Are Large and Complex Agricultural Cooperatives Losing Their Social Capital?

During the last twenty years many traditionally organized agricultural cooperatives have been forced to abandon their business form. Explanations have been put forward, comprising a variety of economic and sociological theories. The present study suggests that the social capital paradigm may add explanatory power when analyzing this development. It is claimed that the problems are due to the members having increasingly little trust in the cooperatives and in each other. The cooperatives' decision-makers have no instruments for estimating how much social capital is lost when they pursue strategies of vertical and horizontal integration. Therefore they do not consider this loss in their calculations. Thus the problems caused by the cooperatives' vaguely defined property rights are becoming increasingly serious. This reasoning is summarized into a model, which is influenced by the consumer choice model.