An Empirical Analysis of the Factors Influencing the Cooperative Relationship between Broiler Processing Enterprises and Broiler Raisers

Ling ZHANG，Xia ZHOU*，Fei QI

1.College of Economics and Management，Shandong Agricultural University，Tai'an 271018，China；2.Shandong Soft Science Planning Office，Jinan 250000，China

1 Introduction

China is the world's second largest broiler producer and consumer.According to the data of China Animal Husbandry Association，it is estimated that the demand per capita will exceed 10 kilograms by 2015，and chicken has become China's second largest meat consumer goods.China's broiler production modes include full industrial integration mode and＂company+farmer＂mode，and the latter accounts for about more than 90%.The＂company+farmer＂mode dominates the broiler production.However，this business mode is faced with frequent breach of contract，small binding forces of contract，broiler quality and safety incidents and other problems in practice.Early literature suggests that the company's own characteristics affect the company's behavior preferences.Enterprise scale，type of ownership，enterprise level and main type of service，are closely related to whether the agricultural enterprises are involved in contract farming（Zhao Cuiping，2008）［1］.The strength of enterprises is also an important factor influencing the corporate behavior，and Yi Qiupinget al.（2013）use the evolutionary game model to reveal the conditions for stable contractual relations between the enterprises with asymmetric strength aswell as their strategy choice［2］.Information costs，negotiation costs and implementation costs have a significant effect on farmers' sales practices（Song Jintian，2011）［3］，and the incompleteness of farm produce sales contract is the key to low agreement fulfillment rate（Liu Fengqin，2003）［4］.Reputation mechanism as a soft constraint can help reduce uncertainty，reduce transaction costs and stabilize cooperative relationship（Zhou Liqunet al.，2004）［5］.The distribution of benefits for leading enterprises and farmers depends on the specificity investment of the two sides，and the higher the specificity investment，the more the quasi-rent，but it also often becomes a condition for fleecing，which is not conducive to the stability of cooperative relationship between the two sides［6］.The＂company+farmer＂business mode changes the risk solely taken by enterprises or farmers to the risk shared by a union，but it does not eliminate the risk，so it is necessary to establish the risk-sharing mechanism［7］.External laws，policy environment and other organizations are also important factors affecting the stability of cooperative relationship.The stability of cooperative relationship between the two sides when there is intermediary coordination is far greater than when there is no intermediary coordination（Xia Taoet al.，2012）［8］.The basis of reducing rate of violation of agricultural contract is to improve the completeness and accuracy of contract terms，and the government or other departments can take timely legal action to ensure compliance rate of agricultural contract and improve the stability of cooperative relationship（Shi Jianmin，2001）［9］.

2 Hypothesis and variable selection

2.1 HypothesisBased on the existing research results，from enterprise characteristics，cognitive characteristics and environmental characteristics，this paper generalizes12 factors that affect stability of cooperative relationship.（i）Enterprise characteristics include enterprise scale，business operating period，enterprise level，and enterprises' attitudes and behaviors.If the enterprise scale is large，the default loss will be great，the agreement fulfillment rate of enterprises will be high and the cooperative relationship will be stable.The longer the business operating period，the more the cooperation and deal experience，the more the attention paid to ensuring stable cooperative relationship.According to the government's support standards for enterprises，if the enterprise level is higher，it will pay more attention to stability of cooperative relationship.The longer the contract term，the greater the probability of default，the more unstable the cooperative relationship.The attitudes and behaviors are enterprises' view of cooperative relationship，and the enterprises with better attitudes and behaviors will have a better understanding of cooperative relationship，and the agreement fulfillment rate will be higher.（ii）Enterprises' cognitive characteristics will affect the cooperative relationship，including transaction cost cognition，contract's binding force cognition，reputation mechanism cognition，specificity cognition，and risk-sharing mechanism cognition.Generally speaking，the greater the transaction costs，the greater the loss after corporate defaults，the more the attention paid to the stability of cooperative relationship.The binding force of contract is an important guarantee for cooperative relationship，and contract will constrain the trading behavior of the two sides to some extent.Trust plays an important role in improving transaction efficiency and reducing transaction costs［10］.Special investment is mainly the investment in space，equipment，technology，channels and other aspects［11］.The enterprises with a more profound understanding of special investment can make reasonable investment and improve the distribution of the remaining interests in advance，which is in favor of stable cooperative relations.Broiler raisers are risk averters，and if enterprises do not provide full insurance，it is easy to breach contract，but if enterprises provide full insurance，it is too difficult for common enterprises［12］.Therefore，there is a need to establish a reasonable risk-sharing mechanism to make enterprises and broiler raisers jointly bear the risk，which will help improve the stability of cooperative relationship.If enterprises have a more profound understanding of role of risk-sharing mechanisms，it will be more conducive to stabilizing cooperative relationship.（iii）Environmental characteristics mainly include legal and intermediary coordination.If the legal protection system is not perfect and enterprises or broiler raisers are not punished after breach of contract，it will encourage them to breach contract，which is not conducive to stability of cooperative relationship.Enterprises and broiler raisers，as two separate entities，need the coordination of intermediaries such as cooperatives.The intermediary coordination benefits both enterprises and broiler raisers.The better the intermediary coordination，the more stable the cooperative relationship.

2.2 Variable selectionBased on the above hypotheses，from the perspective of the enterprise，this paper selects 12 influencing factors to build the measurement model for stability of cooperative relationship，and these factors are listed in detail in Table 1.

Table 1 Variable definitions

3 Model design and data sources

3.1 Model design

3.1.1 Logit model.In statistics，logit model is a direct probability model that was developed by statistician D.R.Cox in 1958.The model is used to predict a binary response based on one or more predictor variables（features）.It is suitable for the choice behavior analysis in accordance with the principle of utility maximization，so this paper chooses logitmodel to analyze the factors influencing cooperative relationship.The stability of cooperative relationship is taken as the dependent variableZ.If it is stable，Z＝1；if it is not stable，Z＝0.Prepresents the probability of stable cooperative relationship；Xiis the factor that may affect the stability of cooperative relationship，i＝1，2，3，…，n.Logitmodel is as follows：

whereZis the linear combination ofXi（i＝1，2，3，…，n），namely：

wherebi（i＝1，2，3，…，n）is the regression coefficient of influencing factori.Ifbiis positive，factoriwill have a positive impact on the stability of cooperative relationship；ifbiis negative，factoriwill have a negative impact on the stability of cooperative relationship.By transforming equation（1）and（2），we get the following logitmodel：

whereb0is the constant term；ε is the random error.Using SPSS16.0，we can obtain the factors that have a significant impact on the stability of cooperative relationship.

3.1.2 ISM model.ISM（Interpretative Structural Modeling），developed by American scholar Warfield，is used to determine the relationship between the factors that affect system.Using correlation matrix and computer technology，it conducts information processing on various influencing factors and their relationship，to determine the correlation between influencing factors and further determine the intrinsic link between various factors.The factors that affect the stability of cooperative relationship are either independent or interrelated，so this paper uses ISM model to analyze the relationship between various influencing factors.The process is shown in Fig.1.

Assuming there arekfactors that affect the stability of cooperative relationship，S0represents a stable cooperative relationship，andSi（i＝1，2，3，…，n）represents the factor that affect the stable cooperative relationship.The definition of element of adjacency matrixBbetween factors can be shown in formula（4）.

Reachability matrixRis calculated by formula（5）：

whereIis the unit matrix，2≤λ≤k.The Boole's rule is used for exponentiation in matrix.The factors at the highest level are determined according to formula（6）.

whereP（Si）is the set of all reachable factors from the reachability matrixSi；P（Si）is the set of factors in the reachability matrix that can reachSi.

wheremijandmjiare the factors of reachability matrix.

3.2 Data sourcesThe data used in this paper are obtained by the students from Shandong Agricultural University in the actual survey and research during July to August2014.The survey areas cover seven cities in Shandong Province（Qingdao，Rizhao，Weifang，Yantai，Linyi，Taian，Liaocheng）.The survey object is the broiler processing enterprise in the7 cities，and the survey method is face-to-face interview.70 questionnaires were distributed and 65 were returned.After excluding the questionnaires lacking primary data，61 valid questionnaires were obtained，with the response rate of 87.14%.There are 32 enterprises with daily slaughter capacity ofmore than 70000，accounting for 52.46%.There are 42 enterprises engaged in broiler processing for more than 15 years，including 28 provincial leading enterprises（accounting for 45.9%）.It can be found that the enterprises surveyed have a large scale and high level，and have been long engaged in the broiler industry，with a better understanding of the＂company+farmer＂business model and cooperative relationship.Therefore，the survey data has high reliability.

4 Empirical analysis

4.1 Study results

4.1.1 The factors influencing stability of cooperative relationship.This paper uses SPSS16.0 to conduct the logit regression on 61 questionnaires，and finally gets7 significant influencing factors（enterprise scale，enterprise level，attitudes and behaviors，transaction cost cognition，contract's binding force cognition，reputation mechanism cognition and intermediary coordination）.The specific results are shown in Table 2.

Table 2 Logit regression results of the factors that affect stability of cooperative relationship

4.1.2 Interpretive structure of stability of cooperative relationship.This paper usesS0，S1，S2，S3，S4，S5，S6andS7to represent stability of cooperative relationship，enterprise scale，enterprise level， attitudes and behaviors， transaction cost cognition，contract's binding force cognition，reputation mechanism cognition and intermediary coordination，respectively.Based on survey and expert consultation，we give the logic diagram of influencing factors（Fig.2）.＂V＂indicates that row factorsaffect column factors while＂A＂indicates that column factors affect row factors.

According to formula（4）and Fig.2，we getadjacency matrix B（omitted）；according to equation（5），we get the reachability matrix R，as shown in formula（8）.

First，according to formula（6）and（7），we determineL1＝｛S0｝；then，according to the methods for other levels of factors，we determineL2＝｛S3，S7｝，L3＝｛S4，S5，S6｝andL4r＝｛S1，S2｝，respectively.Finally，we get the reachability matrixMas follows：

According to the above equation，it can be found thatS0is at the first level；S3andS7are at the second level；S4，S5andS6are at the third level；S1andS2are at the fourth level.Using arrows to connect various levels of factors，we get the logic diagram of the factors influencing stability of cooperative relationship，as shown in Fig.3.

4.2 Analysis of resultsThe regression coefficient of intermediary coordination is 4.398，and the statistical probability is 0.001，passing the1%significance test，indicating that intermediary coordination has a significant positive impact on stability of cooperative relationship，in line with expectation.In actual survey and research，there are no intermediary organizations to coordinate the relationship between enterprises and broiler raisers in many areas；although there are intermediary organizations in some areas，the coordination role is small，and even useless.

Therefore，strengthening the role of intermediary organizations in coordinating the relationship between enterprises and broiler raisers is the main way to improve the stability of cooperative relationship.The regression coefficient of behaviors and attitudes is3.215，and the statistical probability is0.069，indicating that attitudes and behavior have a great positive impact on stability of cooperative relationship，which is also consistent with the expectation of this paper.Enterprises' behaviors are closely related to enterprises' attitudes，and the right attitudes can produce good behaviors.Enterprises' transaction cost cognition and contract's binding force cognition pass the 10%significance test，and reputation mechanism cognition passes the 1%significance test，indicating that transaction cost cognition，contract's binding force cognition and reputation mechanism cognition have a certain impact on cooperative relationship，and reputation mechanism cognition has the greatest impact.The better the cognition of transaction costs，the better the understanding of truth that a stable cooperative relationship helps to reduce transaction costs；the more comprehensive the cognition of contract's binding force，the easier the signing of written contract with broiler raisers；the more comprehensive the cognition of reputation mechanism，the more the attention paid to reputation building.Therefore，the more comprehensive the enterprises' cognition of transaction cost，contract's binding force and reputation mechanism，the more stable the cooperative relationship.The regression coefficients of enterprise scale and enterprise level are 1.725 and 2.042，respectively，and the statistical probability is 0.027 and 0.033，respectively，passing the 5%significance test，indicating that both enterprise scale and enterprise level have a significant positive impact on stability of cooperative relationship，which is consistent with expectation of this paper.The enterprises of larger scale and higher level will have greater business risks and market risks，have a more comprehensive understanding of transaction costs，contract's binding force and reputation mechanism，and pay more attention to stabilizing cooperative relationship to avoid risks.

5 Conclusions and policy recommendations

5.1 ConclusionsThe stability in the cooperative relationship between broiler processing enterprises and broiler raisers is a key factor restricting the performance of＂company+farmers＂business model in the broiler industry.Based on the survey data on seven cities in Shandong Province，from the perspective of broiler processing enterprises，this paper uses Logit-ISM model to reveal the factors influencing the stable relationship between broiler processing enterprises and broiler raisers as well as the hierarchy of these factors.Studies have shown that enterprise characteristics（enterprise scale，enterprise level，attitudes and behaviors），cognitive characteristics（transaction cost cognition，cognition of contract's binding force，reputation mechanism cognition）and environmental characteristics（intermediary coordination）will affect the stability of cooperative relationship.The enterprises of larger scale and higher level will have greater business risks and market risks，have a more comprehensive understanding of transaction costs，contract's binding force and reputation mechanism，and pay more attention to stabilizing cooperative relationship to avoid risks.

5.2 Policy recommendationsFirst，the government should provide preferential policies in capital，technology and information，encourage small enterprises to cooperate，and help large scale leading enterprises to expand the scale and improve the enterprise level；second，it is necessary to enhance training for business managers and decision-makers so that they fully understand the role of transaction costs，contract's binding force and reputation mechanism in stabilizing cooperative relationship；third，it is necessary to encourage enterprises to join the intermediary organizations，such as economic cooperatives，to give full play to the coordinating role of intermediary organizations.

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