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RJOAS, 6(66), June 2017
37
DOI https://doi.org/10.18551/rjoas.2017-06.03
DO GOVERNMENTAL INCENTIVES PROMOTE PARTNERSHIPS AMONG
AGRICULTURAL FIRMS? A MULTIPLE CASE STUDY FROM ITALY
Brusati Luca*, PhD, Associate Professor
Iacuzzi Silvia, PhD, Contract Researcher
Ianniello Mario, PhD, Instructor
Udine University, Udine, Italy
*E-mail: brusati@uniud.it
ABSTRACT
The paper analyses a sample of successful multi-stakeholder projects co-financed by the
European Agricultural Fund for Rural Development in Friuli Venezia Giulia Autonomous
Region (Italy) to understand what factors allow governmental incentives to trigger more
effective partnerships among agricultural firms. Our analysis, based on the standardized
approach for the benchmarking of rural development initiatives designed by the Assembly of
European Regions, identified six predictors of success. Three are associated to the contents
of the project, i.e., strategic vision, sustainability over time and market orientation; two are
linked to the nature of the partnership, i.e., critical mass and project leaders’
entrepreneurship; one more seems to be associated with policy design rather than
implementation, i.e., the design of funding requirements specifically targeted to address
critical weaknesses in agricultural development. Thanks to a better understanding of these
predictors of success, policy-makers promoting rural development can improve the cost-
effectiveness of incentive schemes, in particular by setting tighter standards to be met by
agricultural firms wishing to access preferential funding.
KEY WORDS
Partnership, agriculture, incentives, good practice, European Union.
Rural development is undoubtedly a key area for governmental intervention, in the
European Union (EU) as well as in the Russian Federation [1, 2, 3]. The economic viability of
farming and forestry remains central to rural economies; at the same time, related issues
such as environmental protection, climate change, biodiversity, water supply and food
security are becoming increasingly important dimensions of the modern concept of
sustainability.
In order to coordinate intervention strategies in the area of rural development across
the Member States, in 1962 the EU established a Common Agricultural Policy (CAP), which
underwent several changes over the years but is still the largest single item of expenditure in
the EU budget, accounting for 39% of the total in 2015 [4]. Pursuant to European
Commission Regulation No. 1698/2005, which provides the framework regulations
underpinning the CAP, EU policies pursue three objectives: increase the competitiveness of
agriculture, farming and forestry through restructuring, development and innovation; enhance
the environment by supporting territorial management; improve the quality of life in rural
areas and promote the diversification of economic activities.
As in the Russian Federation [5, 6], also in the EU dedicated governmental subsidies
are available through the CAP to improve the competitiveness of agriculture, farming and
forestry, especially in order to support capital expenditure [7]. In the case of the EU such
support is primarily channelled through the European Agricultural Fund for Rural
Development (EAFRD), overseen by the European Commission’s Directorate General for
Agriculture and Rural Development. EAFRD supports the implementation of Rural
Development Programmes (RDPs) across the EU, agreed with and co-financed by national
and regional governments along standardized guidelines to tackle the specific challenges of
development in different local contexts.
RJOAS, 6(66), June 2017
38
The promotion of partnerships in agriculture is a recurring theme in the debate about
rural development: in many EU Member States the small average size of farms and agro-
industrial businesses implies that they lack scale economies, negotiation power and
innovation potential, and thus the competitiveness needed today to operate effectively on the
market. Partnerships help address the constraints small producers face in scaling up,
including high transaction costs and lack of information [8]. We use here the broader term
“partnership” rather than the term “cooperation” because we do not refer exclusively to the
establishment of farmers’ consortia, cooperatives and associations, but to all the multi-
stakeholder arrangements that can trigger complementarity and synergies among different
players, and especially with other market participants along agricultural value chains.
The aim of our study is to understand the factors underpinning successful partnerships
in agriculture, based on an in-depth analysis of “good practices” co-financed by the 2007-
2013 RDP of Friuli Venezia Giulia Autonomous Region in Italy. Friuli Venezia Giulia is
located in the northeast of Italy, bordering Veneto Region, Austria, Slovenia and the Adriatic
Sea: it covers a total area of 7,858 km2 and has a population of 1.2 million people. The
region is mostly rural; Utilised Agricultural Area (UAA) covers 28% of the territory and is
mainly used for arable crops and pasture, whereas forests cover 41% of the territory and
tend to expand due to the abandonment of agriculture, driven in turn by the fact that 23% of
UAA is in mountain areas. Agriculture employs 3.26% of total employed people and
generates 1.2% of the total added value of the region. Farm structure is fragmented: 22,320
agricultural firms operate in the region, with an average size of 10 hectares. 62% of farm
holders practice agricultures only part-time, and only 4% of them have a high school degree
in agronomics [9].
The Regional Government of Friuli Venezia Giulia is keenly aware of the need to
improve the competitiveness of the agricultural sector, and promoting more effective and
more sustainable partnerships is an important target goal in its RDPs: the 2007-2013 RDP of
Friuli Venezia Giulia stated explicitly that “an increasing autonomy from public transfers and
a growing competitive capacity can be the result of a strong orientation towards quality,
efficiency, innovation, environmental compatibility and the development of forms of
cooperation and integration that can bring producers to the market” [10, p. 131]. On the
backdrop of this vision the unit of the Regional Administration responsible for rural
development commissioned this study, based on the assumption that more systematic
evidence on what makes partnerships successful is important not only for market players, but
also for the policy-makers in charge for the design and implementation of governmental
programmes supporting agriculture.
METHODOLOGY OF RESEARCH
To understand the factors underpinning successful partnerships in agriculture we
chose to use a qualitative methodology, more suitable to help identify commonalities in the
heterogeneous set of the projects co-financed by the 2007-2013 RDP of Friuli Venezia
Giulia. More specifically we analyzed a series of six “good practices” as a multiple case study
[11]. To identify good practices, in agreement with the unit of the Regional Administration
responsible for rural development we took three requirements into account:
first of all, to be assessed in a reliable way projects had to be already concluded, or at
least nearing conclusion (minimum 80% of planned expenditure already accounted for);
secondly, they had to stand out for the results they achieved, in terms of impact, cost-
benefit ratio, innovative partnership or working methods;
the last criterion was a balanced distribution of good practices among the different
lines of intervention (so-called “axes” and “measures”) co-financed by the 2007-2013 RDP of
Friuli Venezia Giulia.
The following six projects were selected as good practices: integrated territorial project
“Urban agriculture” (support to farms located in the territory of Udine, the second largest town
in Friuli Venezia Giulia); integrated value chain project “Fantinel Pitars” (improved
coordination of supply chain for more effective marketing of wine products); integrated value
RJOAS, 6(66), June 2017
39
chain project “Venchiaredo” (improved coordination of supply chain for more effective
marketing of cheese products); agricultural collective action “Vigna in Collio” (upgrading of
equipment among the wineries in the Collio area); forestry collective action “Certified poplar
plantation in Friuli Venezia Giulia” (certification of environmental sustainability of poplar
plantations); forestry collective action “Ovaro, Rigolato, Prato Carnico, Comeglians amd
Paluzza Municipalities” (support to the refurbishment of old wooden buildings in mountain
areas according to traditional architectural standards).
The sample of projects we selected guaranteed a balanced distribution among the lines
of intervention funded by the 2007-2013 RDP of Friuli Venezia Giulia: half of them are
“integrated projects” in the EAFRD terminology, i.e. territorial or value chain partnerships,
and half are “collective actions”, i.e. partnerships among direct competitors. Four projects
concern agriculture, whereas two deal with forestry; integrated forestry projects could not be
included, since, by the time of our study was carried out, none of them had come to
conclusion or to the expenditure threshold we set.
Our analysis was based on the project documents made available to the Regional
Administration by each project leader and summarized in a data acquisition form. For this
purpose we adopted the standard template used by the Assembly of European Regions in
the framework of the RUR@CT network to facilitate the transfer and benchmarking of good
practices in rural development across the EU [12]. Project document data were triangulated
with semi-structured interviews with project leaders and other key informants to better
appreciate the factors, especially in terms of design and dynamics that made it possible for
expected results to be achieved, and for partnerships to prove successful. Whenever
possible two researchers were involved in the interviews to reduce the risk of subjective
interpretation of answers; the completed data acquisition form was then validated by project
leaders and other interviewees.
RESULTS AND DISCUSSION
Our study allowed the identification of six commonalities shared by the projects
qualifying as good practices. Three predictors of success are associated to the contents of
the project, i.e., strategic vision, sustainability over time and market orientation.
Strategic vision. Projects seem to be more effective if they explicitly aim further than
securing financial contributions, and if they focus on strategic goals (medium to long-term)
rather than merely tactical (short-term) ones, not only in the design phase, but also in the
implementation of project activities. In the most forward-looking cases, support for the
projects’ strategic objectives became a discriminating criterion for joining the partnership,
also because in some cases project participation requires partners to behave according to
predetermined conditions, not only in terms of the advanced investment on which financial
support is calculated, but also of compliance with certain production guidelines.
Sustainability over time. As widely acknowledged in the project management
literature, successful projects extend beyond the original planning horizon, although
sometimes in partially different formats. Sustainability over time is directly related to the
ability to operate pursuing a strategic vision. Moreover, the sustainability of a partnership
beyond its formal deadline can be a proxy indicator of the fact that the project has been
designed to address a real need, rather than just to exploit a funding opportunity. In these
cases partnerships continue to exist over time, even though some of their members may
change, and use available financing opportunities to achieve their goals. In many cases,
therefore, one of the most important achievements of the projects we identified as good
practices is testing or consolidating this kind of long-term relationships.
Market orientation. For the lines of intervention for which access to end consumers is
important, strategic vision and sustainability over time also mean the pursuit of a market
positioning that provides beneficiaries a sustainable competitive advantage. This is
especially relevant for integrated value chain projects, but not only: also collective actions at
times display this feature. When governmental contributions just help bear the burden
associated with capital expenditure, competitive implications are negligible. When financial
RJOAS, 6(66), June 2017
40
support funds investments that help lower operating costs, the implications in terms of
market positioning and competitive advantage are undoubtedly more relevant. The most
ambitious projects go further, aiming to widen the margin between prices and costs to the
benefit of all partners through activities that pursue primarily an increase in market value
based on product differentiation [13], for instance through certification of environmental
sustainability or improved traceability of the supply chain.1
Two more predictors of success seem to be linked to the nature of the partnership, i.e.,
critical mass and project leaders’ entrepreneurship.
Critical mass. Taking into account the small average size of agricultural, farming and
forestry firms in Friuli Venezia Giulia, patchy initiatives are likely to have a limited impact,
while projects that set up partnerships among multiple stakeholders working in the same
direction and pursuing at least partially shared goals tend to be more effective. In this
perspective, integrated territorial projects and integrated value chain projects seem more
promising than collective actions; while integrated projects are explicitly aimed at facilitating
cooperation among entities from the same geographic area or belonging to two or more
segments of the same supply chain, collective actions tend to finance actions carried out in
parallel by firms and institutions that keep operating autonomously, failing, at least in some
cases, to catalyse the development of real synergies.
Project leaders’ entrepreneurship. Most of the projects selected as good practices are
coordinated by leaders who stand out for their entrepreneurship: they do not stop at
facilitating the obtainment by all partners of the financial contributions made available
through the EAFRD, but actively seek to establish and maintain a true partnership. Not
surprisingly, they tend to match the profile of “policy entrepreneurs” suggested by Kingdon
[15]. As a consequence, it is not enough for project leaders to have the formal requirements
and skills necessary to submit applications and manage bureaucratic procedures: they also
need substantial (not necessarily hierarchical) transformational leadership vis-à-vis other
project participants, based on a deeply-seated commitment to making the partnership work in
order to achieve individual goals.
One final commonality shared by the projects identified as good practices seems to be
linked to policy design rather than implementation: successful partnerships are consistently
associated with lines of intervention where funding requirements were specifically designed
to address critical weaknesses in agricultural development. For each line of intervention,
RDPs establish that applications have better chances of success and financial support
corresponds to a higher share of expenditure provided that partnerships or proposed project
activities meet certain requirements. This is a very effective feature, which leads applicants
to design partnerships and activities in such a way to fully meet these requirements, in
keeping with the logic of nudging as a driver of success in modern governmental policies
[16]. Obviously partners’ commitment is not always genuine, and in many cases it is merely a
matter of box ticking. On the other hand, one must remember that regional governments set
these requirements based on a detailed analysis of the critical challenges to rural
development in each area of intervention. The good practices we analyzed suggest that
providing preferential support to projects allowing partners to test innovative, targeted
solutions to these challenges leads to interesting results. One likely driver of success seems
to be that the availability of preferential funding supports the agenda of “policy entrepreneurs”
who in many cases are already striving to trigger change among their peers: it is not
surprising that some interviewees suggest that preferential funding for fully compliant
projects should be even more prominent.
Given the intrinsic limitations of a multiple case study, the good practices we studied are
not expected to represent systematically all the projects funded by the 2007-2013 RDP of Friuli
Venezia Giulia, nor was the analysis designed as a fully-fledged final evaluation, i.e. with the
1 According to the classical taxonomy of competitive strategies suggested by Porter, cost leadership is the
strategy of a firm offering standardized products at very low per-unit costs for buyers who are price-sensitive;
differentiation is the strategy of a firm offering products that are considered unique industry-wide and are
addressed to buyers who are relatively price-insensitive [14].
RJOAS, 6(66), June 2017
41
aim of feeding into the 2014-2020 programming cycle. Nevertheless, our findings seem
coherent with those of authoritative sources in the field, such as the World Economic Forum’s
New Vision for Agriculture initiative [17]. We believe that the features shared by successful
projects help shed light on what it takes for governmental incentives to promote effective
partnerships in the agricultural sector. Thanks to a better understanding of these
commonalities, policy-makers promoting rural development in the EU as well as in the Russian
Federation can improve the cost-effectiveness of incentive schemes, in particular by setting
tighter standards to be met by agricultural firms wishing to access preferential funding.
Research was conducted in the framework of and received partial funding by the Friuli
Venezia Giulia Rural Development Programme for 2007-2013 of the European Agricultural
Fund for Rural Development.
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