The article offers some clues to advance future work with more accurate measurements of the transforming scope of the ESS. This constitutes a contribution to the development of a micro–meso–macro approach. The most important issue is that the article allows us to derive from a double conceptual and empirical perspective, a series of guiding criteria for the selection and definition of a system of indicators. At the micro level, it is about putting the focus on the diversity and heterogeneity of the actors (new and already established) as key factors in generating innovations. The SSE stand out in this regard for their innovative social and environmental dynamism, their commitment to the territory and their link to the productive system. At the meso level, the indicator selection criteria must capture the various mechanisms for the diffusion of micro innovations. The organizational advantages

of some entities of the SSE, the predicament of its principles and values outside its own legal field, especially in contexts of violence, inequality, and fragmentation of knowledge, as well as the role of the practice and epistemic communities in the diffusion of innovations among the entities of the same population, can be essential. Third, at the level of macro indicators of structural coherence, two key criteria emerge from our article. It is about, on the one hand, the detection of intermediary actors with the capacity to pave the way for the formation of new broad-based evolutionary trajectories by "merging" various networks of actors that until then would follow differentiated paths. On the other hand, associated with the propensity of the innovative actors of the territory to develop activities in different sectors, very significant possibilities of macro (structural) change are generated following the possibilities of interrelation between different practice and epistemic communities and, the possibility of generating intersectoral innovations that these local innovators convey. Finally, and in a general way for the three micro, meso, and macro levels, it follows from the article that this system of indicators should not focus only, or fundamentally, on the innovations generated by the SSE, but rather on the amplifying effect on territorial innovations that exercises the entry into the action of the entities of the SSE.

**Table 4.** Meso-rules diffusion mechanisms by SSE.

Source: Own made.

This last result is complementary to those obtained recently by some other research focused on the study of certain alternative structures of agrarian organizations, such as *Community Supported Agriculture* [58]. Some of these studies conclude that the attractiveness of these alternative structures increases when these structures establish relationships of trust with external actors [58].

From an economic policy perspective, the article has important implications. First, it has shown the important self-organizing capacity of SSE actors, especially in cooperation with actors who share their organizational principles and values. However, even if these transformation processes have largely taken place outside the public authorities, their role should not be underestimated. Indeed, the actors in the transforming network sometimes rely on public actors occupying peripheral positions, generating a symbiotic relationship based on mutual respect and recognition, which is very useful for the performance of the specific functions of both. Secondly, these processes are an example of the transformative capacity associated with individual and collective actors (e.g., associations) that are acting as entities that have a great deal of autonomy from the public authorities, especially the mainstream political parties. This contrasts with the traditional strong linkage of individual and collective actors in the conservative network with the public authorities, and in particular the political parties. Third, and connected with the contrast we have just seen, the possible demonstration effect of some minority actors of the transforming network on some majority actors of the conservative network should not be underestimated. Consequently, the transforming network's status as a lever of territorial change should make it the focus of any public policy to stimulate democracy, the fight against corruption and the commitment to an endogenous development model fully inserted in the international economy. In this sense, after we conducted the bulk of the interviews that served as the basis for this research, there has been a process of growing autonomy or independence by one of the large associations of sugarcane producers with respect to the major political parties. Trying to deepen the connections that may exist between the latter process and the development and consolidation of a transformative network appears as an interesting field of research for the future that can help to understand the complex dynamic interrelationship between the formal entities of the SSE (agricultural associations and cooperatives, etc.) and other entities that share its organizational principles and values.

Even though we believe that the article opens up some interesting lines of research, to make them effective, it is necessary to address some of the limitations of the article. Firstly, the article has focused on the study of the Veracruz sugarcane cluster (Mexico). No doubt studying the cases of other regions (developing and developed) and comparing them with each other would help to refine the theoretical framework and to fine-tune the proposed system of indicators. Secondly, the methodology used in the empirical analysis is essentially qualitative. Now, it would be necessary to develop some quantitative tools to try to measure the different defining categories of proximity between actors and the diffusion of the meso-rules identified in the article. This could make an important contribution to the development of an operational methodology for the measurement of the SSE that integrates the various methods that revolve strictly around the entities of the SSE and the qualitative method developed here to capture the ability of the SSE to drive a process of broader (territorial) transformation.

**Author Contributions:** Conceptualization, J.R.G.-B.; methodology, M.R.T.-B. and J.R.G.-B.; validation, M.R.T.-B. and J.R.G.-B.; formal analysis, J.R.G.-B. and M.R.T.-B.; investigation, J.R.G.-B. and M.R.T.-B.; resources, J.R.G.-B. and M.R.T.-B.; data curation, M.R.T.-B.; writing—original draft preparation and writing—review and edition, J.R.G.-B. and M.R.T.-B.; funding acquisition, J.R.G.-B. and M.R.T.-B. All authors have read and agreed to the published version of the manuscript.

**Funding:** This work was supported by the Spanish Ministry of Science, Innovation, and Universities (GOBEFTER II Project, CSO2016-78169-R) and by the Mexican National Council of Science and Technology (CONACYT) (grant number CVU 442382).

**Acknowledgments:** This article is a revised version of the communication presented in the 8th CIRIEC International Research Conference on Social Economy "Solidarity and Social Economy and The Agenda 2030: Inclusive and Sustainable Development through Innovative Social Practices", San José (Costa Rica), 8–10 September 2021. The authors appreciate the suggestions of the participants, especially Roberto Cañedo Villarreal. The authors also appreciate the interesting and detailed suggestions of three anonymous reviewers who have helped us many to improve the quality of the article, although only the authors are responsible for the final work.

**Conflicts of Interest:** The authors declare that they have no conflict of interest concerning the research reported in this manuscript.

#### **References**

## *Article* **Why Do Agricultural Cooperative Mergers Not Cross the Finishing Line?**

**Elena Meliá-Martí 1,\*, Natalia Lajara-Camilleri 1, Ana Martínez-García 2 and Juan F. Juliá-Igual 1**

**Abstract:** Mergers have played a relevant role in the business development of many agri-food cooperatives and have led to the consolidation of large cooperative groups which are leaders in their respective business sectors. However, many of the merger processes undertaken fail: some are aborted at the negotiation stage, and others are not approved by members. These failures entail financial and social costs due to frustrated expectations and the time invested in the negotiation process. The objective of this paper is to establish the economic, socio-cultural, organisational and process management factors that underlie this outcome. A survey was conducted among the directors and administrators of a sample of Spanish agri-food cooperatives that had participated in merger processes which were aborted at the negotiation stage or were not approved by their members. Factor and discriminant analyses established the aspects which had the greatest impact on the failure of the merger processes. Far from being economic factors, these analyses reveal that defensive localisms, a lack of commitment to the merger on the part of members and directors, and communication failures were more significant.

**Keywords:** mergers; agri-food cooperatives; failure; integration; approval; negotiations

#### **1. Introduction**

The agri-food sector is subject to many sources of uncertainty. Collaborative networks have emerged to mitigate them and ensure competitive advantages. They also aim to shorten social and physical distances between consumers and producers and reduce the number of intermediaries in the food supply chain [1,2]. This process of shortening complex agri-food supply chains is engendering new market relationships which are built around new forms of association and collaborative organizational structures [3], which can improve competitiveness [4]. These processes include diversification into new activities, increasing the value added to farm products, e.g., through an ecological or regional identity, and involving new forms of cost reduction [5].

Integration processes, including mergers, are one of the ways used by agri-food companies to reduce costs and become more competitive.

Mergers and integration processes are highly complex operations in which numerous interests are at stake. The outcome of these processes is significantly affected by the same factors that influence and shape agri-food collaborative networks: governance, behaviour (trust, transparency), performance assessment, intensity of collaboration, strategy and operations management, amongst others [5]. They are also shaped by various factors which stakeholders often find difficult to control or predict, thus hindering their success [6]. Much of the research into mergers and acquisitions has looked at strategic and financial aspects without addressing socio-cultural, organisational and managerial issues. Even so, there is a growing consensus among researchers that these variables are at least as important for value creation in an integration process as financial ones [7–10]. Cooperatives are mutual undertakings. This means the success or failure of their mergers is not just

**Citation:** Meliá-Martí, E.; Lajara-Camilleri, N.; Martínez-García, A.; Juliá-Igual, J.F. Why Do Agricultural Cooperative Mergers Not Cross the Finishing Line? *Agriculture* **2021**, *11*, 1173. https:// doi.org/10.3390/agriculture11111173

Academic Editors: Adoración Mozas Moral and Domingo Fernandez Ucles

Received: 22 October 2021 Accepted: 18 November 2021 Published: 20 November 2021

**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

influenced or determined by factors which might be considered standard in an integration process. This occurs because of the special relationship between cooperatives and their members [11], who are both its owners and users and may also play the role of proprietor, employee, consumer or supplier [12]. Moreover, cooperative mergers are a result of the application of one of the Principles of the International Cooperative Alliance: cooperation among cooperatives. This states that cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures. Indeed, the issues which may drive cooperative members to back a merger are not simply the traditional expectation of generating value for the shareholder, which is characteristic of limited liability companies. In these cases, other operational and social aspects take on greater importance. Thus, member concerns about a merger depend on the ability of the process to address questions such as: Will the services the cooperative delivers to its members get better after the merger? Will the importance and power of each member or group of members in the resulting cooperative be lessened? Will the merger lead to the relocation of the cooperative's facilities? Will the cooperative's job offering in the municipality or region in which it is located be affected?

Meanwhile, studies about the factors underlying the failure of merger processes tend to focus on ex-post analyses of the merger [6,13–15]. They examine the company's evolution during the following years to unpack the impact which various aspects, decisions or actions taken by the cooperative may have had on this unsatisfactory performance.

Nonetheless, a large number of merger processes fail to cross the finishing line. In some cases, they are shelved due to disagreements in the negotiation stage itself, while in others, General Meetings do not endorse them after being submitted for approval. Although rarely analysed, these processes may also be considered failures as they entail considerable costs. These include the time spent by directors and administrators, the financial outlay of the studies and experts hired, and what might well be even more serious, the opportunity cost of not carrying out the merger or the value of not choosing the best option.

#### *1.1. Objectives and Structure*

This study has sought to add to knowledge of these processes in their earliest stages as these have not been explored in the cooperative arena. The general purpose of this paper was to establish the cultural, organisational, social (related to both members and employees) and operational (tied to the implementation of the process) grounds which shape the termination or failure of some of the merger processes undertaken by cooperatives and to determine their degree of impact on the rejection of the merger. To this end, a survey was sent to directors and administrators of Spanish agri-food cooperatives which took part in a failed merger project in the period 2005–2015 in the aforementioned terms.

The study was conducted in Spain as this is one of the European Union countries with the greatest problem of fragmentation in its agri-food cooperatives [16–20]. Numerous merger processes between cooperatives had been instigated over the study period, which enabled the build-up of a sufficient population of aborted processes.

Firstly, the mergers that yielded this outcome were described (type of process undertaken, number of merging cooperatives, existence of collaborative relationships prior to the merger, whether they are in the same or a different subsector of activity, geographical proximity, etc.). Secondly, the extent of rejection or abandonment of the merger plan in each of the stages was determined by establishing in which ones the cooperative merger process was halted.

Thirdly, the factors or groups of factors which are triggers for this kind of outcome were pinpointed together with the ones that influenced or caused the merger process to be called off in one or other of the identified stages.

Finally, the study aimed to validate a hypothesis that has been much discussed in the literature on cooperative mergers, albeit not confirmed to date by other research, which is that "emotional factors, especially ones related to ties with the territory, colloquially known as localisms, are more responsible for the failure of many merger processes than financial ones" [21,22].

The study's main difficulty lay in finding a sufficient population of cooperatives that had been involved in a merger process which was not successfully completed, since unlike mergers approved by members, this type of outcome is not usually publicised.

This paper is organised as follows: first, the existing literature about qualitative factors shaping the outcome of corporate merger processes and specifically in cooperatives is reviewed. This is followed by the methodology used, the results derived and a discussion of them. Finally, the conclusions of the study are presented.

#### *1.2. Theoretical Framework*

Numerous studies and research projects have addressed the factors shaping the success or failure of merger processes using a variety of approaches and standpoints which basically fall into two main categories [23]:

Studies of mergers and acquisitions tend to be much more detailed in their analysis of hard factors, in many cases sidelining the impact of socio-cultural, organisational and managerial aspects even though these variables are crucial to the success or failure of the process. Hence, as Papadakis points out [9], studies encompassing the widest range of factors are consequently much needed in order to gain a more comprehensive understanding of the success or failure of these processes.

A review of the literature on soft factors identified and classified those which had the greatest impact on the outcome of a merger process (Table 1). They were grouped into two blocks: the first includes factors which may be considered common to corporate merger processes, insofar as they affect companies regardless of their legal form, while the second consists of factors more specific to cooperatives.

**Table 1.** Qualitative factors which are relevant in a merger.

1.2.1. Common Qualitative Factors (Not Specific to Cooperatives) Which Have a Major Influence on the Success of a Merger

Qualitative factors that have an impact on the outcome of a merger include the following: Handling the interests of the stakeholders in a merger (members of the board of directors (BD), managing directors, managers, members and employees): Some studies suggest that it is not uncommon for several of these groups, especially the members of the BD or managing directors, to put their own interests before those of the shareholders or members, often driven by the expectation of seeing their salaries increase, earning higher profits or improving promotion opportunities due to the larger size of the company resulting from the merger [39]. Being the managing director in a larger firm is also often associated with higher social status than a similar post in a smaller firm [35].

Commitment to the process, professional competence and resistance to change are undisputed determinants of merger outcomes. Regardless of the way in which the merger has been conducted, the chances of success are greatly diminished if human resources are not involved and committed to it as the engagement and motivation of the team are essential success factors [35,40–42].

Managing communication in the process and controlling information about it among employees are crucial. Meynerts-Stiller et al. [43] and Davenport and Barrow [44] argue that having a communication plan in place is a decisive factor for the success of the process. Hence, information should be clear and timely to prevent some employees or members from feeling left out. Furthermore, communication can lessen stress levels among employees and thus increase the chances of a successful merger [45]. Anticipating changes and problems is pivotal so that they can be controlled or forestalled [40].

A further factor for success in the view of BenDaniel and Rosenbloom [40] and Rodríguez-Sánchez et al. [46] is the existence of a merger team that handles the process. Setting up this type of a team builds confidence in the company's commitment to the process while providing assurance of the utmost thoroughness and professionalism, an assessment which spreads across different strata of the company and engenders feedback.

In relation to previous experience, Schuler and Jackson [47] maintain that companies with previous merger experience achieve better results, suggesting that there is a learning curve whereby firms that have dealt with previous mergers are more likely to deliver more successful integrations. Here, Cuypers et al. [48] argue that experience can lead to the creation of a capability that helps with another important M&A issue, that is, value capturing, plausibly through improved bargaining and negotiation skills. In addition, they highlight the importance of considering differential experience between both parties as the source of experience advantage. Conversely, Hopkins [49] asserts that too much experience can be as detrimental as no experience at all since it can lead to arrogance or overconfidence. However, Greenberg et al., in Stahl and Mendenhall [50], qualify the contribution this factor may make to success by pointing out that experience helps to some extent as each situation and agreement is unique and different.

Leadership and good management: Leadership is a crucial organisational requirement as it provides a mechanism for control, efficiency, commitment and understanding in a company and has been shown to be a key factor in a successful merger [6]. Teerikangas et al. define the "integration manager" as the project manager appointed by the company to coordinate all integration-related activities [51].

Integration speed and time horizon: The speed of the integration is another influential variable. Budden et al. contend that the faster the integration, the better the outcomes [36]. Decisions should be made promptly, and they suggest a timeframe of about 90 days as the period in which it is feasible to consolidate the process. Oh and Johnson look at post-merger integration duration and suggest that slower integration minimises conflicts between merger partners, enhances trust-building and reduces the disruption of existing resources and processes in both firms, which may benefit M&As [52]. Reynolds et al. stress that all sides need sufficient time to grasp the impact of the process and emphasise that

excessive delays or continuous postponements often have negative consequences, thus increasing the likelihood of failure [53].

Cultural factors: Cartwright and McCarthy argue that corporate culture is the most important facet of organisational adjustment in a merger [54]. Buono et al. note that each organisation has a unique, individual corporate culture and that unexpected problems and conflicts often arise when two or more corporate cultures meet [55]. The prevailing view is that the greater the differences between them, the greater the conflicts and problems for the resulting company [40]. Hence, scholars such as Budden et al. recommend that these processes should take place between companies in the same industry, thereby leveraging any strategic similarities between them [36].

#### 1.2.2. Specific Factors Influencing the Outcome of a Merger of Cooperatives

Numerous factors in a cooperative may have a positive or negative impact on members and other stakeholders when it comes to backing or rejecting a merger. Del Real Sánchez-Flor notes that in any cooperative integration process, it is essential to work in two areas in lockstep: firstly, on human relations, and secondly on technical aspects (legal, financial, labour, etc.) [56], which although in principle are the most important part of the process, in the cooperative industry are often overshadowed by personal issues.

Human relations (members, employees and managing directors): One distinctive element that sets cooperatives apart from other types of firms is the dual condition of their members as both proprietors and suppliers or clients [12]. Within this framework, authors such as Reynolds et al. point out that a major challenge in merging cooperatives is bringing together different cultures and standards for decision-making [53]. They suggest that the negotiation process is an initial test for cooperatives to overcome their differences in order to reach an agreement. They also advocate the appointment of an impartial, fair facilitator to assist in the process. In interpersonal dynamics, Vandeburg et al. specify trust, communication and commitment coupled with the role of the managing director and the rest of the cooperative's staff as key factors for the success of mergers [57]. These conclusions are endorsed by other papers such as the ones by Van Duren et al. [58] and Fulton et al. [59].

At the negotiation stage, it is critical to avoid digressions about who is contributing the most to the process and also to keep an open mind in shaping the new unified cooperative undertaking. It is incumbent upon the organisations involved to be prepared and able to make difficult concessions and even sacrifices, as many negotiations break down when an issue stalls and cannot be resolved [53]. Others point out that managing and handling stakeholders who might oppose the merger transaction is particularly relevant [56,60] and who may be: (1) board members (fearing the loss of prestige and authority), (2) employees (who fear the loss of their employment status in their cooperative) and (3) members, either because of a lack of confidence that the process will yield appropriate results or fear that it may, in some way, alter their operations in the cooperative, especially in terms of the services provided to them, or sometimes because of mere antagonism to the board's management.

Negotiating the makeup of the first board of the ensuing cooperative is often a bone of contention, frequently related to the number of representatives of each cooperative and the choice of chair. When choosing the chair and the members of the board of the resulting cooperative, it is advisable to put a premium on competence and experience rather than the mere fact that they come from one cooperative or another, bearing in mind that in many cooperatives, there is still high demand for professional management and competent members to occupy positions in different bodies [61]. The same principles apply to the choice of managing director.

Local level characteristics and actors: Another recurrent problem and cause of failure in many cooperative merger processes is localism. This refers to the preference of members and staff for the cooperative to remain tied to the municipality, town, region and even the country in which it is domiciled and their refusal to see this situation change after

the merger. Regional identity, related to agri-food products, is a key element in the configuration of agri-food networks, which has given rise to different designations of origin (protected designation of origin, protected geographical indication, etc.) [3]. This sense of identity, which goes beyond the fact that the cooperative has a differentiated product with one of these designations, can become a problem when it overrides economic criteria and the interests of the member, the cooperatives' main asset. Giagnocavo and Vargas-Vasserot cite overcoming resistance to change and localism as one of the main challenges facing cooperatives in Spain [18]. Montero [62] argues that the solution lies in having open-minded managing directors who are capable of overcoming individualist approaches, localism, grandstanding, politicisation and vested interests. Likewise, Swanson pinpoints other problematic strategic factors such as choosing the new undertaking's name, mapping out its general objectives and approach, unifying operations and deciding which facilities should be closed or sold after the merger and which should be kept running [60].

Opportunism, meaning the shrewd pursuit of self-interest [63]: This kind of behaviour is found in inter-organisational and internal relationships and has very harmful consequences. Wathne and Heide point to passive opportunistic behaviour as a reluctance to adapt [64]. As Sánchez-Navarro et al. noted, this behaviour can lead to long-term negative effects, including the abandonment of the project in the case of a merger process [63].

Equity valuation: Performance assessment is a key element in sustainable agri-food networks. Its accurate quantification of efficiency, effectiveness and relationships between firms according to social, environmental and economic perspectives is essential [65]. A common problem in merger negotiations comes from the financial valuation of the cooperatives' equity and setting the share capital to be recognised in the resultant cooperative for the members of the cooperatives involved. Wadsworth and Chesnick note that managing fairness in members' equity is perhaps the trickiest financial issue in a merger and advocate respecting and protecting members' contributions [66], while members should understand that their financial stake in the merged cooperative is significant. Likewise, Swanson points out that the evaluation of assets and liabilities and the transfer of capital during cooperative mergers are thorny issues which have to be handled fairly or in a mutually acceptable way by putting in place a plan that includes alternative methods and implications (impacts whether positive or negative) for combining the assets, liabilities and equity of the cooperatives involved [60]. Scholars suggest that the capital to be recognised for each member in the resulting cooperative should be calculated in real terms along with the monetary compensation (or merger fee) which the members of a cooperative may have to pay in order to offset equity imbalances. Similarly, García Sanz argues that the value of the cooperative as established in the negotiations between the boards of directors should be used to calculate the exchange ratio rather than the book value [67].

Strategy-related aspects: The study "Support for Farmer Cooperatives" points out that an inherent problem in many merger processes is that the merger is not the result of a purposeful, considered decision, and consequently, its strategy is not sufficiently discussed [61]. Indeed, Saisset et al., following an analysis of 14 wine cooperative mergers in Languedoc-Roussillon, found that some were done without any backup strategy, others responded to local policies, and finally, in other cases, mergers were based on real corporate strategic projects leading to synergies between the involved cooperatives [68]. Thus, in many cases, the decision to undertake a merger is often made in response to several years of losses, either due to poor management or periods of crisis. Similarly, Reynolds et al. contend that not all combinations of cooperatives are economically profitable and that at times, some members may be reluctant to merge with a much larger cooperative as they think that it might weaken control over the quality and type of services provided [53]. Meanwhile, Martínez Morillo-Velarde argues that cooperatives have traditionally been wary of gaining size, expanding and internationalising. In a nutshell, they are afraid of losing control [69].

Communication in the process: Duft and Zagelow [70] and Montero [62] stress the negative effect of failing to properly explain to members and directors the benefits of the

merger as well as the features and operations of the resulting cooperative, very much in line with what has been noted above in the general factors. They point to disinformation as a generator of uncertainty and as a propitiator of rumours or fake information, while honesty, integrity and effective communication are the only factors proven to be useful in addressing the problems arising from a lack of information. Likewise, Del Real Sánchez-Flor contends that good management of internal information to members averts rumours, information distortion and unjustified misgivings while building a climate of trust and transparency which, in the long run, will help to achieve the expected goal and to sound out the views of members and anticipate any problems that may come up [56]. It is additionally essential to ensure the cohesion of the largest number of individuals on each board and draw up an agreed message to members and employees stressing the benefits of the integration process.

Team ability: A firm's staff, with their knowledge, skills, experience and motivation, is considered one of the resources with the greatest potential for generating sustainable competitive advantages [71,72]. However, as noted by a good part of the social economy literature, cooperative firms have difficulties in attracting and retaining executives who are both valuable and committed to cooperative values [72–75]. Accordingly, it is essential in a merger process to bring in professional management with the appropriate training, experience and skills as this is one of the most influential and decisive factors in the success of the cooperative resulting from the integration process [76]. The aim, therefore, is to eschew monistic management models, in which both the cooperative's democratic structure (distribution of decision-making power) and business structure (relations between staff and management) are controlled by the actual members, who may behave in an exploitative or opportunistic manner.

The above review of the literature is now followed by an empirical comparison of the main factors determining the failure of mergers of agri-food cooperatives in the equity valuation, negotiation and General Meeting approval stages.

#### **2. Materials and Methods**

#### *2.1. Study Population*

There are no databases or sources which include failed merger processes (called off at the negotiation or approval stage), which meant that the information had to be compiled by asking the federations (representative organisations) of agri-food co-operatives in Spain's 17 autonomous regions. Information was gathered from all of them bar three (Canary Islands, Navarre and the Basque Country).

The population identified after making enquiries to the cooperative federations was made up of 104 agri-food cooperatives which had been involved in 36 unsuccessful or aborted mergers between 1995 and 2015 (Table 2).

For the purposes of this research, a failed merger was defined as a merger that did not succeed due to one of the following reasons:

There are 3669 agri-food cooperatives in Spain [77]. Therefore, the cooperatives which had taken part in a failed merger process accounted for around 2.7% of the total in the period under study. The difficulty of getting hold of this population should be stressed. Although merger processes have to be announced in newspapers and official journals once they have been approved by the General Meetings, information on mergers which were not completed is not available except through the cooperatives themselves and, in this case, their federations. This problem is compounded by the fact that cooperatives often have an overt interest in not publicising these processes because they have not been successfully concluded.

#### *2.2. Sample Selection*

The reliability of the conclusions drawn in a study depends to a large extent on the way in which the sample is selected [78]. In this case, the questionnaire was addressed to the 104 agri-food co-operatives identified by the cooperative federations as participants in 36 failed or aborted merger processes. The response rate was 42%, which means the analysed sample was made up of 44 cooperatives and was thus representative of the analysed population at 94% (Table 2).

#### **Table 2.** Survey factsheet.

#### *2.3. Survey*

The data collection methodology used was a survey (see Supplementary Materials), which is one of the most commonly employed approaches in social science research to empirically study the characteristics and interrelationships of socio-economic and organisational variables [79,80].

The surveys were conducted via email and addressed to the managing directors and administrators of the cooperatives.

#### *2.4. Conducting the Questionnaire*

The first part of the questionnaire consisted of general information about the cooperatives, such as their type, their geographical location and the sector they operated in. The second part investigated the features of the merger process itself including the number of cooperatives involved, the year in which the process took place, the sector which the organisations involved were in and the type of merger proposed.

The third part looked at the reasons why the merger failed. A Likert scale of 1 to 5 was chosen for measurement purposes, ranging from 1 (low influence of the factor analysed on the failure of the merger) to 5 (high influence of the factor analysed on the failure of the merger). Although a Likert-type scale has limitations, such as the absence of a continuous relationship between values and the distances there may be between them, it was chosen because it enables the multidimensionality of the variables to be appropriately addressed [78].

The fourth and last part of the questionnaire summarised the three main reasons which, in the respondent's opinion, led to the failure of the merger in order of importance. It also included other information which may have influenced the outcome of the merger, such as whether the cooperatives involved were engaged in shared business activities prior to the merger. Finally, they were asked whether they considered that their cooperative would have been better positioned if the merger had taken place or whether they had subsequently thought about taking part in other integration processes.

#### **3. Results and Discussion**

#### *3.1. Descriptive Analysis of the Results*

An analysis of the data extracted from the survey showed that the majority were first-tier cooperatives (95%) and only 5% were second-tier cooperatives (Table 3).

When classified by the core business of the organisations, most of the cooperatives which were involved in failed mergers in the sample were in the olive oil and table olive (39%), fruit and vegetable (19%) and wine (14%) industries (Table 3).

**Table 3.** Type of cooperatives in the sample.

The second part of the survey included questions about the merger process itself (Table 4). In 75% of the cases, the merger processes were conducted by two cooperatives, while only 25% involved more than two cooperatives.

As might have been expected, in 93% of the cases, the cooperatives were in the same production industry, and only the remaining 7% were engaged in distinct operations (Table 4).

The proximity between organisations was another of the factors analysed in the survey. In this case, 43% of the cooperatives were in the same municipality and 39% in neighbouring or very nearby municipalities (Table 4).

In terms of the type of merger proposed, 55% of the cooperatives opted for merger by acquisition, while 45% opted for merger by setting up a new company.

**Table 4.** Merger process information.

Another relevant issue was the stage at which the process was halted. Forty-eight percent of the processes failed in the last stage, i.e., approval by the General Meeting. The rest of the mergers were not submitted to the General Meetings, 27% of them ended in the initial analysis or assessment stage and 25% in the negotiation stage, i.e., after the initial assessment, the boards of directors started talks about the merger but were unable to come to a satisfactory agreement.

The third section of the survey explored the reasons why the merger did not succeed. The highest scores were given to members' lack of commitment, localisms, communication failures and the lack of support and trust of the boards. The factors with the lowest scores were potential staff cost overruns after the merger, lack of previous business relationships and opportunism by the managing director (Table 5).

**Table 5.** Responses on the assessment of the reasons why the merger between cooperatives did not succeed, ranked from most to least perceived importance.

Consequently, four process management reasons were picked out with an average rating of more than 3, i.e., they were more to blame for the failure of the process. One was the members' lack of commitment to the merger with a rating of 3.32, and the other was what is called "localism" with an average score of 3.22. This is by no means surprising since many scholars point to this as one of the main causes of the failure of merger processes [18,62]. They all stress the importance of overcoming individualistic approaches and localism as a key issue in achieving greater business concentration in the cooperative industry.

Failures in communication and information management for members, employees and managing directors were the third problem highlighted, with 44% of respondents giving this factor a rating of 4 or 5. Again, these results match the findings of researchers such as BenDaniel and Rosenbloom [40] as well as Denisi and Shin in Stahl and Mendenhall [45], who advocate open, clear communication as a decisive factor in increasing a merger's chances of success.

Lack of support for and confidence in the merger process from boards of directors was the fourth most important reason with an average score of 3.09. As suggested by researchers such as Swanson [60] and Del Real Sánchez-Flor [56], this rejection may be driven by the fear of losing influence, prestige or authority in the cooperative resulting from the merger.

The reason with the lowest impact, with an average score of less than 2, was the lack of pre-merger relations, a response that is most likely due to the finding in Table 4 which revealed that most of the organisations had already conducted joint operations prior to the merger.

Finally, another two key factors in the failure of the merger process were the lack of commitment to and motivation for the merger, with an average rating of 3.32 in the case of members and 3 in the case of the boards of directors. As noted by Van Duren et al. [58], BenDaniel and Rosenbloom [40], Fulton et al. [59] and Vandeburg et al. [57], in human relations, confidence and commitment are crucial to the success of this type of process. The results suggest that members' lack of commitment to and motivation for the merger in 46% of cases, and on the part of the board of directors in another 42%, contributed to the failure of the processes. The rest of the social factors (personal interests, managing directors' or chairs' lack of capacity and lack of previous experience) were not seen as relevant.

The fourth and last block of the survey (Table 6) summarises the main reasons, in order of importance, cited by the respondents as the principal grounds for the failure of the merger so as to validate or add to the previous ones. The three most recurrent reasons are: (1) members' reluctance due to sheer localism (15%), (2) lack of support for and confidence in the merger process from boards of directors (12%) and (3) lack of confidence in the viability of the resulting cooperative's common business plan (11%). In this case, in addition to the localisms and lack of confidence in the merger process already identified in the previous section, the third most important factor was the lack of confidence in the financial viability of the plan.

Furthermore, it was also found that after the failed merger attempt, the cooperatives involved continued to keep up shared business activities in 69% of cases, where the most significant relationship was being part of the same second-tier cooperative (17%) or having members in common (12%) (Table 6).

The respondents' views as to whether they think that their cooperative would be in a better business situation if the merger had taken place are striking. The answer is overwhelmingly yes at 82.5%. Given that the main reasons pinpointed as accounting for the failure of the merger were non-financial (lack of confidence in the process, localism, communication and information management failures and lack of commitment to the merger by managing directors and board members), it is somewhat surprising that once the process had been called off and with the benefit of hindsight, they thought that their cooperative would have been better off if the merger had gone ahead. This suggests that the approach was almost certainly flawed in these processes. There was a failure to fully explore the real strategy and purpose of the merger, to explain and grasp the advantages and synergies it might bring in business terms with respect to cutting costs, expanding markets and so on, and fundamentally, it seems that communicating this strategy to members and directors failed, leading to their lack of motivation and commitment to the process. By contrast, other aspects which had nothing to do with the company's finances, such as localism, played a key role and contributed to the demise of the merger.

It is paradoxical that the very people involved in a merger who, during the process itself, show and convey little conviction and commitment to the process or prioritise aspects related to localism over business considerations are the very ones who after the process and over the years acknowledge their mistake and state that they should have made a greater effort to salvage the merger.

Finally, the question was also raised as to whether other merger processes with other cooperatives had been started up or considered after the failure. In this case, 53% of the cooperatives said yes and 47% said no, which adds to the paradox described above as it corroborates the need for integration due to economic circumstances, and the fact that the latter were outweighed by emotional reasons when the processes were undertaken.

#### **Table 6.** Summary and additional information on the process.

#### *3.2. Principal Component Analysis*

Due to the large number of items, and drawing on the academic background in the literature, principal component analysis with Varimax rotation (KMO = 0.555; Barlett = 0.000; variance explained = 64.936) was performed in order to reduce the number of variables analysed (reasons why the merger did not succeed) by grouping them into factors with a more overarching significance. The number of factors was set at five on the basis of the scree plot. The results derived (Table 7) confirm the existence of five blocks or factors which pulled together qualitative information on the aspects impinging on the failure of the merger process.

The factors identified subsequently established whether they emerged in or had a different impact on the stage at which the merger process was called off or terminated.

The team ability block covers the assessment of the training, experience and leadership capacity of the managing director and the board of directors. The second component extracted—involvement of the board and the managing director—mainly includes aspects such as management and the board's commitment to and support for the project. The third factor contains issues related to communication failures and the involvement of members and employees: their commitment, fear of workforce restructuring and lack of confidence in the business plan. The fourth factor is made up of localisms and misgivings about the organisation chart and includes fear of the loss of services provided in the cooperative and of relocation. The last block reflects aspects related to the merger proposal, such as disagreement with the equity valuation and dissatisfaction with the type of merger together with disparities between corporate cultures (Table 5).

in PCA.

#### *3.3. Discriminant Analysis*

Discriminant analysis is a multivariate technique for explaining (or predicting) an individual's membership of an established category on the basis of observable characteristics or variables. In the case of this study, discriminant analysis helped to surmise at which point a merger process could become unsuccessful depending on the features of the cooperatives or the way in which the process was being approached by the participating undertakings.

The dependent variable in the analysis is the stage at which the failure of the merger is recorded, turned into a dichotomous variable (1: planning, which includes both the analysis and negotiation stages; 2: general meeting), while the following were included as independent variables: location, number of cooperatives taking part in the process, whether or not they were in the same sector, the existence of a previous business relationship, geographical proximity, type of merger, previous merger experience, whether they had already marketed their products together, and the five factors defined above: F1 (team), F2 (involvement of the BD and managing director), F3 (involvement of members and employees), F4 (localisms and fear of change) and F5 (plan proposal). After applying the step-by-step analysis, only previous merger experience, the existing business relationship and the F2 (involvement of the BD and managing director), F3 (involvement of members and employees) and F4 (localisms and fear of change) factors passed the test of equality of means, tolerance of variances and were significant in the classification.

A function was obtained that had a canonical correlation of 0.849 with a Wilks' lambda of 0.279 (0.000), yielding 100.00% correct classifications from the data (Table 8).

**Table 8.** Standardised coefficients of the derived discriminant function.

The centroids were 1.604 for the planning phase and −1.497 for the processes that were halted at the General Meeting.

Based on the coefficients and in view of the value of the centroids of the variables considered, it can be seen that experience in merger processes, knowledge of the organisations through previous business relations and factor 2 (involvement and commitment of the boards of directors and managing directors) coupled with factor 4 (aspects related to fear of change, localism and ones linked to workforce restructuring) were the factors that resulted in premature abandonment of merger processes. The first one, previous experience in merger processes, may be explained by overconfidence in one of the cooperatives involved which may have caused them to break off negotiations in the case of disagreement. The second, prior knowledge of the other organisations, may have had a constructive aspect due to greater propinquity; however, it also had a negative side in this study since if problems arose in the integration process, as the boards entrusted with the negotiation might have been reminded of previous adverse experiences, and this could have led them to scrap the process.

As for factors 2 and 4, it is striking that both included mostly non-financial components. In the case of the former, they were aspects related to the lesser involvement of managing directors and managers in the process and the fact that they put their personal interests before the interests of the cooperative itself which caused the process to be called off at an early stage. In the case of factor 4, it included members' and employees' fears of change, fear of relocation (due to potential transfer of some administration or production sites, loss of jobs or simple refusal to give up roots in the area, or localism) and fear of workforce restructuring (the new organisation chart).

When a merger process was not submitted to the General Meeting for approval, this means that members were denied the opportunity to examine, assess and discuss the benefits or drawbacks which this process could have had for the cooperative.

It should be stressed that the reasons why some processes were not even submitted for approval by the General Meeting, therefore depriving members of the option to make a choice, mostly concerned aspects which had nothing to do with the viability of the merger plan. Instead, they arose out of fears or mistrust of boards of directors and managing directors, putting the personal interests of all the groups in the cooperative before those of the merger itself, as well as sheer localism.

#### **4. Conclusions**

The key problem of agricultural cooperatives in Spain lies in their size. Integration processes have been encouraged in the last few decades, but some of them have not come to fruition. It is evident that, given the core role that members play in these organisations, qualitative factors are particularly relevant when it comes to explaining what leads to the failure of a merger process in cooperatives. Therefore, in line with several aspects such as mutual trust, commitment and taking risks towards a common goal, which are determinant factors in agri-food networks to achieve shared goals, are essential to integration processes [81,82].

For the first time, this study empirically shows that there are numerous aspects in Spanish agricultural cooperatives which influence the failed outcome of cooperative merger processes. It concludes that there are four influential factors: localism (of considerable or major importance in 48% of the cooperatives), the lack of support for and confidence in the merger process on the part of boards of directors (of considerable or major importance in the failure of 45% of the cooperatives surveyed), communication and information management failures (singled out as relevant and very relevant in 44% of the processes) and the lack of commitment and motivation before the merger on the part of members (identified in 46%) and boards of directors (in 42%).

Hence, localisms or regionalisms play a key role and often take precedence over well-founded financial grounds. They diminish the business vision of the cooperative by confining it to a small geographical area and thereby hinder its development and undermine its competitive capacity, which goes to confirm the hypothesis formulated in the study objectives.

Another shortcoming identified in aborted mergers is information and communication management, just as previous papers by Davenport and Barrow [44] pointed out. In a merger, the conflicting interests, and sometimes excessive zeal, of the parties mean that information is either not properly circulated or sends incorrect or incomplete messages, and this can generate opposition to the process on no other bases than ignorance, fear of embarking on new ventures and even the interests of groups which in no case are in a majority.

The third and last factor picked out as a cause of the failure of these processes is the lack of support and motivation for the merger from boards of directors and from members. This lack of support may stem from numerous sources yet should only really surface following painstaking scrutiny of the merger's consequences for the cooperative and its members. The results point to a number of factors which may influence this scant commitment. In 47% of the processes, respondents acknowledged that the lack of confidence in the viability of the joint business plan of the resulting cooperative was either fairly or very important, and in 40%, there were fears over the relocation of the cooperative's facilities. Likewise, this lack of support from members may be the upshot of the aforementioned poor information and communication management.

Principal component analysis was used to determine the extent to which the factors were involved in failed merger processes. Five factors were identified: team ability, board and management involvement, member commitment, social aspects such as localism and fear of loss of services by members, and the merger plan proposal. These blocks are consistent with proposals in previous studies such as the one by BenDaniel and Rosenbloom [40].

This work has analysed which variables may predict how likely a merger project will be aborted in its early stages. The issues which appear to be crucial in processes which are called off at an early stage, and therefore are not submitted for approval by members, are previous experience in merger processes and mutual knowledge through existing business relationships. The previous relationship and shared experiences (assumed to be off-putting) may mean the process is called off in the event of uncertainty, mistrust or disagreement without submitting it for discussion at the General Meeting. Thus, projects between cooperatives that already have business links and an integration team to guide the process would seem to be sensible recommendations.

The results suggest that the aspects triggering abandonment of merger projects in stages prior to approval by the General Meeting, and which deny members the chance to examine, evaluate and choose, are for the most part far removed from business strategy and more bound up with the personal interests of groups of people in the cooperative, which are called localisms, fear of change or simply rejection of new organisation charts. A cooperative's members and board of directors should either back a merger process or object to it on the basis of thorough economic, financial and social analysis which identifies how the cooperative's economic and financial position will be better or worse (cutting average costs, greater profitability, enhanced stability, achieving critical mass in production and/or marketing, etc.). It is these kinds of factors which ultimately shape and determine a member's return from the cooperative that should have the greatest bearing on whether the member is for or against the merger. However, and as noted above, a large proportion of processes are not even submitted for approval and, for the most part, on grounds unrelated to the foregoing points.

Nonetheless, one final aspect confirms these issues, which is that in 82.5% of the aborted processes and after a period of reflection, chairs and managing directors think that their cooperative would have been better off had the merger been successfully concluded. Several alternatives can be derived from this: (i) either the merger was not properly examined and this led to its rejection when actually it was a profitable plan; or (ii) the analysis was correct but the results of this analysis were not properly put across to members; or (iii) it is also possible that, having duly examined the merger and properly conveyed the findings to members, other aspects such as localisms or the fear of relocation of assets had a greater impact on their decision.

This paper contributes to increase existing knowledge and evidence about integration processes in cooperatives. It also provides valuable information about qualitative aspects that are relevant to the success of a merger, reinforcing the idea that cooperatives, like any other business, need to be managed by professionals. In this sense, training, education and guidance from representative organisations or government would help to ensure integration.

#### **5. Study Limitations**

The limitations of this study include, firstly, the fact that the survey respondents were 9% cooperative chairs, 37% managing directors and the remaining 54% other managers (not members of the board of directors). This spread unquestionably entails a bias towards managers and the results should therefore be interpreted in this light.

Another aspect to take into account is the potential endogeneity and thus the effect that unobserved or non-included factors (e.g., size) might have on the outcome of the merger process.

Furthermore, some of the cooperatives involved in the processes studied are no longer going concerns as they have been wound up, so it was impossible to gather their feedback about these processes. Another group of cooperatives declined to collaborate with this study. In some of these cases, the surveys were answered by the heads of the federations on behalf of these cooperatives as they were involved in the project at the time of the process.

**Supplementary Materials:** The following are available online at https://www.mdpi.com/article /10.3390/agriculture11111173/s1.

**Author Contributions:** Conceptualization, E.M.-M. and A.M.-G.; methodology, E.M.-M.; software, N.L.-C.; validation, E.M.-M., N.L.-C. and A.M.-G.; formal analysis, A.M.-G.; investigation, J.F.J.-I.; resources, J.F.J.-I.; data curation, N.L.-C.; writing—original draft preparation, J.F.J.-I.; writing—review and editing, E.M.-M. and N.L.-C.; visualization, J.F.J.-I.; supervision, J.F.J.-I.; project administration, E.M.-M.; All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Informed Consent Statement:** Informed consent was obtained from all subjects involved in the study.

**Acknowledgments:** We would like to thank Cooperativas Agroalimentarias de España and its offices in Spain's autonomous regions for their wholehearted cooperation with this paper; without them, it would have been impossible to conduct this first empirical study as they identified the population of aborted mergers which enabled us to carry it out. We would also like to thank the cooperatives surveyed for their willingness to collaborate. We would like to thank the reviewers for their comments and suggestions, as they have definitely helped to improve the manuscript.

**Conflicts of Interest:** The authors declare no conflict of interest.

#### **References**

## *Article* **Trust in Collective Entrepreneurship in the Context of the Development of Rural Areas in Poland**

**Leszek Sieczko 1,\*, Anna Justyna Parzonko 2 and Anna Sieczko 2**

**Abstract:** The aim of this research was to examine whether trust influences the functioning of various forms of collective entrepreneurship in rural areas. The study focused on organizations which are most common in rural Poland: agricultural producer organizations, rural women's circles, and local action groups. Hence, the survey sample included people engaged in these types of collective entrepreneurship. Data collection was based on a standardized questionnaire distributed online utilizing the computer-assisted web interviewing method. The statistical analysis of the empirical material obtained from 132 respondents involved Pearson and Spearman correlation and principal component analysis. The conducted research shows (1) the superior role of personal trust over institutional trust in the emergence and functioning of the studied forms of collective entrepreneurship in rural areas, (2) the greater importance of social than economic factors determining the functioning of rural collective entrepreneurship, (3) the positive impact of generalized trust on trust placed in the forms of entrepreneurship covered by the analysis, (4) the increase in trust over time of cooperation, and (5) the impact of trust on the functioning of collective entrepreneurship, in both the economic and the social dimensions, with a slight advantage of the latter. By focusing on trust, this article contributes to the literature on the role of trust in developing collective entrepreneurship in rural areas. The authors point out that this article only opens the space for a discussion on trust in the concept of the economics of trust.

**Keywords:** agricultural producer organizations; rural women's circles; local action groups

#### **1. Introduction**

In Poland, rural areas have great social, environmental, and economic importance. This is mainly due to the fact that they cover the vast majority of the country's area and are inhabited by a high percentage of the population. The political transformation in Poland in 1989 revealed that, despite the fact that most of the farms were privately owned, farmers were not prepared for the changes that followed. One of the negative effects of the transformation was unemployment, practically unknown in Poland after World War II. It became obvious that unprofitable agricultural production had to be replaced by new off-farm jobs or additional on-farm activities. The structure of Polish agriculture is highly fragmented. Private sector farms dominate, including family farms, which account for slightly more than 99% of the total number of farms. As for the farm size, in 2019, more than half of the households were small farms with agricultural land not exceeding 5 ha (53.5%). The largest farms with an area of 50 ha of agricultural land accounted for only 2.4%. The average agricultural land per farm has remained at the level of approximately 10 ha for several years [1]. The agricultural policy implemented after the political transformation and after Poland's accession to the European Union has not led to an improvement in the structure of Polish agriculture. The productivity of the factors of production, especially

**Citation:** Sieczko, L.; Parzonko, A.J.; Sieczko, A. Trust in Collective Entrepreneurship in the Context of the Development of Rural Areas in Poland. *Agriculture* **2021**, *11*, 1151. https://doi.org/10.3390/ agriculture11111151

Academic Editors: Adoración Mozas Moral and Domingo Fernandez Ucles

Received: 19 October 2021 Accepted: 11 November 2021 Published: 16 November 2021

**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

labor, is unsatisfactory. It is visible mainly in the weak flow of land from farms that are not very productive or use land poorly to farms that are more effective in this respect. The agrarian structure of Polish agriculture remains flawed, especially when compared to other European Union countries. Currently, over 70% of economically active people living in rural areas do not derive any income from agriculture [2]. Micro-enterprises based on self-employment dominate in the employment structure. Thus, there is an increase in nonagricultural jobs in rural areas, but it is too low to meet the needs of the existing rural surplus of labor. For this reason, Polish rural areas and agriculture require continuous support for modernization and restructuring, as well as strengthening their competitive position in global markets.

The socioeconomic development of rural areas is a derivative of many factors, the importance of which cannot be overestimated. Some of them are exogenous, partly or totally independent of the activities of the local community, while others are endogenous. Research on the use of available resources (endogenous and exogenous) located in rural areas is necessary in order to stimulate positive attitudes toward entrepreneurial initiatives, including collective endeavors. In the literature, attitudes of this type are referred to as entrepreneurial attitudes [3–5].

The concept of entrepreneurship is often discussed in the literature. Entrepreneurship is a multidimensional phenomenon. All attempts to define the concept of "entrepreneurship" prove its interdisciplinarity. It has been a point of interest for researchers representing scientific disciples, such as psychology, sociology, economics, and management. Most often, entrepreneurship is associated with economic issues and a certain attitude involving looking for opportunities and achieving specific goals. In the literature on management and economics, entrepreneurship is most often treated as a process. In this case, the essence of entrepreneurship lies in initiating projects, as well as new forms of activity that would satisfy the needs and generate profits, and it would enable the reproduction and development of entrepreneurship. Entrepreneurship understood as a process involves activities undertaken in a specific space and time, with the use of specific resources by entities characterized by the features and skills desired in this process.

Entrepreneurship in the economic dimension involves the following [6,7]:

Another understanding of entrepreneurship as a process assumes that it is the course of action involving setting up and running a business, including the following components: identifying opportunities and possibilities for operating on the market, developing a business plan and gathering the necessary resources, setting up an enterprise, and leading it through the subsequent phases of its development. Therefore, we can risk a statement that entrepreneurship is an organized activity, focused on the ability to generate and use innovative ideas in order to obtain measurable benefits, carried out under risk conditions [5,8–10].

When considering entrepreneurship in rural areas, one should not only focus on setting up and running a business [11]. Such an approach would considerably narrow the concept itself, as it also includes other activities contributing to the multidimensional development of rural areas, such as the activities of rural women's circles or local action groups. Then, entrepreneurship is associated with the attitude of a person toward the outside world and is expressed in a creative and active pursuit of new activities or expansion of the existing ones. Entrepreneurship can also be understood as a specific type of human activity, defined by behavior, the ability to use ideas, and opportunities that come unnoticed or are underestimated by others. Entrepreneurship, understood as a specific type of human endeavor, may take the form of an individual or collective activity. Collective entrepreneurship can be understood as organized, conscious, and voluntary cooperation of people aimed at achieving a common goal [12]. Its essence is the expression of the

interests of the group and the representation of these interests in the external environment. It requires close working relationships between people, utilization of their talents and creative abilities, and mutual trust.

Trust can appear at different levels of social life. It may arise as a result of direct contacts and strong family and friendship ties in the traditional culture of the community, as well as in communities where secondary groups dominate, as a result of participation in the workplace environment, associations, and civic groups [13]. In the former case, the trust phenomenon derives from mutual relations: the more reciprocal the relations between individual members of the community or positive experiences in neighborly cooperation, the greater the credit of trust. In the latter case, trust is generalized and is based on a generally positive attitude toward others and public institutions. Trust in a situation of cooperation means that there is a widespread belief that others will participate in cooperation to a similar extent, that cooperation will be based on the principles of fair play, and that it is "profitable", i.e., brings benefits for all partners [14,15].

Collaborative networks are mutual relations that take place between individual members of a community, informal groups, and formal organizations. Through them, the community establishes strategic contacts, selects leaders, defines and agrees with local interests, identifies problems, and mobilizes material resources and residents to solve them [16]. People and organizations within such networks often gain two benefits: influence and power. They have greater opportunities to negotiate various types of transactions, because they have easier access to information, as well as greater control over its circulation and, thus better chances to use the emerging opportunities. Local leaders play a huge role in their use [14]. One of the programs facilitating the network cooperation in rural areas is the LEADER program, which contributes to the activation of rural communities by involving social and economic partners in the planning and implementation of local initiatives. It is a program implemented by local action groups (LAGs), which by linking representatives of three sectors, public, economic, and social, contribute to strengthening social capital and economic development of rural areas. Another manifestation of the cooperation network in rural areas, which has tradition dating back to the 19th century, is represented by rural women's circles. They represent the interests and work to improve the social and professional situation of rural women and their families, as well as support the comprehensive development of rural areas. Next, there are agricultural producer organizations, created to enable farmers to become partners for large buyers of agricultural products, as well as means of production. As an organization, farmers are able to meet the increasing requirements imposed by the market regarding the quality of agricultural and food products, but also share expenses on the purchase of equipment or organization of transport, negotiate contracts, trade together in the marketplace, or undertake marketing activities.

The abovementioned forms of collective entrepreneurship are part of the new direction of rural development by creating conditions for effective, efficient, and partnership-based implementation of territorially oriented development activities. The literature suggests that, in this area, it is important to support the so-called collective trust, so that the participants can share their experiences, be open to creative ideas, and find new directions for their enterprises through mutual help and support [17–20].

A manifestation of favorable changes in the perception of the impact of various factors on the economy, including the "soft" ones, is the development of a new trend in economic sciences—the economics of trust. Traditional (neoclassical) economics, despite being a social science, took into account only one type of human behavior, based on rational principle and driven by the maximization of utility [21,22]. The exclusion of social aspects from the analyses, which has been described in the literature as "desocialization" [23], was one of the levels of criticism of mainstream economics and the reason for a significant limitation of its ability to explain many phenomena. Evidence provided by behavioral economics [24], experimental economics [25], or game theory [26] shows that individuals not only assume the existence of noneconomic values, but also make choices guided by these values. One of such values is trust, which plays a crucial role in both social and economic life [27]. In business, trust is recognized as an important component of success [28,29]. The economics of trust is detectable at various levels of social and economic life, from saving money that would have to be spent on security, to improving the functioning of the political system. However, primarily, trust fosters business relationships. Employees who trust each other are more collaborative and more willing to share ideas and information, which facilitates innovation and ultimately increases productivity [30,31]. Lack of trust may stimulate hesitant attitudes toward teamwork or even antisocial attitudes when team members hold back good ideas or vital observations and do not share their experiences with each other [32]; they also have lower tolerance for organizational change [33]. Consequently, absence of trust leads to lower wages, profits, and employment, while its presence facilitates trade and encourages activities that add economic value [34]. In this sense, trust is like an interdependent network that connects all actors in an economy and determines how they interact to drive the economic growth [35,36].

Research in the field of the economics of trust is based on the thesis that trust is related to equality understood in two dimensions: economic equality and equal opportunities [37]. In countries with a high level of generalized trust, the level of economic equality and equal opportunities is high [38], in contrast to countries with a low level of generalized trust. It is also visible in the approach to entrepreneurship. Specifically, societies characterized by economic equality and equal opportunities, i.e., open, knowledge-based societies with a well-developed welfare state, have the best conditions for intrapreneurship and ultimately economic growth [39]. It is worth emphasizing that trust, both institutional and individual, tends to decline when socioeconomic conditions deteriorate [40,41].

Nature of the relationship between generalized trust and economic dynamics is still minimally explored and understood, and the research carried out so far is mainly positioned in a macroeconomic perspective [42].

The aim of the presented research was to find an answer to the question whether and to what extent trust influences the functioning of various forms of collective entrepreneurship in rural areas. We focused on those forms of collective entrepreneurship that are common in Poland—agricultural producer organizations, rural women's circles, and local action groups.

The issue of trust and its role in the creation and management of an enterprise have been widely discussed in the literature. However, the researchers mostly focused on its role in three areas of economic behavior: consumption of goods and services, relations between enterprises, and the superior–subordinate relationship. Unfortunately, the rural context has largely been neglected. As emphasized by Gillath, Ai, Branicky, Keshmiri, Davison, and Spaulding [43], the lack of trust (whatever the cause) can result in limited cooperation, efficiency, and productivity. Few researchers have focused on trust in collective entrepreneurship, which makes this study fit into the existing research gap.

Given the lack or a very limited scale of research focused on trust in collective entrepreneurship in rural areas, and having taken into account its role in business management and in economic and social development, the following research hypotheses were formulated:

**Hypothesis 1 (H1).** *People engaged in the studied forms of collective entrepreneurship in rural areas have greater personal than institutional trust*.

**Hypothesis 2 (H2).** *Social factors determine the functioning of the studied forms of collective entrepreneurship to a greater extent than economic factors*.

**Hypothesis 3 (H3).** *According to the concept of the economics of trust, the higher the level of generalized trust is, the higher the trust in various forms of cooperation will be*.

#### **2. Research Methods**

The empirical research made it possible to verify the formulated research hypotheses. The survey based on a standardized questionnaire was carried out online using the computer-assisted web interviewing method (CAWI), which, in the situation of the COVID-19 pandemic and restrictions on direct social contacts, was one of very few possibilities to collect empirical data. The CAWI method enables quantitative measurement through questionnaires provided via the Internet. The method makes it possible to reach large samples, while ensuring the respondents' anonymity [44]. The proprietary questionnaire was prepared on the ProfiTest platform between June and July 2021. The link to the survey was made available via social media on profiles related to agriculture and rural areas, as well as posted to organizations whose e-mail addresses were obtained from registers kept by the Agency for Restructuring and Modernization of Agriculture: Register of Pre-Recognized Producer Organizations, Recognized Producer Organizations, and their Associations, as well as Transnational Producer Organizations and their Associations on the Fruit and Vegetables Market, Register of Agricultural Producer Groups, National Register of Rural Women's Circles, and Local Action Groups Register 2014–2020 held by the National Network of Rural Areas. We also planned to include members of the voluntary fire brigades, which have a large representation in the rural areas. The link to the questionnaire was posted on thematic Internet forums and sent by e-mail to all the Voivodship Branches of the Volunteer Fire Brigade Associations of the Republic of Poland. Unfortunately, only a few incomplete questionnaires were received in response; therefore, they could not be included in further analysis.

The survey questionnaire consisted mainly of closed rating questions with an 11-point Likert scale. In total, correctly completed questionnaires were obtained from 132 respondents representing the types of organizations selected for the study.

As can be seen from the data presented in Table 1, both the size of the studied population and its structure indicate that the sample cannot be treated as representative of a larger population. However, the overall number of correctly completed questionnaires justifies further analysis of the results.

**Table 1.** Characteristics of the sample.

The questionnaire examining various aspects of trust related to the studied forms of entrepreneurship was designed in such a way that the respondents, when answering each question, had the same 11-degree span. In questions Q8, Q9, Q10, and Q13 (for code descriptions, see Table 2), the scale was defined from −5 through 0 to +5, so that the respondent could give negative and positive ratings. Neutral opinions could be indicated by choosing 0 or values close to it. Question Q11, which examined the importance of trust impact on various aspects of collective activities, involved a scale from 0 (not important) to 10 (very important). The initial dataset collected in this way was cleared of incomplete

questionnaires. Finally, 132 data records were left for statistical analysis. Initially, the results were divided into three groups according to the type of organization represented by the respondent: agricultural producer organizations (G1), rural women's circles (G3), and local action groups (G4), for which basic statistics were calculated, including mean scores (Table 2).

Pearson and Spearman correlation analyses were conducted between the age of the respondents, the length of participation in an organization, and all answers from questions Q8 to Q13. A correlation matrix with dimensions of 54 × 54 was obtained (Appendix A, Tables A1–A4).

In the survey, we asked the respondents to assess their level of generalized trust. Depending on their answers, they fell into one of the three categories: (1) people who are generally trustful, (2) people who are cautious and distrustful in relations with others, and (3) people who cannot identify their attitude in this respect. As the declared trust was a very important factor in our research, further analyses were performed on the basis of a further division of respondents within the three existing groups (G1, G3, and G4) into three more groups depending on the declared trust (T1—trustful, T2—distrustful, and T3—unable to identify their attitude). Therefore, in further analyses, a division into nine groups was used, which were combinations of forms of collective entrepreneurship and the declared level of trust (G1T1, G1T2, G1T3, . . . , G4T3).

For question Q8, in which the respondents assessed the degree of trust in a given organization at three stages of their engagement, an analysis of variance was performed, where the factor at nine levels was the division of respondents according to the form of entrepreneurship and the declared level of trust. A significance level of 0.05 was assumed.

For questions Q9 to Q13, due to a fairly large and detailed set of possible answers, principal component analysis (PCA) was performed. The main purpose of PCA was to facilitate the presentation of the relationship between the studied groups and the obtained results. In addition, a varimax rotation was used, which changes the position of the tested objects so that the individual components contain objects that are strongly correlated with each other and have little correlation with other components. The synthesis and the basis for the discussion were the biplots that contained plotted variants of responses correlated with the components in the two-dimensional space of the first two components (PC1 and PC2). The position of the tested nine groups in relation to the answers and components was also added to biplots. All analyses and graphical presentation of data were executed using IBM SPSS Statistics ver. 26.

**Table 2.** Mean values of ratings by three types of organizations (G1, G3, and G4).

**Table 2.** *Cont.*

#### **3. Results and Discussion**

#### *3.1. Personal and Institutional Trust*

The main question relating to trust is whether one should put trust in someone or something. According to Munns [45], "trust can be defined as a decision to become vulnerable to or dependent on another in return for the possibility of a shared positive outcome". Trust has many levels and dimensions. It is also dynamic and changes over time

and in different environments. Blomqvist [46] noted that, in psychology, some researchers see trust as a personal trait, while others stress its social aspect. This means that each person has their own predisposition to trust. One can trust another person or a system (an institution). In economics, trust is seen as a mutual trust or "informal agreement" in which an individual or an organization trusts another person or organization that they will act as promised [47–49]. Trust, therefore, is the foundation for building relationships between business partners. However, the very existence of trust inherently entails risk and, consequently, risk is embedded in any entrepreneurial activity [50].

When considering the issue of trust in the context of entrepreneurship, two categories of trust—personal and institutional—need to be distinguished. Personal trust is based on unwritten rules and values that are shared by people in informal relationships. It derives from personal experience in contact with the other party and stimulates further actions according to the assumption of good will of all parties. Institutional trust concerns the relationship between an individual and organizations, as well as formal structures; moreover, apart from generally accepted operating standards, it also has its source in the rules applicable in a given industry or sector. Personal trust is particularly important at the beginning of an entrepreneur's activity on the market. Nevertheless, along with the development of the company, institutional trust also starts playing an important role. In order to perform successfully, an organization needs to have both types of trust [51]. Lack of trust in representatives of various institutions may be a significant obstacle in undertaking entrepreneurial activities.

The literature shows that the higher level of social trust is positively correlated with the level of entrepreneurship [52]. For example, the Japanese trust strangers less compared to the Americans. Managers in collectivist societies (such as Japan) show a lower overall level of trust than their counterparts in individualistic societies (such as the United States) but tend to have more trust in other managers in the same group. According to the research by Ding et al. [53], Turkey has the lowest level of social trust, and Sweden has the highest. Thus, what is the level of trust in the case of Poland? The study of interpersonal trust among the Polish population showed that, despite relatively limited trust in strangers, Poles generally trust people with whom they maintain regular contacts. The vast majority of respondents trust their immediate family (98%), their friends (95%), extended family (89%), people they work with on a daily basis (88%), and neighbors (80%) [54].

For the purpose of this analysis, we distinguished two types of trust, personal and institutional. A hypothesis was formulated that people operating within the studied forms of collective entrepreneurship in rural areas show more personal than institutional trust.

Personal trust, also known as interpersonal trust, is placed in the people with whom we have close relationships. The most trusted group is usually the family tied by close and intimate relationships, followed by friends and acquaintances, neighbors, coworkers, and business partners, i.e., people we know personally and with whom we interact directly. This type of trust is also placed in people fulfilling specific social and professional roles. In Polish literature, it is referred to as position-related trust [55].

Institutional trust is aimed at institutions and organizations, understood as sets of structural rules within which actions and interactions take place. This group includes schools, universities, the army, churches, courts, the police, banks, stock exchanges, the government, the parliament, and enterprises.

The scale from −5 to 5, designed to measure trust, allowed the respondents to indicate either the level of existing trust or the lack of it. All the mean scores obtained in questions Q9 and Q10 in the three types of organizations were positive (Table 2). The highest mean score (higher than 4.69) represented trust in family and the loved ones (Q9.1). Interestingly, the next highly trusted groups included friends (Q9.2) and people cooperating in a given organization (Q9.10); the mean score ranged from 3.059 to 3.456. This may indicate that members of rural organizations are also friends. People like the extended family, coworkers, and neighbors (Q9.3, Q9.4, Q9.5, and Q9.7 (for two groups)) received average trust scores of 2.30–3.18. The remaining groups of people from question Q9 and most of institutions

from question Q10 also received positive mean scores, but at a level closer to the neutral rating. In question Q10, a relatively rating of 2.4–2.9 was given to agricultural advisory centers, i.e., the institutions that implement the mission of supporting the development of rural areas and their residents.

As the survey covered many dimensions, divided into three groups and three subgroups (nine groups in total), principal component analysis was performed to reduce dimensionality. As a result, 19 variants of answers were reduced to first five principal components (Appendix A, Table 5). PC1 explained 25.21% of the general variance by including variants of trust assessment such as those included in questions Q9.1, Q9.4, Q9.8, Q9.9, Q10.3, and Q10.7. The second component explained 18.94% of the general variance, including variants of trust assessment such as those included in questions Q9.6, Q9.10, Q10.8, and Q10.9 (Figure 1).

**Figure 1.** Biplot of relationships of variables (Q9.1, ... , Q9.10, Q10.1, ... , Q10.9) for groups (G1T1, ... , G1T3, G3T1, ... , G4T3) representing types of organization subdivided according to the declared level of trust in the space of the first two components PC1 and PC2.

The analysis of the results obtained from questions Q9 and Q10 allowed us to positively verify Hypothesis 1, assuming a greater importance of personal trust over institutional trust in the formation and functioning of the studied forms of collective entrepreneurship in rural areas. As our research is one of the few that concerns trust in collective entrepreneurship in rural areas, we can only refer our results to the available analyses carried out as part of the report "2018 Edelman Trust Barometer" [56]. This study showed that the trust in institutions in Poland in 2018 was below global average (the index for Poland was 39/100 compared to the average global index of 48/100).

We believe that, in the case of the studied forms of entrepreneurship, these two types of trust are correlated and, therefore, should not be analyzed separately.

#### *3.2. Social and Economic Determinants of Collective Entrepreneurship Development*

An attempt was made to evaluate the factors determining the development of collective entrepreneurship. The designed rating scale was from −5 (inhibiting development) through 0 (having no influence) to 5 (stimulating development). Twenty determinants were presented to be evaluated. All determinants obtained average positive scores, which suggests that, according to the respondents, they stimulate the development of collective entrepreneurship in rural areas. The highest mean scores (within the range from 4.00 to 4.65 depending on a group) were achieved by factors related to the leader—personality and managerial skills (Q13.1, Q13.2). Other highly stimulating determinants included working toward a common goal (Q13.5), as well as talents and creativity present in the team (Q13.4, Q13.7), which, in individual groups, were assessed at an average level of 2.94 to 4.42. The remaining determinants were also assessed positively but depending on the studied group at a lower level (Table 2).

The applied PCA reduced the studied space from 20 dimensions to the first four principal components. PC1 accounted for 37.73% of the overall variance, concentrating on determinants such as Q13.4, Q13.5, Q13.6, Q13.7, Q13.8, Q13.10, Q13.12, Q13.13, and Q13.20 (Appendix A, Table 6). This group contained high- and medium-rated determinants. The applied varimax rotation revealed that they are mutually correlated. PC2 accounted for 25.62% of the total variance and the determinants most strongly correlated with it were variables Q13.1, Q13.2, Q13.3, Q13.11, Q13.14, Q13.18, and Q13.19. The first three determinants also had some of the highest ratings. Therefore, this component can be interpreted as gathering the most important features of collective entrepreneurship development (Figure 2). PC3 accounted for 17.76% of the overall variance. Determinants related to family patterns (Q13.9), fiscal systems (Q13.16), and the availability of economic information (Q13.17) correlated with it most strongly. Interestingly, PC4 was strongly correlated with only one feature related to the legibility and knowledge of legal acts, and it explained 10.57% of the overall variance.

**Figure 2.** Biplot of relationships of variables (Q13.1, ... , Q13.20) for groups (G1T1, ... , G1T3, G3T1, ... , G4T3) representing types of organization subdivided according to the declared level of trust in the space of the first two components PC1 and PC2.

The reduction of 20 initial variables to four principal components enabled explanation in a simplified manner of 91.69% of the total variance.

The PCA allowed for the positive verification of Hypothesis 2, assuming that social factors determine the functioning of the studied forms of collective entrepreneurship to a greater extent than economic factors.

A significant correlation (at the level of 0.35) was revealed between how the respondents assessed the impact of family relationships, neighborly relations, friendship, and the performance of social roles on the level of trust and the assessment of the importance of social factors influencing the development of collective entrepreneurship (Appendix A, Table 7).

A similar comparative analysis of the impact of social and economic factors on the development of cooperatives was carried out by Pan [57]. This study showed that the influence of social factors on this collective form of entrepreneurship is stronger than of the economic ones. According to Brodzi ´nski, the influence of social and economic factors on the development of entrepreneurship among agricultural producers is the same, although the author pointed to creativity, optimism and commitment as the primary drive of entrepreneurship [58]. Furthermore, studies of other researchers indicated a greater impact of these factors on the development of entrepreneurship in rural areas [59,60]. According to Björklund, it is easier for entrepreneurs to overcome barriers to innovation if they have specific cognitive abilities. These abilities include sufficient knowledge, access to information, and decision flexibility. Positive attitudes facilitate the implementation of innovations, while negative attitudes make it difficult. A positive attitude toward work and others can enhance individual performance and creativity, foster new relationships, and expand the use of intellectual and social resources [61]. Colombo and Perujo-Villanueva, on the other hand, emphasized that relations between agricultural neighbors are the main determinant of cooperation, not only between small entities [62]. In the research by Krzyzanowska [ ˙ 63] conducted on a group of 132 leaders of agricultural producer groups, trust was assessed as one of the most important interpersonal skills essential in leadership processes. It was rated 3.98 on a Likert scale from 1 to 5, where 1 meant unimportant and 5 meant very important. The importance of trust in entrepreneurial teams was also confirmed by the results of the research conducted by Falkowski et al. [64] among members of agricultural producer organizations in Poland. In this case, 70% of the surveyed farmers most often indicated lack of trust as a factor hindering the creation of producer organizations. Only in the case of producer organizations based on family ties was this aspect not so important. This is probably a manifestation of the mentality barrier resulting from the negative experiences of farmers in the times of centrally planned economy and forced collectivization of agricultural sector, which now still influences the preference for private (family) farming. In rural areas in Poland, the generalized trust index is still relatively low compared to larger cities (on a seven-point scale from −3 to +3, the mean value was −0.88 for rural areas, 0.22 for larger cities, and −0.90 for farmers) [54].

#### *3.3. Trust in Collective Entrepreneurship*

It was assumed in the study (H3) that, according to the concept of the economics of trust, a higher level of generalized trust would result in a greater trust in various forms of cooperation; furthermore, as participants gain common experiences, the level of trust in group cooperation increases. The analysis performed with the use of descriptive statistics, i.e., the statistics of the distribution of the feature value (location and dispersion) confirmed this hypothesis (H3). The data presented in Figure 3 show that those people who believed that most people could be trusted (T1) (and, therefore, showed a higher level of generalized trust than the remaining respondents) were more likely to trust joint ventures. It is interesting, however, that, regardless of the level of generalized trust, after starting cooperation under the researched forms of entrepreneurship, the trust in the organization visibly increases. The highest increase was recorded in the G3T3 group. The exceptions were respondents representing rural women's circles, who did not define their level of

trust by indicating the answer "I do not know" (G4T3). In this group, a slight decrease in trust in the circle was noticeable during its operation.

**Figure 3.** Average trust assessment values (scale from −5 to 5) at three stages of participation by organization type. ANOVA at a significance level of 0.05.

The confirmation of Hypothesis 3 is extremely important from the point of view of the development of collective entrepreneurship in rural areas. Since trust affects the quality of cooperation, it lowers transaction costs and has a positive impact on its durability. In addition, trust can reduce intergroup conflicts and strengthen collaboration between different social groups [53]. This was confirmed by the results of studies by Adro and Franco [65]. The study looked at local and national collaborative networks based on the example of Casa Agrícola dos Arais (CAA). The authors described how a rural farming network operates in a specific sector of Protected Denomination of Origin (PDO) and what its success factors are. Economic benefits, self-confidence, trust, mutual respect, and resilience were the words that the respondents used to identify the factors behind the network's success and the ones that helped them to endure more difficult periods. Despite the fact that the contracts are not formalized, all partners (CAA, milk suppliers, and Tio Careca) had great confidence in the network. On the Likert scale, where 1 meant no trust and 5 meant high trust, all rated the level of trust at 4 or 5 points. Older or less educated producers trusted the given word more than a written contract, which they said they did not need.

The aim of this study was to find an answer to the question whether and to what extent trust affects the functioning of collective entrepreneurship in rural areas. Taking into account the conducted analyses, it can be concluded that trust plays a crucial role, and that the level of trust increases with the length of cooperation.

In Q10, we sought an answer to the question of how, in the respondents' opinion, trust affects the functioning of selected forms of collective activities. Ten aspects that may be affected by trust were selected. The impact was measured on an 11-point scale from 0 (no impact at all) to 10 (very high impact). This scale made it possible to flexibly assess the degree of this impact. All variants of the answers were highly rated by the

respondents. For individual groups, the mean score was from 7.28 to 8.98 (Table 2). The range of assessment, expressed in the mean values of the answers, was about 1.5, which, on an 11-point scale, can be considered small. PCA was performed, where 10 dimensions were reduced to the first two components which accounted for 85.62% of the overall variance. PC1 explained 44.89% of the overall variance and was most strongly correlated with the following response variants: Q11.5, Q11.6, Q11.7, Q11.9, and Q11.10. PC2 explained 40.73% of the overall variance and was most strongly correlated with the following responses: Q11.1, Q11.2, Q11.3, Q11.4, and Q11.8 (Figure 4).

**Figure 4.** Biplot of relationships of variables (Q11.1, ... , Q13.10) for groups (G1T1, ... , G1T3, G3T1, ... , G4T3) representing types of organization subdivided according to the declared level of trust in the space of the first two components PC1 and PC2.

The conducted analysis showed that, in the opinion of the respondents, the impact of trust on the functioning of the selected forms of collective entrepreneurship is noticeable in both the economic and the social dimensions. In our study, the respondents rated the impact of trust higher in social areas, such as strengthening the sense of social identity, self-esteem, and development opportunities, as well as a positive impact on teamwork or social integration. The exceptions were people representing the G1T3 group (members of agricultural producer organizations who did not define their level of trust), for whom these aspects were not as important as the economic ones, e.g., improving financial results or optimizing the use of resources. A completely different opinion was expressed by the respondents qualified to the G3T3 group (women from rural women's circles who did

not define their level of generalized trust), for whom these economic aspects were the least important.

#### **4. Conclusions**

The development of entrepreneurship in rural areas has been, for many reasons, a more difficult process than in urbanized areas [7,66]. This is caused by many factors including location, dispersion, small scale of activity, shallowness of local markets, the level of infrastructure development, and the level of education of rural residents.

Due to the fact that the sample selected for this research was not representative, it does not allow for generalizations. However, as our findings correspond with the results of other authors, as shown in the paper, they provide sufficient grounds for verification of the research hypotheses.

The literature implies that entrepreneurial activity is related to both the most basic trust we place in people with whom we maintain social relations and other types of trust, including trust in institutions. Trust is a value that facilitates cooperation between entrepreneurs and their partners [67–69]. This was confirmed by our research. The conducted PCA showed that the respondents are more likely to trust their family, friends, people they work with, local entrepreneurs, and teachers. In the conducted analysis, institutional trust was rated much lower. The exceptions were agricultural advisory centers, which obtained higher trust mean scores (2.4–2.9) compared to other institutions. This result can be explained by the fact that their activity is directly dedicated to rural residents, and the respondents are familiar with it. Moreover, the PCA analysis revealed that the respondents were also willing to trust institutions such as local authorities, commercial and cooperative banks, and scientific centers. Hypothesis 1 was, thus, confirmed.

The socioeconomic development of rural areas is, inter alia, determined by the effective cooperation between entities operating locally. There is no doubt that the main factor limiting cooperation is insufficient knowledge and, above all, the uncertainty resulting from limited trust. This study shows that trust is a necessary condition for effective cooperation. This was also confirmed by the studies of other researchers [70]. Apart from the influence of trust on the development of collective entrepreneurship, this study shows that other factors, of both a social and an economic nature, also play an important role. The respondents highly rated the impact of social factors including personality traits and skills such as the leader's ability to manage a team, creativity of the members, and orientation toward a common goal. Moreover, conditions such as the climate of trust play an important role. In the opinion of the respondents who actively participate in the analyzed forms of collective entrepreneurship, equally important were economic factors such as the availability of external sources of financing, the macroeconomic situation of the country, the condition of infrastructure, and access to business support institutions. The abovementioned social factors, highly rated by respondents, basically constitute the social capital, which in rural areas is identified mainly with local organizations such as associations, civic groups or producer organizations, rural women's circles, and local action groups covered by this research. Summing up, Hypothesis 2 was positively verified, as the prevalence of social factors over economic factors was demonstrated.

There seems to be a consensus among researchers that a higher level of trust facilitates forming multi-actor networks of entrepreneurs and their successful performance [71,72]. Trust has a considerable impact on cooperation between entrepreneurs in small networks where the relationships are more personal [64]. Our research also shows that people with a higher level of generalized trust are more likely to trust joint ventures, especially before joining a collective endeavor. This confirms Hypothesis 3. However, a new relationship emerged. The local action group members who did not indicate their level of generalized trust declared that their trust increased with the length of participation. Unfortunately, in the remaining groups, i.e., agricultural producers and rural women's circles, such trust growth was not statistically confirmed. The most surprising results were obtained in the group of people who indicated a low level of generalized trust. In this case, in all

the studied groups, the level of trust increased along with the length of participation in the organization.

We are aware that our study is one of the first undertaken in this field. The positively verified hypotheses formulated in the research do not, however, justify the formulation of general conclusions. Firstly, to make this possible, further in-depth research would be required in this area, with particular emphasis on the dominant character of the activities typical for different forms of entrepreneurship. Agricultural producer organizations pursue mainly economic goals, while rural women's circles and local action groups focus rather on the social aspects of local community life. Secondly, there was an overrepresentation of women in the sample. This was due to the following reasons: the survey was carried out using the CAWI method, which subjected the process of sampling to a large extent to fate and, despite targeting a diverse population including producer groups, local action groups, rural women's circles, and volunteer fire brigades, responses were obtained mostly from rural women's circles and local action groups represented mainly by women. While our empirical research contributes to the existing literature on trust in collective entrepreneurship in rural areas, it does show some limitations. We believe that the conducted analysis will inspire future research on the role of trust in the development of collective entrepreneurship in rural areas. It seems important to consider the following research areas:

We hope that the presented research areas will serve as inspiration for future studies. By focusing on trust, this paper contributes to the literature examining the role of trust in the development of collective entrepreneurship in rural areas. Trust is a complex, difficult-to-study topic, both theoretically and methodologically. The limitation of this type of research is the credibility of the respondents in terms of competence and perception. To counteract that, in-depth, qualitative research using the interview technique is required. We believe that our study, which is one of the first in this field, should be seen as a pilot study.

**Author Contributions:** Conceptualization, L.S., A.J.P. and A.S.; methodology, L.S., A.J.P. and A.S.; formal analysis, L.S., A.J.P. and A.S.; investigation, L.S., A.J.P. and A.S.; writing—original draft preparation, L.S., A.J.P. and A.S.; visualization, L.S. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research received no external funding.

**Institutional Review Board Statement:** Not applicable.

**Data Availability Statement:** Not applicable.

**Conflicts of Interest:** The authors declare no conflict of interest.

**Appendix A**

**Table**

 **A1.** *Cont.*

**Table A2.** *Cont.*

**Table**

**A2.**

*Cont.*

**Table A3.** *Cont.*

**Table A4.** Pearson's correlation matrix, \* significant at the alpha 0.05 level, \*\* significant at the alpha 0.01

 level.

**Table A4.** *Cont.*

**Table 5.** Eigenvalues and proportion of the total variance in 9 groups of collective entrepreneurship, as explained by the first three principal components for the original 19 traits and the correlation coefficients between these traits and the first three PCs on for questions Q9 and Q10.

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

**Table 6.** Eigenvalues and proportion of the total variance in 9 groups of collective entrepreneurship, as explained by the first three principal components for the original 20 traits and the correlation coefficients between these traits and the first three PCs on for questions Q13.

**Table 6.** *Cont.*

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

**Table 7.** Eigenvalues and proportion of the total variance in 9 groups of collective entrepreneurship, as explained by the first three principal components for the original 10 traits and the correlation coefficients between these traits and the first three PCs on for questions Q11.

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

#### **References**

*Vladivostok, Russia, 2–4 October 2018*; Auzina, A., Ed.; Latvia University of Life Sciences and Technologies: Jelgava, Latvia, 2018; pp. 221–228.

## *Article* **Profile of the Small-Scale Farms Willing to Cooperate—Evidence from Lithuania**

**Jolanta Droždz 1,\*, Vlada Vitunskiene˙ 2 and Lina Novickyte˙ 3**

**Abstract:** Cooperatives cover a large part of the agricultural sectors and have substantial market shares in agri-food supply chains in the EU Western countries. They account for approximately half of agricultural trade in the EU. By contrast, in the EU Western countries, where farmer cooperatives are widespread and successful, agricultural cooperation in Lithuania has developed intermittently in the last century. We still have very limited knowledge of why the country's agricultural producers (especially smallholder farmers) are reluctant to cooperate in Lithuania. The aim of this study is to assess the level of the willingness to cooperate among smallholder farmers in Lithuania and to draw up the profiles of small-scale farms that participate in and intend to join cooperatives and, conversely, that do not participate in cooperatives and do not intend to do so. To achieve this goal, a representative survey of small-scale farms was conducted. Results of surveys carried out in 2019 in Lithuania on a group of 1002 small-scale farms showed that only 8% of the surveyed farms participate in producer groups or cooperatives, while another 8% intend to participate. Small-scale farms in Lithuania have weak market integration, with no bargaining power on input and output markets. The vast majority of small-scale farms are reluctant to participate in cooperative activities in Lithuania. Therefore, this study aimed to determine the profile of a small farm that tends to cooperate. The main social characteristics of farm managers and economic factors of farms willing to cooperate have been identified.

**Keywords:** small-scale farm; cooperation; contractual integration; willingness to cooperate; farm profile; Lithuanian case

#### **1. Introduction**

There are more than forty thousand agricultural cooperatives in Europe with nine million farmer members [1]. Cooperatives cover a large part of the agricultural sectors and have substantial market shares in agri-food supply chains in the European Union (EU) western countries. They account for approximately half of agricultural trade in the EU and over half in some member states such as Austria, Denmark, Finland, France, Ireland, the Netherlands, and Sweden. Moreover, the market shares of cooperatives differ considerably with respect to sectors [2,3]. According to Ollila [4], not only ideological or sociological but also economic reasons justify the existence of cooperatives. The existence of cooperative organizations in today's business environment, particularly in agriculture, signals their continued ability to provide value to their members [5] by increasing farms' (especially small-scale farms) competitiveness on the national and international markets [6,7]. Agricultural cooperatives have provided a model for overcoming the disadvantages of small-scale farming for more than 150 years [8]. It should be added that the process of farm cooperation in modern Lithuania was decisively influenced by the historical path of agricultural development and the experience of the agricultural community.

**Citation:** Droždz, J.; Vitunskiene, V.; ˙ Novickyte, L. Profile of the ˙ Small-Scale Farms Willing to Cooperate—Evidence from Lithuania. *Agriculture* **2021**, *11*, 1071. https:// doi.org/10.3390/agriculture11111071

Academic Editors: Adoración Mozas Moral and Domingo Fernandez Ucles

Received: 4 October 2021 Accepted: 29 October 2021 Published: 30 October 2021

**Publisher's Note:** MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations.

**Copyright:** © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

By contrast, in the EU Western countries where farmers' cooperatives are widespread and successful, agricultural cooperation in Lithuania has developed intermittently in the last century. The cooperation of farmers developed in the second and third decades of the 20th century, based on the classical principles of cooperation, was completely destroyed by the collectivization of farms into pseudo-cooperative kolkhoz at the beginning of the Soviet era. Moreover, farmers' households were allowed to use only up to 60 acres of land. The collective farms that operated during the Soviet regime (1945–1989) still maintain a nonbeneficial image of anti-cooperation, deterring farmers from joining cooperatives. After the restructuring of independent Lithuanian agriculture in the early 1990s, cooperation between newly established family farms and corporate companies in agriculture has not been expanding and is still very weak. Cooperation among farmers is not widespread in Lithuania—only about 12% of the country's farmers are involved in cooperatives [9]. The research of Borychowski et al. [10] included Lithuania and showed that the production scale was the key determinant of the resilience of small-scale farms in the countries. Moreover, the main way to achieve the higher benefits of increasing the production should be combined with strengthening the market integration of agricultural producers, so the cooperation issue becomes even more relevant. This study extends an established direction of the resilient development of the small-scale farms in Lithuania.

EU Western researchers are looking for the reasons why agricultural producers in the 21st century are choosing a cooperative structure based on classical principles of cooperation [11], and we still have very limited knowledge of why the country's agricultural producers (especially smallholder farmers) are reluctant to cooperate in Lithuania. The main aim of this study is to assess the level of the willingness to cooperate among smallholder farmers in Lithuania and to draw up the profiles of small-scale farms that participate in and intend to join cooperatives and, conversely, that do not participate in cooperatives and do not intend to do so.

To achieve this aim, a representative survey of small-scale farms was conducted. We employed the results of surveys carried out in 2019 in Lithuania on a group of 1002 smallscale farms. The study results contribute to a better understanding of the cooperative or non-cooperative behaviour of small-scale farms.

#### **2. Literature Overview**

#### *2.1. Reluctance to Cooperate*

An overview of the research conducted on farm co-operation in Lithuania revealed that the main reasons for the attitude of Lithuanian farmers towards co-operation have not changed for a long time. The farmer and expert survey data show [12] that the main reasons for farmers' reluctance to cooperate and change are their individuality, lack of trust in collective (cooperative) actions and new ideas, internal competition, and inability to find a joint agreement on different issues.

Both farmers and managers of agricultural companies do not consider cooperation to be a matter of necessity; for them, according to experts, daily work on the farm is of greater value than changes in the area of cooperation. In addition, they feel that there is a lack of time for collaborative actions due to the high workload. Other authors have also identified distrust between people, unwillingness to change their habits, and a lack of time for cooperative activities as the main barriers of the development of farm cooperation processes in Lithuania [13–15]. Tuna and Karantininis [15] conducted a social network analysis and found that there are low levels of social capital (structural, which refers to the presence of a network of access to people and resources, as well as cognitive aspects, such as norms, values, trust, attitudes, and beliefs) in agricultural cooperatives in post-socialist countries. A lack of time and money for cooperative activities, a lack of leaders, and bureaucratic shortcomings have been emphasized as the main obstacles for cooperation in Russia [7].

In some studies, a low awareness of the benefits of contractual integration among farmers was observed along with a weak willingness to cooperate because of the low bargaining power of farmers [16,17]. Kahneman and Tversky's Prospect Theory [18] shows that individuals tend to avoid potential losses rather than seek potential benefits. Agricultural cooperatives in post-socialistic countries often fail to justify their purpose [15]. Czyzewski et al. [19] confirm that human capital plays a significant role in contractual governance and requires special attention. The positive correlations between the length of education and willingness to join agricultural cooperatives have been observed in several studies [20–23]. Education contributes to the quality of human capital. Martey et al. [24] argue that, through educational processes, farmers gain the ability to cooperate and to participate in social activities, while others conclude that better educated and self-confident farmers appreciate contractual integration more than others [20–22].

Other research claims that it can be difficult to organize work and communication processes in cooperative enterprises and it is time consuming to establish new collaborations [25]. On the other hand, an expansion in production is expected to increase production costs unless it is achieved solely through an increase in productivity via costless improved management practices [26]. In addition, exchanges of raw agricultural products are governed by stable contractual relations between farms and buyers when talking about modern markets [27], which also hinders the merging of farms into cooperatives in Lithuania. The data also show that farmers tend to compete with each other and cannot understand the benefits of cooperation [28]. The study from Miceikiene et al. [ ˙ 29] shows that difficult access to financial funds also limits the growth potential of agricultural cooperatives. Agricultural cooperatives face the problem of financing due to higher operational risk.

The low involvement of small-scale family farms in the activities of formal cooperatives is influenced by informal mutual assistance when farmers share machinery and experience in agricultural production and help each other with a high workload during the season [25]. Informal cooperation is of continual importance for small-scale farms [25,30]. Such informal cooperation, similar to mutual assistance and based on trust and the constant fostering of personal relationships, often occurs in Lithuania between neighbours or relatives. Informal cooperation between farmers was identified as one of the main reasons for non-cooperation of farmers in Lithuania [14]. This can be thought of as being particularly common for small-scale farmers.

In summary, three groups of factors can be distinguished, due to which farmers in Lithuania are reluctant to cooperate:

Nevertheless, small-scale farms have little opportunity to compete in the traditional market through individual activities, so one of the options is local food systems, and the way they are created is through farmers' cooperation [25,31]. As long as the level of farmers' cooperation is low, the market share is low as well [32], so market integration through cooperation is essential for small-scale farms in order to improve their market position.

#### *2.2. Incentives for Cooperation*

The establishment and development of different forms of business cooperation, particularly in small-scale agriculture, must depend on the initiative and willingness of the farmer to actively participate in and join the different forms of business cooperation [6]. Many authors have raised the problem of contractual integration of farms and their drivers. Recent examples are Abate [33], Kispál-Vitai et al. [11], Ciliberti et al. [34], Ncube [35], Souza et al. [36], and Candemir et al. [3]. Many positive effects have been found on farms participating in cooperation activities, which should be an incentive for other farms to get involved in the process as well. The efficiency of farm activities increases after they join a cooperative and the financial situation of all farms improves [37]. Cooperatives can help producers in several ways, two of which are specific to their activities in the market: countervailing power and competitive criterion, i.e., market price regulator [11]. In the case of horticulture, producer groups and organisations play a significant role in the modernisation processes [38]. Cooperatives or other producer organizations give small-scale farms the opportunity to get involved in modern agricultural value chains, especially as traditional markets are dominated by large farms [39]. Producer organizations help to reduce barriers to market entry for small producers [40]. The experience of Western European and Scandinavian countries proves that small and medium-sized farms operating through a cooperative increase their bargaining power in the market, become more competitive, and reduce production and logistics costs.

It is therefore important to emphasize, that cooperation not only contributes to the reduction of production costs, but also helps to organize certain markets [36]. Cooperatives can improve smallholder farmers' access to both input and output markets and strengthen their competitive position in different ways, both on an internal and international level [6,13]. For instance, cooperatives enable farmers to bargain collectively with both sellers of inputs and buyers of farm products, can decrease transaction costs and improve transaction efficiency, and can support the information flow between farmers and the market and thus help farmers to meet the specific requirements of high value-added food markets [41]. Ortega et al. [42] proved this positive effect for coffee producers in Rwanda, where cooperative membership was linked to greater access to inputs and an increase in income. Cooperatives can reduce market risk for their members and joint liability groups to enable access to microfinance when there is limited collateral [43], can use a collective quality label or create their own brands and create a product differentiation, and can help farmers to cope with market imperfections [3]. Cooperatives are as response to the weak bargaining power of individual farms on a market [41,44].