owned telephone company was not willing to invest in this region any further. The founding
capital of the cooperative consisted of fees every inhabitant had to pay to join this telephone
company. Additional capital was taken from bank credits whereas the communes and some
local leaders acted as guarantor. With the help of this founding capital a new telephone net-
work was set up and the number of subscribers in Dolina Strugu increased until 2005 to about
9,800. Additionally, more than 3,200 households have internet access, too. For the 6,500
members of the telephone cooperative, local calls were free. Since 1993 the telephone coop-
erative has been able to work without any additional financial support. On the basis of the
successful experience of cooperation, leading members of the telephone cooperative as well
as of local authorities founded a non-profit organisation called “Dolina Strugu”, in order to
solve communal infrastructure problems, support the environmental protection of the area,
and stimulate economic activity in the region. As one of the first initiatives, “Chmielnik
Zdroj” was founded with start-up funds partly from the communes (especially the Chmielnik
commune) and partly from a loan secured by using local leaders’ houses as collateral. Ini-
tially, the partnership provided the regional population with mineral water, to be ordered by
telephone and delivered to their homes. In the following years they added further products
and increased their production capacities very fast. Further important initiatives of the non-
profit organization “Dolina Strugu” have been the support of local business start-ups and the
formation of a local employment agency.
5.3 Success factors
The key factors that made “Chmielnik Zdroj” a success were its specific organisational set-up
as a public-private partnership, its market-oriented way of risk sharing between the public
sector and local businesses, as well as the fact that it was built on local needs, and thus
emerged as a true bottom-up self-help organisation. Most associates had been politically ac-
tive in the local government and thus generated an eye for local problems. As local politi-
cians, they had an incentive to respond to local needs. Because of their detailed knowledge of
local conditions, the founding members of the partnership were able to create an organization
that provides locally viable solutions for the current problems in agriculture and agricultural
producer groups and the rural economy in general. It is a prime example for the rule that suc-
cessful cooperation critically depends on the initiative of the affected individuals and their
willingness to contribute to their development (Müller 1994). However, the actively partici-
pating members are only a small number of local government representatives and local leader
persons. This makes “Chmielnik Zdroj” a public-private partnership distinct from traditional
farmers’ service cooperatives. The approach overcomes a number of obstacles to cooperation
mentioned earlier, but also creates problems of broader participation.
In the following, we summarize the major success factors of “Chmielnik Zdroj”:
1. Market-based approach limits risk of long-term involvement for farmers. The part-
nership uses its own distribution network and established a regional marketing label.
It successfully developed a regional niche market and is hence independent from the
big retail companies. Even so, farmers do not have to become shareholders or invest
own funds and they do not have to take the risk of setting up the organization. This
eliminates the free-rider and moral hazard problems. Due to farmers’ market-based
relation to the partnership, there is little danger of a hold-up for them. Furthermore, a
contract between the commune Chmielnik and the partnership guarantees local farm-
ers’ that they can sell their products to the organization before it is allowed to buy
products from other regions. The main risk has been taken by the communes as well
as by local leaders who are engaged in the management of the partnership. Further-
more, the wide array of products "Chmielnik Zdroj" provides limits the risk of a
product failure that farmer producer groups in Dolina Strugu already experienced.