Transaction costs and performance variation of agricultural operators

Purpose – The purpose of this paper is to investigate the relationship between transaction costs and the performance variance of peasant households and specialized cooperatives, as well as to explore whether or not this relationship varies across different regions in China. Design/methodology/approach – Based on the transaction cost theory (TCT) and the contingency theory (CT), a survey was undertaken at county level to support the main effects and moderating effects and the results were analyzed using a general linear model. A complementary case study was also used to further discuss the results. Findings – It was found that the change rate of peasant households’ scope of operation is sensitive to inadequate market information, purchase and sales expense and resolving disputes expense. In terms of specialized cooperatives, the change rate of their scale of operations is sensitive to inadequate market information, the chances of violating an agreement and incomplete norms. The moderating effect of regional classification is supported in terms of purchase and sales expenses on the performance variance of peasant households, and in terms of inadequate market information on the performance variance of specialized cooperatives. Research limitations/implications – First, the data were collected at the county level, which could only reflect the conditions of the macro-environment. Second, many variables were designed as dummies for the sake of brevity and efficiency, because the respondents were officers in local agricultural departments. Third, transaction costs may not have a direct effect on the variance of productivity but indirect through many potential mediators. Practical implications – The results not only provide useful information for agricultural operators to analyze the transaction costs related to their forms of organization, but also impartial advice for policy makers to consider the form of agricultural operators in different regions. Originality/value – This study focusses on the role of the external environment by integrating the TCT and CT theory. Furthermore, it seeks to explore whether the relationship between transaction costs and the performance variance of peasant households and specialized cooperatives varies across different regions of China.