Genesis and Growth of Amul: Life Cycle Lessons for Kenyan Dairy Cooperatives

The cooperative model of Gujarat, also called the Amul Model or the Anand Pattern, has been a source of great interest to academics and politicians alike because of its potential for replication in India and elsewhere. The Amul Model is founded on six principles in the internal and external environment, which can be interpreted as requirements for individual farm producers to successfully engage in group action. This paper examines the adaptation of the Amul Model by East African dairy cooperatives, beginning with a description of the organizational history of Amul, the largest food brand and dairy cooperative in India, while taking a cooperative life cycle approach. The cooperative life cycle comprises five progressive stages: 1) genesis, 2) organizational design, 3) growth and heterogeneity, 4) recognition and introspection, and 5) choice. Amul, which operates a three-tier federation, has experienced a series of life cycles, each culminating in a critical, revolutionary event to ignite new life cycles characterized by incremental growth. The analysis of organizational data informs a property rights framework to help define the individual steps and stages of organizational growth and decline for cooperatives, thus outlining the paths of degeneration or regeneration for different types of property rights structures, which comprise various combinations of residual claim and residual control rights. While Amul originally started as a defensive bottom-up type of organization to solve a market failure, following the same founding justifications as for many European and American cooperatives, the Amul Model being replicated in East Africa is a top-down approach with a strong emphasis on macrolevel direction to spur micro-level development. The history of Amul generates a range of lessons applicable to agricultural cooperatives at various stages of the cooperative life cycle, from genesis to choice, which includes the options to adjust or convert the organizational form. The lessons are subsequently applied to three specific dairy cooperatives in Kenya, which currently linger somewhere in the first cooperative life cycle; possible steps are identified to prevent demise and help progression to advanced stages of growth and development in the cooperative life cycle.

[1]  H. Hansmann,et al.  The Ownership of Enterprise , 1996 .

[2]  George Hendrikse,et al.  Marketing cooperatives and financial structure: a transaction costs economics analysis , 2001 .

[3]  D. Roodman,et al.  The Anarchy of Numbers: Aid, Development, and Cross-Country Empirics , 2003 .

[4]  J. Bijman,et al.  Erim Report Series Research in Management Ownership Structure in Agrifood Chains: the Marketing Cooperative Bibliographic Data and Classifications , 2022 .

[5]  A. Venables,et al.  Geographical Disadvantage: A Heckscher-Ohlin-Von Thunen Model of International Specialization , 1999 .

[6]  C. Ménard.  The Economics of Hybrid Organizations , 2004 .

[7]  Mark R. Manfredo,et al.  Cooperative mergers and acquisitions: The role of capital constraints , 2003 .

[8]  Stephan Dohrn,et al.  Collective action for smallholder market access , 2009 .

[9]  Deborah Brautigam,et al.  Aid Dependence and Governance , 2000 .

[10]  F. Chaddad,et al.  Redesigning Cooperative Boundaries: The Emergence of New Models , 2004 .

[11]  Bengt Holmstrom,et al.  Future of Cooperatives: A Corporate Perspective , 1999 .

[12]  S. Bhuyan.  The "People" Factor in Cooperatives: An Analysis of Members' Attitudes and Behavior , 2007 .

[13]  M. Cook.  The Role of Management Behavior in Agricultural Cooperatives , 1994 .

[14]  J. Bijman,et al.  Innovations in Cooperative Ownership: Converted and Hybrid Listed Cooperatives , 2006 .

[15]  O. Williamson.  The Vertical Integration of Production: Market Failure Considerations , 1971 .

[16]  R. Meinzen-Dick,et al.  Special Section: Collective action for smallholder market access. , 2009 .

[17]  Michael L. Cook,et al.  The Future of U.S. Agricultural Cooperatives: A Neo-Institutional Approach , 1995 .

[18]  Gerald C. Nelson,et al.  Introduction to the special issue on spatial analysis for agricultural economists , 2002 .

[19]  Sanford J. Grossman,et al.  The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration , 1986 .

[20]  J. Stiglitz.  Markets, Market Failures, and Development , 1989 .

[21]  C. Delgado.  Rising consumption of meat and milk in developing countries has created a new food revolution. , 2003, The Journal of nutrition.

[22]  R. Coff,et al.  Both Market and Hierarchy: An Incentive-System Theory of Hybrid Governance Forms , 2009 .

[23]  R. Sexton,et al.  Factors Critical to the Success or Failure of Emerging Agricultural Cooperatives , 1988 .

[24]  W. Baumol.  Retrospectives: Say's Law , 1999 .

[25]  Anne Parmigiani,et al.  Clearing a Path Through the Forest: A Meta-Review of Interorganizational Relationships , 2011 .

[26]  Murray Fulton,et al.  New Generation Cooperatives and Cooperative Theory , 1996 .

[27]  K. Cameron,et al.  Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence , 1983 .

[28]  T. Reardon,et al.  The Economics of the Food System Revolution , 2012 .

[29]  Gerald F. Ortmann,et al.  Agricultural Cooperatives I: History, Theory and Problems , 2007 .

[30]  John A. Parnell,et al.  Organizational Life Cycle: A Five Stage Empirical Scale , 2003 .

[31]  T. Coelli,et al.  Performance of Dairy Plants in the Cooperative and Private Sectors in India , 2001 .

[32]  J. Swinnen,et al.  Up- and Downstream Restructuring, Foreign Direct Investment, and Hold-Up Problems in Agricultural Transition , 1998 .

[33]  F. Chaddad.  Advancing the Theory of the Cooperative Organization: The Cooperative as a True Hybrid , 2012 .

[34]  David L. Sunding,et al.  The agricultural innovation process: Research and technology adoption in a changing agricultural sector , 1999 .

[35]  I. Jawahar,et al.  Toward a Descriptive Stakeholder Theory: an Organizational Life Cycle Approach , 2001 .

[36]  F. Dong,et al.  Outlook for Asian Dairy Markets: The Role of Demographics, Income, and Prices, The , 2005 .

[37]  B. Klein,et al.  Vertical Integration, Appropriable Rents, and the Competitive Contracting Process , 1978, The Journal of Law and Economics.

[38]  Sidney Hoos,et al.  Cooperative Enterprise and Organization Theory , 1962 .

[39]  P. H. Friesen,et al.  A Longitudinal Study of the Corporate Life Cycle , 1984 .

[40]  Marcel Fafchamps,et al.  Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained , 1991 .

[41]  Peter Österberg,et al.  Members' perception of their participation in the governance of cooperatives: the key to trust and commitment in agricultural cooperatives , 2009 .

[42]  O. Hart,et al.  Property Rights and the Nature of the Firm , 1988, Journal of Political Economy.

[43]  G. Hendrikse,et al.  Marketing Cooperatives and Financial Structure , 1995 .

[44]  O. Williamson.  Comparative Economic Organization: The Analysis of Discrete Structural Alternatives , 1994 .

[45]  F. Chaddad,et al.  Understanding New Cooperative Models: An Ownership–Control Rights Typology , 2004 .

[46]  N. Kalogeras,et al.  Which Cooperative Ownership Model Performs Better? A Financial-Decision Aid Approach , 2013 .

[47]  H. Demsetz.  The Structure of Ownership and the Theory of the Firm , 1983, The Journal of Law and Economics.

[48]  F. Chaddad,et al.  Control Rights, Governance and the Costs of Ownership in Agricultural Cooperatives , 2013 .