Managing uncertainty and expectations: The strategic response

of U.S. agricultural cooperatives to agricultural industrialization§

Julie A. Hogeland

U.S. Department of Agriculture, Business and Cooperative Programs, Stop 3254, Room 4234, 1400 Independence Avenue, S.W., Washington, DC 20250-3254,

USA

1. Introduction

Recent fluctuation in global financial markets led a panel of

cooperative leaders to identify uncertainty as the primary

managerial difficulty anticipated by cooperatives in the future

(Boland, Hogeland, & McKee, 2011). Likewise, the 20th century

industrialization of agriculture confronted cooperatives with the

challenge of responding to an event they neither initiated nor

drove. When the environment is highly uncertain and unpredictable, Oliver predicts that organizations will increase their efforts to

establish the illusion or reality of control and stability over future

organizational outcomes (Oliver, 1991: 170). This study argues

that cooperatives used two metaphors, ‘‘serfdom’’ and ‘‘cooperatives are like a family’’ to manage uncertainty by predicting

industrialization’s eventual outcome and cooperatives’ producerdriven compensation.

These metaphors are agrarian. Recent research highlights the

impact of agrarian ideology on cooperatives. Foreman and

Whetten (2002: 623) observe, ‘‘co-ops have historically sought

to reinforce the traditions and values of agrarianism through

education and social interventions. Indeed, for many members

these normative goals of a co-op have been preeminent.’’ These

authors studied the tension within rural cooperatives produced by

a normative system encompassing family and ideology and a

utilitarian system defined by economic rationality, profit maximization and self-interest. They argue that this split in values implies

that cooperatives are essentially two different organizations trying

to be one. To capture the tension between these multiple identities,

they focused on a potential family/business divide in cooperatives,

basing this on a duality often noted in cooperative community and

trade publications.

The authors found that respondents wanted their local co-op to

be more business oriented and at the same time, expected co-ops

ideally (e.g., as an ideal organizational form) to be more family

focused. These conflicting expectations suggested that multipleidentity organizations need to be assessed in terms of the

Journal of Co-operative Organization and Management 3 (2015) 60–71

ARTICLE INFO

Article history:

Received 30 August 2014

Received in revised form 9 May 2015

Accepted 23 June 2015

Keywords:

Cooperatives

Agricultural industrialization

Agrarianism

Expectations

Family business

Family farming

Metaphors

Lock-in

ABSTRACT

The 20th century industrialization of agriculture confronted U.S. agricultural cooperatives with

responding to an event they neither initiated nor drove. Agrarian-influenced cooperatives used two

metaphors, ‘‘serfdom’’ and ‘‘cooperatives are like a family’’ to manage uncertainty and influence

producer expectations by predicting industrialization’s eventual outcome and cooperatives’ producer

driven compensation.

The serfdom metaphor alluded to industrialization’s potential to either bypass family farmers, the

cornerstone of the economy according to agrarian ideology, or to transform them into the equivalent of

piece-wage labor as contract growers. The ‘‘family’’ metaphor reflects how cooperatives personalized the

connection between cooperative and farmer-member to position themselves as the exact opposite of

serfdom. Hypotheses advanced by Roessl (2005) and Goel (2013) suggest that intrinsic characteristics of

family businesses such as a resistance to change and operating according to a myth of unlimited choice

and independence reinforced the risk of institutional lock-in posed by agrarian ideology.

To determine whether lock-in occurred, Woerdman’s (2004) neo-institutional model of lock-in was

examined in the context of late 20th century cooperative grain and livestock marketing. Increasingly

ineffective open markets prompted three regional cooperatives to develop their own models of

industrialized pork production. Direct experience with producer contracting allowed cooperatives to

evade institutional and ideological lock-in.

Published by Elsevier Ltd. This is an open access article under the CC BY license (http://

creativecommons.org/licenses/by/4.0/).

§ U.S. Department of Agriculture/Business and Cooperative Programs.

E-mail address: Julie.Hogeland@wdc.usda.gov.

Contents lists available at ScienceDirect

Journal of Co-operative Organization and Management

journal homepage: www.elsevier.com/locate/jcom

http://dx.doi.org/10.1016/j.jcom.2015.06.001

2213-297X/Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
individual components of their identity and the tension (or

interaction) between them. Foreman and Whetten regard dual or

multiple identity organizations as hybrids. There are consequences

to hybridity: many members of a hybrid organization will identify

with both aspects of its dual identity, ‘‘and thus find themselves

embracing competing goals and concerns associated with distinctly different identity elements’’ (Foreman and Whetten, 2002).

They conclude that competing goals and concerns foster competing expectations with consequences for organizational commitment (and I would add, performance).

The split focus observed by Foreman and Whetten can be

regarded as a contemporary expression of a value conflict

beginning early in the 20th century over how production

agriculture should be organized. Decentralized, autonomous,

and typically small, family farmers used their skill at deciding

the ‘‘what, when, where, how and why’’ of production and

marketing to reduce the risk of being a price taker at open,

competitive markets. Farmers also diversified the farm enterprise to spread price risk over several commodities. Corporateled industrialized agriculture (integrators) by-passed both

markets and independent farmers. Integrators coordinated

supply and demand internally based on top-down administrative control over production and marketing decisions. They

engaged in production contracting with growers who were held

to competitive performance standards and paid according to

their productivity. In contrast, family farmers were accountable

only to themselves.

2. Study overview

Foss (2007) observes that the beliefs organizations hold about

each other or the competitive environment are a key aspect of

strategic management which have been understudied. Beliefs,

which include norms and expectations, are important because they

can be wrong. Cooperatives are often considered to have an

ideological component but how such ideology develops and

persists also has been understudied. This study addresses that gap

by examining how agrarian language and assumptions shaped

cooperatives’ reaction to 20th century agricultural industrialization. During this era, industrial methods transformed the production and marketing of processing vegetables, poultry, beef, and

pork and were initiated for dairy and grains. An historical and

institutional perspective is used to examine how two contrasting

metaphors brought cooperatives to the brink of institutional lockin. The study spans the entire 20th century from beginning to close.

The study opens with a brief discussion of metaphors and

norms then presents a theoretical model of lock-in. Discussion of

the overarching role of agrarianism follows. Discussion then

addresses why the cooperative alternative to corporate-led

industrialization – the 1922 model developed by Aaron Sapiro –

was not palatable to agrarian-influenced cooperatives (this section

also defines agrarian-influenced cooperatives).

Discussion then turns to considering how the disturbing

implications of serfdom paved the way for the agrarian-influenced

norm, ‘‘cooperatives as a competitive yardstick’’ and the cooperative metaphorical norm, ‘‘cooperatives are like a family.’’ Producer

expectations triggered by ‘‘serfdom’’ and ‘‘cooperatives are like a

family’’ are addressed. Parallels are briefly drawn between

neighborhood exchange in late 19th century rural California and

behavior implied in ‘‘cooperatives are like a family.’’ Parallels are

then drawn between family business traits and cooperative and

producer experience in livestock and identity-preserved grain

markets. This provides a foundation for examining in greater detail

how well cooperative experience in pork and grains corresponded

to Woerdman’s four part model of lock-in (2004). Study conclusions and suggestions for future research follow.

3. Importance of ideology, metaphor and norms

Economists have begun studying how cognition and discourse

affect cooperative outcomes (Fulton, 1999). This study continues

that line of inquiry by considering how a dominant ideology like

agrarianism produced words and associations that, for most of the

20th century, arguably had a deterministic effect on farmer and

cooperative perceptions of the future. Even today, few guidelines

or predictions exist that suggest how organizations can manage

ideological conflict (Greenwood, Raynard, Kodeih, Micelotta, &

Lounsbury, 2011). Moreover, the difficulties of escaping a

hegemonic ideology have seldom been recognized (Spencer, 1994).

Metaphors are a pithy word or expression meant to evoke a

comparison. They are used to understand one thing in terms of

another (Lakoff & Johnson, 1980: 5). Understanding what

metaphors represent and how they emerge and persist can offer

a window into the salient factors influencing farmer and

cooperative decision-making. Moreover, as in this text, metaphors

‘‘allow for the sorts of story in which overwhelming evidence in

favor of one interpretation of the world can be repeatedly ignored,

even though this puts the assets of the firm and the position of the

decision-makers at extraordinary risk’’ (Schoenberger, 1997: 136).

Much of what Pfeffer and Salancik (2003) say about norms also

applies to how metaphors are used in this study. For example,

these authors observe that an important function of norms is to

provide predictability in social relationships so that each party can

rely on the assurances provided by the other. Consequently, norms

stress the meeting of expectations in an exchange relationship.

Certainly, the metaphor, cooperatives are like a family, can be

understood in the same manner. Defining norms as commonly or

widely shared sets of behavioral expectations, Pfeffer et al. also

indicate that norms develop under conditions of social uncertainty

to increase the predictability of relationships for the mutual

advantage of those involved. Once they cease to serve those

interests norms break down.

4. Theoretical framework

Twentieth century U.S. agricultural transformation was profound. Early 20th century agriculture was labor intensive,

employing almost half the U.S. workforce on a large number of

small diversified farms (Dimitri, Effland, & Conklin, 2005). ‘‘From

1900–2005, the number of farms fell by 63 percent while the

average farm size rose 67 percent’’ (Dimitri et al., 2005).

Productivity-enhancing technological change which made farmers

redundant also contributed to farm decline1 (Hogeland, 2013).

‘‘Farm operations became increasingly specialized – from an

average of about five commodities per farm in 1900 to about one

per farm in 2000 – reflecting the production and marketing

efficiencies gained by concentration on fewer commodities’’

(Dimitri et al., 2005: i).

The core question considered by this study is, ‘‘Why does

institutional inertia persist despite indications that change is

urgently required?’’ (Haase, Roedenbeck, & Sollner, 2007: 1).

Agrarian-influenced cooperatives did not consider how family

farming could be adapted to capture some of industrialization’s

benefits until close to the end of the 20th century, a delay

indicative of institutional lock-in. Lock-in has been defined as

getting stuck with traditional styles of thinking and acting in a

manner that is hard to escape (Haase et al., 2007: 17; North, 1990).

1 Hogeland (2013) notes that agrarians attributed farmer decline to the decline in

open markets, not to productivity increases that made farmers redundant. It is

possible that the rapid increases in four-firm concentration ratios in the red meats

industries some two decades after the industrialization of the beef industry

overshadowed the impact of productivity increases on farmer attrition.

J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71 61
Although the term ‘‘institutions’’ is used in this study, North

notes that lock-in is ultimately about how organizations choose

among alternatives such as competing technologies (North, 1990:

95). Cooperatives could continue their commitment to open

competitive markets (the dominant but suboptimal technology) or

develop a cooperative version of the superior technology,

industrialization. To the degree information is imperfect and

incomplete, choices like this will be made under conditions of

uncertainty that will inflate perceptions of how much the switch

will cost.

Woerdman (2004) proposes a model of lock-in that accounts for

the impact of culture, history, perceptions and learning through

changes in switching costs.2 The latter offer a point of entry to infer

the cultural impact of agrarian ideology on cooperatives’ decisionmaking. The model (below), conceptually similar to North (1990),

presumes the following:

1. The existence of a superior alternative institution or technology

which competes with a dominant, sub-optimal institution.

2. The dominant sub-optimal institution exhibits increasing or

stable effectiveness (e.g., problem-solving capacity).

3. Pronounced knowledge gaps and uncertainty (incomplete

information) exist regarding the superior institution.

4. Large switching costs are required to shift to the superior

alternative.

Self-reinforcing mechanisms are an important dimension of

Woerdman’s model:

In general, a lock-in becomes more likely when there are more

self-reinforcing mechanisms at work, for instance, when not

only switching costs are perceived to be large, but also when

there are substantial network externalities and learning effects

that lower the running costs of the dominant institutional

arrangement. Nevertheless, the costs of switching to a superior

institutional arrangement, for instance arising from legal

problems and cultural resistance, are likely to play a crucial

role in issues of institutional change, precisely because

institutions are made up of formal and informal constraints

[e.g., North, 1990: 68] (Woerdman, 2004: 69).

Culture’s impact on technological decisions can have a potent

ethical dimension, e.g., the prospect of serfdom, which increases

the probability of lock-in:

Culture can be self-reinforcing if the values in a society

somehow favor the dominant institution and somehow reject

the superior institution as unethical... The more of these

subgroups of society share common values against the superior

alternative, the higher the information, bargaining and decision-making costs are and the stronger lock-in is likely to be’’

(Woerdman, 2004: 64).

Thus, agrarian ideology is assumed to be the primary cultural

influence on cooperatives confronting 20th century industrialization. Three propositions suggest its impact on cooperatives:

1. Agrarian ideology elevated family farmer importance and

requirements to a degree that became culturally difficult for

farmer-owned cooperatives to challenge.

2. Behaviors theoretically associated with family-owned enterprises were reinforced by agrarian ideology.

3. Agrarianism triggered an institutional lock-in limiting the

cooperative community’s ability to perceive how industrialization could benefit them.

Ideologically, family farmers were far more than agricultural

producers: they were the foundation of the American economy and

American values.3 Agrarianism spelled out how respect for family

farmers could be expressed by fostering their survival, welfare,

independence and prestige. This producer-orientation or ‘‘producerism’’ (Barron, 1997) was arguably reinforced to a considerable

degree by preferences and behaviors that Roessl (2005) and Goel

(2013) associate with family businesses.

Industrialization fostered the belief that once all farming was

done by corporations, family farmers would disappear (Breimyer,

1995; Kirkendall, 1991). Cooperatives believed that they had a

responsibility to protect or buffer members from market adversity

(Hogeland, 2006, 2013). These factors contributed to a strong but

inflexible organizational culture within agrarian-influenced cooperatives. If family farmers no longer existed, there would be no

need for farmer-owned cooperatives. According to Sorensen, a

culture can be considered strong if ‘‘norms and values are widely

shared and intensely held throughout the organization’’ (Sorensen,

2002: 72). Such normative consistency reduces and contains the

anxiety of dealing with an unpredictable and uncertain environment (Sorensen, 2002: 73).

5. Agrarianism’s ideological implications

Agrarian ideology begins with the premise that agriculture is

the most basic institution in the economy since all occupations

depend on farmer-produced food and fiber. Agricultural prosperity

ensures the nation’s prosperity. Farmer choice is an integral

component of agrarianism: those who want to farm should be free

to do so (Tweeten, 2003). Similarly, farmers should be free to be

their own boss by determining the ‘‘what, when, where, why and

how’’ of production and marketing.

Strategically, the intrusion of factory farming into a landscape

previously dominated by family farming called for a tacit

revaluation of the latter along the lines of a competitor analysis

(i.e., here’s what we can do, here’s what our competitors do, etc.).

But such dispassionate analysis was overruled by the revolutionary socio-economic nature of industrialized agriculture. Industrialization challenged the ability of cooperatives to define and

sustain a social order encompassing family farmers, open

competitive markets, and marketing cooperatives. Anthropologist Erica Schoenberger comments, ‘‘When these struggles are

sufficiently acute, they amount to a kind of cultural crisis in which

competing models of the social order, and the material and human

resources and identities tied to them, are threatened with

devaluation and oblivion’’ (Schoenberger, 1997: 122). To agrarians, industrialization threatened to transform formerly independent family farmers to a ‘‘degraded peasantry or at least reduced

to a subsistence basis of existence’’; there was no middle ground

(Ross, 1948: 67).

Agrarian ideology derived its power from the assumption that

‘‘the farm and its problems were something apart and essentially

different from the characteristic phenomena of business enterprise’’ (Ross, 1948: 67). The alternative to exalting or deprecating a

part of the total economy was to regard farmers as businessmen

like any others having similar concerns about specialization,

standardization, labor displacement, capital apportionment, credit

provision and market adjustments (Ross, 1948: 67). Similarly,

farmers who wanted more independence could be seen as no

2 Woerdman defines a lock-in as the dominance of a sub-optimal situation (e.g.,

open competitive markets) in the presence of a superior alternative (e.g.,

industrialized agriculture). Optimality is defined in terms of efficiency; industrialized agriculture’s normative standard of cost leadership fulfills this criteria. He

argues that his neo-institutional framework accommodates history, learning,

culture and perceptions better than possible with efficiency-oriented neoclassical

or new institutional economics.

3 In 1782, Thomas Jefferson concluded that the moral and social character of the

U.S. depended on the family farm.

62 J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71
different than other entrepreneurs who sought freedom from

interference in the way their business was conducted.

6. California’s early industrialization

It seems reasonable to assume that agrarianism’s belief in the

pivotal importance of agriculture was shared to some degree by all

U.S. cooperatives. However, unique features of California’s

agriculture, particularly in the Central Valley, predisposed it to

industrialize some decades earlier than the Midwest, Great Plains,

and Northeast (McClelland, 1997). The latter continued to rely on

patriarchal family farm labor and so, for this paper, are assumed to

represent the core domain of agrarian-influenced cooperatives.

These areas lacked access to the supply of excess ethnic or minority

labor which McClelland indicates prepared California for industrialization by 1910. Added to this advantage was California’s legacy

of estate or hacienda production which boosted cultural familiarity

and acceptance of large scale production (Hogeland, 2010).

In 1922, California attorney and cooperative organizer Aaron

Sapiro combined elements of California experience into a model of

cooperative organization and marketing popularly known as

‘‘orderly marketing.’’ Sapiro began by extolling industrialization:

‘‘The factory system is recognized as the key to all forms of

productive industries to-day all over the world-except in

agriculture... The farmer is the only part of modern industry...

in which you have individual production’’ (Sapiro, 1993: 81).

In general, Sapiro offered a cooperative alternative to producers’

tendency to dump excess supply from bumper harvests on the

market. Instead, cooperatives should provide a home for the

growers’ product and use accumulated inventory to develop new

products to stimulate consumer demand. Investing in processing

or preservation technologies – canning, refrigeration and drying –

would allow cooperatives to release excess production to the

market in a progressive ‘‘orderly’’ manner.

For example, by 1925 Sunkist growers had increased fruit

utilization by transforming oranges from a single hand-held

breakfast fruit to a glass of juice made from multiple oranges. The

Sunkist extractor was specifically designed to use off-size fruit and

wind-damaged fruit that would not sell as fancy Sunkist table fruit

because all produced the same quality juice (Nourse, 1925). In

1922, Sun Maid scored a consumer success by packaging raisins in

convenient snack-sized boxes called ‘‘Little Sun Maids’’ (Gary

Marshburn, telephone conversation, July 24, 2008; Cotterill, 1984).

The far-sighted orderly marketing norm anticipated the values

of industrialized agriculture, urging cooperatives to guarantee

supply through marketing contracts with some 85–95 percent of

producer-members (Sapiro’s recommended target).4 This commitment could propel the cooperative into being sole supplier of a

particular specialty crop.5 (Such specialization was facilitated by

California’s geographically compact micro-climates).

Sapiro’s model provided a template for important 20th century

specialty crop cooperatives outside of California, notably, Ocean

Spray Cooperative (cranberries) and Welch’s (Concord grapes).

However, Sapiro’s model represented a highly specialized,

marketing-intensive cooperative that was conceptually and

financially out of reach of the small family farmers in the Midwest,

Great Plains, and the Northeast who produced fungible commodities like milk, meat and grains.6 Cooperative philosopher and

economist Edwin Nourse commented on cooperatives performing

agricultural rationing such as orderly marketing:

To be sure, a few cooperatives which stand in a class by

themselves have already attained a degree of success comparable with the best achievements in industrial lines. But these

are in comparatively small branches of specialized agriculture

where economic organization was already on a high level.

Before anything like the same result could be achieved in the

great staple lines of production, where the demand for [price]

stabilization is most acute, there would have to be a fair degree

of concentration of executive responsibility in their operating

organization (Nourse, 1930: 132).

7. Serfdom’s implications

During the 1920s and 1930s – considered a ‘‘golden age’’ of

agriculture – collective action surged. Rudimentary markets and

chaotic distribution channels for basic commodities like milk,

grain, and fruit provided new opportunities for cooperative

marketing. Moreover, new antitrust legislation curbed many of

the horizontally-integrated ‘‘trusts’’ dominating 19th century meat

packing, oil, railroads and grain markets.

Nevertheless, as early as 1922, Nourse saw emerging within

agriculture market power so centralized and hierarchical it seemed

feudal (Nourse, 1922: 589). Subsequently, the metaphor of

‘‘serfdom’’ was used throughout the 20th century by agrarianinfluenced cooperatives to suggest how industrialization’s contract

production could reduce entrepreneurial and independent farmers

to the equivalent of hired hands – so-called ‘‘piece wage labor.’’

In 1900, most counties could point to someone who started as a

tenant or laborer and through hard work, luck, sharp dealing or

intelligent cultivation, retired as a landlord owing several farms

(Danbom, 1979: 7). In 1917, Ely introduced the concept of the

‘agricultural ladder’ as a model of occupational progression to farm

ownership. The ladder showed how the agrarian virtue of hard

work could allow a landless, unpaid family laborer to progress

from being a hired hand and tenant farmer to an independent

owner-operator (Kloppenburg & Geisler, 1985). Yet, the serfdom

metaphor suggested just how tenuous such occupational progression could be.

Late 19th century farmers formed cooperatives in response to

market exploitation or failure. Although such exploitation affected

farmer costs and returns, as a rule it did not impinge on farmers’

understanding of themselves as entrepreneurial and independent.

Agrarian ideology lauded family farmers for taking on the risks of

farming with a frontier attitude of self-reliance. Such farmers

answered to no one except themselves. The small farmer was ‘‘first

of all a self-directing individualist who could be counted on to

resist with vigor the encroachments of outside authority’’

(Robinson, 1953: 69).

Industrialized agriculture brought a new institutional logic7 to

agriculture by putting efficiency and profitability first and using

vertical integration to bypass farmers’ decision-making power

over agriculture. Industrialization was market driven, seeking

growth in identifying and satisfying consumer preferences.8

Research has indicated that the norms and prescriptions dictated

4 In practice, 60 percent was a more realistic goal. It was possible, said one

observer, ‘‘to get one-third of the growers together in an organization; these can get

another third to join; but no power outside the Almighty can draw the other onethird in’’ (Kraemer and Erdman, 1933: 120). 5 Specialty crops refer to fruits, vegetables and nuts. 6 Late 20th century cooperative emphasis on adding value to corn by producing

ethanol or other bio-fuels led to the concept of the ‘‘value-added’’ cooperative

which could be considered a contemporary adaptation of Sapiro’s model.

7 Institutional logics provide a rationale for organizational diversity. They have

been defined as overarching sets of principles that prescribe ‘‘how to interpret

organizational reality, what constitutes appropriate behavior, and how to

succeed... To the extent that the prescriptions and proscriptions of different

logics are incompatible, or at least appear to be so, they inevitably generate

challenges and tensions for organizations exposed to them’’ (Greenwood et al.,

2011: 318). 8 For example, latent Asian demand for pork motivated the late 20th century

industrialization of the pork industry.

J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71 63
by family logics are often at odds with the prescriptions dictated by

markets (Greenwood et al., 2011).

Power, reflected in ownership and governance arrangements,

determines which logics will more easily flow into organizations

and be well received (Greenwood et al., 2011). Family logics

formally embedded into an organization’s ownership structure are

a very effective conduit for increasing familial influences within

the organization. Not surprisingly, farmer-owned cooperatives

believed they had a mandate to protect and foster family farming

(Hogeland, 2006).

8. Expectations

This inductive study proposes that cooperatives used

two agrarian metaphors, serfdom and ‘‘cooperatives are like a

family,’’ to foster cooperative and farmer expectations of

industrialization and cooperatives.9 These expectations gave

producers and cooperatives a way of understanding industrialization’s potential impact on family farmers and how co-ops fit

into that scenario. Cooperatives did not know in advance where

and how industrialization would evolve. These expectations

arguably allowed cooperatives to ‘‘manage’’ the uncertainty

associated with structural change they neither initiated nor

desired.

Expectations like these are important because firms make

promises based on them. In turn, expectations imply that such

promises will be fulfilled (Borup, Brown, Konrad, & Van Lente,

2006). Yet, more often than not, expectations are misleading or

wrong, leading to misallocated resources and investment

(Brown, Rip, & Van Lente, 2003). Yet, so little is known about

the dynamics of expectations that it is not clear how mistakes

regarding long-term transitions can be avoided (Brown et al.,

2003).

The term ‘‘expectations’’ should encompass both positive and

negative expectations, e.g., early promises and early warnings

(Nerlich & Halliday, 2007: 48). Serfdom was a negative expectation; cooperatives are like a family was its positive counterpart.

Expectations are important because they have a ‘‘performative

effect’’ of eliciting action and investment from individuals,

institutions and government. In a broader sense, performative

suggests how new technologies, new identities, or audience

reactions ‘‘come into being’’ (Taylor Nelms, personal correspondence March 27, 2014).

Expectations are meant to command audience attention.

There’s a risk in this – Ferraro, Pfeffer, and Sutton (2003: 5)

argue that ‘‘great theories in social science attain their status not

because they are true, but because they are interesting, and

engage the attention of their audience of experts and practitioners.’’ Serfdom was a disaster metaphor intended to provoke

urgency and action. But what kind of action? By themselves,

metaphors do not indicate what actions should be taken and when

(Nerlich & Halliday, 2007: 51).

Nourse’s prescription for combatting potential serfdom was the

normative concept of cooperatives as ‘‘competitive yardsticks’’ first

iterated in 1922 (Nourse, 1922). By 1945, he had expanded it into

the argument that cooperatives should intervene in thinly-traded

markets to restore farmer choice through an ‘‘extra bid’’ as the

yardstick concept was popularly called (Nourse, 1945). The

concept of cooperatives as ‘‘competitive yardsticks’’ was intended

to ensure farmer survival by restoring market choices precluded by

monopoly. Such choice was essential to the agrarian concept of

family farmers as independent and entrepreneurial.10 From a

pragmatic standpoint, the competitive yardstick norm arguably

gave small producers in particular hope that cooperatives could be

counted on to resolve their market difficulties.

There seems to have been little expectation among cooperatives

that producer investment would support these endeavors. In 1922,

Nourse declared, ‘‘The farmer’s need of capital in his own business

dictates that he go no farther afield than necessary in marketing or

processing undertakings’’ (1922: 597). However, producers’

market access was being squeezed at the same time that

industrialization’s increased scale and global perspective brought

cooperatives into competition with agribusinesses like Cargill,

Continental, ConAgra, and Archer-Daniels Midland (ADM). Moreover, Nourse’s competitive yardstick norm called for cooperatives

to keep a step ahead of the competition in innovation. Between

1954 and 1970, the capital requirements of cooperatives more than

doubled. After 1962, capital was supplied by debt financing, not

from members’ equity contributions (Griffin, 1973: 8).

In 1973, Farmland Industries, then the second largest U.S.

cooperative, tacitly endorsed Nourse’s philosophy: ‘‘The high cost

of capital investment in agriculture requires that a farmer and his

local cooperative use as much of their own funds as possible, on his

farm and at the local grain or farm supply cooperative. That means

if a regional [cooperative] can borrow money elsewhere, it should

do so. Indeed, it has a responsibility to do so’’ (Lindsey, 1973: 10).

Expanding despite the 1970s energy crisis and inflation required

large regional cooperatives to incur further debt, a pattern that

continued through the 1990s (Duft, 1985; Gherty, 2004).

By the 1970s, apprehension regarding serfdom had evolved into

the larger issue, ‘‘Who will control U.S. agriculture?’’ (North Central

Public Policy Education Committee, 1972). At this time animal

scientists were on the verge of resolving the health and other

issues (i.e., how to raise large animals under confinement) that

prevented integrated pork production. Serving independent pork

producers was a particular cooperative strength. Irrespective of

equity requirements, the prospect of losing feed sales increased

pressure on cooperatives to rescue producers from a particular

economic destiny.

When cooperatives assume risk on behalf of producers they

exhibit a behavior associated with ‘‘cooperatives are like a family,’’

as discussed in the following section.

9. Cooperatives are like a family

Schoenberger’s observation, ‘‘Strategy is the way firms envision

a social order and their position in it’’ may explain why agrarianinfluenced cooperatives, prompted by the serfdom metaphor,

interpreted industrialization as an attack on the established rural

social order (Schoenberger, 1997). This falls within the purview of

cooperative behaviors seen by Nilsson and Hendrikse (2011) as

inherently conflictual: member interests as a cooperative group or

society are at odds with the cooperative’s business objectives.

Agrarians like Nourse sought an social order rendered ideal,

stable, predictable, and straightforward by clear boundaries

between what farmers did (e.g., crop and livestock production)

9 The new field of the sociology of expectations examines how recent scientific

and medical advances have been interpreted through media ‘‘hope and hype.’’ Since

agricultural industrialization was also driven by scientific and technological

innovation, such studies have implications for cooperative strategy.

10 As the century progressed and the impact of industrialized agriculture became

clearer, the monopoly engendered by industrialized agriculture was more

accurately described as the ‘‘concentration and centralization of agriculture.’’

When explaining the competitive yardstick norm in 1945, Nourse expressed

concern that large cooperatives could grow and expand into monopolies who would

act no differently than other monopolies who had exploited farmers. In his

exposition, Nourse objected strongly to Sapiro’s model of cooperative industrialization. An analysis of the competitive yardstick norm using critical discourse

analysis suggests that Nourse’s penultimate goal was keeping rural society in a

balance or equilibrium that was contingent on keeping ‘‘big business’’ at bay

(Hogeland, 2007; Nourse, 1945).

64 J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71
and what occurred independently elsewhere in the supply chain,

e.g., manufacturing, transportation and finance (Nourse, 1945).11

Agrarians saw industrialization as a violation of the natural order

because it combined multiple functions under one roof (Buttel &

Flinn, 1975: 135).

Further contributing to the perception that industrialization

was unnatural was the comparison it evoked with Soviet-style

agricultural collectivization (Robinson, 1953). Many cooperatives

encountered industrialization at a time when vertical integration

was too new and unknown to displace competitive markets as an

economic ideal. Hayek’s influential book, The Road to Serfdom,

published in 1945, criticized central planning compared with the

efficiency and choice offered by competitive markets. That same

year, Nourse proposed the competitive yardstick norm to suggest

how additional competition would improve producer returns and

market choices. Consequently, agrarianism’s vaunted ‘‘freedom

for’’ market choice could also be seen as a ‘‘freedom from’’ the

coercion associated with industrialization’s hierarchy.

Corroborating empirical evidence of Nourse’s prediction of

serfdom further heightened cooperatives’ concern. By 1981, USDA

economists noted how industries of small, scattered, independent

producers selling through open markets became the basis for

highly concentrated, integrated, and industrialized agricultural

subsectors (Reimund, Martin, & Moore, 1981: 3). They concluded

that industrialization disproportionately affected the small producers who represented the majority within the first subsectors to

industrialize – broilers, fed cattle, and processing vegetables.

Initially, these growers produced as a sideline, risk management

strategy of diversifying the farm enterprise. Products were sold in

local markets; producers could enter or exit production easily.

Within twenty years (e.g., 1954–1974), economists observed

industrialization’s greater capital intensity raise productivity.

Processors gained managerial and decision control through grower

production contracts. Conditions of exit and entry became more

difficult for growers (Reimund et al., 1981: iv).

Agrarian ideology situated family farming within a complex

socio-economic normative framework. Such multi-dimensionality

made it much harder for farmer-owned cooperatives to see how

they could benefit from industrialization. Even by the end of the

twentieth century, it was not clear whether producers should

resist industrialization or try to capture part of the benefits

(Hayenga, 2000). In contrast, the primary norm of industrialization

was simple and direct: the low-cost producer survives (Drabenstott, 1995; Hogeland, 2006). Under these circumstances, there

was no readily available or obvious solution for cooperatives.

Groups and organizations have different criteria – or, in the case of

family farmers, different commodity orientations – for evaluating

an organization because they make different demands of it. This

complexity prevents such conflicts from being resolved through

maximization or other simple calculations (Pfeffer & Salancik,

2003: 93).

Management theorists have observed that mid-century [investor-owned] firms who initially considered themselves a ‘community,’ a ‘family,’ or simply a coalition of stakeholders eventually

adopted a ‘market’ metaphor (Ferraro et al.). This metaphor

allowed firms to see employees as commodities that can be

acquired, dismissed, or even exchanged through mergers and

acquisitions. As the pace of industrialization quickened, fear of

undergoing a similar cultural transformation arguably led

cooperatives to intensify what was ‘‘cooperative’’ about their

business.

As the century advanced and farm numbers continued to

decline, cooperatives intensified calls for greater cooperative

commitment and loyalty. Cooperatives routinely used member

education to enhance producer commitment. However, a more

subtle and personalized way of stimulating loyalty is presented by

Fulton (1999). He argues that member commitment to a

cooperative depends on an advantage not obtainable from investor

owned firms (IOFs) such as an ideology which espouses particular

outcomes. Fulton suggests that collective action problems can be

overcome if members get a private benefit in addition to the

collective one.

One adjustment to industrialization was open to all cooperatives: how they related to producer-members. The metaphor,

cooperatives are like a family, reflects how cooperatives personalized12 the connection between cooperative and farmer-member to

position themselves, in a manner of speaking, as the exact opposite

of serfdom (Rich, personal communication, March 2013; Hogeland,

2004; Wells, 1996).

Within the organizational values and behaviors associated with

the metaphor cooperatives are like a family is considerable room

for managerial flexibility, private benefits, and special considerations (i.e., late harvests, a small window for planting, etc.).

Interviews with some 30 local and regional cooperative managers

led Hogeland (2004) to identify values which arguably provide a

basis for the private benefits suggested by Fulton:

Being altruistic, not exploiting the business for a profit;

Emphasizing service over making money;

Valuing the ‘‘small and personal’’ over the ‘‘large and impersonal’’;

Displaying an unwillingness to let go of relationships, things, or

places;

Allowing a cooperative to assume risk on behalf of producers;

Attaining cooperative self-sufficiency to minimize farmer

dependency on those perceived as outsiders;

Preferring to subordinate individual goals to the good of the

whole; and

Valuing equality (‘‘treating everyone equally’’).

These behaviors are assumed to define the metaphor, ‘‘cooperatives are like a family.’’

This metaphor suggests that farmers saw cooperatives through

the lens of their own family orientation. Indeed, Goel (2013)

anticipated such overlapping between family and business

subsystems. Manager observations suggest that the boundaries

between cooperative and farm were blurred, allowing cooperatives

to be seen more as a lenient parent than as businesses subject to

market constraints. For example, if producers produced a fruit

variety or size not demanded by the market, the cooperative might

quietly absorb the loss in revenue from marketing such fruit. In

effect, such producers shifted their price risk to their cooperative.

The implicit social contract implied in the ‘‘cooperatives are like a

family’’ metaphor presents an example of another characteristic of

family enterprises hypothesized by Roessl (2005): the existence

of informal structures which are not necessarily explicit.13

Historical evidence from 19th century rural California suggests

that exchange between family farmers and neighbors also involved

11 Was Nourse an agrarian? He endorsed industrialization (1930) but added a

caveat: ‘‘cooperatives simply represent an effort to devise a form of control which

will permit of the benefits of large-scale organization but will restore the

independence and utilize the personal contribution of the many under thoroughly

democratic principles’’ (1922: 589). His emphasis on independence reflects belief in

a core agrarian principle considered antithetical to industrialization.

12 ‘‘Personalizing’’ is an anthropological concept drawn from Wells (1996) and

Rich (2010) reflecting how participants in a potentially exploitative economic

relationship act to increase their agency and reduce exploitation.

13 Nor would such institutional structures be transparent as that would defeat

their purpose of providing the necessary cooperative flexibility to provide private

benefits.

J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71 65
informal structures (Welker, 2013). Farmers’ interest in building

strong communities similar to those they had left behind fostered a

complex economic culture that straddled an agrarian past and a

cash-based modern economic order. The informal economy

represented debts that were rarely ascribed a precise value,

almost never explicitly balanced, nor held to a strict timetable for

repayment. A loose system of barter prevailed.

These obligations arose primarily from the need for harvest

labor but day-to-day tasks such as farm maintenance, transportation, and meals were also important. The family dimension

was a significant aspect of the informal economy because family

members could provide services to offset ‘‘debt’’ incurred by the

household head. ‘‘A farmer’s ability to operate successfully

depended in large part upon his willingness to be lenient when

he dealt in particular goods and services. If he acted otherwise,

he ran the risk of offending his neighbors and thus jeopardizing

his personal reputation and by extension his credit’’ (Welker,

2013: 405).

The easy-going nature of the informal economy hints at

farmers’ unwillingness to be boxed in. Next, discussion turns to

the overlap between agrarian ideology and family business

characteristics regarding the pivotal importance of choice and

independence.

10. Family business characteristics and agrarianism

Agrarianism argued that farmers needed independence and

market choices to survive. Indeed, founding father Thomas

Jefferson considered freedom and independence to be farmers’

birthright. The freedom to choose gave farmers their status as risktaking entrepreneurs. Choice was also integral to farmer identity:

‘‘Without choice,’’ said cooperative educator Owen Hallberg in

1980, ‘‘a man is but a number, an instrument, a thing’’ (1980: 21).’’

Roessl (2005) hypothesizes that family businesses tacitly

embrace a myth of unlimited freedom of choice and independence.

For family farmers, choice meant a freedom from interference that

allowed them to be ‘‘their own boss.’’ This emphasis was consistent

with ‘‘living in a world where people will and ought to pursue their

individual interest above all else’’ (Ferraro et al., 2003).

The myth of unlimited freedom of choice and independence

implies, as Roessl suggests, that cooperation requires a willingness

to forego other options. Cooperatives’ overriding agrarian-influenced need to ensure producer choice arguably prevented them

from seeing open markets as an outdated method of coordination.

This can be seen from a snapshot of 20th century open markets

for livestock. For most of the century, there were no objective

measurement technologies that could measure the animal’s

‘‘percent lean.’’14 Visual inspection was the norm. Consequently,

at open competitive markets such as auctions and terminal

markets15 animals were marketed in lots with the producer

receiving the average market value of the lot. The rationale for

open markets was their potential to provide price premiums that

would reward producers with lean animals. Unfortunately, open

market prices were not sufficiently fine-tuned to distinguish

between superior and poor quality, thereby penalizing better

producers. Moreover, consumer preferences for lean meat were

inadequately addressed by average pricing. This may explain why

the white and red meat industries were among the first to be

industrialized. In fact, clinging to obsolete products and production

technologies and preferences for maintaining the status quo are

other characteristics of family businesses identified by Roessl.

Roessl also hypotheses that family-owned businesses are

associated with values or tendencies that can limit cooperation

and cooperative behavior. This is evident in the light touch or even

‘‘hands off’’ approach preferred by farmers from the organizations

they owned (Hogeland, 2013). In 1935, H. E. Babcock famously

declared: ‘‘I regard a farmer-owned, farmer-controlled cooperative

as a legal, practical means by which a group of self-selected, selfish

capitalists seek to improve their individual economic positions in a

competitive society’’ (Babcock, 1935: 42). To this way of thinking,

‘‘if the farm was profitable, the cooperative did not have to be’’

(Stokes, 1957: 12).

11. Other contributions to institutional lock-in

The potential for exploitation hardened farmer attitudes and

fostered an ‘‘insider/outsider’’ culture where farmers were

reluctant to trust non-farmers (Hogeland, 2010). This is suggested

by a 1923 editorial in Successful Farming: ‘‘Just as sure as the

packers, the great bankers, the leading manufacturers or the big

corporations propose something that their business experience has

shown would be beneficial to... the farmers... the farmers assume

an aloofness that is dramatic’’ (1923: 8).

An insider/outsider culture can also be seen as a preference for

predictability and stability, as in the following characteristics

identified by Roessl:

A resistance to change in organizational cultures; a preference

for maintaining the status quo.

Clinging to obsolete products and production techniques.

Difficulty questioning existing business strategies.

Hogeland (2001) studied cooperative receptivity to the late

20th century innovation of identity-preserved grains (which

prompted the industrialization of the grain industry). Study

findings suggest the existence of an insider/outsider dimension,

a preference for maintaining the status quo (including obsolete

products) as well as difficulty questioning existing business

strategies.

In this study, surveyed local (locally-owned) cooperative

managers classified their cooperative as either: an Innovator

(being ‘‘first’’ is a priority); Follower (willing to innovate but more

cost sensitive); or Status Quo (conservative, cautious, slow to react,

and independent). Each category represented one-third of

respondents.

Innovator-respondents handled a much greater IPG volume than

Followers and Status Quo. Interdependence demonstrated through

partnering with regional cooperatives and investor-owned firms

(IOFs) appeared to underwrite Innovators’ willingness to bet on new

products. The more traditional and independent cooperatives

appeared to retain the independence and isolation that is the

historical norm of grain cooperatives, including a competitive, even

adversarial relationship with regional cooperatives.

Unlike Innovators, Status Quo and Followers saw less evidence of

producers adopting IPG in their marketing territory. They preferred

to focus on getting the best price for producers through a

unidimensional focus on traditional marketing practices such as

arbitrage. In contrast, Innovators operated in a multidimensional

world where many avenues and perhaps some money-losing

detours could ultimately achieve a similar end (Hogeland, 2001:

p. iii).

The concept of multiple closed and self-contained business

systems functioning in relative isolation from others – similar to

Nourse’s 1945 concept of the ideal economy and Status Quo grain

cooperatives – strikes Djelic and Quack (2008) as outdated. They

14 The scientific orientation of industrialization fostered objective measurement

to determine the ‘percent lean’ or yield of a hog carcass by using a probe to measure

back-fat thickness and the loin eye. This post-slaughter measurement fine-tuned

the price-quality relationship by providing incentives and feedback which farmers

could use to improve production.

15 Terminal markets originated at the end of a rail line. Famous terminal markets

were the Chicago Stockyards and the Kansas City Stockyards.

66 J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71
argue that isolated and self-contained national business systems

are incompatible with organizational involvement in multiple

institutional environments (e.g., transnational) with different and

sometimes conflicting rule systems.

12. Lock-in and cooperative experience

Following is a brief summary of how each feature of lock-in

identified by Woerdman corresponds to problematic aspects of

industrialization encountered by cooperatives.

12.1. Existence of a superior alternative institution or technology

Industrialized agriculture was broadly superior to open

competitive markets because it streamlined production and

marketing to lower transaction costs.16 The multiple choices

prized by agrarian ideology and family farmers came at the cost of

excess handling from a marketing system containing too many

middlemen, i.e., commission agent, dealer, handler or broker. Each

time livestock were transferred from one marketing agency (or

location) to another they were watered, fed, and sorted, delays

which put them at risk of going ‘‘out of condition’’ (chiefly, gaining

excess weight).

Grain was similarly vulnerable to loss of condition due to selling

practices like arbitrage and the industry’s practice of commingling

and blending lots for an average (No. 2) quality. Such mass

marketing required end users to adapt grains to their specific

requirements.

Economists were aware of the consequences from ‘‘duplication

of effort.’’ In 1922, Nourse suggested that the ‘‘despised middleman

system’’ added an unnecessary layer of costs that could be

eliminated if farmers controlled the marketing system and

operated on a strict cost-of-service basis (Nourse, 1922: 590,

583). In his opinion, middlemen and further processors heaped

commissions and monopoly profits on food marketing through

product and brand proliferation – activities which seemed

frivolous and pointless. Nourse sourly concluded, ‘‘’Salesmanship’

so-called has become our god’’ (1922: 580). Too often farmers and

cooperatives agreed, believing that money spent on product

development and market research shortchanged producer returns.

Reluctance to identify and respond to buyer preferences can

also attributed to a general sense among farmers and cooperatives

that buyers were adversaries who took income from farmers by

driving down the price of food. This perspective conceivably

limited cooperatives’ ability to see modern consumer marketing as

a source of revenue that could counterbalance industrialization’s

emphasis on cost minimization.

12.2. The dominant sub-optimal institution exhibits increasing or

stable effectiveness (or problem-solving capacity)

‘‘An increasing or stable problem-solving capacity of the

dominant arrangement is a necessary self-reinforcing mechanism’’

(Woerdman, 2004: 68). However, by the 1980s open markets were

beginning to create more problems than they solved. The number

of bids livestock producers received was declining noticeably: a

1987 survey indicated producers uniformly reported receiving one

bid less than they had received five years earlier (Hogeland, 1988).

In the grain industry open markets were also counterproductive. Producer-members and managers of local cooperative

elevators preferred arbitrage over making formal commitments

to market grain through an integrated cooperative grain system

(Turner, Heifner, Nichols, & Wisner, 1978: 16). ‘‘Optimal use of the

facilities individually did not result in optimal use of the facilities

as a system’’ (Ginder, 1991: 16). In sustaining marketing facilities

that were underutilized the cooperative sector incurred a high

level of debt. An agricultural depression during 1983 led producers

to rebuke cooperatives for having ‘‘too much cooperative baggage,’’

such as bureaucracy, inefficiency, and excess capacity’’ (Cook &

Ilipoulos, 1999: 527). In 2002, Farmland Industries reduced

cooperative involvement in the grain industry to the post-harvest

‘‘first handler’’ local cooperative level by selling many cooperative

assets to Archer Daniels Midland (ADM). Farmland Industries also

filed for bankruptcy that year.

Producer goals like ‘‘getting the market ‘top’ [price]’’ through

arbitrage interfered with the straightforward movement of

commodities to their ultimate destination. Seeking the ‘‘continuous throughput’’ of the factory line in moving commodities from

one stage of production to another, industrialization’s vertical

integration lowered transaction costs compared with the hit-ormiss coordination of open markets.

The advantages of vertical integration were particularly evident

in pork production. Hogs were systematically moved from one

stage of production to another according to their biological

requirements. For example, feeder pigs progressed from the

nursery to grow-out to finishing to market (ready) hogs. Each

stage was accompanied by specific feeding regimens and potential

housing adjustments. Moreover, consistent genetics meant that

the hogs were predictably lean with standardized pork cuts.

Open competitive markets did not foster such consistency

because producers were free to choose when and where to market.

Farmers might risk commodity deterioration by waiting for

markets to improve. Producer willingness to buy genetics from

farmer-breeders further contributed to product inconsistency.

12.3. Pronounced knowledge gaps and uncertainty (incomplete

information)

In17 1995, survey results from 670 locally-owned feed and grain

cooperatives revealed that the Midwestern federated system linking

regional and locally owned cooperatives could boost cooperative

prominence in the pork industry (Hogeland, 1995). Yet, debate over

cooperatives’ future role was complicated by the massive structural

changes overtaking the industry. In overhauling production and

marketing as they had been known, the pork industry was assuming

characteristics of a completely new (or emerging) industry, notably,

a high degree of uncertainty. No single production technology,

breed, or production facility (pork building) had been sufficiently

proven to become the industry standard.

The transition from single-site farrow-to-finish production to

multi-site production within the 1980s is a striking example of

how swiftly perceptions regarding the most efficient technology

can change.

In the early 198Os, the reigning technology for hog production

was farrow-to-finish in self-contained confinement units. As hog

production became specialized in two- or three-site production (i.e.,

a feeder pig production unit, nursery, and finishing floors), the

technical dimension of raising hogs increased. Multiple sites

accommodated all-in, all-out production (AIAO) where hogs of

the same age were moved as a group from one site to another to

allow complete cleaning and disinfection between litters. AIAO

reduced the disease potential inherent in the mix of ages and

16 An agrarian perspective on transaction costs is supplied by economist Harold

Breimyer (1995: 197): ‘‘Insofar at the doctrine of minimization of cost and

maximization of consumer satisfaction is taken seriously, the responsible

economist must follow the lead of the Nobel Laureate Douglass North in looking

into the big wastage of transaction costs. If we were truly concerned to treat our

consumers as well as our resources permit, we would find a way to deliver products

to them without all the hoopla and ballyhoo that are the mark of today’s

merchandizing.’’ 17 Both this section and the following draw on Hogeland (1995).

J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71 67
weights associated with continuous flow management. Like another

facility-dependent innovation, split-sex feeding (feeding barrows

and gilts separately), AIAO reduced variability in marketing weights

not attributable to genetic diversity. Greater consistency in

slaughter weights enabled packers to automate part of the kill line.

By 1995, AIAO had caught on among all sizes of Iowa producers

at the nursery stage, but only about a third of those surveyed used

this practice in the grow-finish phase of production. To capture the

advantages of AIAO or split-sex feeding, the typical Midwest

farrow-to-finish facility needed to be remodeled by adding walls

and pit dividers to make finishing rooms with new ventilation

systems, etc. Despite these technological advances and widespread

perceptions that Iowa’s infrastructure was aging, more than half of

the surveyed producers had no plans to remodel or build new

facilities.

Such turnover in production technologies within the pork

industry is not out of the ordinary. Typically, within emerging

industries, the technologies and products which confer an edge in

the opening phase of an industry are not sufficient to carry a firm

through later stages of industry development.

12.4. Large switching costs

Despite the uncertainty posed by the pork industry, cooperative

involvement was motivated by the belief that members would be

worse off if integration forced formerly independent family

farmers to become contract growers subject to anonymous

corporate authority. Moreover, the uncertainty characteristic of

emerging industries gave cooperatives reason to believe that

modernizing and upgrading the facilities and techniques of small

producers in particular might allow them to hang on, if not survive

and prosper.

Accordingly, regional cooperatives Land O’Lakes, Farmland

Industries, and Countrymark, Inc., developed cooperative variations of a ‘‘pork system’’ replicating key advantages of integration

such as standardized genetics, pork buildings and technical

support. These systems included a market element: regional

cooperatives relied on locally-owned cooperatives to market feed

and feeder pigs to pork producers, efforts that were complimented

by collectively-owned slaughter and processing plants. The pork

system developed by Land O’Lakes included a floor price in the

member contract. By shifting risk from producers to the cooperative, the floor price can be regarded as an expression that

‘‘cooperative are like a family.’’

Significant cooperative involvement continued until, at the end

of 1998, a temporary shortage of industry slaughter capacity

caused hog prices to plummet to 16.5 cents per pound. The breakeven price was 36–40 cents per pound. Integrated systems are

vulnerable to bottlenecks causing interruption in the continuous

flow process from farm to slaughter. The crisis was sufficiently

severe to trigger a shake-out of independent producers from the

industry. However, the floor price in the Land O’Lakes member

contract shielded members from the full impact of the price

collapse. Nevertheless, losses of $26 million ultimately led the

cooperative to transition out of providing a floor price (Hogeland,

2006). By 2005, the cooperative had sold its pork operations.18

13. Discussion and conclusions

This study explores the relationship between family businesses

such as family farming and cooperation by examining the overlap

between agrarian ideology and characteristics of family businesses

hypothesized by Roessl (2005) and Goel (2013). This connection is

explored in a particular context: the 20th century industrialization

of agriculture. This period challenged the primacy of family

farming in U.S. agriculture through the spread of a competing

corporate-led model of production based on vertical integration.

Decisions ordinarily made by family farmers such as what to

produce, where, and when, and for what market were co-opted by

corporate hierarchy. Agrarian ideology conditioned family farmers

and farmer-owned cooperatives to see industrialization’s contract

growers as the equivalent of hired labor or – worse – as ‘‘serfs’’

subject to a new kind of feudal hierarchy.

Metaphors like ‘‘serfdom’’ and ‘‘cooperatives are like a family’’

are important because they show how agrarian-influenced

cooperatives and farmers represented the world to themselves

and how they perceived the conditions for action in that context.

The term ‘‘serfdom’’ reflected farmers’ belief that they would be

victimized by industrialization’s restrictive production contracts.

‘‘Cooperatives are like a family’’ reflected the efforts of cooperative

managers to compensate by upholding the dignity and independence of farmer-owners.

The primary method cooperatives used to compete with

industrialization for most of the 20th century was the marketstimulating competitive yardstick norm. In effect, this norm sought

to turn back the clock to the pre-industrialization era when open

markets gave family farmers more choices. This emphasis supports

Roessl’s hypotheses that family businesses are driven by a myth of

unlimited free choice and independence and tend to cling to

outdated technologies.

The question motivating this study is why institutional [or

organizational] inertia persists despite indications that change is

urgently required. This study attributes delay to agrarian ideology

which was proposed to work in the following way: First, agrarian

ideology elevated family farmer importance and requirements to

a degree that became culturally difficult for farmer-owned

cooperatives to challenge. Second, agrarian ideology reinforced

behaviors theoretically associated with family-owned enterprises.

Third, these factors triggered an ideological lock-in limiting

cooperatives’ ability to see industrialization as a mix (from their

standpoint) of both positive and negative aspects.

Woerdman (2004) argues that the potential for lock-in is

revealed by four conditions: a superior technology competes with

a dominant sub-optimal technology; the latter continues to be

effective; little is known about the superior technology, and high

switching costs are required to implement it. In his model, culture

is a particularly strong self-reinforcing mechanism when the

superior technology is rejected as somehow unethical. Moreover,

‘‘when a superior alternative exists but is barely known among

those who choose, other inputs are beliefs and expectations shaped

by both personal and collective experiences and culture’’ (Woerdman, 2004: 66).

For most of the 20th century, the pejorative term, ‘‘serfdom’’

substituted for direct cooperative and producer experience with

industrialization. Woerdman (like North) argues that cultural

change is a slow process which can take years, even decades. It is

likely that the metaphor of serfdom, and agrarian ideology in

general, fostered such preconceived notions of industrialization

that benefits were largely inconceivable. As Schmid says, ‘‘We see

what we have a language to see’’ (2004: 267).

Moreover, industrialized production was capital intensive and

large scale which meant switching costs were high. However, by

the late 20th century, severely declining market competition

18 From this experience came the recognition that cooperatives could serve

farmers better by creating innovative value-added products. That is, cooperatives

would become part of industrialized agriculture but not by becoming indistinguishable from those they sought to challenge. Cooperatives also realized that they

were investments which had to be competitive with producers’ other investment

choices. In the decade that followed, cooperatives continued to expand their goals

and outlook. For example, Land O’Lakes sought to apply its broad-spectrum

strengths in food production and branded-product marketing to the task of ‘feeding

the world’ (Policinski, 2010).

68 J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71
prevented open markets from effectively performing basic

functions like price discovery and market-clearing. The unlimited

free choice sought by producers came through a market system

with too many middlemen (marketing agencies). Duplication of

effort increased marketing costs. Open market failure forced

marketing cooperatives to consider alternatives. Moreover, compensating farmers through the attributes of ‘‘cooperatives are like a

family’’ did not respond to the core problem presented by the

serfdom metaphor: the reduction in producers’ decision-making

authority in contract production.

Woerdman indicates that lock-in can reversed to become

institutional ‘‘break out,’’ especially when ‘‘traditional firms

possessing... large financial means commit themselves to the

development of this [superior] trajectory’’ (Woerdman, 2004: 75)

(Break-out implies the superior technology is adopted). The

variations of industrialized pork production developed by Farmland Industries, Land O’Lakes and Countrymark in the late 20th

century had strong market elements in sourcing feeder pigs and

feed but nevertheless represent such development.

Direct cooperative experience with producer contracting

reduced switching costs in a setting where limited information

and uncertainty about industrialization would have otherwise

prevailed. Direct experience also weakened the power of the

serfdom metaphor, allowing cooperatives to evade ideological

lock-in. Reducing switching costs is the key to organizational

transformation. This requires leaders who can recognize when the

old culture has become counterproductive, and can envision and

impose a new culture. ‘‘The essence of leadership, in this context, is

the ability to step outside one’s cultural assumptions in order to

effect the change’’ (Schoenberger, 1997: 119).

It is also possible that farmer decline had to reach a critical

threshold which represented a point of no return before

cooperatives could question existing business strategies. Greenwood notes that ‘‘organizations are more likely to abandon an

institutionalized template when facing adverse situations, such as

resource scarcity’’ (Greenwood et al., 2011: 340).

Expectations based on metaphor have intrinsic shortcomings

– they are unavoidably reductionist and selective – highlighting

some aspects of an issue while hiding others. Family farmers

traditionally managed risk through a diversification that usually

encompassed livestock production. Under industrialized agriculture, the integrator owned the animals raised by the contract

grower. The serfdom metaphor focused on the loss in farmer

identity and status associated with contract production. The

metaphor did not reflect how producers benefited from shifting

the risks of market determination and animal ownership to

integrators. By the end of the 20th century, farm lenders

began demanding that producers have a contract in hand

specifying market destination before facility financing could be

discussed.

Likewise, the positive expectation that cooperatives are like a

family overshadowed the costs of this strategy to cooperatives. The

most problematic aspect of this construct was cooperative

willingness to assume risk on behalf of producer members. It is

possible that cooperatives interpreted this metaphor to include the

distributive justice Nourse (1922: 594) counted as a producer

prerogative. If so, then cooperatives likely tried to ensure that

producer-members would receive the return they were implicitly

or explicitly promised. Cooperative interest in seeing producers get

a fair shake in the marketplace may have led them to put programs

in place via cross-subsidization (without expecting commensurate

equity contributions) to enhance members’ market opportunities.

Cook (2004) regard cross-subsidization as a situation where

ownership rights are misaligned with use, control, investment

incentives and benefit distribution. He observes that such

situations were a contributing factor to recent bankruptcies

among large multipurpose cooperatives (including Farmland

Industries’ bankruptcy in 2002).

In retrospect, cooperatives’ efforts to protect producermembers from ‘‘serfdom’’ put them under extraordinary moral

and therefore financial pressure. The consequences for cooperatives suggest that Schoenberger was correct when she concluded

– as quoted in Section 1 – that metaphors ‘‘allow for the sorts of

story in which overwhelming evidence in favor of one interpretation of the world can be repeatedly ignored, even though this puts

the assets of the firm and the position of the decision-makers at

extraordinary risk’’ (Schoenberger, 1997: 136). ‘‘Serfdom’’ was a

polarizing concept. It is possible that narratives which challenged

the universality of the serfdom concept (i.e., that serfdom was

an inevitable and inescapable consequence of industrialized

production) would have given cooperatives an alternative

perspective.

Cook (1997) speculated that the mission, objectives, and/or

goals of cooperatives really are different from investor-owned

firms. This study situates that difference in agrarian ideology.

Bolstered by its overlap with traits and preferences associated with

family business, as hypothesized by Roessl and Goel, agrarian

ideology was indeed hegemonic.

Did Serfdom Occur? In Section 8, this study draws attention to

the potential for expectations to be misleading or wrong and so

lead to misallocated resources and investment. Consequently, an

important question for cooperative scholars and policy makers is,

‘‘Did serfdom occur?’’ Fieldwork conducted by anthropologist

Ronald Rich (2010) in the Midwestern pork industry from 1998 to

2001 suggests that the producer ‘‘serfdom’’ anticipated by

agrarians was not universal. Because contractors must supervise

many growers with many animals, they cannot fully monitor

grower behavior. The contracting relationship is vulnerable to

moral hazard where incorrect or unauthorized grower actions may

not be clearly evident. Consequently,

contractors who exploit growers risk a counterproductive

backlash capable of raising costs and decreasing profitability.

Although both contractors and growers recognize the potential

for inequality and conflict in their relationship, Rich concluded

that trust, honesty and personal integrity are more associated

with contracting than conflict. Of 27 contract operations he

studied, 20 were farm based, following existing lines of

friendship, neighborhood, work, and kin. These close and

natural associations allow Midwestern family farmers, contractors and growers alike, to manage their participation in

‘exploitative agriculture development more generally’ (Hogeland, 2013: 112; Rich, 2010: 109).

Agrarian expectations of industrialization were more pessimistic, i.e., ‘‘An industrial system is implicitly regimented, privately

and publicly. Its internal interdependence is so intricate as to

straightjacket both processes and people’’ (Breimyer, 1995: 4).19

To oversimplify industrialization in this manner was to get it

wrong in a way crucially important to cooperatives: ‘‘Firms can

hold competitive advantages simply because their rivals entertain

erroneous beliefs about them’’ (Foss, 2007: 1). Rich’s ethnographic

findings present a solid economic basis for contract hog producers

to be an integral part of decision-making. The negotiated context of

pork production, especially among the farm-based contract

operations Rich studied, exists ‘‘in part as a result of the frail

quality of industrial hogs; contractors are reliant on contractees to

raise a distinctly fragile commodity that requires immediate

attention to biological issues (health) and infrastructure (barn

conditions)’’ (Rich, personal communication, May, 2013).

19 The word ‘‘straightjacket’’ perfectly captures how independent family farmers

anticipated being immobilized by contract production.

J.A. Hogeland / Journal of Co-operative Organization and Management 3 (2015) 60–71 69
For decades, agrarian-inspired disaster motifs like serfdom,

straightjacket and feudalism seemed to have limited cooperatives’

ability to see themselves as resilient, able to foster new

institutional designs within industrialization’s complexity. Because cooperatives appear to have been on the side-lines looking

in, they may not have known it was possible to have a nuanced

response to industrialization. This suggests that cooperatives

should assess future agricultural developments more carefully

before rejecting them.

Why would agrarians regard industrialization in such emotionally freighted terms? Maintaining farmer status and importance was a core agrarian issue much more important than

identifying a role for cooperatives. Agrarians’ choice of terminology

conceivably reflected fears that industrialized agriculture was

revisiting a century-old conflict over whether farmers should be

regarded as capitalists (as agrarianism suggests) or radicalized as

workers (Taylor, 1989) (This identity conflict may be the reason

Nourse (1945) criticized the Sapiro model for bringing a ‘‘big stick’’

of union-like militancy to cooperation). A close reading of the

competitive yardstick norm led Hogeland (2007: 46) to conclude

that Nourse’s primary concern was the welfare of farmers, not

cooperatives. This was a crucial distinction liable to be overlooked

by agrarians: the two are not the same. Even though cooperatives

are farmer-owned, what is good for farmers – unlimited choice

and independence for example – may not necessarily be good for

cooperatives.

Agrarianism’s influence on 20th century cooperatives provides

support for Roessl’s concept of ‘‘informal structures which are not

necessarily explicit.’’ Agrarianism added additional often subtle

constraints to cooperative decision-making beyond cooperatives’

role as ‘‘user-owned, user-benefiting, and user-controlled’’ organizations. As this study shows, additional constraints – especially

the impromptu expression of ‘‘cooperatives are like a family’’ – can

raise the cost of doing business and, if taken too far, may jeopardize

the organization’s survival.

On a day to day basis, agrarian values and goals can be

incompatible in key respects with other cooperative priorities as

Foreman and Whetten (2002) indicate. The extent of this

incompatibility is seen by Greenwood et al. (2011) as an indicator

of organizational complexity. Further research might foster greater

transparency in cooperative decision-making by examining

agrarianism’s impact. Does evidence suggest that agrarian priorities have become a ‘‘taken for granted’’ unchallenged aspect of dayto-day cooperative transactions? If not, how are trade-offs

between agrarian and economic priorities negotiated?

Alternatively, because institutions seek to instill and reproduce

the values they require, members must have some need that is met

by agrarian-influenced marketing cooperatives. Do members feel

that an agrarian identity or connection increases cooperative

legitimacy and trustworthiness? To what extent does agrarian

ideology foster an increase in cooperatives’ social capital relative to

the losses anticipated by Feng, Friis, and Nilsson (2015) in response

to increasing organizational complexity among cooperatives? If so,

how does this connection position cooperatives for competitive

advantage? Is family always the most salient expression of

ideology for members? How does an agrarian-influenced cooperative identity inform the self-concept or identity of producermembers?20 Much contemporary market research examines how

retail product choices are perceived by consumers to reinforce a

desirable identity or self-concept. Retail products are frequently

status-enhancing or aspirational. How agrarian ideals affect

farmer-members’ service or product choices is not as clear.

Another research topic is the potential interaction between

agrarian values and metaphors as tools that help cooperatives

navigate the cooperative life cycle. Both the serfdom metaphor and

‘‘cooperatives are like a family’’ positioned cooperatives as a haven

relative to the competitive turbulence spawned by industrialized

agriculture. What kind of metaphor would be useful for a start-up

cooperative with a need for greater member cohesiveness? How

can metaphors help mature cooperatives differentiate themselves

from other agribusinesses?

Many countries, especially those with a feudal legacy or

landowning class, have an agrarian heritage. Further research

could examine how agrarian ideals in various settings affect

cooperative decision-making. Cross-country comparisons could

further clarify how ideology helps and hinders cooperative

development.

Acknowledgements

Appreciation is expressed to two anonymous reviewers for

comments and suggestions.

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