Commercialization of Smallholders: Is Market Participation Enough?

The literature on commercial transformation of smallholders makes little distinctionbetween market orientation (production decision based on market signals) and marketparticipation (sale of output). However, policy implications to enhance commercialtransformation of subsistence agriculture drawn from the analysis of the determinants ofhousehold market participation alone could be inadequate, if in fact, the determinants ofmarket orientation and market participation are not the same or not consistent with eachother. This paper analyzes the determinants of market orientation and marketparticipation in Ethiopia separately and examines if market orientation translates intomarket participation. Empirical results show that the determinants of market orientationand market participation in crop output markets are not the same, but market orientationtranslates strongly into market participation. Results imply that while interventions toenhance market orientation could also help in promoting market participation,interventions to promote market participation may not be adequate to promote marketorientation.