Cooperation and innovation under production risk: evidence from a lab-in-the-field experiment

PurposeThis study analyzes the role of cooperative behavior in facing the risk of encouraging innovative agricultural production projects by small-scale farmers in the context of farmers in developing countries.Design/methodology/approachA within-subjects field experiment was conducted with small-scale Colombian panela cane farmers. The authors used the collected data to run the regression analyses.FindingsThe results suggest that when small farmers can follow cooperative behavior by joining a group and pooling resources to face risk, they are more willing to invest in a novel and profitable alternative, albeit riskier. However, the possibility of cooperating with a group to invest in a novel production project depends on its expected risk level.Research limitations/implicationsThese results will help develop agricultural policies for sustainable development. Establishing informal networks for small-scale farmers to deal with unpredictable risks may aid in developing innovative systems.Social implicationsAgriculture is highly vulnerable to climatic impacts, which, combined with the inherent risk of innovation, may reduce small farmers' willingness to adopt innovation. Cooperation appears to be a mechanism for pooling resources and facing risk.Originality/valueResearch has focused on experimentally testing the effect of cooperative behavior when facing risk. The authors contribute to the literature by demonstrating the impact of the ability of small-scale farmers in rural areas to collectively manage risk on investment in innovative projects.