Box 10.3 Formalizing the linkages in agriculture: the importance of co

Chapter

An extensive study by FAO (FAO, 2001 i) brings together numerous examples from many developing countries that confirm the generally positive influence of TNCs on the agriculture of these countries. But the FAO study also shows that policies play an important role in promoting the benefits that TNCs or the local processors can provide for a country's agriculture. Most important, it shows that the underlying contracts between farmers and the company are crucial for success or failure. Numerous examples demonstrate how well-managed contract

ABSTRACT

One of the most influential studies in this context (Griliches, 1957) underlines the importance of inventive adaptation . Griliches shows that farmers in Iowa and Illinois had long adopted highyielding hybrid maize varieties suited to the Corn Belt states, while farmers outside the Corn Belt (e.g. in Alabama) continued to grow inferior traditional varieties. This had little to do with the farm ers’ capabilities. Instead, differences in the agro-ecological conditions between the Corn Belt and Alabama, together with the sensitivity of hybrid maize to these differences, resulted in the lack of adoption and the continuous technological distance between these maize-growing areas. As Griliches noted, “farmers outside the Corn Belt could not reap the benefits of the new technologies until the adaptive research had taken place to make the technologies available to the new environm ent”.

Box 10.3 Formalizing the linkages in agriculture: the importance of contract farming

ABSTRACT