On flexibility of agri-businesses: Are small- or large-scale farms more flexible?

Farming operations facing substantial pressures to adapt in response to changed economic and socio-political framework conditions in recent years. Increasing price fluctuations, significant adjustments of nutritional habits in populous economies, progressing climate change and agricultural policy reform efforts make entrepreneurial flexibility a key prerequisite of market competitiveness of agri-businesses.

IAMO director Thomas Glauben and researchers Swetlana Renner and Heinrich Hockmann applied newly developed metric methods and a comprehensive dataset to analyze the extent and determinants of flexibility using the example of Polish agricultural businesses.

Albeit that numerous popular scientific and practice-oriented papers emphasize the necessity of flexible corporate concepts and production technologies, it was largely unexplored to date what exactly entrepreneurial flexibility is, how it can be measured and what its determinants are.

Based on the findings of a study conducted by IAMO, flexibility – in economic terms – can be defined as the capability to adapt production to a new situation without substantial extra cost. Flexible production technologies entail high scope advantages, low marginal cost increases and high scale advantages.

The agricultural economists established in their analysis that the flexibility of production technologies is closely related to farm specialization. Mixed farms, in comparison to dairy cattle and processing farms, have more flexible technologies and are capable of adapting their production outputs at relatively lower cost. Out of the four reviewed farm types, Polish cropping enterprises has the lowest flexibility in their production methods.

It also became apparent that, irrespective of all analyzed farm types, small-scale operations have more flexible production systems than large enterprises. ‘It can be assumed that smaller full-time farms opt for flexible production strategies in order to hold their own on the market against larger, often ‚more vigorous‘ operational structures. This may also be an explanation for the occurrence of small-scale or dual agricultural structures in various transition countries, such as Poland’, says IAMO director Thomas Glauben.

The IAMO Policy Brief 19 titled ‘On flexibility of agri-businesses: Are small- or large-scale farms more flexible?’ is available for free of charge download on the IAMO webpage: www.iamo.de/publikation/en/policybrief-19

IAMO Policy Briefs

The publication series IAMO Policy Brief is published at irregular intervals and provides a platform for research findings and outcomes of the Institute of Agricultural Development in Central and Eastern Europe (IAMO) with social relevance to be communicated accessibly and entertainingly to a broad audience. Key target groups include political decision-makers, mass media representatives and the general public.

About IAMO

The Leibniz Institute of Agricultural Development in Transition Economies (IAMO) analyzes economic, social and political processes of change in the agricultural and food sector, and in rural areas. The geographic focus covers the enlarging EU, transition regions of Central, Eastern and South Eastern Europe, as well as Central and Eastern Asia. IAMO works to enhance the understanding of institutional, structural and technological changes. Moreover, IAMO studies the resulting impacts on the agricultural and food sector as well as the living conditions of rural populations. The outcomes of our work are used to derive and analyze strategies and options for enterprises, agricultural markets and politics. Since its founding in 1994, IAMO has been part of the Leibniz Association, a German community of independent research institutes.

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