defined as the information exchange between farmers about their production methods. Farmers communicate with each other to share their production knowledge. This may decrease their own (marginal) production costs at the upstream stage of production. From the innovation perspective, this belongs to individual (small scale) innovation (Pelz et al. 1978) . We associate, therefore, HC with process innovation. VC is the communication between the members (the farmers with superior production knowledge) and the CEO (wi (...truncated)


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Xiao Peng, George Hendrikse, Wendong Deng. Communication and Innovation in Cooperatives, Journal of the Knowledge Economy, 2016, pp. 1-26, DOI: 10.1007/s13132-016-0401-9