The Impact of Tie Strength on the Sustainable Participation of Farmers in Contract Farming: An Empirical Study in Inner Mongolia, China
2. Theoretical Analysis
Interaction intensity has a positive influence on the trust level.
Reciprocity intensity has a positive influence on the trust level.
The trust level has a positive impact on farmers’ willingness to renew their contracts.
The trust level has a positive impact on the perceived economic value.
Perceived economic value has a positive influence on contract renewal willingness.
3. Materials and Methods
3.1. Data Source
Field survey data from thirty-one administrative villages in seven counties of Inner Mongolia, China, were used in this study. From January to June of 2021, the research team carried out a preliminary survey in Chifeng City, Hohhot City, and Ordos City in Inner Mongolia (located in the eastern, central, and western parts of Inner Mongolia, respectively), involving a total of more than twenty agricultural enterprises and cooperatives engaging in contract farming. From August to December of the same year, some farmers who signed official contracts with seven leading agricultural industrialization enterprises and cooperatives among those involved in contract farming were selected as survey objects in this study. At the same time, for each of these seven enterprises or cooperatives, three to six administrative villages that had cooperative relationships with that enterprise or cooperative were randomly selected, obtaining a total of thirty-one villages. Subsequently, eight to ten farmers who had signed formal contracts with enterprises (or cooperatives) in each village were randomly selected and surveyed. With a combination of randomly selected cooperative villages and contracted farmers, a total of 286 questionnaires were collected through a survey method of face-to-face interviews. With 7 invalid questionnaires and 3 noncompliant questionnaires excluded, a total of 276 valid questionnaires were finally obtained, yielding a valid questionnaire collection rate of 96.50%. The contract crops of the surveyed farmers primarily include millet, miscellaneous grains, beans (mainly buckwheat, sorghum, soybean, and mung bean), oats, potatoes, sweet corn, and sugar beet. Contract crops planted in the survey areas are primarily local specialty crops. The distance between Ar Horqin Banner in Chifeng City in the eastern region of the survey areas in this study and Zhunge’er Banner in Ordos City in the western region of the survey areas in this study is more than 1100 km. In these areas, types of cultivated land include both irrigated land type and nonirrigated land type, which primarily relies on natural precipitation. Inner Mongolia, which is one of China’s four major grain-producing provinces, accounts for 8.9% of the total arable land area in the country. Therefore, the survey areas selected in this study can reflect to some extent certain characteristics of land in northern China.
3.2. Questionnaire Design and Variable Measurement
Based on the characteristics of the contract renewal willingness of farmers and field survey data, questionnaire items for each variable were designed. Five latent variables, namely, trust level, interaction intensity, reciprocity intensity, perceived economic value, and farmer contract renewal willingness, and sixteen relevant observable variables were covered in the questionnaire. In this study, except for the net income of contract crop (PEV1), a 5-point Likert scale was applied to each measurement item used in the questionnaire. Scores 1–5 were used to reflect the assessment degrees of surveyed farmers on the content involved in each questionnaire item. A score of 1 represents “completely not concerned”, “completely not”, and “completely unsatisfied”; a score of 2 represents “not intimate”, “not frequent”, and “not satisfied”; a score of 3 represents “common”; a score of 4 represents “intimate”, “frequent”, and “satisfied”; and a score of 5 represents “very intimate”, “very frequent”, and “very satisfied”.
Tie strength: We divided tie strength into three dimensions: trust level, interaction intensity, and reciprocity intensity. The trust level refers to the extent to which farmers believe that their cooperative partners are willing and able to fulfill their corresponding obligations [47,48]. Affective trust (such as honesty, credibility, and benevolence) and trust in competence are generally regarded as elements of trust [49,50,51]. With reference to the above-mentioned research outcomes, and with the combination of reliability analysis based on the trust level scale, we selected three items, namely, “Based on previous experiences, it can be ensured that cooperative partners will abide by their cooperative agreements or commitments”; “Do you think your cooperative partners have the technical skills and abilities to fulfill their cooperative agreements?”; and “Do you think your cooperative partners are candid and trustworthy?”, to measure the trust level (TR1-TR3). Interaction intensity reflects how frequently farmers communicate with their cooperative partners and is normally measured with communication degrees and times through different communication approaches (telephone, face-to-face communication, etc.) . Smartphones are frequently used in rural China. Many agricultural enterprises are promoting their products and technologies through their WeChat official accounts or WeChat groups. This information garners the attention of farmers, who usually add the staff of these enterprises as their WeChat contacts. With the characteristics of Chinese farmers considered in this study, four items, namely, “How are you concerned about the official accounts (WeChat groups) of your cooperative partners?”; “face-to-face communication frequency (times)”; “telephone communication frequency (times)”; and “WeChat communication frequency (times)”, were used to measure the interaction intensities among farmers (IN1-IN4). Reciprocity intensity refers to the levels of interest-based cooperation and reciprocal relationships between farmers and their cooperative partners through resource exchanges. Reciprocity is concerned with satisfaction, friendliness, and the accessibility of information to partners . In this study, we believed that benefits to enterprises (cooperatives) that cooperate with farmers and their recognition of reciprocal relationships should also be considered. Therefore, four items, namely, “Your satisfaction (gratitude) level on the cooperation with your cooperative partners”; “Do you feel you might give up fulfilling your agreements with your cooperative partners?”; “Do you recognize that you have win-win relationships with your cooperative partners?”; and “The degrees of benefit growth (development) of enterprises resulted from cooperation with you”, were selected in this study to measure the intensity of reciprocity (RE1-RE4).
Perceived economic value: With the combination of reliability analysis using the scale, we selected two items to measure the perceived economic value (PEV1-PEV2). PEV1 is the natural logarithm of the net income of the contract crop. The net income of the contract crop can be calculated by reducing input costs from the yield of the contract crop multiplied by the selling price. Specifically, input costs include direct material costs such as seed costs, fertilizer costs, pesticide costs, plastic film costs, and irrigation costs; direct labor costs such as self-harvesting labor costs or hired harvesting labor costs; and machinery costs such as hired machine costs for land plowing, sowing, and harvesting or the depreciation costs of self-owned machines and fuel costs. PEV2 refers to the income levels of farmers planting contract crops compared with the income levels of other farmers planting noncontract crops in the same village. It can be seen that PEV1 and PEV2 measure the perceived economic value primarily from two perspectives of absolute number and relative level, respectively.
Farmer contract renewal willingness: In existing studies, contract renewal willingness is only reflected with a single item of intention intensity . This study holds that contract renewal behaviors are somewhat uncertain under the current circumstances. Farmers may face certain difficulties in their subsequent cooperation, and farmers who overcome difficulties and continue their cooperation will exhibit stronger intentions to renew their contracts. Therefore, three items, namely, “Intention intensity of subsequent participation in contract farming”; “Do you feel it is not difficult for you to continue to participate in contract farming?”; and “How strong is your intention to overcome difficulties to continue your participation in contract farming?”, were selected in this study to measure the intentions of farmers to renew their contracts (CRW1-CRW3). The specific measurement results and descriptive statistics of all the variables mentioned above are listed in Table 2.
3.3. Measure Reliability and Validity
4. Data Analysis and Results
4.1. Correlation Test of Variables
4.2. Model-Fit Analysis
The measurement variables RE1, RE2, RE3, and RE4 corresponding to the variable of reciprocity intensity all passed the significance test at the 1% level, with the obtained standardized coefficient values of 0.801, 0.876, 0.895, and 0.792, respectively. This indicates that the satisfaction levels of farmers in cooperation with their cooperative partners and their recognition levels of win–win relationships with their partners can significantly increase the reciprocity intensities among supply chain partners.
The measurement variables TR1, TR2, and TR3 corresponding to the variable of trust level all passed the significance test at the 1% level, with the obtained standardized coefficient values of 0.823, 0.825, and 0.747, respectively. This indicates that the recognition of farmers on their cooperative partners’ compliance with agreements, contract-fulfilling capabilities, candidness, and trustworthiness can significantly enhance their trust levels in their partners.
The measurement variables PEV1 and PEV2 corresponding to the variable of perceived economic value all passed the significance test at the 1% level, with the obtained standardized coefficient values of 0.472 and 0.968, respectively. This indicates that compared with the incomes of noncontract farmers, the net incomes of contract farmers during their cooperation periods have a significant impact on the economic value they perceive from future contract cooperation.
The measurement variables CRW1, CRW2, and CRW3 corresponding to the variable of farmer contract renewal willingness all passed the significance test at the 1% level, with the obtained standardized coefficient values of 0.956, 0.457, and 0.847, respectively. This indicates that the willingness of farmers to continuously participate in contract farming and overcome the difficulties associated with their participation, as well as the difficulties related to their participation in further contract farming, are the three factors with progressively weakening influences on the contract renewal willingness of farmers.
4.4. Mediating Effect Analysis
Contract farming is an important method of vertical collaboration in the value chain of agriculture and has been widely used in the world because of its advantages in optimizing production organizations, promoting technological progress, and achieving intensive production. Contract farming is of great significance in organically bridging small farmers with agricultural modernization and promoting the sustainable development of small-scale farming and rural economies. It is of theoretical and practical significance for the government to formulate policies to promote the quality development of contract farming and form a pattern of complementary advantages and labor division between enterprises and farmers in the industrial chain.
In terms of contract renewal in contract farming, current studies have not shifted their focus toward tie strength. Compared to the existing literature, this study primarily makes two marginal contributions as follows: First, we systematically examined the formation processes of farmers’ contract renewal intentions and identified the key relational factors influencing the formation. The theoretical logic of interaction intensity (communication frequency), reciprocity intensity, and trust level promoting the continuous cooperation of contract farmers was explored. This study compensates for the deficiency of existing studies, which mostly focus on a certain dimension of tie strength as an influencing factor, and supplements the literature on the relationship governance of contract farming. Second, we introduced the concept of “perceived economic value” as an intermediary variable within the framework of enhancing tie strength to foster sustainable participation of contract farmers in cooperation. This study provides empirical evidence supporting the notion that both tie strength and perceived economic value serve as fundamental prerequisites for ensuring the stability of contract farming. From the results, new insights are obtained, especially in regard to the impact of trust on the perceived economic value and households’ contract renewal intentions. It is hoped that the results can inform policymakers.
In addition, the specific results of this study show that the pathway of reciprocity intensity to trust level has a coefficient value of 0.643, while the pathway of interaction intensity to trust level has a coefficient value of 0.264, indicating that reciprocity intensity has a more significant influence on trust level than interaction intensity. Compared with frequent communication and interactions, satisfaction with cooperation and recognition of win–win outcomes for farmers will enhance their trust in the cooperation. A possible explanation is that enterprises (cooperatives) can demonstrate their social responsibility toward farmers, shareholders, and other stakeholders through various ways. That is, they can actively help supplier farmers overcome difficulties and improve satisfaction in cooperation; operate their businesses rationally to increase their profitability; provide great rewards to their shareholders; and improve their image, competence, and sustainable development levels. These behaviors can lead to increased reciprocity intensities of farmers, thus further improving their transaction trust, affective trust, and cognitive trust in their cooperative partners. In comparison, communication and interactions between enterprises and farmers can also increase their trust levels toward each other. However, the rural society in China is based on personal connections, and farmers can obtain useful information they need through their channels with other farmers, achieving similar effects as direct communication with enterprises. Therefore, frequent communication and interactions with enterprises are not very important for farmers. Reciprocity intensity, followed by interaction intensity, should be emphasized in relationship governance first.
6. Conclusions and Recommendations
Based on survey data from farmers, this study empirically investigated three dimensions of the supply chain, namely, tie strength, perceived economic value, and contract renewal willingness of farmers, using structural equation modeling; the following results were achieved:
Interaction and reciprocity intensities have a significantly positive influence on the trust level. That is, more frequent interactions and more intensive reciprocity will bring higher trust levels between agricultural enterprises and farmers. Reciprocity exerts a more pronounced influence on trust compared to interaction.
The trust level has a significantly positive impact on farmer contract renewal willingness. The total effect of trust on contract renewal willingness has a value of 0.637, which is the sum of the direct effect value of 0.475 (trust level → contract renewal willingness) and the pathway mediating effect value of 0.162 (trust level → perceived economic value → contract renewal willingness).
Reciprocity and interaction intensities have an indirect impact on contract renewal willingness through the trust level, with indirect influence effect values of 0.168 and 0.410, respectively.
6.2. Policy Recommendations
Based on the above conclusions, we propose the following policy recommendations: First of all, reciprocity is a pivotal factor in fostering sustainable contractual relationships. Astute managers endeavor to establish a balanced or even generalized reciprocity mechanism between farmers and enterprises, thereby propelling the sustainable development of enterprises while concurrently enhancing the economic benefits of farmers, ultimately culminating in a mutually beneficial outcome. Secondly, on the basis of reciprocity, farmers’ trust in enterprises should be improved through communication and interaction. Enterprises should strive to influence the attitudes and behaviors of farmers through methods such as incentivization and effective information exchange. Additionally, enterprises must actively embrace their social responsibilities by faithfully fulfilling the commitments made when establishing cooperative relationships with farmers while also providing increased assistance to farmers facing difficulties in order to enhance the perception of trust in enterprises.
6.3. Limitations and Prospect
Although in this study, we conducted theoretical and empirical analyses in a systematic way, there are still some limitations to be addressed. Firstly, only quantitative methods were used in this study. Future studies can deepen the investigation on the sustainable participation of farmers in contract farming by employing such qualitative research approaches as in-depth interviews and case studies. The second limitation of this paper involves its research scope. In this study, only supply chains in the plant industry in Inner Mongolia, China, were investigated, and the research results of this paper can only provide a reference for China and other developing countries. Future studies can expand the scope of their investigations to enrich research outcomes. Thirdly, we only investigated internal variables (reciprocity intensity, interaction intensity, and trust level) in tie strength. Future studies can further investigate the influences of external variables such as market dynamics and environmental conditions on sustainable agriculture. Finally, only one-year cross-sectional data were used in this study. Future researchers can continue to track and collect panel survey data to obtain valuable insights into the long-term influence of tie strength on sustainable contract farming.
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