Abstract
This study aims to understand the social capital inherent in agents and the role of social and economic trust in transactions between beef cattle producers and slaughtering cooperatives in the specialty beef production system in Paraná state, Brazil. This qualitative research involved 31 semi-structured interviews with beef cattle producers, cooperatives, and key agents. Results revealed that social capital, comprising networks and informal norms, favors the condition of trust, enabling the construction of a hybrid governance structure under a complex institutional environment. Social and economic trust between agents facilitates transactions, reduces behavioral and market uncertainties, enables ex-post adaptations, and consequently, reduces monitoring costs and transaction costs. Trust based on social aspects, i.e., social trust, was more relevant for the construction of arrangements, while trust based on economic aspects, i.e., economic trust, had a greater impact on the continuity of arrangements. This reveals that looking at only one of them is not enough to understand contractual arrangements. Thus, this study highlights that unfolding the concept of trust and investigating whether it comes from an economic or social basis is important to understand the complexity of such arrangements, which may influence specialty beef production system design and coordination efficiency.
1. Introduction
The coordination of agrifood systems has been widely discussed due to the importance of value distribution and efficiency in sustaining a given production chain (Cuypers et al., 2020; Oliveira et al., 2017). From an institutional perspective, efficiency depends not only on the way the actors are micro-analytically organized but also on their alignment with the formal and informal institutions within which economic transactions take place (North, 1990; Trienekens, 2011).
However, there are chains in which this apparatus is insufficient, which is the case of the Brazilian beef production system, which lacks efficient institutions to support transactions between agents (Farina and Nunes, 2003; Shanoyan et al., 2019; Colares-Santos et al., 2020). A long history of economic and legal disputes between beef cattle producers and the processing industry sheds light on inefficiencies within that system (Caleman et al., 2008; Caleman and Monteiro, 2013; Oliveira et al., 2019; Santos and Batalha, 2023).
In addition to this problem, the sector faces market changes resulting from the increased demand for quality products, aligning with international standards such as traceability and concerns related to social, environmental, and health aspects. These changes require more complex forms of coordination than the market, challenging the sector (Caleman and Zylbersztajn, 2012).
Alternative organizational arrangements have emerged to address failures in the system, particularly involving differentiation efforts. Brazil holds a significant position in the global beef sector, featuring a diversity of contractual arrangements and chain designs across the country. In this context, Paraná, as the 8th most important state in terms of bovine cattle herd and slaughtered animals in Brazil (IBGE, 2017), plays a crucial role.
Within Paraná, the Beef Cattle Project, initiated by the former public institution ‘Paraná Institute of Technical Assistance and Rural Extension’ (Emater), now known as the ‘Paraná Institute for Rural Development’ (IDR-PR), aims to consolidate high-quality beef production and exports. The project seeks to increase beef cattle producers’ income and enhance relationships along the chain. Consequently, the focus is on quality rather than quantity, with the basic strategy involving collaboration with both formal and informal groups of producers, thereby creating conditions for the emergence of slaughtering cooperatives (Emater, 2018).
In the beef production system, collective organizational arrangements, including alliances, associations, or cooperatives, are established by groups of producers who set rules to offer a product with distinct quality attributes. From the product perspective, specific investments are necessary for differentiation, such as those related to the production of precocious and standardized animals, investments in genetic development, good management practices, and high-quality pastures, among others (Macedo, 2015). These investments tend to be highly specific, particularly considering the limited number of buyers who value differentiating aspects (Santos, 2017; Shanoyan et al., 2019). These investments result in differentiated products that generate superior value and can increase asset specificity, as observed in the case of Brazil.
From the neo-institutional perspective, particularly considering transaction and measurement cost assumptions, the escalation of asset specificity and the difficulty in measuring dimensions create a heightened requirement for system coordination. This, in turn, significantly influences the governance structure adopted by agents (Barzel, 2005; Cuypers et al., 2020; Sudré et al., 2021; Williamson, 1985). The increased dependence between agents necessitates the adoption of more effective coordination mechanisms to ensure efficient transactions (Caleman et al., 2008; Colares-Santos et al., 2020; Saes and Silveira, 2014; Shanoyan et al., 2019).
The case of Brazilian beef is marked by significant complexity and diversity (Caleman and Zylbersztajn, 2012; Galuchi et al., 2019; Pereira et al., 2022b). Unlike other livestock systems, such as poultry and pork, formal contractual relationships are less common, and there are frequent conflicts between producers and processors (Carrer et al., 2014; Saab et al., 2009).
Under high complexity and asset specificity, it is important to understand how those transactions are organized (Caleman et al., 2008; Williamson, 1985). The Sociological Economics perspective emerges as a key component in understanding the organization of transactions in the beef production system, as it involves characteristics of social organizations, such as networks, norms, and trust, that facilitate coordination and cooperation (Putnam, 1993; Kremer and Talamini, 2018; Macedo, 2015).
The possibility of complementarity between both neo-institutional and sociological economics theories is emphasized by economists and economic sociology authors alike (Ebers and Oerlemans, 2016; Elfenbein and Zenger, 2014; Nee and Ingram, 1998; Richter, 2015; Zenger et al., 2001). The question of how informal constraints and social aspects influence governance structures remains to be answered (Joskow, 2004; Ménard and Shirley, 2014; Villalba et al., 2023). By combining social and economic perspectives, this study aims to understand the role of social capital in transactions and in the choice of governance structures adopted between beef cattle producers and slaughtering cooperatives in the Brazilian specialty beef production system.
Our theoretical and qualitative hypotheses is that when considering the influence of social capital, transactions should be viewed as exchange relationships permeated by a social context in which social interactions between individuals and groups interfere. Previous studies have highlighted the relevance of social aspects, such as trust, in beef production systems (Colares-Santos et al., 2020; Dinku et al., 2021; Guimarães et al., 2021; Javornicky et al., 2021; Shanoyan et al., 2019). The influence of social capital in the analysis of economic behavior impacts the decisions of the agents, as these decisions cannot be solely based on economic considerations but must also consider social aspects to avoid a loss of efficiency. Therefore, decisions regarding the growth or development of contractual arrangements must consider issues of trust and group cohesion to avoid harming the exchange relations and the perpetuation of the arrangement.
Considering the apparent interaction between economic and social issues, our purpose is to analyze the role of social and economic trust in supporting transactions in specialty beef production systems. The paper is structured into six sections. In addition to this introductory part, the second section covers a theoretical framework based on New Institutional Economics (NIE) and New Economic Sociology (NES). Then, we present the methodological procedures based on a qualitative approach. The fourth and fifth sections show, respectively, the results and discussion. Finally, we conclude with the main contributions of the study.
2. New Institutional Economics (NIE) and New Economic Sociology (NES): a theoretical discussion
NIE defends the role played by institutions in economic development, giving great importance to the concept of institutions, on both the macro and the micro analytical levels (North, 1991, 2005). On the micro analytical level, institutions are seen as influencing the relationships between agents, that is, the parties involved in a transaction. If formal institutions refer to rules that can be put into practice in a specific and precise way, such as laws, constitutions, and regulations, informal restrictions are more complex since they are seen as ways of doing things, in the form of norms of behavior, traditions, and codes of conduct (North, 1991, 2005). Informal norms guide the behavior and actions of individuals daily, but they do not appear in formal terms, the reason for such complexity (North, 2003). Despite the difference in their characteristic enforcement mechanisms, they operate together and mutually influence each other in reciprocal action (Zenger et al., 2001; Pereira et al., 2022b).
Based on Williamson’s (1985) and Barzel’s (1982) contributions to transaction and measurement costs, the most appropriate structure would be one that minimizes transaction costs and maximizes value (Cuypers et al., 2020). According to Transaction Costs Theory (TCE), the selection is made through qualitative and comparative analysis based on transaction attributes (frequency and uncertainty), but primarily on specific assets.
Asset specificity is linked to the ability to reuse it with the same efficiency in alternative uses or for alternative users without a loss of value (Williamson, 1985), and it can be of six types: location specificity, physical asset, human asset, dedicated, brand, and temporal assets (Williamson, 1996). Frequency involves the repetition of transactions over time and their regularity, while uncertainty is conditioned by the unpredictability associated with behavioral and environmental uncertainties that are always present (Williamson, 1985).
Alternatively, in Measurement Costs Economics (MCE), the choice would be in favor of a structure that maximizes the transaction’s value, considering the measurability of attributes and the information costs involved in the exchange (Caleman et al., 2008; Oliveira et al., 2019; Souza and Bánkuti, 2012; Zylbersztajn, 2005). According to Barzel (2005), due to incomplete information and high access costs, individual rights are not clearly delineated, leading to errors. In such cases, value can be dissipated if property rights are not accurately defined, resulting in losses for the involved agents (Oliveira et al., 2019; Zylbersztajn, 2005). The objective is to ensure well-defined property rights, preventing unequal value appropriation (Barzel, 2005; Oliveira et al., 2017).
The more measurable and verifiable the contractual stipulations, the clearer the transaction, and the lower the cost of measuring the attributes, the more attractive the exchange. In this context, to identify the most efficient governance structure, one must assess the feasibility of measuring the dimensions involved in the transaction (Caleman et al., 2008).
According to Barzel (2005), most exchange agreements combine contractual guarantees, enforced by the State, with long-term relationships, aiming to secure property rights. Property rights can be assured on both the legal and economic fronts, but always with associated positive costs (Caleman and Zylbersztajn, 2012; Sudré et al., 2021).
However, as Ménard (2018) states, there are many organizational “strange forms” that cannot be explained only by transaction attributes and information measurement. This is especially important when we talk about organizational arrangements that are relational or so uncertain that it is not possible to put them in a contract (especially due to subjective measurement) (Guimarães et al., 2021; Pereira et al., 2022a). Even if NIE recognizes the existence and importance of social and informal aspects (Barzel, 2005; Greif, 1996; Ménard, 2012; North, 2003; Williamson, 1985), they do not take them into account when analyzing economic transactions. For Hodgson (2006), excessive emphasis on formal and legal aspects can neglect dependence on informal rules and norms. Therefore, the greater focus of NIE on formal institutions opened space for the need to complement this vision with an approach that could emphasize informal institutions, such as the vision of NES and social capital (Nee and Ingram, 1998; Nee and Swedberg, 2008; Richter, 2015; Zenger et al., 2001).
According to Granovetter (1990), economic sociology is based on two fundamental sociological propositions: the first is that action is always socially located and cannot be explained by individual motives alone; the second is that institutions do not arise automatically; they are socially constructed. To understand how behaviors and institutions are influenced by social relations, Granovetter (1985) argues that economic activities are structurally embedded in concrete and continuous systems of social relations, a concept known as “embeddedness”. Embeddedness is a macro analytical construct that emerges from the argument that behavior and institutions should be analyzed as dependent elements of social relations (Granovetter, 1985). Assuming that economic activities are immersed in networks of social relationships, the network can be seen as a micro analytical part of NES and embeddedness, as it is concerned with the relationships between actors.
Social networks are defined as a set of nodes or actors, which can be people or organizations, linked by social relationships or ties of a specific type, containing strength and content (Castilla et al., 2000). Based on the concept of embeddedness and closely tied to informal institutions, the concept of trust gains special attention. However, a limitation arises when dealing with social aspects within social networks, where the focus remains on relational aspects (ties formed between actors) or structural aspects (actors’ positions in the network), without considering institutional issues, such as norms.
Social capital is defined here as norms, networks, and trust that facilitate collective action (Keefer and Knack, 2008; Putnam, 1993; Woolcock, 1998). It can extrapolate horizontal relationships to vertical relationships (Coleman, 1988). Trust is conceptualized as “the extent to which someone believes that others will not act to exploit their vulnerabilities” (Morrow et al., 2004: p. 49). Two types of trust are considered: trust based on economic aspects, including belief in contracts, transaction guarantees, and formal organizations; and trust based on social aspects, which arises from emotional ties (family or friendship), common characteristics between them, and the reputation of the individual involved in the exchange (Chiles and McMackin, 1996; Morrow et al., 2004).
Studies have been developed to explain interfirm relationships (Beuve and Saussier, 2012; Ebers and Oerlemans, 2016; Zheng et al., 2008). Beuve and Saussier (2008, 2012) consider that when the institutional framework is weak, especially regarding enforcement, the use of informal devices between the parties is not the result of a choice but rather a consequence of the institutional and legal framework. In these cases, the importance of social capital to explain economic relationships is highlighted, as has been developed in studies in Sri Lanka (Priyanath and Premaratne, 2015), Ethiopia (Abbay et al., 2018; Gelaw et al., 2016; Tadesse and Kassie, 2017), Ghana (Lyon, 2000), Uganda (Heikkilä et al., 2016), India (Mungra and Yadav, 2022), Morocco (Chafai, 2023), South Africa (Thindisa and Urban, 2018), China (Li et al., 2023), and Brazil (Macedo, 2015; Pereira et al., 2022a; Santos Junior and Waquil, 2012).
The complementarity between the approaches was also observed in other contexts, where the existence of social capital resulted in positive impacts on innovation (Chang et al., 2012; Zhao et al., 2021), transfer of knowledge (Kim et al., 2012), productivity (Nerozzi et al., 2014), value co-creation (Chang et al., 2017), credit access (Heikkilä et al., 2016; Villalba et al., 2023), and encouragement of agro-processing participation (Thindisa and Urban, 2018). Some studies, while employing the concept of social capital, focus on social networks to analyze social aspects without considering informal norms (Jacques et al., 2018; Vlachos and Dyra, 2020). Additionally, other studies use the concept of relational capital to explain the importance of relationships built through repeated exchanges (Elfenbein and Zenger, 2014; Raue and Wieland, 2015; Swierczek, 2020).
However, none of these studies sought to understand how social capital, especially through trust, impacts the organization of economic transactions from a neo-institutional perspective. Despite efforts to integrate these approaches, there is no clear answer on how social capital influences economic transactions or about the sources of social capital, whether it comes from norms, networks, or trust. Therefore, our aim here is to understand the transactions between agents and the governance structure adopted from two aspects: the economic one, which depends on the attributes of the transactions and the measurable dimensions; and the social one, considering the interactions between individuals and groups as a backdrop.
3. Methods
In this paper, our aim is to understand the role of social and economic trust in transactions and in the choice of governance structures between beef cattle producers and slaughtering cooperatives in the specialty beef production systems in Paraná state, Brazil. For this purpose, we conducted a qualitative and descriptive research (Denzin and Lincoln, 1994; Flick, 2009), involving a deep investigation according to the NIE and NES theoretical framework, which do not aim to create economic models to address complex economic problems (Williamson, 1985; Joskow, 2000). Our approach included a structured and systematic analysis, incorporating bibliographic, documentary, and field research to reinforce the study’s validity.
Both secondary and primary data were collected for this study. Secondary data were obtained from beef cattle reports and bulletins in Brazil and Paraná, as well as from internal documents and websites of the analyzed cooperatives. Following the convergence and saturation criteria, primary data were gathered through 31 in-depth semi-structured interviews with a set of agents integrating the chain. Initially, three key agents were interviewed, namely those who participated in the design and execution of the “Bovinocultura de Corte do Paraná” project by Emater/IDR-PR, and/or supported the development of cooperatives focused on the production of specialty beef in the state (AC1, AC2, AC3).
During the interviews with key agents, the distinction between the cooperatives in the North and South of the state was highlighted, prompting the investigation of cooperatives in both locations. Three cooperatives, along with some of their members, were examined. The decision was made not to identify the cooperatives due to the complexity of their institutional environment, aiming to prevent potential constraints on the interviewees.
This type of arrangement differs from the conventional organizational approach in Brazil. Other similar attempts to form alliances or cooperatives, coordinated by groups of producers, have been unsuccessful, leading to discontinuation or modification over time (Caleman et al., 2008; Macedo, 2015; Pereira et al., 2022a). We have selected representative cases to address the research questions. Specifically, the cooperatives studied account for 42% of all seven cooperatives operating in the state. The three cooperatives under study encompass nearly 34% of producers operating in this system.
In the first cooperative investigated, located in the North of the state and referred to as Cooperative A, interviews were conducted with three representatives of the cooperative (CA1, CA2, CA3), seven cooperative members (PA1 to PA7), two distributors (SA1, SA2), and a former member (PA8). In the second cooperative, situated in the Southwest region of the state and named Cooperative B, interviews were conducted with two representatives of the cooperative (CB1, CB2), five cooperative members (PB1 to PB5), and one supplier (FB1). In the third cooperative, situated in the Center-South region and known as Cooperative C, interviews were conducted with two representatives of the cooperative (CC1, CC2) and five cooperative members (PC1 to PC5).
Interviewees were selected using snowball sampling (Atkinson and Flint, 2004), where key agents in each cooperative initially nominated potential interviewees. Subsequently, representatives of the cooperatives and beef cattle producers suggested additional interviewees based on the accessibility of the nominees. Additionally, non-participant observation was conducted during visits to cooperatives, some slaughterhouses, and rural properties. On these occasions, pertinent information for the survey was recorded in a field diary.
For the analysis of both primary and secondary data, qualitative content analysis was used (Mayring, 2014). Content analysis is useful for developing in-depth qualitative analysis in a structured and systematic way (Bardin, 1979). The interviews totaled around 28 hours of audio recording, averaging almost one hour per interviewee. All interviews were recorded and later transcribed. To help organize and categorize the data, the software Atlas.ti was used, as shown in Table 1.
Code process
Citation: International Food and Agribusiness Management Review 27, 3 (2024) ; 10.22434/ifamr2022.0049
Source: authors.Categories and subcategories of analysis.
Citation: International Food and Agribusiness Management Review 27, 3 (2024) ; 10.22434/ifamr2022.0049
Source: authors.The codes were organized into seven family codes, and these family codes were further grouped into categories and subcategories. Table 2 provides a summary of the categories and subcategories of analysis that emerged from the literature, forming the analytical framework for this research.
Data collection involving various agents in the chain, non-participant observation, and the use of secondary data allowed its triangulation.
4. Results
Cooperative A was initially established as a marketing alliance in 2005. By the end of 2008, it underwent a transformation into a cooperative to formalize the commercialization of meat, which was previously sold with a direct invoice from the producer (CA1). The administrative management of the cooperative is handled by an outsourced company (referred to as Outsourced A). Despite being formally hired by Outsourced A, the interviewees, namely CA1, CA2, and CA3, were considered representatives of the cooperative, as their roles are often conflated in the perception of those involved. Cooperative A consists of 27 beef cattle producers (CA2, CA3), slaughters approximately 750 head of cattle per month (CA1, CA3), and distributes the meat to 18 municipalities (CA3).
Cooperative B originated from the organization of beef cattle producers along the lines of a marketing alliance in 2004. Initially, only 13 beef cattle producers agreed to form the alliance, involving the purchase of a meatpacking plant. To meet the legal minimum number of participants required to establish the cooperative, the beef cattle producers included other family members, totaling 22 people (CB1, PB1). The proximity of beef cattle producers and the investments made contributed to Cooperative B operating in a closed manner, making it difficult for new beef cattle producers to enter.
The presence of its own slaughterhouse enables Cooperative B to slaughter animals from both its cooperative members and partners (non-members). Additionally, Cooperative B has leased a farm for animal fattening. Currently, the slaughterhouse processes cattle, with 60% coming from members and 40% from non-members. The cooperative has 30 to 40 beef cattle producers classified as partners. According to CB1, a partner is a beef cattle producer who consistently sells to Cooperative B without negotiating the price. The slaughter volume ranges from 1500 to 2000 animals, resulting in a meat volume of 375 to 500 tons per month.
Cooperative C began to be designed in 1998 by a group of seven producers of German origin who were part of another agro-industrial cooperative in the Center-South region of Paraná, here called CX. It was the first marketing alliance created and became a cooperative in 2007 (CC1). It has about 50 employees to manage the two projects: cattle and sheep. The entire logistical process of searching for cattle and delivering meat is carried out by Cooperative C, which allows quality control from the farm to the retail (CC1, PC1). Currently, there are about 130 cooperative producers in total.
The slaughter volume is approximately 22 000 animals per year, and the slaughter service is outsourced (CC1). Cooperative C pays a fee for the slaughter service. Most of the slaughter is conducted in a partner slaughterhouse, with the partnership formed from the beginning when it was still an alliance. Although this meatpacking plant is not exclusive, CC1 mentions that most of the slaughter is carried out for Cooperative C. Due to space and volume restrictions in the meatpacking plant, a second partnership was established with a larger meatpacking plant located almost 300 km away from the Cooperative’s headquarters, aiming to increase the slaughter volume. Cooperative C holds breed certification.
It is observed that, although the operation of cooperatives is similar, and all structures are characterized as hybrid, there are differences in the procedures that influence transactions, reflecting the heterogeneity of organizations. These differences include the slaughter structure, which may be self-owned (Cooperative B) or outsourced (Cooperatives A and C), flexibility regarding age and breed, the type of technical support, the fleet that can be owned (Cooperatives B and C) or outsourced (Cooperative A). A summary of the economic and social aspects identified in the three cooperatives studied was presented in Table 3.
Comparative summary of social and economic aspects in the studied cooperatives.
Citation: International Food and Agribusiness Management Review 27, 3 (2024) ; 10.22434/ifamr2022.0049
Source: authors.It is observed that there is physical asset specificity in transactions (Williamson, 1996), as the transaction depends on cattle attributes, such as breed; locational specificity, given that the location of the properties impacts the transaction, and the movement of animals over a long stretch can cause wear or stress to the animal, consequently affecting quality; human asset specificity, as agents need to acquire specific knowledge for the transaction to occur satisfactorily; temporal specificity, associated with the animal’s age requirements and the regularity of delivery, which is important for this transaction; and, in the case of Cooperative C, brand specificity, due to breed certification.
Frequency plays a crucial role, as both the regularity of delivery and the time commitment of beef cattle producers in the arrangement influence the negotiation. The commitment to delivery, if not fulfilled, results in moral sanctions and may lead to the expulsion of the producer from the cooperatives. Payment frequency is also a significant aspect for beef cattle producers.
In the case of uncertainties impacting the transaction, it can be observed that there are market uncertainties due to constant fluctuations in cattle prices and the seasonality of retail meat demand; climatic uncertainties, such as excessive rains or droughts; and behavioral uncertainties, such as the behavior of meatpackers and some beef cattle producers seeking to take advantage of the transaction. Nevertheless, all interviewees agree that uncertainties in cooperatives are lower than in the conventional market. This is because confinement and food supplementation make the impact on the system smaller than in the conventional market. Furthermore, the climate interferes to a lesser extent in livestock compared to agriculture.
Regarding the measurable dimensions, it is observed that they are carried out as a means of guaranteeing the value of the products. In all three cooperatives, similar measurements are performed, although their intensity varies. A significant aspect of measuring the attributes in this transaction is that the transaction occurs when the animal is loaded onto the farm (ex-ante), but some measurements can only be made after slaughter (ex-post).
The age of the animal can be visually analyzed ex-ante through the teeth and confirmed ex-post, which, according to the interviewees, is easily ascertained. Sex is easily analyzed visually by agents ex-ante, but this does not apply ex-post. Breed is visually analyzed ex-ante, which agents say is easy for them. However, as the animals are crossed, they can acquire characteristics of the breed of both parents, resulting in different characteristics. This depends on experience or specific knowledge for verification, making this attribute difficult to measure.
Regarding the animal weight, cattle are initially weighed on the farm and then at the Cooperative. Although the weight used for payment is that of the cooperatives, measuring on the farms is important for the beef cattle producer to compare weights and maintain trust in the cooperative. After slaughter, the carcass weight is calculated to estimate the yield when compared with the animal’s weight. This process can sometimes lead to conflicts, as discussed by Pascoal et al. (2011), since carcass weight falls under the domain of the processing link.
The animal’s conformation is visually analyzed ex-ante, relying on the agents’ experience, and does not guarantee ex-post quality; hence, it can be considered difficult to measure. Estimating the fat finish can be done by analyzing ex-ante the animal’s conformation, which is considered difficult to measure, as it does not ensure that the finish aligns with the required specifications. Ex-post, visual confirmation of the carcass’s fat content in millimeters and uniformity of the fat cover is conducted. Despite respondents claiming it is easy to measure, it is subjective. Regarding animal health, it is emphasized as a minimum requirement that can be verified both ex-ante and ex-post through the purchase invoices of vaccines and the list of vaccinated cattle.
The division of Cooperative A into two distinct groups brought problems to the arrangement and resulted in the departure of some beef cattle producers. Cooperative B, with its cohesive network, faces difficulties in opening to new members. Nevertheless, there have been new entries, necessitating modifications to the regulations. Cooperative C, which had to expand due to certification, exhibits a cohesive core and a distinct fringe. Despite the expansion considering social ties, the profile of beef cattle producers, and slaughter volume, there is a noticeable distance of new entrants from decision-making power. The board of Cooperative C and the supervisory board are predominantly formed by beef cattle producers from the core, either due to geographic proximity or their willingness to participate.
When it comes to norms, the behavior pattern of the cooperatives’ agents differs from that in the conventional market. Regarding the beef cattle producer, interviewees perceive the traditional beef cattle producer as individualistic and hesitant to invest in cattle. The change in the beef cattle producer’s behavior, according to interviewees, is linked to three attitudes: (1) the approach to property management, considering the necessity of regular delivery; (2) the requirement to invest in and modify the breeding/production system; and (3) the focus on collective work. Generally, the observed rules of conduct among agents significantly influence transactions, as they are concerned with the opinions of other agents and consider them in decision-making. Another noteworthy observation is the cultural origin, which affects how agents act. Heterogeneous cultural origins were identified in Cooperative A, while homogeneous origins were found in Cooperatives B and C, aligning with the patterns of occupation and population dynamics in the regions to which the cooperatives belong.
In conclusion, considering trust, participation in alliances primarily originated from existing network ties and individual reputations. Geographic proximity also played a crucial role in forming these networks. Norms within each group significantly contributed to their cohesion, highlighting the importance of trust based on social aspects, including ties, norms, and individual reputations. Emater’s/IDR-PR reputation, though influential in both alliance and cooperative formation, had a somewhat lesser impact on participation in Cooperative B.
On the other hand, the frequency of successful transactions, including measurements, favored the construction of the cooperatives’ reputation, strengthening trust among agents. Trust, based on economic aspects, is shown to be more important for the perpetuation of the organization and, consequently, contributes to the reduction of transaction costs, because, as perceived, the need for measurements and monitoring is reduced, both by technicians and beef cattle producers.
In general, the variations in governance structures are associated with social capital, involving various types of ties, informal norms, and levels of trust. In this context, it becomes evident that, within the same governance structure, transactions are not uniform, as the degree of closeness and adaptability of the beef cattle producer permits a certain leniency in measurements. Thus, it is observed that there is no singular standard in transactions, highlighting the complexity inherent in the beef production system.
5. Discussion
Considering the description of the attributes, dimensions, and social capital inherent to the agents in the three slaughtering cooperatives of the specialty beef system in the state of Paraná, their influence on the exchange relations and the adopted governance structure can be noted, as preliminarily discussed. First, it was observed that, considering the beef production system, failures in the formal institutional environment (Caleman and Zylbersztajn, 2012; Pascoal et al., 2011; Pereira et al., 2022; Santos, 2017b) persist. Despite the existence of extensive regulations, the voluntary nature of some rules, and the misalignment between them, along with the low enforcement power of the State (a weak institutional environment), do not seem to contribute to their adoption.
The deficiencies related to formal public institutions contributed to the agents acting in an environment focused on mistrust, with the possibility of opportunistic actions. Private formal institutions, in turn, do not resolve existing failures. For this reason, informal institutions in the beef production system are considered, mitigating the conflicts. This is because all agents, especially beef cattle producers and meat packers, have peculiar behaviors that contributed to the formation of this environment. This scenario favored the emergence of an organization that efficiently responded to this environment of uncertainty when the system turned to livestock with quality attributes more difficult to measure, which culminated in the development of alliances and, later, their transformation into cooperatives, considered as hybrid structures (Ménard, 2014; Souza and Bánkuti, 2012; Williamson, 1985).
Within this hybrid structure, as there are investments and efforts by the beef cattle producer to meet specific parameters, it involves bilateral dependence between the parties. When considering TCE, it is observed that a high specificity of assets exists, including specificity of physical, locational, temporal, human assets, and brand (Williamson, 1996); in the case of Cooperative C, it holds certification. Additionally, the amount paid for joining the cooperatives can be seen as a specific non-recoverable investment, since the beef cattle producer does not receive the amount paid back if they leave the cooperative, which also becomes a specificity. When it comes to the beef production system in general, it is noteworthy that behavioral and market uncertainties exist, which are mitigated in the studied cooperatives. Moreover, necessary ex-post adaptations, such as price and scale adjustments, could lead to conflicts between the parties.
It is observed that measurements are important during transactions, as they seek to ensure the parties’ property rights (Barzel, 2005). However, as beef cattle producers deliver the cattle and receive payment for the meat, the dimensions that are difficult to measure ex-ante, such as the conformation of the animal, fat finish, and the dependence on specific knowledge to visually classify the breed, such measurements do not guarantee efficiency in adopting the hybrid form of organization by themselves. Therefore, there are risks for value appropriation and hold-up (Klein, 1996; Mazé, 2002).
Despite the feasibility of conflicts and disincentives to quality, which could compromise the functioning of the system, this has been mitigated by social aspects, being resolved between the agents without breaking the relationship. In this context, it is argued, as discussed initially, that transactions are permeated by social interactions since it was possible to identify that social capital, in the role of ties between the various agents, geographical proximity, group cohesion, behavioral change of the agents involved, and cultural origin, enabled the formation of the arrangement and has helped in its perpetuation. These social aspects were sources of trust among the agents, who until then had acted in an environment averse to cooperation, which made it possible to act together.
It was identified that it was social and economic trusts that made the formation of the arrangements possible. While social trust had more relevance in the formation of the arrangement, economic trust had more relevance in the efficiency of the transactions. As the exchanges were repeated and the cooperative became recognized, that is, the organization’s reputation grew, trust based on economic aspects became more important, as the new beef cattle producers, who do not have the same personal knowledge of the former, entered the arrangement based on trust in the cooperative’s reputation.
Trust based on economic aspects has a greater influence on the transaction, as it was observed that repeated exchanges allowed for a relaxation of measurements and the need for monitoring beef cattle producers, leading to a decrease in monitoring costs and, thus, in transaction costs. Economic-based trust, however, would not be enough for the system to function, as it depends on socially based trust for its formation.
It identified informal norms that hold a relevant weight in social interactions, as the behavior of the agents, the cultural origin, and the cohesion of the group were sources of trust, requiring the incorporation of their analysis into studies dealing with social networks, as discussed by Keefer and Knack (2008).
As far as the sources of social capital are concerned, it can be observed that they can derive from networks, norms, and the trust that arises from both the social and economic aspects that involve exchange relations. In the cases studied, trust for the formation of the governance structure and for the transactions was built based on different sources: (1) in the relationship networks, including friends, family, and people with reputation in society, that is, both for strong and for weak ties; (2) informal norms, in the role of norms of behavior, cultural origin, and group cohesion; and (3) through repeated exchanges and the reputation of the organizations involved. In this scenario, the findings contribute by demonstrating that research focusing only on social networks or informal norms may present incomplete results.
When the two sources, networks and norms, are more influential, social capital tends to be reinforced, as in the case of Cooperative B and more strongly in Cooperative C, in which the homogeneous cultural origin, especially ethnicity, played a significant role in the formation of arrangements and influence in the undertaking of transactions. Therefore, given the influence of social interactions between individuals and groups, it is assumed that transactions can be seen as exchange relations.
As an empirical contribution, exchange relations are not homogeneous. Even if the rules are the same for all cattle livestock producers, those who reach a higher level of trust within the cooperatives, either due to the greater participation or proximity of the arrangement and/or the one who has been in the arrangement longer, tend to be more adapted. Therefore, transactions tend to occur more naturally, with fewer errors in the quality standard, a lower incidence of conflicts between the parties, and less need for monitoring, reducing the consequent transaction costs.
This question reveals another important theoretical-empirical contribution, as it raises the need to look at the governance structure involving transactions that are different from each other and not considering all transactions as equal. This entails identifying individual transaction characteristics that influence transaction costs. This identification can help by allowing the characteristics that reduce costs to be adopted or stimulated by other agents, optimizing the other transactions within the same governance structure. Consequently, when considering the choice of governance structure, it is argued that social capital should be analyzed, especially in complex institutional environments. In the cases described the trust between the parties enabled the adoption of the hybrid structure, which, even with high asset specificity and some aspects that are difficult to measure, proved to be efficient.
When considering the complementarity between TCE and MCE, it was observed that measurement has a predominant role in the beef production system, since the use of measurement mechanisms, even if deficient ex-ante, such as animal conformation and fat finish, helped to build trust in the economic base. It is also argued that the need to measure dimensions can be reduced in the presence of social capital.
From these contributions, it was possible to identify some points of attention when considering these arrangements. First, given the heterogeneity of slaughtering cooperatives and the influence of the identified social aspects, it is argued that growth or development decisions cannot be based solely on economic aspects. The decision to certify animals from a certain breed is also an aspect to be analyzed with caution, as the required slaughter volume tends to increase, and, with this, there is a need to increase the production of cooperative members or to open up to new members. This expansion in the face of a cohesive network can contribute to discontent and even the departure of beef cattle producers.
In general, the complexity of this type of organization indicates the need for gradual growth, as it depends on the behavior of all agents. Therefore, given the importance of the beef production system and the influence of slaughtering cooperatives in this system, as well as the need to promote better practices for organizations and improve the coordination of this chain, it is suggested that further research be conducted based on the findings reported here. It would be relevant to formulate hypotheses that can be tested in quantitative research, such as comparing the effects of social trust and economic trust in exchange relations. Another avenue of research could explore downstream exchange relationships, considering retail and consumers. Additionally, it is recommended to use the model developed to understand the specialty beef production system in other states, especially when considering non-cooperative meat packers, and to explore other beef production systems aimed at differentiation.
6. Conclusions
In summary, social capital fosters trust in networks and informal norms, facilitating the establishment of a hybrid governance structure in a complex institutional environment. In essence, social capital alters the parameters outlined by TCE and MCE for the adoption of the governance structure. It is essential to examine both trusts based on social aspects and trust based on economic aspects to comprehend the formation and sustainability of cooperative arrangements. Relying solely on one aspect is insufficient. Social trust holds greater significance in the arrangement’s formation due to recurring transactions, while economic trust becomes crucial for its continuity.
The trust achieved by agents facilitates transactions, alleviates behavioral and market uncertainties, enables ex-post adaptations, reduces monitoring costs, and consequently, lowers transaction costs. Nevertheless, it is argued that trust is always conditioned by economic aspects. If both the economic advantages and the measurements are not satisfactory, social aspects alone do not guarantee the completion of the transaction.
This study advances by highlighting the need to unpack the concept of trust. Simply addressing trust without investigating whether it stems from an economic or social basis is insufficient to comprehend the complexity of arrangements. Research in the general field of Economics often deals with trust without delving into its economic or social origins, which may be inadequate for understanding the complexity of arrangements and, consequently, hinder the ability to replicate and analyze other contexts. The simultaneous analysis of social capital and economic theories addresses this gap, serving as a valuable tool for replication and advancement in economic and social analyses.
Acknowledgment
The authors declare no conflicts of interest. We would like to thank the support received from the Coordination for the Improvement of Higher Education Personnel - Brazil (CAPES) - Financing Code 001 and the National Council for Scientific and Technological Development (CNPq) (proc. 471559/2014-8). Additionally, this study received partial funding from the Universidade Federal de Mato Grosso do Sul (UFMS/MEC), Brazil and the State University of Maringá (UEM), Brazil.
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