Formal and informal governance mechanisms of machinery cooperatives: The case of Quebec

Abstract

Although embedded in a regulatory framework, studies suggest the important role of informal (relational) mechanisms in agricultural cooperatives, mostly viewed as complements to formal mechanisms. However, the interaction between these two mechanisms remains unclear. To improve our understanding of this interaction, we investigate governance mechanisms in agricultural machinery cooperatives, especially the “Coopératives d′Utilisation de Matériel Agricole” (CUMA). Machinery cooperatives allow producers to share machinery within a legally defined structure, but the traits of these cooperatives cause to rely heavily on informal mechanisms. This paper analyses how the interaction between formal and informal mechanisms minimizes coordination and motivation problems. Based on a multiple case study approach, the paper shows that the use of informal mechanisms results from the failure of formal mechanisms to minimize opportunism among members. As a result, CUMA members will primarily resort to informal mechanisms, using formal mechanisms as a complement when needed.