Supply Chain Management

How to Assess the Governance Efficiency of Farming Enterprises?

Article Details

Pub. Date	:March 2022
Product Name	: The IUP Journal of Supply Chain Management
Product Type	: Article
Product Code	: IJSCM020322
Author Name	: Hrabrin Bachev
Availability	: YES
Subject/Domain	: Strategic
Download Format	: PDF Format
No. of Pages	: 15

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Abstract

Despite the fundamental progression of the theory of economic organizations, farm continues to be studied as a "production structure" and its efficiency is assessed with "factors productivity". This study incorporates the New Institutional Economics and adequately defines and assesses the economic efficiency of Bulgarian farms. If inputs supply and marketing transactions of a farm are governed effectively (equal or fewer costs compared to another farm/organization), it is considered to be efficient, and vice versa. First in kind quantitative evaluation of governance efficiency of Bulgarian farms is made on the basis of assessments of managers of typical farms. "Nature of the problems in effective organization of major type of farm transactions for securing the needed factors of production and output realization" is used as an indicator for the comparative transaction costs. The study has found that the governance efficiency of farms in general is at a good level, but 60% of all farms have low efficiency and will likely cease to exist in the near future. The major factors behind inferior governance efficiency of farms are unsatisfactory efficiency in the supply of necessary labor, innovations and know-how, and funding. There is a huge variation in the governance efficiency of farms with different specializations, as holdings in field crops, vegetables, flowers and mushrooms, and mixed livestock demonstrate the lowest levels. There is a big discrepancy between the new assessments and traditional approach to farm efficiency. The suggested framework has to be improved and widely applied in economic analysis at various levels, which requires the collection of a novel type of microdata on farms' governance and transaction costs.

Introduction

The issues related to understanding, assessing, and improving the economic efficiency of farms and other agrarian organizations have been among the most topical in academic, business, and policy debates in the last decades (Sykuta and Cook, 2001; European Parliament, 2014; and Hoppe, 2021). Consequently, there have been numerous publications on the "right" approaches for defining and evaluating the farm economic efficiency as well as multiple assessments of the efficiency level of farms in a particular country, a specific subsector of agriculture, a particular type of farming organization, a different region, and so on, including comparative studies between countries, industries, regions, farming structures, historical periods of evolution, etc. (Habtamu et al., 2018; Gunes and Guldal, 2019; and Gaviglio et al., 2021).

Despite the fundamental progression of the theory of economic organizations in the last several decades (Bachev, 2004; James et al., 2011; and Massey et al., 2020), the farm

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