Impact of Strategic Alliances on the Productivity of Housewives Groups in Northern Thailand
The food industry in Thailand comprises various types of food manufacturers including local processors who produce cottage foods, defined as foods produced in a home with little capital requirement and without the use of a commercial kitchen. The cottage food processing industry mainly comprises community enterprises such as the so-called 'housewives groups'. These groups consist of a number of rural Thai housewives who combine their food processing activities in a particular district or village. The main objective is to assess the impact of vertical and horizontal strategic alliances on the productivity of housewives groups in the cottage foods industry in northern Thailand. In particular, we focus on both types of alliances as conduits to raise the productivity of these groups in producing processed fruit and vegetable products. Vertical alliances are implemented by entering into relationships with groups in the supply chain that supply them with inputs or buy their outputs. Horizontal alliances are implemented to exchange information on product marketing and inputs for production, improve distributional services, exert greater marketing power, and share technology and equipment among groups at the same level in the supply chain. We also assess whether higher levels of vertical strategic alliance are more productive than lower levels. Five levels of strategic alliance can be identified for housewives groups in Thailand, in ascending order of aggregation: village; district; 'aumpher' (sub-provincial); provincial; and regional. Greater productivity gains are expected at higher levels of strategic alliance because they should open up a broader range of opportunities to improve processing performance. In the next section, the main competitive weaknesses of housewives groups are outlined, followed by a review of how they may use strategic alliances to overcome these weaknesses. The analytical method to measure the efficiency and productivity of the groups is then outlined and a brief description is provided of the source of data. Results are reported and discussed, and the paper ends with a section containing the main conclusions drawn from the analysis.
Does A Rising Tide Lift All Boats?: The Case of Vertical Strategic Alliances Involving Housewives Groups in Northern Thailand
We analyse factors influencing the technical inefficiency of housewives groups in northern Thailand and test for the productivity effects of vertical strategic alliances. Technical efficiency gains could be reaped by housewives groups joining vertical strategic alliances, with higher efficiency gains at higher levels of alliance. However, no technological gains were evident from group membership of vertical alliances. No evidence of scope economies was found while decreasing returns to scale are reported, suggesting that housewives groups would need to adopt more industrial food processing modes to escape scale diseconomies. Such a move would have ramifications for their financial and social structure.
An Assessment of the Impact of Strategic Alliances in Food Processing on the Technical Efficiency of Housewives Groups in Thailand
The cottage food processing industry in Thailand comprises mainly small-scale enterprises such as the 'housewives groups' that consist of a number of housewives who combine their food processing activities in a particular district or village. The effects of various factors on the performance of these housewives groups is assessed using survey data to estimate a stochastic input distance model. Our results show that membership of vertical strategic alliances at a high level is associated with higher levels of technical efficiency. Other factors positively influencing technical efficiency within these groups are the level of experience of group members, the ratio of workers to total members, government support, the community base of the group as opposed to private ownership, and the availability of funds to invest in business activities that have been derived from savings activities by group members. The ability of housewives groups to exploit cost complementarities by combining fruit and vegetable processing activities is tested by estimating scope and diversification economies for fruit and vegetable processed outputs. While diversification economies were found to exist, the more rigorous test for scope economies did not support their existence.
Technical efficiency and technology gaps on 'clean and safe' vegetable farms in northern Thailand: a comparison of different technologies
"Clean and safe" agricultural products are an important issue among consumers, farmers and governments. Many developing countries develop their produce at various points along the 'clean' continuum based on production practices related to use of synthetic chemicals. Organic farming is applied to technologies with no chemicals or synthetic fertilisers used during production or processing. It was initially developed by farmers and non-government organisations in Thailand, and subsequently implemented by the Thai government through a series of policies on clean produce to meet international standards. Safe-use and pesticide-free practices lie between organic and conventional practices, and are possible steps when converting conventional farms to organic farms. We compare the technical efficiencies and technology gaps of the four farming systems in northern Thailand of which three - organic, pesticide-free and safe-use - are designated 'clean and safe'. Farm-level data on vegetable production were collected from random samples of farms using these technologies. A metafrontier model was estimated, enabling the estimation of technical efficiencies and technology gap ratios (TGRs) for vegetable farms operating under the different production systems. Conventional farms were expected to have the highest mean TGR (smallest distance from the metafrontier) as they are least constrained in the way they farm, and results bear out this expectation. The mean TGR for conventional farms is 0.80, significantly higher than that for organic farms at 0.45. But all production systems have farms lying on the metafrontier. In contrast to the TGR results, conventional farms have the lowest mean technical efficiency relative to their group frontier (0.33) and pesticide-free vegetable farms the highest (0.47), most likely reflecting the different degrees of technical assistance provided to farmers in these groups. Organic farming is that farmers in this group did not perform markedly worse than farmers in other groups in terms of productivity. There are numerous organisations and projects providing assistance for 'clean and safe' vegetable farming in northern Thailand. Scope exists to improve the performance of farmers in all groups as technical efficiencies and TGRs of farms vary widely in all groups. Improvements are needed for agronomic technology, supply chains, farmer capacity in production and marketing, and effectiveness of technology transfer strategies.
Production Efficiency and Technology Differences in 'Clean and Safe' Vegetable Farming Systems in Northern Thailand
'Clean and safe' agricultural products are an important issue among consumers, farmers and governments. Many developing countries develop their produce at various points along the 'clean' continuum based on four different production practices related to use of synthetic chemicals. Organic farming is applied to technologies with no chemicals or synthetic fertilisers used during production or processing. It was initially developed by farmers and non-government organisations in Thailand, and subsequently implemented by the Thai government through a series of policies on clean produce to meet international standards. Safe-use and pesticide-free practices lie between organic and conventional practices, and are possible steps when converting conventional farms to organic farms. The main purpose of this paper is to examine the production efficiency of four different vegetable farming practices. We compare the technical efficiencies and technology gaps of the four farming systems in northern Thailand of which three - organic, pesticide-free and safe-use - are designated 'clean and safe'. Farm-level data on vegetable production were collected from random samples of farms using these technologies. A standard stochastic production frontier was estimated for each system to obtain technical efficiency (TE) estimates with respect to their respective cohorts. The likelihood ratio test indicates that significant technology differences exist between these farming practices. Accordingly, a metafrontier model was estimated, enabling the estimation of technical efficiencies and technology gap ratios (TGRs) for vegetable farms operating under the different production systems. The model was checked for self-selectivity bias and it was found that there was no such problem.