Collective Entrepreneurship: A Comparison between two Producer Organizations

in the Ethiopian Honey Sector

Paper prepared for the EMNet 2011 in Cyprus (Dec. 1 – 3)

C. Chagwiza1, R. Muradian

1, R. Ruben

1, W. Tessema

2

1*Centre for International Development Issues Nijmegen, Radboud University, the Netherlands

Email:clarrytee@yahoo.co.uk 2 Department of Agricultural Economics, Hawassa University, P.O Box 05, Awassa, Ethiopia

ABSTRACT

Collective entrepreneurship has emerged as a viable strategy for producer enterprises to accrue

economic benefits and improved market access. Producers’ participation and collective action is

the core of the value chain development. This paper focuses on the comparison of 2 honey

producers` enterprises in Masha district, Ethiopia. We argue that the collective entrepreneurial

capacity of collective producer groups may vary depending on the form of organizations

involved (our case: cooperatives and private limited companies (PLCs)). The producer

enterprises considered are operating in the same area; they both received training on honey

production and quality management provided by SNV and most importantly, are both suppliers

of a lead firm, honey processing company and exporter to the European Union. By comparing

the groups across a number of variables, our results show that as compared to cooperatives,

PLCs have succeeded in their economic performance, concerted upgrading and integration into

the value chains. Our findings are consistent with collective action theory, which claims that the

likelihood of collective action is higher in small user groups. Additionally, the PLCs have

managed to establish good relations with the processor which can be seen in the value chain

financing. This paper further suggests that engaging the private players like processors is pivotal

in facilitating innovativeness and entrepreneurship among producers, rural development and

socio-economic betterment of smallholder producers.

KEYWORDS: Collective entrepreneurship, collective action, cooperatives, honey, PLCs, pro-

poor, value chain development, and Ethiopia

1 THEORETICAL BACKGROUND

The manner in which producer groups functions and relate with the downstream value chain

players (private processor-our case) determines whether or not they are able to accrue economic

rents. As Mangus and Piters (2010) put it, the private sector is interested in the output whilst the

small scale producer is interested in improved market access. Organising the producers into

groups bridges these two symbiotic needs, but it is not a matter of simply being “organised”, how

producers are organised is essential. This reflects the importance of the type/form of producer

institution. Market intermediaries, for example downstream actors like processors, can play a

significant role in stimulating entrepreneurship among small scale producer groups. In this study,

we seek to explain the process by which individuals collaborate as a group to seize wealth

creation opportunities by comparing 2 different collective enterprises, cooperatives and private

limited companies (PLCs1). The main important differences between these 2 groups are: (i) the

size of membership; primary cooperatives can have several hundreds of members while the

PLCs are allowed to have a maximum of 50 members (ii) the cooperatives are strongly regulated

by the cooperative offices whereas PLCs does not have much external influence and finally (iii)

unlike in cooperatives, PLC members can buy shares.

Collective entrepreneurship is a key component of economic growth and development. The

organization`s entrepreneurship co-aligns it with the market conditions by building and

modifying organization`s resources, competences, and organizational architecture to respond

(Bratnicki, 2005) and influence market conditions and development This phenomenon is

described as a process by which entrepreneurs engage in collective action for the economic and

social betterment of a locality by means of some transformation of social norms, values, and

networks for the production of goods or services (Connell, 1999) and taking risks together

(Trompenaars and Hampden-Turner, 2002). Stewart (1989) suggests that collective

entrepreneurship implies an increase in the ability of each member of the group whenever they

are confronted by the continued demands and opportunities from the environment. The concept

of collective entrepreneurship has now evolved as a strategy for producers to overcome business

challenges and accrue economic benefits. However, Cook and Plunkett (2006) proposed that

collective entrepreneurship begs for more research.

Enhancement of entrepreneurial capacities has recently become part of the agenda of global rural

development interventions. Having said this, we argue that the producers’ participation and

collective action is the core of the value chain development2 since they are the producers of the

commodities. However, Cook and Plunkett (2006) points out that for any form of a collective

organization to achieve the highest performance, members` decisions about their own on-farm

activities and investments should be aligned with the cooperative. This is a risk associated with

collective entrepreneurship that producers should be willing to take.

1 Despite the differences highlighted between the 2 groups, it is important to note that a PLC is also a form of a

producer group formed as an alternative to a cooperative. Just like cooperatives, a PLC is formed and owned by a

group of farmers 2 Value chain development implies the inclusion of upstream value chain players through guaranteed marketing

outlets and the appropriate response to quality and standards requested by downstream value chain players

Vast literature on natural resource management has already demonstrated the advantages of

collective action. The literature on the factors that are likely to affect collective action,

particularly in natural resource management, offers numerous lessons that can be applied to

collective action in marketing (Markelova and Meinzen-Dick, 2009). Social and economic

heterogeneity, group size, and the mediating role played by institutions (coops and PLCs – our

case) have been highlighted in literature (Poteete and Ostrom, 2004; Agrawal, 2000) as factors

that influence collective action. Among the other factors that can affect collective action, group

size has been mentioned by several researchers (Olson, 1965; Agrawal and Goyal, 2001; Hussi et

al. 1993). For instance, Agrawal and Goyal (2001) argue that the costs of monitoring rise more

than proportionately as group size increases. In the same vein, Bandiera et al (2005) argues that

on one hand, the institutional features that make collective action successful, such as monitoring,

are more easily implemented in small groups. On the other hand, as compared to small groups,

there might be economies of scale in large groups.

Olson (1965) addressed the “free rider” problem, whereby the contributions offered by group

members toward collective goals decline with increases in group size. Olson hypothesized that

“unless the number of individuals in a group is quite small . . . , rational, self-interested

individuals will not act to achieve their common or group interests unless certain conditions are

present.” He further mentioned “privileged group and special incentive mechanisms” as some of

the conditions. A privileged group is described by Olson as one that functions in a manner that

aligns member preferences and reduces organizational inefficiencies. In larger groups, every

member benefit even without their contributions to collective action. Olson (1971) proposes a

strategy to solve this problem by creating individual selective incentives that will induce

individuals to contribute to a collective good as a by-product of their contribution.

Hussi et al (1993) points out that transaction and managerial costs of cooperation increase faster

than the gains as group size increases beyond a certain level. In the same line, Hardin (1982)

argue that the larger the number of people who must be coordinated, the higher the costs of

organizing them to an effective level. Thus basically, transaction costs are expected to be

proportionally higher in larger groups as compared to smaller groups. Additionally, resource

characteristics and diversity among members influence transaction costs of collective action

(Ostrom, 1994). There are social norms and values like trust, loyalty, social capital etc, which

can play a big role in facilitating the success of collective action. Bonding social capital

(involved in the linkages between different social groups, such as between suppliers and buyers)

typically is formed in small groups (O`Brien et al 2005) and the potential of social capital as

highlighted by Kirsten (2004) is that each partner will forego opportunistic behaviour and

thereby lowering transaction costs.

In addition to factors influencing the success of collective action discussed above, Aiken and

Hage (1971) identified another important factor that can hinder innovativeness of a collective

group or organization. In the current study we refer to technological innovation which is defined

by Devaux et al (2007) as improvements in the way commodities are produced or transformed.

According to Aiken and Hage, the older the organization, the more bureaucratic and the less

receptive it is to innovation. Younger organizations are believed to be in a better position to

embrace new technologies and more willing to innovate than older organizations.

The current study focuses on the collective entrepreneurial capacities of different honey

producing enterprises. We seek to examine how collective entrepreneurship capacities of these

enterprises can transform honey production in Masha area into a competitive sector that could

promote higher exports and stable income growth among beekeepers. Two types of producer

groups (cooperatives and PLCs) exist in the study area and they are both producer collective

enterprises. The area of study was an interesting choice due to various reasons. NGOs like The

Netherlands Development Organization (SNV) and Non-Timber Forest Products (NTFP) are

working in partnership in promotion of honey in the area. Since the forest in the study area play a

very crucial role in the livelihoods of the local people, NTFP project aims to contribute to

poverty alleviation and environmental conservation by facilitating certification of the forest

products like honey and coffee. The area is characterized by producing “Tropical Forest Honey”,

which allows the processor, Bezamar, to supply a niche market with organic honey. The two

producer marketing organizations, cooperatives and private limited companies (PLCs), were

considered for the study because they are both the main suppliers of the lead firm, Bezamar. In

addition, both groups received training on quality financed through SNV and NTFP grants and

also from the NTFP project. Hence, it is interesting to assess the effects of the interventions on

collective entrepreneurship capacities of the 2 groups. The following conceptual framework

(Figure 1) is proposed to guide and explain this phenomenon among honey producing groups

using different dimensions:

Figure 1: Conceptual Framework

The framework presented above focuses on how collective enterprises, through various

dimensions of entrepreneurship, aim to be profitable, transfer competitive and responsible

business practices along the corporate value chain. Thus we can argue that the cooperatives and

PLCs are especially important for capacity-building and for empowering small producers to

engage in market forces. Muradian et al. (2011) identified the alignment of incentives; the

possibilities of coordination (organizational structure and value chain governance); attitudes

towards risk; psychological traits and social abilities of managers as determinants of collective

entrepreneurship. On the other hand, Yan and Sorenson (2003) points out that the collective

Collective entrepreneurship

Dimensions of entrepreneurship

� Incentive schemes for board members

� Price

� Marketing

� Productivity

� Innovation and technological transfer

(Adopting transitional beehives )

� Income

capability of both identifying and responding to opportunities are important components of

collective entrepreneurship.”

The main objective of this study is to empirically compare how the value chain development

intervention has facilitated collective entrepreneurship between cooperatives and PLCs and how

that has translated to productivity and commercialization of honey between these 2 groups.

The general objectives of this study are:

� To compare the entrepreneurial capacities between the coops and PLCs

� To evaluate the influence of different forms of producer organizations (cooperatives and

PLCs) on honey commercialization and innovativeness among producers

� To identify constraints and opportunities for honey marketing among the cooperatives

and PLCs members

� To assess the producers` perceptions on the transitional beehives as compared to

traditional hives

The remainder of the paper is structured as follows: the next Section 2 provides a brief

background of the Ethiopian honey sector. Section 3 presents the sampling techniques, type of

data collected and the methods used for data analysis. Empirical results are presented in Section

4. Finally, concluding remarks are presented in Section 5.

2 THE ETHIOPIAN HONEY SECTOR

Beekeeping is a traditional important farming activity to harvest honey for many rural people in

Ethiopia (Agonafir, 2005). Ethiopia`s total honey production stands at approximately 39,700 tons

per year (GDS, 2009). The country is one of the five biggest wax producers with an average

annual export estimated at 3000 tones (EEPD, 2006). This makes the country the leading honey

producer in Africa and one of the ten largest honey-producing countries in the world. Moreover,

it stands as the world’s 4th largest beeswax producer. The main importers of honey are the USA,

Japan and EU countries.

Seeing the potential of the sub-sector, different stakeholders (the government, non-governmental

organizations, etc.) have initiated development interventions in the country as a whole and the

study area (Masha) in particular. The government has given more attention to the promotion of

improved hives (transitional and modern) provided with subsidized prices through the Ministry

of Agriculture and Rural Development extension system. This policy has triggered the

participation of women in beekeeping activities. The NGOs have facilitated the adoption and use

of low-cost and appropriate hive technologies and provided training to the beekeepers. However,

this rapid promotion of improved beekeeping technologies has not been well-embraced by the

smallholder producers and has been constrained by different problems which are not well

documented especially for the Masha area.

Small-scale producers are the most important honey producers in Ethiopia. The main buyers for

the Masha honey are private traders (local merchants), local Tej (Ethiopian traditional honey

wine) brewers and processors, for example, the lead firm Bezamar, a honey processing, trading

and exporting company. A lead firm can be described as a firm that have forward and backward

commercial linkages with a number of small-medium enterprises within the value chain and

holds a significant market share in the sector. The linkage of the private sector and honey

producers and their institutions (e.g. farmers groups) is considered essential along the value

chain to effectively link production, processing, value additions and the market. Thus, to satisfy

the market requirements on quality and volumes producers (suppliers) and buyers (processors)

need to closely align their activities in order to coordinate their transactions in an efficient

manner and become profitable. As a result, their degree of interdependence is increasing.

Bezamar is one of the key entrepreneurs who have assisted in facilitating the transformation of

the honey sector. SNV promoted a mutually beneficial relationship between the producer groups

and the lead firm through providing for the producer groups, a training on quality and technology

transfer; and business development services to Bezamar.

The sector is still underdeveloped as small scale farmers often lack access to improved hives and

international markets. Ethiopia’s honey production remains traditional in the sense that farmers

tend to stick to the traditional way of beekeeping and thus productivity is low. This is evidenced

from Kerealem et al (2009) who highlighted that about 94 to 97 percent of bees are still kept in

traditional hives. Improved way of beekeeping is generally low and thus the overall potential

yield of the sector is relatively low. Hence, the products obtained from this sub sector are still

low as compared to the potential of the country.

Beekeeping requires relatively simple techniques that can be easily managed and it doesn't

require investment to acquire big land size, which is often a problem for the poor rural dwellers

(Debela, 2010). However, this depends on the type of honey-bee production system used. In

Ethiopia, there are 3 types of bee husbandry systems being exercised namely; traditional,

transitional and modern beekeeping. In the traditional way of beekeeping, the hives are made out

of logs, bark, reeds, gourds and clay pots. The hive has to be hanged on top of a tree. The

traditional beehives are costless but yield very low output. Transitional beehive refers to a hive

technology that is between the traditional and the modern one and is managed at the backyard.

Transitional hives have a higher honey yield over the traditional hives as well as provide a

mechanism for monitoring the maturity of honey thus enabling harvest at optimal time. Finally,

the modern beekeeping involves the frame hives which are created from rectangular and square

boxes. These include Langsroth and Top Bar hives. The hives are more complex and difficult to

build but they are easily transportable and generate greater quantities of better quality honey,

which will command higher prices (Mehari, 2007).

The three types of beekeeping systems described have different costs, harvesting techniques and

productivity expectations (GDS, 2009). By adopting the transitional and framed types of hives,

alongside with proper training on management of the honeybees, producers can harvest high

yields. The average yield potential for each hive is shown in Table 1 below!

Table 1: Average Yield Potential per each hive type

Hive type Farmer’s Average Yield

(kg/hive)

Research Center3 Yield

(kg/hive)

Traditional 5.0-7.0 NA

Transitional (intermediate) 15.0-25.0 25

Framed (boxed) 30.0-45.0 40

Source: Global Development Solutions, LLC (2009)

3 Research centre refers to the centre built for scientific research

As indicated in Table 1 above, transitional beehives have the potential to increase productivity of

the producers from 5-7 kg/hive/harvest from the traditional beehives to 15-25 kg/hive/harvest.

However, the probability of adoption of a new technology will depend on the difference in

profitability between the new and old technologies and the ability of the farmer to perceive the

advantages and efficiently utilize the new technology (Schultz, 1995).

3. METHODOLOGY

This section describes the study area and the sampling strategy applied in selection of the

respondents. Furthermore, the procedure for data collection, source of data and the kind of data

collected are presented. Statistical methods used for data analysis are also presented.

3.1 Description of the Study Area

This study was carried out in Masha district, South west part of Ethiopia. Masha is one of the 77

woredas in the Southern Nations, Nationalities and Peoples` Region of Ethiopia (SNNPRs)

(CSA, 2005). Different nationalities are found in this zone and these include Shekicho, Sheko,

Megzenger, Keficho, Amhara, Oromo and Guraghe. This woreda falls under the Sheka

Administrative Zone (see map below in Figure 2).

Figure 2: Map showing the study area (Masha-Sheka Zone)

Source: Abbute (2003)

More specifically, Masha is the administration center of Sheka Zone and is located 676km south

west of Ethiopia from Addis Ababa along Addis-Jimma road. Geographically, the Zone lies

between 7°24’–7°52’ N latitude and 35°13’–35°35’ E longitude. The altitudinal range of the

areas in the Zone falls between 900–2700 m above sea level, and it receives high amount of

rainfall, with an average of 1800–2200 mm annually. This woreda is notable for its relatively

high forest cover as compared to other parts of Ethiopia. In general, the area is characterized by

dense forests and woodlands that contain diverse plant species that provide surplus nectar and

pollen to foraging bees. However, this important attribute is threatened by the rate of

deforestation in the area that has aggravated in recent years due to increased rate of conversion to

agriculture and monoculture plantations of coffee and tea.

3.2 Sampling Strategy and Data Collection

Out of the 5 cooperatives / kebeles4, 3 primary cooperatives (Genobay, Akach and Degele) were

selected for the study. Due to the nature of the study as well as the topography of the study area,

accessibility was taken into consideration in selecting these primary cooperatives. From these

cooperatives, 60 producers were selected randomly from a list (obtained from the cooperative

marketing office). However, 58 producers participated in the survey and the remaining two could

not participate due to various reasons. As for the PLCs, all the members from the 3 PLCs

(Chiefdale, Gada and Shatto) were included in the study since PLCs consists of relatively smaller

numbers. Their list was also obtained from the cooperative marketing office. 43 honey producers

were interviewed from the PLCs. Table 2 provides total membership (group size) and number of

participants of all the groups that participated in the survey.

Table 2. Number of members in the producer groups that participated in the study

Organization Total no. of members No. of participants/group

Gada PLC 14 12

Chiefdale PLC 17 15

Shatto PLC 19 16

Akach primary cooperative 445 19

Degele primary cooperative 270 19

Genobay primary cooperative 451 20

Data for this study were collected from March to April 2011 through a household survey from a

total sample of 101 households. Generally, the semi-structured questionnaire was designed to

generate information in the following areas: duration of membership, main source of income,

dividend, annual income from honey, number and type of beehive owned, constraints of

beekeeping, perceptions of the producers on the transitional beehives, amount of honey

yielded/hive, year of adoption of transitional beehives and beekeeping experience.

Face-to-face interviews were also conducted with the management team of the producer

organizations (cooperatives and PLCs), private traders, the processor (Bezamar), and personnel

from NGOs. More relevant secondary information and data were gathered from various

institutions including the zonal and woreda sector offices. Documents from NGOs (SNV and

NTFP) active in the study area were also consulted and reviewed.

3.3 Data Analysis

Data were analyzed using the Statistical Package for Social Scientists (SPSS) 19.0 for Windows

and Generalized Linear Models (GLM) of Statistical Analysis System (SAS) (2006). The effect

of organization system (whether PLC or cooperative) and some demographic data (age, sex,

4 A kebele is defined in Ethiopia as the smallest administrative units, below the municipality-district level.

education, training) on adoption of transitional beehives and quantities of honey produced from

both transitional and traditional beehives were analyzed. The first analysis consisted of

descriptive statistics in order to have a comprehensible profile of the sampled respondents.

Descriptive statistics (percentages, frequencies, mean and standard deviations) were generated

for gender, age, years of experience in beekeeping, education level and duration of membership.

T-test and χ2 were employed to test the significance of continuous and discrete variables,

respectively. Based on the theoretical framework we provided in the first section, our main

hypotheses to be tested includes: (1) PLCs as institutions are more entrepreneurial and

innovative than cooperatives and (2) More honey is commercialized through PLCs as compared

to cooperatives.

To make our comparison easier, our research objectives were transformed into research

questions. The research questions were operationalized as presented below:

Operationalization of the research questions

Research questions Indicators

1 Are there any differences in entrepreneurial capacities

between coops and PLCs

-Incentive schemes for board members

-Dividend

-Price

-Productivity

-Adopting transitional hives

(innovation and technological transfer)

2 Which institution commercializes higher quantities of

honey?

-Marketing (proportion of honey

marketed by groups)

4. EMPIRICAL RESULTS

This section presents the findings of the research. The section specifically seeks to highlight the

conditions that currently exist in the area in terms of production and marketing between 2

different producer groups in Masha district. Comparisons of the 2 samples are made with

reference to the question of statistical significance, because the key objective of our study is to

determine if the two groups differ from each other in any substantively significant ways. The

presentation and discussion of results between and within the 2 different producer groups

(cooperatives and PLCs) is guided by the hypotheses proposed in the previous section of the

current study.

4.1 Socio-economic Characteristics of Respondents

Most of the households interviewed were male-headed, while a small percentage was female-

headed. More detailed information about the gender composition is provided in Table 3. Across

all producer groups (coop and PLC), most beekeepers (83%) were 34 years or older. Table 2

shows the distribution of age across all groups. The findings are similar to the results obtained by

Kugonza and Nabakabya (2008), which showed that over 82% of the beekeepers interviewed in

Uganda were 30 years or older. Across all the respondents, about 78.3% of them went to school,

with the majority having completed secondary school education and the others having completed

high school. The remaining 22 respondents indicated that they have never been to school. As can

be seen from Table 3, there were no much differences in education levels between members of

cooperatives and PLCs.

Table 3: Distribution of respondents according to age and education

PLCs (43) Coops (58)

Number % Number %

Gender

Female 9 20.9 2 3.4

Male 34 79.1 56 96.6

Total 43 100 58 100

Age groups

24 & below 1 2.3 1 1.7

25-34 9 20.9 7 12.1

35-44 14 32.6 21 36.2

45-54 14 32.6 13 22.4

55-64 5 11.6 15 25.9

65 & above 0 0 1 1.7

Total 43 100 58 100

Education level

Never been to school 10 23.3 12 20.7

Primary school 8 18.6 15 25.9

Secondary school 19 44.2 24 41.4

High school 6 14.0 7 12.1

Total 43 100 58 100

Source: Survey results (2011)

About 72 percent of all the respondents had beekeeping experience of 20 years or above. This

implies that beekeeping is a long-standing activity in the area. The minimum and maximum

numbers of years of experience indicated amongst respondents were 2 years and 48 years

respectively. About 49 percent of the respondents have been members of their organizations for

8 years or above. The highest duration of membership was 19 years, mainly by cooperatives

members since the cooperatives existed long way back. PLCs are relatively new organizations

since they were formed as an alternative to the cooperatives.

Across the whole sampled respondents in both producer organizations, honey was ranked as the

highest source of income, followed by kocho and then livestock. This probably owes to the rich

and thick forests which allow the residents to produce organic forest honey. Table 4 below shows

the means of each of the sources of income as they were ranked by the individual households.

Table 4: Sources of income as ranked by respondents

Source (Mean rank)a

1 Honey 1.707

2 Kocho 1.802

3 Livestock 2.275

Source: Author research results

a The lower the rank of a source, the greater is its importance

Between the groups, only 33% of cooperative members ranked honey as the highest income

earner whereas in PLCs, 58% of the respondents indicated honey as their highest income earner.

This is probably because cooperatives engage in the trading of different agricultural products

which give them alternative higher incomes whereas for PLCs, their core business is on honey

production. During our interviews the cooperative members highlighted that their production is

diversified into different commodities, thus in addition to honey, they also trade commodities

like peas and beans. The management team even highlighted this multi-purpose nature as one of

the advantages of cooperatives that they serve their members in different aspects unlike in PLCs.

Honey production is of high priority for PLCs which is reflected in the quantities they market.

4.2 Level of adoption of transitional beehives

In the study area, the use of transitional beehives was generally low across all the respondents.

However, significantly different results were recorded in the means of the number of transitional

beehives adopted in the years 2007 and 2010 between cooperative and PLC members. A higher

mean for the PLCs shown in Table 5 reveals that the PLCs had higher number of transitional

beehives as compared to cooperatives. Similar results were obtained for the variable measuring a

decrease or increase in rate of adoption of the transitional beehives. Here, the number of

beehives adopted in 2007 were subtracted from those adopted in 2010 to show the increase (or

otherwise) in the number of transitional hives. The results in Table 5 show a higher mean for the

PLCs as compared to the cooperatives. This result is in agreement with Aiken and Hage (1971)

who found out that the older the organization, the more bureaucratic and the less receptive it is to

innovation. In our case, the PLCs are relatively younger organizations since they were formed

later as an alternative to cooperatives.

Table 5: Summary of independent-samples t test results

Cooperatives (58) PLCs (43) (Difference; Coops -

PLCs)

Variables

Mean SD Mean SD T-stat P-value

Socio-economic variable

Beekeeping experience (years) 26.29 11.06 26.23 10.15 -0.028 0.978

Duration of membership (years) 13.03 4.35 6.12 1.12 -11.610 0.000***

Production and income variable

Number of transitional beehives in 2007 0.31 1.08 2.09 3.06 3.654 0.001**

Number of transitional beehives in 2010 1.48 1.64 4.56 3.71 5.080 0.000***

Change in number of transitional beehives 1.17 1.77 2.47 4.17 1.911 0.061*

Production transitional 2007 (kilograms) 3.28 13.81 21.26 35.97 3.112 0.003**

Production transitional 2010 (kilograms) 12.47 21.05 53.51 56.38 4.545 0.000***

Production change transitional (kilograms) 9.10 17.50 32.26 62.01 2.37 0.022**

Productivity of honey (kg/hive) 2.47 1.83 3.48 2.14 2.560 0.012**

Income honey sales 2008 (Birr) 1075.84 863.63 2542.59 2014.24 4.480 0.000***

Income honey sales 2010 (Birr) 1615.50 1229.49 4060.21 2740.78 5.456 0.000***

Dividend paid (second payment) (Birr) 14.93 46.18 276.95 308.72 5.520 0.000***

Source: Survey Data

*significant at 10%; **significant at 5%; ***significant at 1%

The beekeepers were asked whether they are willing to give up on traditional beehives and focus

only on transitional beehives. 89% of all the respondents answered “Yes”, indicating that they

are very much aware of the benefits that come along with the use of these improved beekeeping

technologies. The respondents raised important reasons for their response. Among the most

important were; transitional beehives are easier to manage, there is a huge increase in production,

they can be managed from the backyard; and honey from transitional beehives has better quality

than that from traditional beehives.

On the other hand, only 11% answered “No” and they highlighted a number of reasons why they

are not willing to give up completely on their traditional beehives. According to the beekeepers,

the major constraints in adopting the transitional beehives were; absconding (the total movement

of honeybee colony by leaving the hive – Workneh, 2007) of bees from the transitional beehives

due of ants and pests, uncertainty and risk that comes with just abandoning a large number of

traditional beehives; and shortage of labour to monitor the transitional beehives.

4.2.1 Dividend (second payment)

When asked if they received dividend from their organizations in the last production season,

Table 9 (showing the Chi Square tests) shows that a large proportion of the PLC respondents

answered Yes, whereas in cooperatives only a few also answered Yes. Furthermore, Table 9

reveals there was a statistically significant difference of the proportion of people who received

dividend between the 2 groups (p<0.041). More interestingly, Table 5 shows that there was a

significant difference in the amount received by the producers between the 2 groups. PLCs had a

higher mean as compared to cooperatives. Producers across the groups highlighted a number of

reasons why they did not receive dividend from their organizations. Table 6 presents the reasons

as they were ranked by the respondents. The information was generated only from the members

(coop=40, PLC=21) who indicated that they did not receive the dividend.

Table 6: Reasons for not receiving dividend

Reason

Number of

respondents

(coop = 40)

%

1 Re-invest for expansion of business 15 37

2 Not aware of the reason 12 30

3 The coop not yet audited 6 15

4 Did not sell through my organization 6 15

5 The processor delay to pay my cooperative 1 3

Total 40 100

Number of

respondents

(PLC = 21)

%

1 Re-invest for expansion of business 10 48

2 The PLC not yet audited 4 19

3 My PLC did not make enough profits to distribute 3 14

4 Not aware of the reason 3 14

5 My PLC have just been audited, we are going to get soon 1 5

Total 21 100

Source: Survey results (2011)

4.2.2 Incentive system for management team

By incentive we refer the payment or compensation given to the board members of an

organization for keeping the firm running. The outcome of our interviews with the managers of

the producer groups shows that the incentive schemes for board members among PLCs are more

market-oriented where the board members do their job and expect to receive a proportion of the

total profits made by the PLC as their payment. The board members of the PLCs get 10% of the

net profit made by the organization. During the interviews, unlike in PLCs, all cooperative board

managers revealed that they do not receive any payment for the work they are doing for their

organization. They justified their unpaid managerial tasks rather as a contribution to the common

good and a social duty. This implies that the incentive system in PLCs could be more organized

and business focused as compared to that of cooperatives.

4.2.3 Honey productivity among groups

Increased productivity can translate into increased producer income. Productivity is defined by

Sartorius and Kirsten (2004) as the ratio of output to input or alternatively input to output. We

used the quantile method of classifying data to classify the households. The data was arranged in

descending order that is from the highest to the lowest. 101 households were grouped into 3

classes; high, medium and low, according to their productivity performance. Table 7 presents the

productivity measures between and within the producer groups.

Productivity in honey production was calculated as follows:

Quantity of honey (kg)

Honey productivity = -------------------------------

Number of beehives

Table 7: Honey productivity

PLCs (43) Cooperatives (58)

Gada (12) Chiefdale (15) Shatto (16) Akach (19) Degele (19) Genoby (20)

Rank

% % % % % %

1 High 33 27 50 21 10 20

2 Medium 58 53 50 58 37 45

3 Low 9 20 0 21 53 35

Total % 100 100 100 100 100 100

Source: Own computation

The results of the statistical analysis were very interesting, showing a great variation between

cooperatives and PLCs. Honey productivity levels significantly (p<0.05) varied between

cooperatives and PLCs with the means (Table 5) showing that PLCs had higher productivity as

compared to cooperatives. As can be seen in Table 7, all the 3 PLCs (Gada, Chiefdale and

Shatto) had higher percentages of their member respondents in the high rank as compared to the

3 cooperatives. In the low productivity rank, the cooperatives had higher percentages of their

members in the rank. This is in line with priori expectations that PLCs are more entrepreneurial,

efficient and productive than cooperatives. However, amongst the PLCs (though lower than all

the other 3 cooperatives) Chiefdale had a relatively higher percentage (20) of their respondents in

the low productivity rank but the reason for this was not established. The findings of our study

that productivity was higher amongst PLCs` members as compared to cooperatives` members are

similar to the study findings by Bandiera et al (2005) where their study results revealed that a

given worker cooperates more when she works in smaller groups than in larger groups.

4.2.4 Trend of Honey Prices between Producer Groups

In this study we consider price given to the farmers as one measure of efficiency,

entrepreneurship and market orientation of a producer group. To allow for easier comparisons in

price trends across a period of 4 years (2007-2010) between cooperatives, PLCs and private

traders, a line graph is presented. Because of lack of time series data on producer prices for

analyzing price variation over time, average honey prices received by producers across four

years from alternative marketing channels have been used in the analysis. Figure 3 shows the

trend of how the prices have evolved amongst the three buyers across time.

6

8

10

12

14

16

18

2007 2008 2009 2010

Year

Pri

ce/k

g Coop

PLC

Private

Figure 3: Price variation among buyers across years

Source: Survey data (2011)

Figure 3 shows that across a period of 4 years, producers delivering their honey to PLCs are

receiving better prices than those delivering to cooperatives and private traders. More

interestingly, the trend shows that, except for 2007, the private traders are offering higher prices

than cooperatives but less than PLCs. This probably explains why a good number of cooperative

members market a proportion of their honey through private traders. In addition to paying

relatively higher prices than the cooperatives, some of the cooperative producers interviewed

also mentioned exceptional services they get from the private traders like advance payment. This

means that the PLCs group succeeded in negotiating better market conditions for its members as

compared to the cooperatives. Differences in honey prices reported by farmers may also be due

to other factors (e.g. quality of honey, cleanliness, etc.) that cannot be easily measured.

4.2.5 Producer Perception about the Effect of Improved Hives and Training on Income

An independent-samples t test was used to compare means of the income obtained from honey

for the years 2008 and 2010 between PLCs and cooperatives. Table 5 clearly shows that PLCs

obtained significantly higher incomes from honey sales as compared to cooperatives. The higher

incomes may be attributed to higher efficiency and productivity; and the higher prices the PLC

members receive from their organizations. PLCs show higher collective entrepreneurial capacity

as compared to the cooperatives.

All the respondents were asked to rank their responses to the statement “I am very satisfied with

my income over the past three years as a result of the training on beekeeping”. This was ranked

on a 5-Likert scale from strongly disagree to strongly agree. About 76 percent of all the

respondents indicated that they in agreement (whether strongly agree or agree) with the

statement. However, Table 8 indicates that significant differences (p<.05) were observed

between the means of PLCs and cooperatives. PLCs had a higher mean (4.28) as compared to

cooperatives (3.79), showing that the PLCs agreed more to the statement that indeed they are

satisfied with their income as a result of the training as compared to cooperatives. This tend to

agree with the result shown in Table 5, which shows also a significant difference (p<.05) on the

means of income obtained by the PLCs and cooperatives in 2010 as well the average income.

The respondents were also asked to give their responses on the statement “As a result of the

training and access to modern technologies on beekeeping, I would confidently say that my

household income has…” This statement was measured on 3-Likert scale with the following

items; increased, slightly increased and remained the same. Across the two groups, about 65

percent indicated that their income has increased. As shown in Table 8, significant differences

(p<.05) were observed in the means of PLC producers and cooperative producers. Cooperatives

had a higher mean (1.71) on the statement that is they highly considered their income to have

remained the same as compared to PLC members (1.26).

However, it should be noted that probably there are a number of factors that may have indeed

resulted in the increase in income among the honey producers. Hence, we cannot make a general

conclusion that the higher incomes were as a result of factors limited to training and access to

modern beekeeping technologies, the transitional beehives.

Table 8: Summary of producers` opinion about their incomes

Source: Survey Data

Means are in bold and standard deviations are in parenthesis

Significant at 10 % = * Significant at 5% = **

Strongly

disagree

Disagree Neutral Agree Strongly

agree

Mean & Std. T-value P-Value

PLC (43) 0 3 3 16 21 4.28

(0.882)

I am very satisfied

with my income over

the past three years as

a result of the training

Coop (58) 0 7 12 25 14 3.79

(0.951)

2.619

0.010*

Increased Slightly

increased

Remained

the same

Mean & Std. T-value P-Value

PLC (43) 34 7 2 1.26

(0.539)

As a result of the

training and access to

modern technologies

on beekeeping, I

would confidently say

that my household

income has…

Coop (58) 32 11 15 1.71

(0.859)

-3.234

0.002**

4.3 Honey production and marketing

In the study area, the mean annual honey yield from transitional beehives in 2010 was

29.94kg/hive/annum. The yield was above the average yield that is expected from transitional

beehives at farm level, 15.0-25.0kg/hive/annum. Significant differences were revealed (see Table

5) in the quantities of honey produced from transitional beehives in 2007 and 2010 between

cooperatives and the PLCs. Cooperative producers indicated lower means as compared to PLC

member producers. Similar results were obtained for the change in production where PLCs

indicated a higher mean of 32.26 against 9.10 for the cooperatives.

In this study, 3 marketing channels were identified among respondents; own organization

(cooperative or PLC), private traders and neighboring cooperatives. Selling to own organization

is the most popular direct market as it offers benefits like dividend and better prices as compared

to the other buyers, for example, private traders. Table 9 gives summary of Pearson Chi Square

test results showing the association of numerous variables with the type of organization, i.e. PLC

or cooperative.

Table 9: Summary of Pearson χ2 test results

Organization variables Coop (58) PLC (43) χ2 Value Asymp. Sig (2-

sided)

Age 5.582 0.349

Gender 7.776 0.005**

Education 0.760 0.859

Yes Yes

Dividend 18 22 4.183 0.041**

Marketing channels: (1)Own

organization

43

42

10.26

0.001**

(2)Private traders 37 8 20.41 0.000***

(3)Neighboring coops 0 2 2.75 0.097

Willingness to give up

traditional beehives

52

38

0.042

0.838

Advance payment from

organization

0 5 7.095 0.008**

Receive equipment 10 16 5.150 0.023**

Note *significant at 10%; **significant at 5%; ***significant at 1%

Source: Author, survey results

As indicated in Table 9 above, 43 (74%) of cooperative producers are selling their honey through

their cooperative, whereas 42 (98%) of the PLC members are selling their output through the

PLCs. Choice and utilization of marketing channel varies significantly (p<0.05) across producer

organization (coop or PLC). This is probably due to the fact that the PLCs member producers

gets higher dividend for their patronage as compared to cooperative members. The PLCs ought

to have better and efficient services for their members as compared to cooperatives. Although

both producer groups have enhanced the level of market integration of the smallholder farmers,

we argue that the effect varies greatly between the cooperatives and PLCs. Our data reveal that

members of PLCs over the years consistently market a considerable higher amount (ranging

between 80%-96%) of their honey through their own group. This is comparable to the

cooperatives members who market only between 35% and 49% of their produce through their

own organization.

Another important marketing channel identified in the study area is the private trader. As shown

in Table 9, the cooperatives` 37 (64%) members are marketing a proportion of their honey

through private traders, whereas only 8 (19%) of PLCs are marketing part of their output as well

through this channel. The results further shows a significant difference in the extent to which

producers from the 2 groups uses this channel. At the time of the interview, a number of

cooperative member beekeepers raised an important issue on why they market their honey

through private traders. They highlighted that they get an advance payment from private traders

which allows them to cover urgent expenses like school fees, food, etc; a service they are not

getting from their cooperatives. This is different from PLCs where some of the members (12%)

indicated that they get an advance payment from their own organization.

The respondents further indicated that private selling is the simplest form of marketing their

honey since the merchants just buy whatever quality of honey you provide for them. However,

they expressed concerns over the private buyers` low prices and cheating in weighing the honey.

Lastly, the less used channel is the neighbouring cooperatives. Only 2 (5%) of the PLC members

were selling part of their honey through the neighbouring cooperatives. As for the cooperative

members, none were selling their honey through this 3rd market outlet.

4.3.1 Honey marketing by producer groups

Bezamar (honey processing and exporting company) is the main buyer of honey from both the

cooperatives and PLCs. The producer groups buy honey from their suppliers (members), bulky it

and sell to the processor. As has been highlighted earlier on, PLC members are marketing most

of their honey through their organization than the cooperatives members who sell most of their

output to private traders. Figure 4 below shows the honey sales reported by both PLCs and

cooperatives from 2007 to 2010.

Figure 4: Honey sales by PLCs and coops

Source: Survey data

As can be seen from Figure 4, more sales are reported by the PLCs than the cooperatives. This is

probably due to the fact that PLC members are more productive, engage more using the

transitional hives which increases production and they are loyal to their organization than

cooperative members. Our results contradicts the findings of Barham and Chitemi (2009) where

they found no evidence in their study to support the hypothesis that smaller farmer groups will be

better positioned to improve their market situation over larger groups. Another important factor

is that of value chain finance. During our interviews with the managers, the PLCs indicated that

they get an advance payment without interest from the lead firm, Bezamar, so that they have

enough capital to buy higher quantities of honey from their members. The opposite is true for the

cooperatives where the lead firm gets honey on credit basis and pays the cooperatives with

interest when payment is received by the lead firm from the export market. Bridging social

capital (O`Brien et al 2005) is higher between PLCs and the processor. This kind of value chain

financing has tended to benefit the PLCs more than the cooperatives. Bezamar delays to pay the

cooperatives which in turn compromise their relationship or trust with their current money

lenders. Moreover, the cooperatives highlighted that their current creditors will seize to operate

and will not be available in the future, leaving them with no source of credit. The other reason

that generally affects both producer groups is the poor road networks that hinder the

organizations from buying honey during the rainy season.

Reported Honey Sales by PLCs

0

20

40

60

80

100

120

140

160

180

Chaffe Shatto Gada

2007 2008 2009 2010

0

20

40

60

80

100

120

140

Genobay Akach Degele

2007 2008 2009 2010

Reported Honey Sales by Primary Cooperative

Ethiopian

Birr

(1000)

Ethiopian

Birr

(1000)

4.3.2 Marketing constraints

Despite all the benefits that honey can bring to the beekeepers in the area, the producers are

confronted with a number of challenges and constraints that can potentially hamper the future of

honey production and the economic contribution it brings to their livelihoods. Identifying these

marketing constraints can help increase the quantities of honey that is produced and

commercialized by the producers.

Table 10: Marketing constraints as reported by the beekeepers

Challenge

Number of

respondents

(coop = 38)

%

1 Low price of honey 15 39

2 Lack of access to credit 9 24

3 Lack of support from the union 8 21

4 Private trader cheats on price and weight 6 16

5 Lack of capital for organization to buy all our honey 5 13

6 Transport problem 5 13

7 Fewer buyers 3 8

8 Unable to get timely information 2 5

9 The organization does not buy honey on time 2 5

10 The coop cheat when weighing honey 2 5

Number of

respondents

(PLC = 30)

%

1 Low price of honey 16 53

2 Lack of access to credit 7 23

3 Fewer buyers 6 20

4 Lack of capital for organization to buy all our honey 4 13

5 Unable to get timely information 3 10

6 Private trader cheats on price and weight 2 7

7 The organization does not buy honey on time 2 7

8 Transport problem 1 3

Source: Author`s survey results (2011)

Table 10 above presents, separately, all the marketing constraints identified in the order in which

they were ranked by the producers. Respondents who indicated that there are no problems were

not included. Based on the results of this study, beekeepers across all producer groups (PLCs and

cooperatives) ranked low price of honey as the most important marketing constraint. Lack of

access to credit was ranked second in both groups. As their third marketing constraint,

cooperative members indicated that they lack support from the union. This was also confirmed

by the management team during our interviews with them. They highlighted that they lack

financial and technical support from the union. This could probably be explained by the fact that

the union is multipurpose thus it deals with numerous agricultural products like coffee, spices,

etc. Hence, it is multi-focused resulting in the cooperatives not having the proper support they

expect.

5 CONCLUDING REMARKS

Collective entrepreneurship has evolved as a strategy for producer enterprises to exercise

efficiency and accrue rents whenever they are faced with opportunities. Institutional and

structural differences between groups may cause also differences in the way in which producer

groups may react to opportunities and innovations. The main purpose of this study was to

compare the collective entrepreneurial capacities of 2 honey producing groups; cooperatives and

PLCs. Striking differences were identified across a number of aspects between the 2 producer

enterprises. PLCs had a higher means for productivity, income, dividend, number of transitional

beehives, and price per kilo of honey. Additionally, the incentive scheme exercised by the PLCs

was market oriented in that the board members were getting payment for their services. In

contrast, the cooperative board members were not getting any payment for their work.

Furthermore, as compared to cooperatives, the PLC members demonstrated higher loyalty shown

by the proportions of honey they market through their organization.

However, this does not mean that cooperatives are not performing good and also that PLCs are

without their own disadvantages. Cooperatives have higher bargaining power due to economies

of scale. For this reason, upgrading opportunities are higher in cooperatives if they are to

increase their sales to the processor. Hence, they can easily move to processing (possibilities of

vertical integration). The PLCs have a disadvantage as far as economies of scale are concerned.

This is attributed to their size of membership (fewer members) which limits their bargaining

power. Moreover, unlike cooperatives which are diversified in terms of the commodities they

trade, PLCs are not diversified as they only focus on the marketing of honey. Thus, we can

consider the price risk for cooperatives to be spread over a number of commodities they trade

like peas and spices, as compared to that of PLCs.

Collective entrepreneurship has the potential to benefit members of producer enterprises

financially and through inclusion into the dynamic value chains. This study shows that honey

production in Ethiopia and particularly in Masha can serve as a reliable source of income for the

rural producers. Private players are pivotal in the success of interventions set to assist rural

producers in improving market access, commercialization and innovation and technological

transfer. Hence, from the results we can see that through collective entrepreneurship, the PLCs

have succeeded in upgrading and integration into the value chains. Policymakers aiming at

promoting rural development through improved market access, livelihoods and income must

ensure increased involvement of the private /downstream players like processors in such a way

that facilitate collective entrepreneurship amongst groups. Also, owing to the general slower rate

of adoption of the transitional beehives among beekeepers, the government should ensure that

the improved hives are sold at a subsidized price or on credit to promote increased adoption and

use by the honey producers.

Findings of this study that PLCs are more entrepreneurial than cooperatives should not be

generalized across all sectors and regions. Rather, our findings could shed more light on the

importance of organizational features like group size for successful implementation of rural

development interventions. The finding would justify, for instance, the organization of larger

communities into smaller subgroups that interact with each other through representatives.

Additionally, cooperatives should change their incentive mechanisms, for example, they should

adopt from PLCs a system where board members benefit from the organization’s profits as a way

of motivating them.

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