Returns to Scope?: Smallholders' Commercialisation through Multipurpose Cooperatives in Ethiopia

This paper addresses the extent to which the scope of smallholder cooperatives' activities may affect their performance in marketing their members' surplus output. Previous papers have highlighted such effects and explained it by the extra burden that diversified activities impose on the often limited management capacities of these organisations. We propose an alternative explanation, linking the scope of activities to membership structure: marketing cooperatives engaging in a vast array of unrelated activities may lose their marketing-oriented members for those more interested in the new activities proposed. The model's predictions are supported by recently collected data on 172 smallholder grain marketing cooperatives in Ethiopia. Implications for the support of farmer organisations are derived and discussed in conclusion.