Abstract

Dairying is an important agricultural industry in Macedonia. It is, however, not competitive internationally seen. If a development of this industry is to take place, new governance structures are required. Hence the aim of this study is to identify the conditions for behavioural changes by Macedonian dairy farmers as concerns their choice of dairy processors. Transaction cost theory provides the analytical toolbox. The empirical data are collected through structured personal interviews with 30 dairy farmers. The findings indicate a general pattern; smallholders tend to sell to small processors and large farmers more often sell to large ones. This pattern has transaction cost economic explanations. For example, there is human asset specificity in the form of personal relations between the smallholders and the small processors. Physical asset specificity exist as the smallholders’ production facilities give rise to low quality milk, which can not be sold to large processors as these pay according to hygienic standards. Small processors pay a per-litre price

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Conference

Economics and Management of Networks

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