efforts to create small farm associations or producer groups generally failed, except in a few
cases. In 2000, 2003 and 2004 different laws were passed by the Polish parliament to provide
a legal framework and financial incentives to establish producer groups. However, as Ba-
naszak (2005, p. 3) states, the latter groups currently still possess only "a very marginal share
in terms of both volume of the goods marketed and the number of associated farmers." As
case studies in North-Western and South-Eastern Poland have revealed, there are often local
constraints preventing the successful formation of agricultural service or marketing coopera-
tives (Gramzow 2006a and Gramzow 2006b). Similar findings are presented by Banaszak
(2005), too. She suggests, based on a study comprising 62 interviews with managers of agri-
cultural producer groups in the voivodship Wielkopolskie, that not only the economic and
market environment hampers the success of such groups, but also collective action problems.
The results of our case study show that various constraints are likely to prevent successful
cooperative action on the local level. The following concerns were expressed by local inter-
view respondents or emerged as a result of our data collection:
1. Individual reservations against cooperation. This is locally called the “Polish men-
tality” and was characterised by a local farmer as follows: “If the one who cooperates
with me will earn higher profits from this cooperation than I do, I don’t see any rea-
sons to cooperate. And how can I trust that he does not take advantage of me?” The
reservation against cooperation is even boosted by the income disparities between ru-
ral households, which strongly increased within the transformation process.
2. Principal-Agent problems between management and members. If the management is
employed by a producer group, members have to be aware of opportunistic behav-
iour of the manager. Therefore, a control system or a particular incentive system has
to be established which leads to an increase of transaction costs. However, since
members of agricultural cooperatives are compared to shareholders of a firm not able
to buy or sell stocks of the organization to make speculative gains based on future
flows of firm profits, incentives of cooperative members to monitor the management
will be lower (Deininger 1995, p. 1319). Hence, in particular the willingness of
members of agricultural cooperatives to bear additional costs for a monitoring and
sanction system might be generally low.
3. Free-riding among members. Producer groups in general produce different club
goods as they provide e.g. marketing facilities and negotiate product prices which are
often linked with certain production standards and quantities (see also Banaszak
and Beckmann 2006). The provision of such club goods enable free-riding activities
among members. Such free-riding situations emerge as it is individually rational for
every member to produce to lower production standards respectively to non-
contribute to common producer group facilities, although it would be in the interest
of every member if all members contributed or produced to commonly defined pro-
duction standards. Additionally, investments in the producer group are processes
with a long time perspective. Hence, the question arises: How can members be sure
that if they pay their fees and invest in the producer group, other members would do
the same, too? According to Olson (1965), this problem increases significantly with
the number of members of an organisation.
4. Inflexible decision making procedures. It is estimated that producer groups in Dolina
Strugu need more than a thousand members to achieve some bargaining power. But
to find a consensus and to pass decisions in such a big group leads to high transaction
costs and paralyses decision making. Furthermore, the often neighbourly or even
friendly relationship between producer group members also hampers to apply formal
rules or sanctions against each other and reduces therefore an effective function of a
producer group (similar findings were given in Banaszak 2005).