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Structural
Structural heterogeneity heterogeneity
in farm structures: a in farm
structures
configurational approach
Bruno Varella Miranda 65
Insper Institute of Education and Research, São Paulo, Brazil, and
Received 20 December 2018
Anna Grandori Revised 1 May 2019
11 July 2019
Department of Management and Technology, Universita Bocconi, Milano, Italy Accepted 24 July 2019

Abstract
Purpose – The purpose of this paper is to provide a multidimensional framework for the identification,
description and comparative analysis of alternative farm structures and their properties for economic development.
Design/methodology/approach – Integrating previous typologies and considering a large set of examples,
the authors identify six attributes that are necessary to characterize and compare farm structures: size;
strategy; organizational form; legal form; who the owners are; and degree of separation of ownership and
control. They also discuss potential complementarities between those organizational attributes and specific
features of the institutions of developing and emerging countries, such as contract enforcement and property
rights protection regime, and developed capital markets and corporate law.
Findings – Conceptually and empirically, effective farm structures can deviate from the templates traditionally
considered – “small family-owned farm” or “large factory-like corporate farm,” combining structural attributes in
diverse ways. The dimensionalization of farm structures also helps in revealing complementary institutional
traits at the regional or larger system level that may foster development processes.
Research limitations/implications – The paper is limited to theory building and case-based evidence.
Nevertheless, it provides dimensions that can be measured on a larger scale and by quantitative studies.
Originality/value – This paper sheds light on organizational diversity in agriculture and on a wider set of
feasible development paths.
Keywords Agribusiness, Farm organization, Organizational configurations, Organizational economics
Paper type Research paper

1. Introduction
A fundamental topic in the intersection between agribusiness management and
development economics research fields is the future of organizational forms related to
farming. Most farms in the world are small and family owned. Graeub et al. (2016) estimated
that more than 98 percent of all farms in the world are family owned. In turn, the High-level
Panel of Experts on Food Security and Nutrition found that, in a sample of 81 countries,
85 percent of all farms are not larger than 2 hectares (HLPE, 2013). Yet, discussions on the
future of family farming are frequent (see Poulton et al., 2010; Wiggins et al., 2010). A similar
level of interest pervades the debate on the impact of emerging farm structures on
development (see Hazell et al., 2010; Deininger and Byerlee, 2012). Since the turn of the
twenty-first century, large-scale corporate farms have consolidated their participation in
total production and total harvested area in agricultural powerhouses in the developing
and transition world, such as Argentina, Brazil and Ukraine (see Hermans et al., 2017).
For example, non-family farms control more than 75 percent of the agricultural land in
Brazil (Graeub et al., 2016). In highly dynamic agricultural frontiers, such as the Brazilian
Matopiba region, large-scale corporate farms harvested around one-third of the total area
used in production in 2013 (Chaddad, 2016). Journal of Agribusiness in
Developing and Emerging
Will the future of farming be marked by the coexistence of diverse farm structures? Are Economies
Vol. 10 No. 1, 2020
certain farm structures better suited to promote the development of rural communities? In pp. 65-83
order to discuss these questions, shedding light on the nuances behind the use of terms such © Emerald Publishing Limited
2044-0839
as “diversity” and “heterogeneity” is necessary. In the specific case of farm structures, DOI 10.1108/JADEE-12-2018-0183
JADEE scholars have identified at least two levels of diversity. A first level of diversity is found in
10,1 more visible attributes, such as the size and the nature of the labor relationships within the
boundaries of the farm. Despite being inspired by different theoretical influences,
contributions that focus on this first level of diversity tend to conceive each generic type of
farm as composed of a particular set of attributes (e.g. De Janvry, 1975; Pollak, 1985; Allen
and Lueck, 2004). For instance, much of the research on farm structures distinguishes
66 mainly two forms: the “family farm” – imagined as small and local, without any separation
of ownership, control and operating activities – and a set of large-scale farm structures
grouped under generic labels such as “corporate farm” or “latifundia.”
A further scrutiny of the nature of the farm structure reveals a second level of diversity.
Under this perspective, an organizational form is still seen as a bundle of organizational
attributes, but a new possibility is envisaged: those organizational attributes can be
combined in more varied ways, thereby generating a wider variety of structures. The
possibility that more than one combination is equifunctional – that is characterized by high
performance under the same conditions – is known as “structural heterogeneity” (Milgrom
and Roberts, 1995; Grandori and Furnari, 2013). In this paper, we address the task of
dimensionalizing the structural alternatives in farm governance and organization. We aim
to provide tools to facilitate the identification, description and comparative analysis of
structural alternatives in agriculture. Recognizing that farm structures are characterized by
a broader set of attributes and that these attributes can combine in diverse ways would
facilitate the task of describing in detail emerging organizational forms that might
contribute to development in rural areas across the globe.
In addition to a more precise identification of the attributes that shape structural
heterogeneity, the study of farm structures from a development-oriented perspective would
benefit from an extension of the explanatory variables typically used to identify and classify
these arrangements. This would be the case of the institutional attributes that complement
the traits found in organizational arrangements, whose presence or absence is likely to affect
the viability and efficiency of each structural alternative. Indeed, institutional voids might
explain the widespread use of so-called “strange forms” in developing and transition
countries: factors such as the inefficiency of capital markets, the lack of reliability of legal
systems and the underdevelopment of corporate law play a decisive role in shaping at least
some of the characteristics of an organizational form (see Khanna and Palepu, 1997). In this
sense, the disentanglement of the attributes that characterize farm structures may enhance
our ability to establish causal relationships between a set of specific features found in the
institutional framework and the adoption of a given bundle of organizational attributes.
This paper is organized as follows. After reviewing the literature on the organization of
the farm in Section 2, we outline a series of attributes that are combined in diverse ways in
farm structures across the globe in Section 3. Using several cases from developing,
transition and developed countries, we also highlight nexuses among those organizational
attributes and complementary institutional attributes. Then, Section 4 draws implications
for development processes in the developing and emerging world.

2. Studies on farm organization in developing countries

Examples of structural heterogeneity in the farming sector abound. When it comes to
large-scale farms, the case of the “mega farms” found in the Brazilian cerrado that combine a
“factory-style” organizational setup with family ownership can be considered (see Chaddad,
2016; Chaddad and Valentinov, 2017). In Eastern Europe, several agroholdings – some of
them being family-owned firms that adopt a corporate legal form – congregate a broad set of
stakeholders that include the State and external investors (see Hermans et al., 2017).
In Argentina, family-owned firms such as Los Grobo have attracted external investments to
harvest enormous areas without retaining ownership rights over the farmland or most of
the resources used in production (Bell and Scott, 2010; Senesi et al., 2017). Across the globe, Structural
family-owned farms have adopted corporate forms and implemented the principles of heterogeneity
corporate management – for example the separation of ownership and control and the in farm
professionalization of management – in order to attract investments or to guarantee a
peaceful succession (see Chaddad, 2016; Gagalyuk, 2017). Family farms also provide several structures
examples of structural heterogeneity. Even the adoption of a relatively simple legal
form – for example “sole proprietorship” – may encapsulate a more complex network of 67
residual claimants, as suggested by the Census data and empirical studies of several
developed countries (see Munton and Marsden, 1991; Hill, 1993; Johnson et al., 2009;
Moreno-Pérez and Lobley, 2015).
Much of this accumulated evidence is qualitative, an outcome that reflects the limitations
in the measurement approach of several national surveys. Most surveys in the developing
world still fail to capture central relationships within farm boundaries, such as the existence
of permanent hired workers or the legal form adopted (see Johnson et al., 2009; FAO, 2013;
Lowder et al., 2016). These measurement difficulties have influenced the debate on the
coexistence of diverse organizational forms in agriculture, with a tendency to the adoption
of a dichotomist perspective – for example a comparison between the “factory-style
corporate farm” and the family-owned farm (e.g. Elliott and James, 2017). For instance, most
papers devoted to the study of farm structures aim to explain why a given organizational
form is predominant. In this sense, the general tendency is to compare the strengths and
weaknesses of a few broadly defined structural alternatives. Although the main conclusions
found in the literature are useful to explain the survival and diffusion of organizational
forms, they might overshadow further nuances that differentiate existing arrangements.
Justifications for the pervasiveness of family farms, for example, are older than the
emergence of new institutional economics and modern organization theory (see Holmes,
1928). Starting in the 1980s, a new wave of contributions justifies the dominance of family
farming (see Calus and Van Huylenbroeck, 2010 for a review). The main conclusions of this
broad literature can be summarized as follows. First, family farmers have a greater
flexibility to allocate the resources found within the boundaries of the farm in off-farm
activities, as well as to use the net returns from farming (Schmitt, 1991; Van der Ploeg, 2000).
The resilience of family farmers may also ensue from the pursuit of non-economic goals,
reflecting an identity that values strategies and objectives beyond short-term profit
maximization (see Fitz-Koch et al., 2017). Other authors highlight the role of monitoring
costs in the dominance of family farms. Perhaps the best illustration is Allen and Lueck’s
(2004) contribution, which intends to explain why family-owned farms represent the
predominant organizational form in agriculture, as well as to analyze the occasional
emergence of corporate “factory-style” units (see also Pollak, 1985; Valentinov, 2007). With
the support of an empirical analysis of over 1,000 farms in North America, Allen and Lueck
(2004) contended that family-owned farms deal more efficiently with the uncertainty that
precludes farmers from monitoring how the relative level of effort of a worker affects farm
output. This would be the case of crops directly affected by seasonality effects and random
shocks, such as soybeans and wheat.
Development economists have also analyzed the strengths and weaknesses of the main
structural alternatives in farming, paying attention to history and path dependence factors
alongside transaction cost-based considerations. Long-lasting theoretical influences, such as
the broad literature on the phenomenon of “dualistic agrarian structures,” discuss the nature of
the coexistence between large and small farms within the same society (see De Janvry, 1975).
Moreover, development economists have scrutinized the influence of agroindustrialization on
the redefinition of farm boundaries in developing countries (see Reardon and Barrett, 2000;
Reardon et al., 2009). In particular, scholars have discussed how market concentration in
further segments of the value chain and the growing adoption of vertical coordination
JADEE strategies influence the survival prospects of different farm structures. In countries with a
10,1 dualistic agrarian structure, buyers may marginalize small family-owned farms and privilege
the establishment of fewer contracts with large-scale producers (Key and Runsten, 1999;
Reardon and Berdegué, 2002). However, buyers dealing with a fragmented agrarian structure
tend to devise specific strategies to deal with small family-owned farms (Dries et al., 2004;
Humphrey, 2007; Miyata et al., 2009).
68 Despite the many advances in the analysis of the organizational nature of the farm
structure, the use of a dichotomist perspective has constrained our ability to identify
the considerable structural heterogeneity found within generic labels, overshadowing the
variety of potential development paths in the developing and emerging world. In fact, the
widespread use of the term “strange form” in the literature on the organization of
arrangements in agriculture signals the insufficiency of the available analytical lenses (see
Ménard, 1996; Grandori, 2017). Several studies have highlighted the existence of structural
heterogeneity in farm structures (e.g. Moreno-Pérez and Lobley, 2015; Bosc et al., 2015;
Chaddad, 2016; Favareto, 2016; Mier and Cacho, 2016; Hermans et al., 2017). From a
development perspective, Favareto (2016) argued that both small-size and large-size farms
operate in the most dynamic niches of agriculture in Brazil – a reality that contrasts with the
commonly held view that only large-size corporate farms belong to the most efficient strata
of Brazilian agribusiness (see also Chaddad, 2016, Mier and Cacho, 2016). Contributions that
aim to create comprehensive definitions to terms such as “family farms” and “corporate
farms” also show the heterogeneity in existing forms. For example, Bosc et al. (2015)
outlined several dimensions in which family farms may differ, such as the legal status; the
land right status; the source of capital; and the management structure. In turn, Hermans
et al. (2017) contended that three attributes can inform the classification of many large-scale
farms around the world: their enormous size; the integration of multiple stages of production
and processing; and the participation of external investors.
Whenever deviant cases pile up, time is ripe for a partial redefinition of the taxonomies at
hand. Starting from these contributions, Section 3 outlines six organizational attributes, whose
disentanglement might allow researchers to understand their properties and drivers of joint
use. Similarly, such disentanglement can help scholars to understand the consequences of each
attribute on different performance measures – particularly for development processes. Our
ideas are rooted in the growing literature on the role of complementary institutional features in
organizational choices (see Peng, 2002 for a review). Indeed, factors such as the efficiency of
capital markets, the structure and regulation of labor markets, and the contract enforcement
regime and other regulatory policies affect the effectiveness of the attributes used to
characterize an organizational form (Khanna and Palepu, 1997).

3. Dimensionalizing farm structures

Several different dimensions are used in the discussions on the nature of the farm found in the
literature. Authors who discuss the diverse ways in which a farm can be organized refer to
variables such as the size of the farm, whether it is a “corporation,” whether it is “family
owned,” whether it is “vertically integrated,” and so on. The purpose of this section is to
advance in the discussion and systematization of these dimensions, arguing that structural
attributes not only frequently overlap, but that the combination of organizational traits is also
broader than commonly acknowledged. Moreover, we contend that all these multiple
configurations can be effective, and under proper institutional conditions, they can contribute
to development processes. This analysis contributes to the study of agribusiness management
research issues by providing an enriched framework for the description, comparison and
design of farm structures. From a development perspective, the analysis of specific
organizational dimensions helps the identification of the complementary system-level
institutional attributes that might be necessary for the proper working of farm-level attributes.
 An analytical question introduces the discussion of each one of the dimensions Structural
presented below. In order to support our arguments, we rely on several examples from both heterogeneity
developing and developed countries. in farm
3.1 What is the size?
structures
In agriculture, size is typically measured as the number of hectares under the control of a
farmer. Researchers have traditionally considered the amount of land that a single family 69
can efficiently manage as the upper limit to the optimal size of most farms (see Grimes,
1931). For instance, Allen and Lueck (2004) contended that although the proliferation of
corporate farms under conditions of uncertainty was unlikely, technological development
would contribute to the growth in the average size of family farms. Nevertheless, Chaddad
and Valentinov (2017) showed that technological development has led to the emergence of
“mega soybean farms” in Brazil, a phenomenon that implies not only the management of
growing areas of farmland but also the adoption of some type of corporate legal form and, in
some cases, the attraction of external investors and the separation of ownership and control
(see also Chaddad, 2014). In this sense, new technologies can positively affect both the
ability of a farmer to manage a higher plot of land and the access to timely information on
the performance of hired workers and managers – a scenario that may enable the use of a
“factory-style” structure.
Of course, expansion may ensue from reasons beyond shifts in production or monitoring
costs. Strategic choices that can support growth include the pooling of pieces of farmland in
different locations, the vertical integration of a given segment of the agribusiness chain or the
pursuit of a diversification strategy. These choices on firm boundaries have their own predictors
in factors such as task interdependence, economies of scope, exposure and sensitiveness to
environmental and meteorological uncertainty, complexity of harvesting technologies, site
specificity, and so on (Thompson, 1967; Pfeffer and Salancik, 1978; Williamson, 1981).
In addition, the use of the size of a production unit as the only measure of the size of an
organized system of production may be misleading. The complexity of an organizational form
and the full scope of activity of the organization often reside in the inter-farm structure, rather
than within the boundaries of a single farm. As contended by Marshall (1920), an organized
network of many small production units may be structurally equivalent to a large enterprise,
such as in the case of “industrial districts.” Many examples of “agroindustrial districts” also
exist: these are not limited to the sharing and circulation of “production secrets in the air” – to
use Alfred Marshall’s words – but are structured in quite complex and integrated
organizational arrangements. Examples include cooperatives with offensive market strategies
(Cook, 1993), consortia that promote the horizontal integration of small-sized farmers, a
designation of origin – for example the Parmigiano Reggiano supply chain (Arfini
et al., 2006) – and quality standards, such as the Label Rouge standard (see Ménard, 1996).
Hence, the attribute “size” may be further disentangled in an “internal size” dimension – the
dimension of the single enterprise – and an “external size” dimension – the dimension of the
inter-organizational entities to which the enterprise belongs.

3.2 What is the strategy?

Patterns of horizontal integration, vertical integration or diversification do not appear to
provide a “one-size-fits-all” solution either. Several hypotheses associate the configuration of
organizational boundaries with external variables or the features of the ties with other
organizations. First, the shortage of suppliers, distributors or potential allies should lead to
higher degrees of integration (Harrigan, 1984; Langlois, 1992). Threats of expropriation of the
quasi-rent from specific investments can also incentivize vertical integration (Klein et al., 1978;
Williamson, 1985). Finally, an organization may decide to “make” at least a percentage of a
transacted good – that is adopt a plural form – in order to mitigate the risk of insufficient
JADEE supply or to enhance the bargaining power with independent sellers (Parmigiani, 2007;
10,1 Ménard, 2013). Beyond the well-known cases of firms such as United Fruit and Standard Fruit
(see Bucheli, 2005), strategies in the Brazilian citrus, sugarcane and pork industries illustrate
the search for enhanced bargaining power (Azevedo, 1997; Feltre and Paulillo, 2015; Martins
et al., 2017; Ito and Zylbersztajn, 2018). In turn, scholars expect to find a higher level of
diversification wherever institutions are relatively weak. For example, inefficient capital
70 markets would explain unrelated diversification (Williamson, 1975; Khanna and Palepu, 1997).
Moreover, firms may decide to diversify to benefit from political connections or close ties with
other organizations that provide resources and furnish legitimacy to business activities
(see Peng et al., 2018).
Therefore, we should expect to find higher degrees of integration and diversification – that
is larger organizational boundaries – in developing and emerging countries (see Khanna and
Palepu, 1997). Still, path dependence, entrepreneurial behavior and even serendipity can lead
to particular configurations of businesses. Eastern European agroholdings integrate multiple
stages of production and processing (see Matyukha et al., 2015; Grouiez, 2018). The strategy
may reflect not only efficiency-based considerations, but also the fact that political ties play an
important role in explaining the survival of businesses in several transition countries (Walder,
2003; Plank, 2016). In Latin American countries, although mega farms tend to specialize in
fewer activities, the analysis of specific examples reveals diversified strategies. One of the
largest world producers of soybean, the Brazilian Grupo Bom Futuro, sells seeds and owns
storage facilities, providing services to independent growers. Likewise, the firm manages a
“low cost” airplane line that connects rural communities with the capital of the Brazilian state
of Mato Grosso and develops neighborhoods in portions of farmland close to urban areas.
Strategic choices can also combine with diverse legal forms and be implemented by
organizations with various ownership structures, which are further structural dimensions
discussed in the next few paragraphs. For example, public research and development in the
soybean industry led to innovations that spread broadly to farmers in countries such as
Brazil and the USA for much of the twentieth century (Alston et al., 2010; Chaddad, 2016). As
the importance of private investment in research and development grows, “clubs” of farmers
with relatively well-defined property rights over seeds or other technologies may emerge.
This is the case of Fundação Mato Grosso, a Brazilian research center specialized in the
creation of soybean varieties adapted to the local Cerrado region (see Chaddad, 2016).
However, the strategy is not exclusive of coalitions of large-scale farms with a corporate
legal form. Many of the farmers who finance research and development initiatives in Brazil
own large-scale farms whose control is shared exclusively with other family members.
Chaddad (2016) also described cases of family farmers who have created and maintained
successful research initiatives within the boundaries of cooperatives in Southern Brazil.

3.3 What is the internal organizational form?

If, as argued by Hermans et al. (2017), the use of the term “agroholding” can encompass a
broad collection of corporate and mega farms in developing and transition countries, we
need to introduce an additional attribute to the discussion: the organizational form.
A holding is a specific sub-type of the multidivisional structure, in which the main units are
subsidiary firms controlled by a central firm tying together their stocks (Williamson, 1975).
In the case of Eastern European agroholdings, the available evidence shows that holding
companies include groups of firms with diverse legal or organizational structures (Serova,
2007). The adoption of the holding form requires a corporate legal form, allowing the control
via shareholding of the subsidiaries. The opposite is not true: the adoption of a corporate
legal form does not imply the establishment of an organizational holding form. Indeed, the
legal form of a corporation often combines with a multidivisional organizational form and
even with a unitary organizational form. The available evidence shows that large-size
corporate farms from developing countries do not necessarily adopt a holding structure, Structural
as the proposal made by Hermans et al. (2017) concerning the use of the label “agroholding” heterogeneity
to describe these structures could suggest at first. in farm
The widespread presence of “agroholdings” in transition economies raises the question of
whether any institutional factor is likely to influence the adoption of a holding structure in structures
their agricultural sectors. The literature suggests a path of convergence in the case of the
multidivisional form, with a progressive diffusion of the structure, irrespective of institutional 71
specificities. We are not aware of a similar body of evidence for the case of the holding
structure. Yet, Williamson (1975) provided a relevant conceptual argument: to the extent that
the holding form is more used for governing conglomerate diversification – rather than
technologically-related diversification – and that conglomeration responds to capital market
inefficiencies, we can draw the proposition that agroholdings are likely to be relatively more
present in the context of developing and emerging economies. Transition countries, with a
recent history of central planning and considerable institutional voids, provide an environment
that would help to explain the diffusion of agroholdings. At the same time, studies such as
Matyukha et al. (2015) show that other attributes, such as “who the owners are,” are also
relevant factors to understand the diffusion of holding structures in agriculture.

3.4 What is the legal form?

The legal dimension is a fundamental attribute in the definition of any firm structure.
In response to factors such as successive farm crises, succession and tax benefits, a growing
number of farmers has adopted corporate legal forms since the 1990s. Yet, the percentage of
farmers who adopt some sort of corporate form is still low: to use data from a country with a
developed corporate law, 84 percent of all the farms in the USA were sole proprietorships in
2012. In turn, corporate farms represented 2.2 percent of the farms and 12.6 percent of the
production in the USA in 2017 (USDA, 2018). In any case, given the influence of local
institutional factors and policies, the legal form often provides an incomplete picture of the
complex ownership and control patterns found in agriculture. This is also true in the case of
family-owned farms. Using survey data from Canada and the USA, Johnson et al. (2009)
showed that sole proprietorships can have de facto residual claimants from multiple families.
Therefore, sole proprietorships could encapsulate a more complex ownership structure than
supposed at first sight (see also Bosc et al., 2015; Moreno-Pérez and Lobley, 2015).
The adoption of a “corporate form” has distinctive features, preconditions, costs and
benefits that should be considered when assessing its role in development processes.
Armour et al. (2009) outlined five core features of the “corporate form”: legal personality;
limited liability; entity shielding and capital lock-in; transferable shares; and delegated
management under a board structure. A sub-type of “less complete” corporate forms – for
example the limited liability company (LLC) in the USA, the Gesellschaft mit beschränkter
Haftun (GmbH) in Germany and the società a responsabilità limitata (s.r.l.) in Italy – includes
characteristics such as the pooling of assets and the provision of limited liability.
Nevertheless, these “less complete” forms do not include a board structure with multiple
members and admit the transference of shares only with the approval by other partners.
Finally, fideocomisos – that is trust funds – have also been used in several Latin American
countries to support farm activities. Fideocomisos are flexible contracts that aim to pool
resources from diverse external investors in order to achieve a defined goal. Although a
fideocomiso does not create a legal entity per se, the agreement separates the pooled assets
from obligations held by the investors in other businesses.
Indeed, one of the core functions of the corporate form is the separation between investors
and the firm as an entity. Such separation provides limited liability and continuity of existence,
facilitating the attraction of external investors. Hence, the development and efficiency of the
capital market is a complementary institutional condition that increases the probability of
JADEE adoption of a corporate form. Another core function is the existence of an identifiable
10,1 responsibility guaranteed by the assets of the firm, whose complementary institutional trait is
a well-developed and efficient corporate law system. If capital markets and the corporate law
system are not fully developed, the adoption of the corporate form may be limited.
Another potential constraint to the establishment of a corporate form relates to the
peculiarities of the activities conducted: given that the use of a corporate form implies the
72 “partitioning of assets,” one condition behind its adoption should be the separability
between people and assets (Grandori, 2010). This is the case of emerging large-scale farm
structures characterized by the intensive use of technology (see Chaddad and Valentinov,
2017). In contrast, whenever traditional and tacit knowledge is important, the separability
between people and assets is likely to be low, limiting the adoption of a corporate form.
This does not imply, however, that a simple legal form, such as the sole proprietorship,
will be necessarily adopted. The heterogeneity may be considerable, in particular among
large-size units. In Mato Grosso, two examples of large-size farms with diverse legal forms
are Grupo Bom Futuro and Produzir. Whereas Grupo Bom Futuro adopts a legal form that
resembles a LLC, that is a sociedade empresária limitada, Produzir is a full-fledged
corporation, that is a sociedade anônima (see Chaddad and Valentinov, 2017). In turn, Mier
and Cacho (2016) described the organization of large-scale farms in the Brazilian Cerrado
that retain attributes that would associate them with traditional family farming, such as the
adoption of a simple legal form and the absence of separation of ownership and control.
In the same region, we find cases such as BrasilAgro, a full corporation with a high degree of
separation between ownership and control and the participation of external investors
(Chaddad, 2014). Another example of non-standard farm structure in Latin America is
Agrícola Xingu, a corporation that is part of the conglomerate Mitsui and farms almost
50 thousand hectares in three Brazilian states. In Eastern Europe, further structural
alternatives emerged from the process of privatization of state-owned and collective farms
during the 1990s. For example, many collective farms in countries such as Bulgaria were
transformed in production cooperatives in which their members pool resources in order to
jointly farm extended land areas (see Hagedorn, 2014).

3.5 Who are the owners?

No matter what the legal form is, “who the owners are” is another issue. For example,
BrasilAgro has dispersed ownership, whereas both Grupo Bom Futuro and Produzir have
family ownership. In fact, the term “family” qualifies who the owners are, whereas the term
“corporate” denotes the legal form of the enterprise. Since the two terms are not mutually
exclusive, it would not be appropriate to contrast the terms “family” and “corporate” as part
of a unique category of qualifiers of a firm. For example, shareholders in a corporation can
be all members of the same family; include external investors – individuals, public and
private companies or the State – or a mix of these; encompass employees or other types of
owners. In addition, corporations do not need to be “public companies” with dispersed
ownership. Indeed, most corporations around the world have concentrated ownership, and
furthermore this ownership is often retained in the hands of the members of the same family
(see Gedajlovic et al., 2012; De Massis et al., 2018).
If this is the case, what is precisely the function of the attribute “family ownership”?
The core benefits ascribed to family ownership derive from the deep knowledge of fellow
owners, homogeneity of interests, high levels of social embeddedness, trustworthiness,
cohesion and control – that is lower probability of opportunism and low agency costs
(see Villalonga and Amit, 2006; Arregle et al., 2007; Peng et al., 2018). It is worth highlighting
that the advantages associated with family ownership are similar to those attributed more
generally to “strong ties.” In other words, family ownership is only a particular case of
structure that can mitigate the threat of opportunistic behavior and fill the voids left by the
incompleteness of formal and legal instruments (Ouchi, 1980; Granovetter, 1985; Greif, 1993; Structural
Uzzi, 1996). Strong ties may encompass a broad set of allegiances – family ties, religious ties, heterogeneity
ethnic ties and common political affiliation. For instance, political networks complement in farm
family-based networks in the definition of the ownership structures of several agroholdings
in Eastern Europe (see Matyukha et al., 2015). In any case, the owners of a farm can structures
implement legal and governance procedures that are typical of a corporate form and still
preserve strong ties among family or clan members. 73
Interpreting the term “family ownership” as a particular case of a more general “strong
social embeddedness” organizational attribute allows the development of hypotheses based
on the specificities of developing and emerging countries. Strong social networks of any
origin may fill the voids left by weak institutions (see Engwall and Morgan, 1999).
Consistent with this conceptual argument, Peng et al. (2018) observed that wherever the
protection of property rights of minority investors and the regulation and auditing of
corporations are poorly developed – that is institutions are relatively weak – family
ownership and control tend to persist even when the legal form of the enterprise is the
corporation. More generally, we hypothesize that owners from developing countries will
tend to belong to highly connected networks – in particular to families – even if the farm
adopts the corporate legal form. For instance, the dense ties between public officials and the
owners of private business in countries such as Ukraine and Russia help to explain the
business strategies of agroholdings as much as their decision to engage in activities such as
the building of roads in rural communities (see Plank, 2016).
Along with the identification of the other attributes, understanding “who the owners are”
can help researchers to clearly identify “what the owners own.” The example of Los Grobo in
Argentina can be considered: a company that has farmed hundreds of thousands of hectares
since the 1990s without retaining the ownership over most of the assets used in production.
Los Grobo evolved from a typical family-owned farm to a corporate entity, renting growing
areas of farmland at the turn of the twenty-first century. Although the retention of family
ownership and control is a central aspect in explaining the evolution of the firm, investment
funds are the major shareholders in Los Grobo – Gustavo Grobocopatel, the main designer
of the strategy of the company, owned 25 percent of the shares of the company in 2018. As
described by Senesi et al. (2017), Los Grobo has traditionally focused on the provision of
legal and financial services, while relying on a network of partners to outsource activities
such as spraying, sowing and harvesting. Hence, Los Grobo does not own tractors, seeders,
harvesters or the farmland used in production.
Identifying who the “owners are” can also help researchers to show the presence of
external investors in farming activities and analyze the causes and consequences of this
relationship. The arrival of external investors is generally associated with the adoption of a
legal form that locks in assets and provides limited liability, such as the LLC or a full
corporation. Trust funds can also be used to attract risk capital to farming, as illustrated by
the example of the fideicomisos in Argentina (see Senesi et al., 2017). Less straightforward is
the association between external investments and the two other traits outlined by Hermans
et al. (2017) to characterize large-scale farm structures – that is the enormous size and
vertical integration. True, external investors have traditionally participated in large-scale
projects in agriculture. Examples include firms specialized in buying farmland with the goal
to improve the productivity of the resource (see Chaddad, 2014; Byerlee et al., 2017).
However, external investors may also participate in small-sized firms. For example, the
“innovative start-up” configuration typically involves the initial support of families and
friends, with the arrival of external investors and the adoption of a relatively simple type of
corporate form after some evidence of viability.
Of course, the emergence of small-sized firms supported by external investors may be
rare in the developing world and even less common in the agricultural sector. Yet, the
JADEE example of the innovative start-up may help to inspire possible paths for the design of
10,1 development strategies in rural areas – perhaps with adaptations to deal with the
characteristics of potential investors and the relatively narrow strategic choices available to
farmers. The case of Iroquois Valley can be considered, a high impact investment fund that
buys land in the USA and offers leases and mortgages to farmers who want to produce
organic food. The fund privileges the provision of long-term agreements to young producers
74 with a background in family farming, a demographic group particularly affected by the
challenge of accessing farmland in a context of increased interest in the acquisition of this
resource (HLPE, 2011; Deininger and Byerlee, 2012; National Young Farmers Coalition,
2017). Strategies such as the one devised by the Iroquois Valley fund might lead to the
emergence of a group of family farmers that do not own the land but are strongly connected
to dynamic niches of the market and to resources provided by external investors.

3.6 What is the degree of separation of ownership and control?

Since the turn of the twenty-first century, several large-sized farms have moved toward
governance models that rely on the support from professional managers. This trend can be
tracked in farms with diverse structural features – either family-owned or not and using
different legal forms. Path dependence helps to explain the direction of changes in this
attribute: the arrival of professional managers often ensues from succession challenges or
the difficulty of dealing with the growth of increasingly complex organizations. In the
example of Produzir, professional managers run the farm, overseen by a Board with seven
seats – six seats for the many branches of the family that owns the corporation and one seat
for an independent director (see Chaddad and Valentinov, 2017). Produzir is incorporated,
but a firm does not need to be a corporation to be run by professional managers. Likewise,
the hiring of managers does not necessarily imply the end of the influence from family
members in corporate structures. In those large-size Brazilian farm units that adopt
relatively simple legal forms, the common practice is to appoint a family member considered
to be knowledgeable and trustworthy to oversee the daily routine of the operations (see
Chaddad, 2016).
The available evidence on large-size farms reveals different degrees of separation of
ownership and control. Still, cases of full separation are the exception, and they are generally
motivated by the need of attracting financial resources from external investors (Chaddad,
2014; Gagalyuk, 2017). An example is BrasilAgro, a publicly traded corporation with a Board
that includes three independent directors and the separation of the roles of chief executive
officer (CEO) and chairman of the board (COB). The relative lower diffusion of the separation
of ownership and control in developing and emerging countries may derive from the lack of
complementary institutional elements that would support the adoption of the practice. For
example, Peng et al. (2018) suggested that the weaker the institutions protecting investors and
regulating the responsibilities of delegated executives, the less likely is the adoption of high
degrees of separation of ownership and control. Another potential explanation for the limited
separation of ownership and control in large-size farms is the existence of socioemotional
capital – that is affective considerations that prioritize family ownership and control
(Gómez-Mejía et al., 2007; Fitz-Koch et al., 2017). As pointed out by Wasserman (2017), “the
throne vs the kingdom” bias may lead individuals to refuse to relinquish control of growing
companies; however, the concentration of power in the hands of the founder might negatively
affect the performance of an organization as it gains complexity.
In summary, the arguments and examples outlined in Section 3 show that the structural
heterogeneity of farm structures is higher than suggested by comparisons between generic
labels such as “family farm” and “corporate farm.” For a proper description of farm
structures, answers for at least six questions are necessary: What is the size? What is the
strategy? What is the organizational form? What is the legal form? Who are the owners?
What is the degree of separation of ownership and control? The recombination of these six Structural
dimensions allows a better specification of the relationship among different organizational heterogeneity
attributes. Thus, it can improve both the description of existing forms and the design of in farm
organizational solutions to development challenges in rural communities across the globe.
Section 3 also sheds lights on the complementarities between each organizational structures
dimension and specific features of the institutional framework. We identify four pertinent
traits, articulating some of the factors discussed in the literature (Khanna and Palepu, 1997; 75
Peng et al., 2018): contract enforcement regimes, which may preclude the adoption of
corporate forms if insufficient; the property rights protection regime, whose weakness may
contribute to the widespread reliance on strong ties among owners and potential investors
and low levels of separation of ownership and control; efficient capital markets; and mature
corporate law, which are preconditions for many organizational attributes, such as the
attraction of external investments in large scale and the professionalization of management.

4. Implications for development policy and agribusiness management

The configurational approach developed in Section 3 suggests new questions and some initial
answers and prescriptions on which configurations may sustain economic development in
agrifood sectors in developing and emerging countries. We now advance in the discussion of
five implications of our arguments. These ideas can be used from a managerial “organization
design” perspective and for designing public policies in developing contexts.
First, the traditional twofold alternative between the “small family-owned farm” and the
“corporate factory-style farm” should be redefined and enriched. Both organizational forms
have their strengths and weaknesses, providing solutions to particular organizational
challenges and objectives (see Allen and Lueck, 2004), However, the use of a dichotomic
frame and assessments based on the idea that one form is necessarily superior may lead to
the under-specification of potentially superior and better tailored combinations. Often, the
most effective driver of economic development is the emergence and consolidation of
coexisting organizational forms – both small entrepreneurial firms and large
corporations (Baumol et al., 2007) – rather than the prevalence of one form. This is the
case in many dynamic agribusiness frontiers, as demonstrated by the example of Brazil (see
Chaddad, 2016; Favareto, 2016; Mier and Cacho, 2016). In addition, the typical attributes of
these two organizational forms can be bundled in diverse configurations. Different forms
not only can coexist successfully, complementing the activities of each other, but their
attributes can also be combined selectively in different ways, generating further structural
alternatives. For example, our analysis indicates that “large corporate family farms” and
associations of small – and not necessarily family-owned – units may result in efficient
structural alternatives.
Of course, to assume that organizational attributes can be combined in multiple ways
does not imply that every organizational choice is feasible for every farmer (Miranda and
Chaddad, 2014). Indeed, complementary institutional attributes play a fundamental role in
supporting the adoption of organizational attributes. Since not every farm carries out the
same set of activities, the nature of the farm activity may also help to explain the use of an
organizational attribute. If these conclusions are correct, core research questions should be
designed in order to take stock of structural diversity, instead of discussing which farm
structure should dominate agriculture in the next few decades. The policy implication is that
public intervention should support the broadening of feasible organizational forms for
farmers and the interaction and collaboration among heterogeneous forms, rather than
incentivizing the adoption and diffusion of a single structural form. This idea challenges
both the views of those who suggest “small is necessarily beautiful” when it comes to
farming and those who boast the many benefits of large-scale “factory-style” farming for the
future of agriculture.
JADEE A second implication derives from the role of strong ties in the agricultural sector of
10,1 developing and emerging countries. From a broader perspective, the available evidence suggests
that over-socialized governance – established around families or other clan-like networks –
typically hinders development and innovation both in large and small organizations. Regardless
of the kind of a strong tie, deleterious effects for economic development ensue when a dense
network is the only source of information and venue for exchange (Uzzi, 1996; McDonald and
76 Westphal, 2003; Eagle et al., 2010). This is particularly true if innovation is the desired outcome:
although strong tie-based organizations have advantages when it comes to reliability and
control, the exclusive reliance on trust may lead to inertia (Granovetter, 1983). Given the
unquestionable importance of innovation for economic development (see Fagerberg et al., 2010),
both management and public intervention may usefully be oriented to limit strong tie-based
governance in small and large enterprises. This means infusing professional management and
enhanced recruiting practices, the establishment of meritocracy-based systems of evaluation,
transparency and greater openness to external contributions of resources.
Although we acknowledge that farmers have relatively limited strategic decisions (see
Boehlje et al., 2011; Morel and Léger, 2016 for a discussion), the adoption of attributes such
as some level of separation of ownership and control or the attraction of external investors is
not unfeasible altogether. If complementary institutional attributes exist, the use of new and
innovative legal forms may foster the development of farms in directions that could
positively influence employment, innovation and the establishment of infrastructure at the
regional level. For example, institutional reforms, such as the creation of rules that allow
the establishment of “new generation cooperatives” (see Chaddad and Cook, 2004), may
facilitate the attraction of capital at the cooperative level, incentivizing farmers to adopt new
combinations of organizational attributes in their own farms. Hence, a further implication
from a public policy perspective is that development should be sustained by legal
frameworks that contemplate a variety of forms for the agricultural enterprise and for the
cooperation and association among farms.
A fourth implication for the development of the configurational approach advanced in this
paper is that the combination of organizational attributes in new and innovative forms should
help farmers to address current changes in the agrifood sector more effectively. Structural
transformations, such as the consolidation of supermarkets, the growing demand for farmland
and the emergence of new market niches, have reshaped the agricultural sector across the
world (see Deininger and Byerlee, 2012; Reardon and Timmer, 2012). Several cases show how
an enhanced ability to combine organizational attributes could be beneficial in responding to
those development challenges. The case of the growing demand for farmland, as well as the
implications of the phenomenon, can be considered. As suggested by the example of the
Iroquois Valley fund presented in Section 3, the demand for land should not necessarily imply
the exit of small farmers from the market. Investment funds may focus on increasing the
productivity of the resource, splitting the acquired farmland in multiple pieces and selling it to
family farmers later (see Byerlee et al., 2017). Moreover, investment funds might establish a
long-term relationship with farmers, which, in practice, would imply the access to an additional
source of capital. Previous research shows that the nature of the investments made by an
agricultural firm influences the governance mechanisms that are adopted to obtain the
necessary amount of capital (Mondelli and Klein, 2014).
Another contemporary change that may represent an opportunity for small
farmers – especially if organized in arrangements that include larger players in the industry –
is the rise of niche markets such as organic, fair trade and local food. The demand for new food
attributes provides new value creation opportunities for small farmers, combining traditional
methods of cultivation with high technology – for example mechanized harvesting, intensive
use of quantitative data for decision-making and internet-based distribution. Although the
production unit may be small, the investments in technology, inputs and equipment are often
quite high. The example of emerging niches can be considered, such as the bio-energy sector, in Structural
which complex arrangements enable the cooperation among farmers, industrial facilities and heterogeneity
other providers of key capabilities and resources (Burress and Cook, 2009; Cembalo et al., 2014). in farm
Another case is the Label Rouge standard in France. As described by Ménard (1996), the
production of chicken under this quality standard may be carried out by coalitions of firms and structures
farms with very different characteristics. Within the Label Rouge standard, it is possible to
find farmer-owned cooperatives that vertically integrate the processing stage, processing firms 77
that devise a strictly coordinated supply chain without an active participation of farmers in
decision-making and relatively decentralized arrangements of independent farmers coordinated
by a committee that negotiates contracts with processing plants. Therefore, both farm
management and public policy should consider the establishment of networks, alliances and
quasi-integration structures between farmers and other players on the agri-food chain as an
effective – and often superior – solution in comparison to full vertical integration.
Finally, the specification of the set of complementary institutional features should facilitate
the assessment of organizational forms in their specific institutional context. A careful approach
is demanded in the evaluation of strengths and weaknesses of emerging models. The example of
agroholdings in several Eastern European countries can be considered, whose emergence and
consolidation have taken place in a context of institutional voids in some of the complementary
mechanisms outlined in Section 3 – for example the lack of developed capital markets and
corporate law regimes. Although agroholdings may be a feasible “second best” form in the
context of countries such as Ukraine, researchers should be careful before using the terminology
to describe other arrangements that basically share the feature of having a large size, such as the
Brazilian mega farms. Another illustrative example is Argentina, a country with a considerable
level of institutional uncertainty. Since the 1990s, several different organizational models have
been used to organize farming activities in the country (see Senesi et al., 2017). Some of them,
such as the use of trust funds and investor-oriented firms to attract external investments, have
lost importance after government decisions that restricted the exports of commodities in 2008.
Therefore, the strengths of a farm structure can only be understood if attention is paid not only
to the nature of the agricultural activity (e.g. Allen and Lueck, 2004) but also to the presence or
absence of supporting or hindering institutional elements (see also Binswanger et al., 1995).

5. Summary and conclusions

This paper discusses the issue of structural heterogeneity in farming. Departing from the idea
that generic farm types – family farm or corporate farm – represent a unique configuration of
organizational attributes, we contend that farm structures represent a collection of attributes
that can be combined in multiple ways. We use a series of questions to describe six attributes
that can help researchers to identify and compare existing farm structures. The questions are
as follows: What is the size? What is the strategy? What is the organizational form? What is
the legal form? Who are the owners? What is the degree of separation of ownership and
control? Moreover, we discuss possible complementarities between those organizational
attributes and specific features of the institutions of a developing economy. Four institutional
features are considered preconditions for the adoption of organizational attributes with
expected positive impact on development, such as the attraction of external investments in
large scale and the separation of ownership and control: contract enforcement regimes; the
property rights protection regime; efficient capital markets; and developed corporate law.
Hence, this paper contributes both to the identification and interpretation of the
organizational arrangements observed and diffused in developing and emerging economies
and to the assessment and prescription of the set of forms that provide feasible trajectories of
development for farmers in a given institutional context. Our framework can be used to classify
either long-standing structures – “plantation agriculture” – or emerging arrangements, such as
those discussed more in depth along this contribution. Finally, from the analysis offered in this
JADEE paper, several implications for relevant players – both farmers and regulatory authorities and
10,1 policy makers – can be drawn. We highlight five main implications: the “variety of species” –
that is the coexistence of various organizational forms, particularly large and small, should be
supported; corporate law, transparency and the professionalization of management should be
strengthened, facilitating the detachment from governance models rooted mostly in strong ties;
national corporate laws should be rearticulated, with the recognition that new forms of
78 enterprise would support innovation and territorial development; the inclusion of small farms
in both horizontal inter-farm networks and vertical complex collaboration contracts along the
agrifood chain should be supported, as hybrid or network-based organizational forms are often
superior to large fully integrated enterprises; both the nature of the economic activity and the
presence or the possibility of establishing complementary institutional elements should be
considered when assessing the strengths of a farm structure.

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Further reading
USDA (2014), “United States’ 2012 census of agriculture”, available at: https://tinyurl.com/y3htxr2b

Corresponding author
Bruno Varella Miranda can be contacted at: brunovm@insper.edu.br

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