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READ L. Farms possess many valuable resources which can also be used in novel non-agricultural enterprises. The subject of this paper is to discuss how farm diversification can be approached within the resource-basedtheory RBT framework.
Key questions are: what kinds of resources are important in diversified farms, andhow diversified farms can compete with specialized firms. Although the resource-based theory is seldom usedin farm management studies, it provides a good theoretical framework for farm diversification.
Turning Rural Potential into Success
Diversified farms were an in-between group. Diversified farms were equally successfulor even slightly more successful than non-farm enterprises in possessing the needed resources. Thus, farmerswho have diversified are well placed in possessing general resources to run their farm-firm complexes.
In thefuture, intangible resources are becoming more and more important in many sectors, so in the long run weshould focus on them. Key words: farm diversification, resource-based theory, rural area.
IntroductionRural areas and the use of rural resources are goingthrough rapid socio-economic change. Globalization,fierce competition in world markets, crises in foodsafety, and poor profitability of many agriculturalproducts have led to a decrease in farm incomesand increased uncertainty. New demands for landuse and environmental issues will certainly changethe operational environment of rural industries. Ina similar manner, globalization, rapid technologicalchange and population trends have affected othereconomic sectors in rural areas.
Consequently, thereis an urgent need for new enterprises and new incomeopportunities. At the same time, there is an increasingdemand for rural services and products. Rural areashave many specific resources which can be used inmany ways and they do provide unique businessopportunities.
Farm diversification provides onesolution in meeting the demands.
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Local farmers areoften well placed to take advantage of possibilitiesfor increasing demand for rural products and services Haines and Davies, ; Carter, ; Rantamäki-Lahtinen et al. Diversification is not by any means a novelphenomenon among farmers. Agricultural historianshave reported diversification activities from medievaltimes Friedmann, ; ref.
Recently, there is clearly an increasing interesttoward diversification. For instance, the share offarms with other gainful activity 1 OGA has risenfrom 7.
Farms possess many valuable resources which can also be used in novel non-agricultural enterprises. The subject of this paper is to discuss how farm diversification can be approached within the resource-based theory RBT framework. Key questions are: what kinds of resources are important in diversified farms, and how diversified farms can compete with specialized firms. Although the resource-based theory is seldom used in farm management studies, it provides a good theoretical framework for farm diversification. Also the latter valued intangible things highly, such as the firm s image or customer relationships.
It can be predicted that the role of diversified farmswill increase in the future. As agriculture is goingthrough big changes, policymakers as well as farmershave many expectations concerning non-agriculturaldiversification. Farms do possess many valuableresources which can be used in non-agriculturalenterprises as well.
The term is narrower than the definition of farmdiversification in this paper.
LLU Raksti 21; L. Rantamäki-Lahtinen Turning Rural Potential into Successpossibilities to invest in new avenues, while at thesame time maintaining its current lines of businesses. There are several problems in diversification strategyas well. In order to perform well, a firm mustovercome these problems. Diversification strategyhas several risk elements, and entering into differentmarkets is obviously a risky business Markides, RBT has been used to explain diversificationstrategy as it is a theory which is fundamentallyconcerned with the internal accumulation of assetswith asset specificity and, less directly, transactioncosts.
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RBT has a very significant advantage inthat it works as a unifying theory which allows itto view both related and unrelated diversificationthrough a common lens Peteraf, Thus,RBT has drawn attention from product-marketactors to resource factors. RBT has been applied todiversification strategy in different ways.
RBT can provide explanationsas to why firms diversify and explain the underlyingprinciple for the direction of the diversification. RBTcan also provide an explanation for the relationshipbetween performance and a chosen diversificationstrategy. In particular, the theory explains howresources which are associated within certaindiversification types are related to performance. RBT can provide an explanation for portfolio-levelrelationships and how such linkages can be used toexplain financial performance and, finally, it can alsoprovide new insights for the efficient management ofdiversification strategy Bergh,pp.
Markides and Williamson stressed thatdiversification will only enhance performance, if itallows a firm to obtain preferential access to criticalresources which cannot be purchased or replaced by itsnon-diversified rivals.
Even then, the advantage willeventually perish when non-diversified competitorsimitate them and asset erosion affects these resources. One of the most important ways to obtain newstrategic assets or critical resources is to accumulatethem through learning.
A diversified firm might havea possibility to use universāls uzturs fat burner 55 es cilnes former experiences when it iscreating new critical assets or core competences inother fields, and thus, derive long-term benefit ofthis kind of dynamic relatedness.
In order noņemt taukus no dubultzoda gain asustainable competitive kā sadedzināt taukus pār muskuļu by sharing thesecritical resources between different lines of industry,the firm must also have an organizational structurewhich is more efficient in realizing the benefits ofsharing than the alternative transaction modes usedby competing non-diversified firms Robins andWiersema, Farm Diversification and RBTOver the years, researchers representing numerousdisciplines have studied farm diversification andportfolio universāls uzturs fat burner 55 es cilnes.
They have been studied,e. Somestudies have focused on a single farm diversificationindustry, like agro-tourism Hjalager, ; Busbyand Rendle, ; Nickerson et al. Inaddition, diversification could be classified as oneof the key issues in strategic management literatureconcerning large enterprises see e.
Howeverso far, not much small business or farm managementresearch has used universāls uzturs fat burner 55 es cilnes RBT framework directly,although it is very promising approach.
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Pascotto stated that, in diversified Italianfarms, a diversification enterprise produces a universāls uzturs fat burner 55 es cilnes to total revenues, even though the greaterproportion of work time is spent on agriculture. Thisis due to the use of agricultural resources in thediversification activity, i.
Cabrera-Suárez et al.
These family business typeswith critical resources are, for instance, the high levelof commitment of the family members and employeesand their dedication to the firm, and the quality andtrust which are often related to family businesses. Torkko studied farm diversification in herdissertation. Her main objective was to find factorsby which positive development could be promoted. A qualitative study was made using hermeneuticmethods and a case-study approach. The main resultswere that farmers had stronger product-related skillsas compared to marketing, and diversified farms didnot have official strategies.
Kujala et al.
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Triangulation of quantitative andqualitative data and methods were used. Accordingto the results, the farmer himself is the key actorwhen successful innovative business concepts arecreated. His ideas, know-how and courage werethe most crucial factors when ideas were developedfor innovations. Rantamäki-Lahtinen Turning Rural Potential into Successamong diversified farms, resources which are basedon an innovation environment should be in moreeffective use and attention should be paid cik ilgi ātri sadedzināt taukus focusing these resources.
Alsos and Carter studied resource transferfrom agriculture to other business ventures andperformance consequences on diversified Norwegianfarms. Their results indicate that there is a substantialresource transfer, especially when a diversificationenterprise is closely related to agriculture throughhorizontal or vertical integration. Farms which haverelatively more resources, such as knowledge or officepremises, also transferred more of them to the newbusiness.
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According to the study, resource transferaffects both positively and negatively the profitabilityperformance of new ventures. The transfer ofphysical resources did enhance the performance,but the transfer of know-how actually hindered theperformance of the new venture.
There are several studies which have not directlyused RBT but have results which help to understandfarm diversification from the resource-based angle. There are several studies to hand from all overthe world which have explored why farmers havediversified in the first place, and whether theyare happy with the chosen path.
Nickerson et al. Rantamäki-Lahtinen studied diversificationstrategy and decision-making in diversified Finnishfarms from the perspective of management. Accordingto the results, the objectives to start non-agriculturalentrepreneurial activities on farms were driven byboth opportunity and necessity.
Farm diversificationcould be implemented though vertical integrationor horizontal integration or agriculture and the nonagriculturalenterprise might be unrelated. Resultsalso indicate that existing spare resources affect thedirection of the diversification. On those farms whichhad vertically or horizontally integrated agricultureand diversified enterprise, the initial objectivesto diversify linked in closely with existing sparephysical resources, such as own raw materials andmachinery.
Resource allocation,therefore, is indeed an important issue for thesefarms. The focus of the project is onresource management and entrepreneurial identity.
The large postal survey data collected in areutilized. The data consist of two data sets: panel datathat was the follow-up survey for the similar survey and an additional sample.
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Data collectionprocedure and response rates are illustrated inFigure 1. The survey was sent in autumnand for thosewho did not respond at the first time, it was sent againabout a month later. Data collection procedure jauns ķermenis slaids response rate.
There are two limits of the data. As mentioned,only the data collected in concerning the useof resources are used in the analysis presented inthis paper.
The data did not have variables thatcould be used in the analysis concerning the resourceuse. Second, the focus on diversified farms wereon farms where the turnover of non-farm activity isrelatively significant over 8 Euros.
In addition,some of the respondents had not answered to allquestions. This is why results cannot be generalizedfor the whole population of diversified farms as such. However, it can be assumed that the outcomes thathave come to light during the analysis also exist forreal-life decision-making among the whole populationof diversified farms.
The use of resources and their importance wasmeasured on different kinds of rural firms. Forsman created indicators for critical and baseresources in small rural food-processing firms, andher results were utilized when this study was designed. Different resources are important orcritical in different industries.
As shown in Table 1,only two variables, technology and networks, werevalued similarly in all three enterprise groups.