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Abstract:
Agro-holdings in Russia are large-scale vertically integrated farms within the food processing industry which emerged in the economic, political, and social context inherited from the Soviet era and the post-Soviet market transition. Several economic researchers consider agro-holdings either as a transitory phenomenon or as a major innovation that enables economies of scale and scope. However, their sustainability does not support the idea of a transitory organizational form. Meanwhile, important aspects of their activity, as with the financing of social infrastructures and the partnership with public institutions, cannot be explained by the aim of productive efficiency. I argue that applying John R. Commons’ concepts of strategic transactions, going concerns, and futurity offers an insight enabling the understanding of agro-holdings in Russia as the result of actors’ capacity to form new working rules and compromises, reflected in going concerns that incorporate both the productive and distributive dimensions of their activity.
Notes
1 In order to remain consistent with the Commons’ vocabulary, I use the concept of “wealth” to refer to what could be called “income” in a more modern perspective, namely, something received in money, in-kind goods, or services and distributed by firms.
2 See Bruce F. Hall and E. Philipp LeVeen (1978).
3 In the asset specificity issue, an upstream party uses an asset to produce a good that is valuable to a downstream party. The asset is specific in the sense that the value of the good to the downstream party is always larger that its value in the alternative use. The upstream party must make investments that affect the value of the good for the downstream party, but contracts are incomplete: none of these investments or value can be put into an enforceable contract. Under integration, the downstream party can simply take the good without any payment after production takes place. Under non-integration, however, she has to pay a price to the upstream party to secure the good. With incomplete contracts, ex-post bargaining is needed to determine this price and to allocate the surplus generated by the relationship. Integration, through ownership process can then resolve this hold-up issue (See Christian A. Ruzzier (Citation2009) for an in-depth analysis and particularly his interrogation about the effectiveness of this Williamson hypothesis).
4 However, other factors such as the geographic location and the types of products are not taken into account by this economic literature to explain the difference in profitability and could be introduce.
5 Even some points are similar, old institutional economists have a different view than Williamson about transaction costs. See Janet T. Knoedler (Citation1995) for an in-depth analysis of the issue.
6 I will use the term “wage-labor nexus” to refer to “all the legal and institutional conditions that govern the use of salaried work, as well as reproduction of workers’ existence (…) In a more analytical fashion, it is convenient to break the wage-labor nexus down into its five components: the organization of the work process, the hierarchy of qualifications, the mobility of workers (within and outside the firm), the direct and indirect wage formation principle, [and] the use of wages” (Boyer Citation1986, 49).
7 This was reflected in extremely low agricultural produce prices compared to the prices of industrial goods.
8 These benefits notably enabled the individual plots to be supplied with agricultural inputs, thus providing sustenance for the rural population (Maurel Citation1980).
9 Jobs for agricultural education graduates are quite specialized, as shown by job offers listed on the website of Oryol State Agrarian University in 2016: agronomist, zootechnician, veterinarian, tractor driver, milking machine technician, cowman, welder, calf raiser, workshop electrician.
10 A portion of land assets was also transferred from the state to local authorities.
11 Oryol Oblast is located 450 km southwest of Moscow. A portion of this Oblast benefits from geological conditions favorable to agriculture (the beginning of the Central Black Earth Region). It is also characterized by the fact that its main leader throughout the transition period, Egor Stroev, was involved in the agricultural sector.
12 A semi-direct interview is a meeting in which the interviewer does not strictly follow a formalized list of questions. He or she will ask more open-ended questions, allowing for a discussion with the interviewee. The interviewer may prepare a list of questions but does not necessarily touch on them in any particular order, using them instead to guide the conversation.
13 Eksima-Agro is a holding company whose majority shareholder is Soûzagrozagranpostavka, a firm specializing in the meat import-export market, which covered a portion of the USSR’s meat supply during the Soviet era. In 1992, Soûzagrozagranpostavka created Eksima in order to continue its international commercial business. This enabled it to take part in programs sponsored by the Russian Federation and the City of Moscow for the purchase and delivery of food produce. Eksima therefore works with major state-owned banks such as Rossel’hozbank, Gazprombank, and Sberbank. Initially the owner of a major charcuterie factory in Moscow called Mikoân (with a 20% market share in Moscow; also the official supplier of the Kremlin), in 2006, it took control of four agricultural operations in Oryol Oblast. It then focused on pig farming in order to supply its charcuterie factories. At present, Eksima encompasses 20 firms (including four agricultural operations) and has 10,000 employees.
14 The scissors effect is the difference between the selling price of food produce and the cost of purchasing machines and fertilizer needed for agricultural production. During the Soviet period, prices were mainly administered and agricultural production was set by the Plan, so the gap between these prices inevitably caused losses for agricultural operations, which required periodical state intervention. In most cases, such intervention involved wiping off the debt of the agricultural operations.
15 During the transition, there were two types of regional agricultural policies in Russia. Some territorial administrations chose to support agricultural operations beginning in the mid-1990s, whereas others chose not to intervene in the sector transformation process. Oryol Oblast fell in the former category, while Moscow Oblast and Krasnodar Krai (where Bonduelle is located) were in the latter.
16 For example, during my field work, I observed that daily reports were made via walkie-talkie, which obviously makes it more difficult to control the actual work done.
17 Another bargaining transaction took place between Bonduelle and the local administration for a 49-year land lease of 100 ha of land.
18 In addition, EUR 46 million in investments over ten years to recapitalize the canning factories.
19 In other words, on the micro scale (1) and/or the meso one (2), but not on the macro scale (3), to borrow the breakdown of transaction scales suggested by Romuald Dupuy, Philippe Roman, and Benoît Mougenot 2015, 907.
Additional information
Notes on contributors
Pascal Grouiez
Pascal Grouiez is an associate professor of economics at the Université Paris Diderot, Sorbonne Paris Cité. The author wishes to thank the referees as well as Irène Berthonnet, Bernard Chavance, Pepita Ould-Ahmed, Antoine Rebérioux, Yorgos Rizopoulos and Mehrdad Vahabi for their constructive comments and suggestions. The usual disclaimer applies, the author being responsible for any errors in this article.