RAISING THE BAR IN A DAIRY COOPERATIVE
Encouraging innovation through exchange relationships
Master Thesis, MSc Human Resource Management University of Groningen, Faculty of Economics and Business
December 19, 2015 Nico Stokman S1967673 Schuitermakersstraat 2-2 9711 VD Groningen tel.: +31 (0)6 42506980 e-mail: n.j.h.stokman@student.rug.nl Supervisor:
Prof. dr. O. (Onne) Janssen
Co-assessor S. (Sanne) Feenstra
2 RAISING THE BAR IN A DAIRY COOPERATIVE: ENCOURAGING INNOVATION THROUGH EXCHANGE RELATIONSHIPS.
ABSTRACT
This study examines whether member-farmers engage in either an economic or social exchange relationship with a Dutch dairy cooperative, and how these distinct types of exchange relationships are differentially related to farmer innovations. As hypothesized, results of a survey among 408 young member-farmers show a negative correlation of the individual characteristic of collectivist orientation and the situational characteristic of trust in organization and perceived organizational support to economic exchange relationships and a positive correlation of these characteristics and orientations to social exchange relationships. Moreover, the study results demonstrate a direct effect of economic exchange relationships on economic innovation, and a mediating effect of internalization of firm vision and values on the relationship between social exchange and sustainability innovation. Results contribute to further theoretical and practical understanding of exchange relationships with respect to innovations in the farming community.
3 INTRODUCTION
Sustainable innovation has become increasingly important for the Dutch dairy industry. One of the reasons for the growing importance of sustainable innovation is that Dutch consumers and citizens are becoming more involved in socio-cultural and environmental themes of dairy farming (Boogaard, Oosting, & Bock, 2008; van Asselt, Capuano, & Van der Fels-Klerx, 2015; van der Jagt, Groen, & Kavvouris, 2013). However, desirable, the incorporation of environmentally sound and socially acceptable practices needs to be economically viable in order to be widely adopted by the dairy industry (Thomassen, Dolman, van Calker, & de Boer, 2009). If farmers would fail to meet the standards for environmentally sound, socially acceptable and economically viable practices, future farming would become uncertain for them (Dolman, Sonneveld, Mollenhorst, & de Boer, 2014).
However, research shows that both organic (Oudshoorn, Renes, & de Boer, 2008) and conventional dairy farmers (Berentsen, Kovacs, & van Asseldonk, 2012) have difficulties innovating their farming practices in ways that meet both sustainability and economic requirements. As over 80 percent of Dutch dairy farmers are organized in dairy cooperatives (Bijman, van der Sangen, Poppe, & Doorneweert, 2012), one of their key challenges and responsibilities is to stimulate and facilitate the transition of more ‘traditional’ farming methods to more sustainable methods while maintaining the economic feasibility of these enterprises. The present research study was undertaken within the context of a specific Dutch dairy cooperative and aims at answering the question, “What factors and motivating process mechanisms may drive dairy cooperative’s member-farmers to implement necessary economic and sustainable innovations?”
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extent predicted by both individual and situational characteristics. Therefore, this study will not only assess the differences in exchange relationships that member-farmers establish with the dairy cooperative, but also how two individual and two situational characteristics influence the types of exchange relationships that are formed.
The two individual characteristics that will be studied are long-term orientation and collectivist orientation. Long-term orientation describes an individual’s focus on either the future or the past, while collectivist orientation captures a person’s values as they relate to groups and social behavior (Hofstede & Bond, 1988). The reason these two factors have been chosen is that research shows them to be valuable predictors of the quality of exchange relationships (Blau, 1964; Shore et al., 2006).
The two situational characteristics to be studied are trust in organization and perceived organizational support. Whereas trust describes an individual’s willingness to be vulnerable towards the other party (Mayer, Davis, & Schoorman, 1995), perceived organizational support can be defined as an individual’s perception that their organization genuinely cares about their well-being (Eisenberger, Huntington, Hutchison, & Sowa, 1986). These two situational characteristics are being studied as previous research has shown them to be important predictors of the quality of exchange relationships (Shore et al., 2006).
Furthermore, the current study argues that member-farmers’ exchange relationships are differentially related to the kind of innovations they implement on their farms. Member-farmers with an economic exchange relationship are more likely to engage in economic innovations, as this type of innovation fits the nature of their relationship with the dairy cooperative (Shore et al., 2006). On the other hand, member-farmers with a social exchange relationship with the dairy cooperative are less influenced by purely economic motivators to incorporate innovations. In turn they are assumed to be focused on long-term outcomes that can benefit the cooperative as a whole, and therefore more likely to engage in sustainability innovations. Furthermore, member-farmers with a social exchange relationship are even more likely to engage in sustainability innovations when they internalize the dairy cooperatives’ vision and values for sustainability, as this internalization leads them to feel obligated to support and meet these sustainability vision and values (Blau, 1964; Shore et al., 2006). Hence, internalization of the firm’s vision and values for sustainability is expected to operate as a mediating variable on the relationship between social exchange and sustainability innovation.
5 FIGURE 1
Conceptual model
The model proposes that: (a) the individual characteristics of long-term orientation and collectivist orientation, and the situational characteristics of trust in the organization and perceived organizational support influence whether member-farmers engage in either an economic- or social exchange relationship with the dairy cooperative; (b) the economic exchange relationship promotes economic innovation; and (c) the social exchange relationship promotes sustainability innovation, in particular due to the mediating effect of internalization of firm goals and values for sustainability. As most of the relationships in this moderated mediation model have not been tested before, and results might help organizations to better understand and motivate their employees, this study will contribute to both existing theory and practice.
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sustainability innovations member-farmers implement on their farm. Thus, this study attempts to provide practical guidelines on how dairy cooperatives can stimulate their member-farmers to engage in innovations that combine environmentally sound, socially acceptable and economically viable farming practices.
THEORETICAL FRAMEWORK Exchange theory and social and economic exchange relationships
Exchange theory describes the combination of contributions in a relationship between employer1 and employee2 (Shore et al., 2006). Exchange theory has emerged as one the most influential conceptual frameworks for understanding both human and organizational behavior (Cropanzano, & Mitchell, 2005; Flynn, 2005), and has been found to provide a good conceptual foundation for conducting detailed analyses within cooperatives in particular (Jussila, Goel, & Tuominen, 2012b). Recent literature proposes to distinguish separate contributions of employers and employees into economic and social exchange relationships, as it provides a better understanding of the extensive nature of exchanges between employee and employer (Shore et al., 2006). Economic and social exchange relationships will be further explained in the following paragraphs.
Economic exchange relationships can be defined as relationships based on tangible and financial aspects and quid pro quo dynamics (Shore et al., 2006). While economic exchange relationships have received less attention in recent literature than social exchange relationships, there is enough evidence to presume they are separate constructs (Cropanzano, & Mitchell, 2005). Economic exchange relationships are defined as short-term and are characterized by low levels of trust and investment (Song, Tsui, & Law, 2009). Instead, they are based on well-defined obligations that specify the exact quantities to be exchanged, which can therefore be enforced through legal sanctions (Aryee, Budhwar, & Chen, 2002). Furthermore, economic exchange relationships have an emphasis on equivalence, which implies that each party must repay their obligations in a quid pro quo manner in a relatively short period of time (Song et al., 2009). Hence, economic exchange relationships emphasize
1‘Employer’, ‘cooperative’, ‘organization’ and ‘firm’ will be used interchangeably in this
study as all of these terms imply a position of power over the other actor in the relationship.
2‘Employee’ and ‘member- farmer’ will also be used interchangeably as both perform work in
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the financial and more tangible aspects of the exchange relationship (Shore et al., 2006). The low relational investment and low level of trust is associated with a narrowing of exchange roles which in turn leads individuals that engage in an economic exchange relationship to only match required performance of the organization (Kamdar, & Van Dyne, 2007).
In the specific case of the dairy cooperative, member-farmers could engage in an economic exchange relationship when their membership with the cooperative is solely motivated by getting a high price for their inputs (Hendrikse, & Veerman, 2001). Furthermore, all financial resources accumulated beyond the total sum of member-farmers’ contributions are member-farmers’ common property in a dairy cooperative (Bataille-Chedotel, & Huntzinger, 2004; Nilsson, 2001). This implies that all profits after taxes and interest of the dairy cooperative flow directly and proportionally back to its member-farmers, which provides them with an additional financial, short-term benefit from engaging with the dairy cooperative.
Social exchange relationship, on the other hand, can be defined as long-term relationships in terms of duration and investment. These long-term relationships are built on reciprocity and trust (Graen, & Uhl-Bien, 1995; Shore et al., 2006), affective commitment (Shore et al., 2006) and mutual attraction (Emerson, 1981; Molm, 1994). The reciprocal exchange under social exchange takes places under incomplete contracts (Das, & Teng, 2001). This implies that when an individual does another party a favor, that individual expects a future return. However, when that particular favor will be returned, and in what form, is often unclear (Blau, 1964; Shore et al., 2006). Therefore, social exchange relationships emphasize the socio-emotional aspects of the employment relationship, rather than the strict economic aspects (Shore et al., 2006). Thus, individuals that engage in a social exchange relationship balance the search for personal gain with the development of sustainable relationships (De Clercq, Dimov, & Thongpapanl, 2010; Granovetter, 1985). As the quality of these relationships increases, individuals tend to focus more upon the mutual interest of the organization and themselves (Uhl-Bien, & Maslyn, 2003). This can be seen as the opposite from economic exchange relationships, as social exchange relationships serve to exceed, rather than to meet standards of job performance. As a result, individuals that engage in social exchange relationships perform better at their jobs than individuals that engage in economic exchange relationships (Shore et al., 2006). Hence, social exchange is a two-sided, mutually contingent, and mutually rewarding process between two parties (Emerson, 1976).
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exchange relationships because their contracts with the cooperative are incomplete. This is the case as the real world complexity makes it too costly to describe all relevant contingencies (Hendrikse, & Veerman, 2001). This, in turn, implies that farmers deliver their products to the cooperative without prior knowledge of the final prize for their products. Farmers first settle for a lower prize and collectively decide about a possible surplus after the accounting period (Jussila, Byrne, & Tuominen, 2012a). This uncertainty about the specific rewards for their efforts is no big deal for member-farmers that engage in a social exchange relationship with the cooperative as they trust their cooperative to sufficiently repay them in the future.
Member-farmers may also be likely to engage in a social exchange relationship because they might want to exercise their control rights. Although every member-farmer has certain control rights over the dairy cooperative (Grossman, & Hart, 1986), not every member-farmer is equally likely to use them (Chaddad, & Cook, 2004). One might assume that only member-farmers who feel connected and responsible for the dairy cooperative will want to actively use these control rights. This connection and feeling of responsibility could in turn only develop when a member-farmer would engage in a social exchange relationship with the dairy cooperative.
Antecedents of exchange relationships
Social and economic exchange relationship can be predicted by a number of antecedents within both employees and employers. Only the antecedents most relevant for the targeted respondents and organization will be assessed. These antecedents will further be divided into individual and situational characteristics, as many scholars suggest that both individual and situational characteristics should be considered when trying to explain human behavior in exchange relationships (for an overview, see Cassematis, & Wortley, 2013).
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contribute and take from a common pool of resources (Fiske, 1991; Triandis, 1995), which fits the values of a cooperative, as all its additional profits created through synergy are member-farmers’ common property (Bataille-Chedotel, & Huntzinger, 2004; Nilsson, 2001).
Individuals with a long-term orientation are willing to delay short-term material success for success in the future. They value persistence, perseverance and being able to adapt (Hofstede, & Bond, 1988). Furthermore individuals with a long-term orientation desire to build term relationships with specific exchange partners (Ganesan, 1994). These long-term relationships therefore always consist of multiple transactions (Noordewier, John, & Nevin, 1990). Long-term orientation is vital for social exchange relationships, as the exchange is ongoing and based on feelings of obligation. Individuals with a social exchange relationship have long-term and open-ended expectations of the exchange duration and thus expect long-term reciprocity (Blau, 1964). Furthermore, it is argued that long-term orientation leads to social exchange relationships as it lead to lower immediacy, in which parties have a longer time period to repay mutual obligations (Uhl-Bien, & Maslyn, 2003).
On the other hand, member-farmers with an economic exchange relationship value narrowly defined financial obligations without long-term implications (Graen et al., 1995; Shore et al., 2006). The relationship itself is defined as short-term, and each party must repay their obligations in a short period of time (Song et al., 2009). Therefore, this relationship is not based on a long-term orientation as it only focuses on the present and the past. Individuals without a long-term orientation value tradition, hierarchy, fulfilment of obligations and care more about immediate rewards than long-term goals (Hofstede, & Bond, 1988). Therefore, the following hypotheses are proposed:
Hypothesis 1a: Member-farmers’ long-term orientation will be negatively related to their economic exchange relationship with the cooperative.
Hypothesis 1b: Member-farmers’ long-term orientation will be positively related to their social exchange relationship with the cooperative.
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they can and take what they need from a common pool of resources (Fiske, 1991; Triandis, 1995). Furthermore, individuals with a collectivist orientation are more concerned about the image, prestige and distinctiveness of the in-groups they belong to, including their organization (Farooq, Farooq, & Jasimuddin, 2014).
Relationship norms for people low in collectivist orientation are based on market pricing, which indicates that these individuals have less long-term orientation and more expectations of quid pro quo responses (Ravlin, Liao, Morrell, Au, & Thomas, 2012). This matches the values of individuals in an economic exchange relationship (Shore et al., 2006). On the other hand, individuals with a high collectivist orientation interpret the obligation to their employer in relational terms, as their beliefs indicate that a relational contract is consistent with what is common or what ought to happen between employee and employer (Ravlin et al., 2012). These unspecified contracts do not conform well to contracts in economic exchange relationships as those consist of well-defined obligations (Aryee, et al. 2002).
However, these relational contracts that people with a collectivist orientation value so much do fit social exchange relationships, as those are based on unspecified reciprocal contracts. Besides, individuals with a collectivist orientation are motivated to engage in long-term obligations (Tse, Lee, Vertinsky, & Wehrung, 1988), which are also fundamental for social exchange relationships (Blau, 1964; Shore et al., 2006). Furthermore, as individuals with a collectivist orientation draw so much of their social identity from the organization they belong to, they are very concerned about the image of their organization (Triandis, Bontempo, Villareal, Asai, & Lucca, 1988; Farooq, et al., 2014). This corresponds with the values of social exchange relationships, as these individuals tend to focus upon the mutual interest of the organization and themselves (Uhl-Bien, & Maslyn, 2003). Therefore, the following hypotheses are proposed.
Hypothesis 2a: Member-farmers’ collectivist orientation will be negatively related to their economic exchange relationship with the cooperative.
Hypothesis 2b: Member-farmers’ collectivist orientation will be positively related to their social exchange relationship with the cooperative.
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perceived actions of an organization to stimulate employees into behaviors that benefit the organization (Cassematis, & Wortley, 2013). In the current study, trust in the organization and perceived organizational support will be examined as antecedents for exchange relationships. The first reason for using these particular characteristics is that trust has been connected to social exchange, whereas perceived organizational support has been shown to have an effect on both economic- and social exchange (Shore et al., 2006). The second reason is that these characteristics are of particular interest for farmers. Trust has previously been found to be one of the main determinants of farmers’ behavior (Barraud-Didier, Henninger, & El Akremi, 2012), as research shows that trust leads, amongst other outcomes, to more farmer participation in environmentally sound practices (Jongeneel, et al., 2008), more farmer loyalty towards their cooperative (James, & Sykuta, 2006), and member’s participative behavior towards their cooperatives’ governance (Nilsson, Kihlén, & Norell, 2009; Österberg, & Nilsson, 2009). Additionally, perceived organizational support has been established as an important determinant for farmer involvement and commitment to an organization (O’Driscoll, & Randall, 1999). The next two paragraphs will explain the relationships between these two situational characteristics and the exchange relationships of the member-farmers.
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other party. In the specific case of this study, member-farmers’ vulnerability towards the cooperative finds itself in the dependence on the latter in terms of revenue and information (Barraud-Didier et al., 2012).
While less trust leads to more equivalence in reciprocal relationships, this study argues that less trust leads to economic exchange relationships. This is the case as economic exchange relationships are based on equivalence, for parties want to define the exact quantities to be exchanged (Aryee, et al., 2002). Furthermore, a lack of trust leads to economic exchange relationships as it also leads to higher immediacy of exchanges. This description fits economic exchange relationships as they emphasize repayment of obligations in a relatively short period of time (Song et al., 2009). Another reason low trust may lead to economic exchange is that social obligations, trust, interpersonal attachments and commitment are not a part of economic exchange relationships (Emerson, 1981), as these relationships are impersonal (Shore et al., 2006).
On the other side, while trust usually forms the basis of all relationships (Schoorman, Mayer, & Davis, 2007), it is particularly important for social exchange relationships (Coyle-Shapiro, & Shore, 2007). Trust is a critical component of social exchange, as the relationship is built in the absence of any formal contract or specified repayment schedule. The absence of formal contracts creates vulnerability, as one party risks the possibility that the other party will not meet its obligations (Colquitt, Scott, & LePine, 2007). Individuals with a social exchange relationship are less concerned by this vulnerability, as their trust in the other party leads them to focus less on the equivalence of the relationship. Furthermore, while trust in itself is not reciprocal (Brower, Schoorman, & Tan, 2000), it facilitates low immediacy reciprocity as it leads individuals to believe that favors will be returned in due time (Blau, 1964). Therefore, as trust is not emphasized in economic exchange (Shore et al., 2006) whilst social exchange relationships cannot develop in the absence of trust (Blau, 1964), the following hypotheses are proposed:
Hypothesis 3a: Member-farmers’ trust in the organization is negatively related to their economic exchange relationship with the cooperative.
Hypothesis 3b: Member-farmers’ trust in the organization is positively related to their social exchange relationship with the cooperative.
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(Eisenberger, Huntington, Hutchison, & Sowa, 1986). POS is a situational construct as it assesses the way the organization deals with the individual. It is conceptually distinct from social exchange as POS reflects the type of resources exchanged, while social exchange reflects the process of exchange (Shore, Coyle-Shapiro, Chen, & Tetrick, 2009). POS has also been explained as the employer side of the exchange relationship, as it implies the investment of the employer into the relationship (Eisenberger et al., 1986; Eisenberger, Fasolo, & Davis-LaMastro, 1990).
Shore et al. (2006) show that POS is negatively related to economic exchange. Amongst other effects, the negative relationship suggests that low perceptions of employer commitment have a strengthening effect on economic exchange relationships. This can be explained through the understanding that when organizational support is perceived to be low, the employee may infer that the economic aspects of the employment relationships are the primary basis of exchange with the organization (Shore et al., 2006). Another explanation of this relationship is that low POS can feel like a breach or violation of the psychological contract and will lead employees to engage in an economic exchange relationship (Coyle-Shapiro, Shore, Taylor, & Tetrick, 2004).
The opposite is true for high perceived organizational support, as research shows that an investment in the relationship is crucial for social exchange (Eisenberger et al., 1986; Rousseau, 1995). Furthermore, high POS has been found to lead to social exchange as an employee’s perception of the organization’s commitment to them contributes to their subsequent commitment to the organization (Shore et al., 2006). When an organization treats an employee well and values their efforts, the employee will devote greater effort towards helping the organization achieve its goals (Ambrose, & Schminke, 2003; Masterson, Lewis, Goldman, & Taylor, 2000). This works through reciprocation as an employee who sees the employer as supportive is likely to return the gesture (Cropanzano, & Mitchell, 2005). Therefore, the following hypotheses are proposed:
Hypothesis 4a: Member-farmers’ perceived organizational support is negatively related to their economic exchange relationship with the cooperative.
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Economic exchange and economic innovation
This study makes a distinction between economic innovation and sustainability innovation, and attempts to determine how these different kinds of innovations are related to the exchange relationships of member-farmers.
Economic innovation can be defined as those kinds of innovations of which the main objective is to stimulate the economic viability of farming systems, or their ability to be profitable (van Calker, Berentsen, de Boer, Giesen, & Huime, 2007). This can either be achieved by innovations that reduce production costs on the farm or innovations that directly generate more revenue. These innovations are crucial as milk production cannot exist without economically viable farms (van Passel, Lepoutre, Nevens, & van Huylenbroeck, 2004). An exemplary economic innovation would be the outsourcing of land processing to external contractors. Farmers can choose to outsource this activity as external contractors can process the land more effectively and efficiently as they have specialized equipment to do so. This specialized equipment uses GPS technologies for instance, to evenly spread manure over the farmer’s fields. As hiring contractors to process the fields does not only lead to more yield from the farmers’ land, but also saves potential opportunity costs, it can be qualified as an economic innovation.
Shore et al. (2006) give us insights on how to tie these innovations to exchange theory, as they argue that each of the exchange processes may have a unique influence on employee behavior. Therefore, this study argues that as member-farmers with an economic exchange relationship focus on quick economic and tangible profits in their relationship with the cooperative (Shore et al., 2006), it is expected that these member-farmers are more likely to focus on economic innovations. Member-farmers with an economic exchange relationship value well-defined obligations that name the exact quantities to be exchanged (Aryee, et al., 2002) which will likely motivate them to implement economic innovations that provide exact economic outcomes. These innovations will give them direct economic benefits, without having to trust on long-term, uncertain outcomes. Therefore the following hypothesis is proposed:
Hypothesis 5: Member-farmers’ economic exchange relationship with the cooperative is positively related to economic innovations they implement on their farm.
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economic innovation. It is therefore expected that economic exchange will operate as a mediating variable in the indirect and negative relationships between these individual and situational characteristics and economic innovation. Therefore, the following mediating hypothesis is proposed:
Hypothesis 6: The indirect and negative relationships of the individual characteristics of long-term orientation (H6a) and collectivistic orientation (H6b) and the situational characteristics of trust (H6c) and POS (H6d) with economic innovation will be mediated through member-farmers’ economic exchange relationship with the cooperative.
Social exchange and sustainability innovation through internalization of firm vision and values
As opposed to being purely economically motivated, member-farmers with a social exchange relationship engage in supportive behavior of organizational goals because they feel connected and responsible for the organization. This level of connectedness towards the organization could lead individuals with a social exchange relationship towards the internalization of firm vision and values. Internalization can be defined as a process in which the vision and values of one party become incorporated in the thoughts and actions of the other party (Stobbelaar, Groot, Bishop, Hall, & Pretty, 2009). In the particular case of the dairy cooperative this would imply that member-farmers incorporate the vision and values of the cooperative into thought and action.
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Hypothesis 7: Member-farmers’ social exchange relationship with the cooperative is positively related to the internalization of firm vision and values.
This study proposes that the internalization of firm vision and values can lead member-farmers to engage in sustainability innovation. Before this point is argued, sustainability innovation will further be defined.
As opposed to economic innovation, this study defines sustainability innovations as socially acceptable and environmentally sound innovations of dairy farmers. Socially acceptable innovations are aimed at the well-being of the farmer and his family (i.e. quality of life and physical well-being), and meeting societal demands (i.e. quality of products and acceptable practices) (Lebacq, Baret, & Stilmant, 2013; van Calker et al., 2007). Environmentally sound innovations are related to the input management of farms (i.e. pesticides and nutrients), and the quality of natural resources (i.e. emissions of greenhouse gases and biodiversity) (Lebacq et al., 2013). In the particular case of the Dutch dairy cooperative, socially acceptable and environmentally sound innovations have a lot in common, as Dutch society’s main concerns revolve around the environment (Van der Jagt et al., 2013). Research of Boogaard et al. (2008) showed that of the ten socio-cultural themes that Dutch citizens valued most on dairy farms, six were related to environmental themes. Therefore, the current study merges the domains of socially acceptable innovations and environmentally sound innovations into ‘sustainability innovations’.
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over time (Chirkov, Ryan, Kim, & Kaplan, 2003). This implies that formulating and communicating a clear vison and values for sustainability by the cooperative might increase member-farmers’ commitment to engage in sustainability innovations. This vision needs to be as clear as possible, for when member-farmers do not understand the sustainability values of the cooperative, they are less likely to implement the necessary activities in a timely and effective manner (Monson, & Boss, 2009).
Firm vision and values have been shown to have an effect on creative behaviors, but only when the firm’s identity is perceived as innovative (Chen, Sanchez-Burks, & Lee, 2008; Mok, & Morris, 2010). Research conceptualizes the innovative identity of the firm as an individual’s perception of an organization’s enduring capability that results in novel, creative and impactful ideas and solutions (Kunz, Schmitt, & Meyer, 2011). The innovative identity of the dairy cooperative focusses on animal health- and welfare, climate, energy, biodiversity and environmental factors. As the internalization of firm vison and values is expected to lead to more sustainability innovation, the following hypothesis is proposed:
Hypothesis 8: Member-farmers’ internalization of firm vision and values is positively related to the sustainability innovations they implement on their farm.
As hypothesized, member-farmers’ long-term orientation, collectivist orientation, trust and POS will not only lead them to engage in social exchange relationships, but also lead them to internalize firm vision and values. Subsequently they will put these internalized vision and values of the dairy cooperative into action by implementing sustainability innovations on their farm. Therefore the following mediation hypothesis is proposed:
18 METHODS
Participants
In order to test the hypotheses, an online survey was distributed amongst 2466 young member-farmers of the dairy cooperative. A total of 408 completed responses were returned totaling in a response rate of 16,55%. The age of the farmers ranged between 18 and 35 years with the mean age being 29 years (SD= 5,34). 360 of these respondents were male and 48 were female. Education levels varied amongst participants with the greatest groups having finished MBO (36%), HBO (46%) or University (8%).
The fact that respondents are member of the cooperative implies they are actively participating on their own farm. To check to what extent this is the case, three questions were added to assess whether participants were actively involved in their farms, with how many people they shared control, and how high they rated their influence on the decision making process on the farm. Data showed that one respondent never actively worked on their farm, whereas 32% worked part-time and 67% worked full-time on their farm. Of the respondents 8,35% indicated that they work alone on their farm, 52% shared responsibility with one other worker and 29% worked together with two other people on their farm. The rest of the respondents shared responsibilities ranging with 3 or more persons. When asked to indicate their influence on their own farm on a scale from 0 to 100, the mean score for the respondents was 71.6 (SD= 22.42).
Procedures
Participants were contacted by email in which the objective of the research was shortly explained. The survey was designed with the program Qualtrics. It began with an explanation of the content and the way the participants could navigate through the survey program. The online survey contained 64 statements by which the study variables were measured. Participants were requested to indicate their personal level of agreement or disagreement with the statements by responding to them on a Likert scale ranging from 1 to 7 (Likert, 1932). The items, originally constructed in English, were translated into Dutch and then back-translated to English by a second assessor. Any discrepancies were resolved before proceeding (Brislin, Lonner, & Thorndike, 1973). The survey ended with six questions regarding information about the participant’s age, gender, level of education and whether they were running the farm on their own or if they had shared control.
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was set at two weeks. During this period email addresses of participants that had participated were saved so they could be excluded from reminder emails. These reminder mails were sent once to respondents that hadn’t completed the survey yet, as to increase the response rate (Baruch, & Holtom, 2008).
Measures
Long-term orientation was measured using a 6-item scale developed by Yoo, Donthu, & Lenartowicz (2011). The items were evaluated using the format, ‘How important is (value x) for you?’ An example item is: ‘Giving up today’s fun for success in the future’. The items were rated on a 7-point Likert scale ranging from 1 (‘very unimportant’) to 7 (‘very important’). Internal consistency was α= .68.
Collectivist orientation was measured using 6 items by Yoo et al. (2011). The items were rated on a 7-point Likert scale ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). An example item is: ‘Individuals should sacrifice self-interest for the group’. Internal consistency was α= .84.
Trust in the organization was measured using Gabarro and Athos’s (1976) 7-item scale. An example item is: ‘I can expect [my organization] to treat me in a consistent and predictable fashion’. The response format for the items is a 7-point Likert scale ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). Internal consistency was α= .87.
Perceived organizational support was measured using the eight-item scale (e.g.: ‘[My organization] is willing to help me if I need a special favor’) developed by Eisenberger, Cummings, Armeli and Lynch (1997). These eight items have been found to be applicable to a wide array of organizations. Participants could indicate the extent of their agreement with each item on a 7-point Likert scale ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). Internal consistency was α= .83.
Social exchange relationships were measured with the 8-item measurement scale developed by Shore et al. (2006). The measurement instrument used a response Likert scale of 1 (‘strongly disagree’) to 7 (‘strongly agree’). An example question is: ‘I don’t mind working hard today- I know I will eventually be rewarded by [my organization]’. Internal consistency was α= .80.
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Internalization of firm goals and values were measured using four self-constructed items (for example: ‘The vision and values for sustainability are an important guidance tool for my business.’). These questions were preceded by a short introduction that explained the cooperatives’ vision and values about sustainability. A 7-point Likert response scale was used with items ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). Internal consistency was α= .83.
Innovation; Economic innovation was measured using five self-constructed items (for example: ‘I only innovate when there is a direct economic result involved.’). Internal consistency was α=.77. Sustainability innovation was measured using five self-constructed items which were designed to reflect both environmentally sound and socially acceptable innovations (for example: ‘Even more than for financial gain, the innovations on my business are focused on animal welfare and environmental protection.’ and ‘The interests of citizens and consumers play an important part in the innovations I implement on my farm.’). The innovation items were rated on a 7-point Likert scale ranging from 1 (‘strongly disagree’) to 7 (‘strongly agree’). Internal consistency was α=.74.
Finally, an additional question was added in which farmers could indicate to what extent they have invested in nine different aspects of innovation on farms. This list has been developed by the researcher in collaboration with multiple farmers to describe the different innovation opportunities on farms as thoroughly as possible. The final list included the following nine innovation opportunities: animal welfare, economic return, own labor input, environmental impact, saving/ generating energy, nature conservation, outdoor grazing, communication with stakeholders and second branch. Respondents could indicate their level of investment in each of these innovation opportunities on a scale from 0 to 100.
Control variables were measured to control for the possibility of demographic differences interfering with the constructs. Three questions about age, gender and level of education were added to the survey. In addition to these demographics, three questions were added to assess whether participants are actively involved in their farms, with how many people they share control, and how high they rate their influence on the decision making process on the farm.
21 Data analyses
To test the hypotheses, several tests were conducted using SPSS. Internal consistency was analyzed for each scale using Cronbach’s alpha function in SPSS. The acceptable level of consistency was set at 0.7, and there were no scale items deleted as internal consistency could not be improved significantly. After the reverse coded items were recoded, mean scores for the variables were computed. Then, means, standard deviations and correlations were computed for all tested variables.
To test hypotheses 1-4 regarding whether the individual characteristics of long-term orientation and collectivistic orientation and the situational characteristics of trust in organization and POS are significantly negatively related to economic exchange and positively related to social exchange, two linear regression analyses were conducted. The first analysis used the dependent variable of economic exchange and the four independent variables, including control variables that significantly correlated with one or more of the variables. The second analysis used these same independent- and control variables but applied social exchange as the dependent variable.
Hypotheses 5, 7 and 8 regarding the relationship between economic exchange and economic innovation (H5), the relationship between social exchange and internalization of firm vision and values (H7) and the relationship between internalization of firm vision and values and sustainability innovation (H8) were also tested with linear regression analyses. To test hypothesis 6 a bootstrapping procedure with percentile confidence intervals (Selig & Preacher, 2008) was used to test the indirect relationships between the individual and situational characteristics and economic innovation through economic exchange (H6). This was done by using model 4 of the PROCESS procedure (available from www.afhayes.com) developed by Hayes (2013). The other individual and situational characteristics, as well as social exchange were used as covariates in the mediation analysis as to eliminate the possible influence of confounding or interacting variables.
22 RESULTS
Descriptive statistics
Means, standard deviations, minimum and maximum scores are presented in Table 1. Correlations are presented in Table 2. Regarding the demographic variables, age was slightly negatively correlated to collectivist orientation (r= -.148, p< .01), trust (r= -.100, p< .05), POS (r= -.103, p< .05), and social exchange (r= -.099, p< .05). Gender was slightly positively correlated to education (r= .127, p< .05) whereas education itself was negatively correlated to economic exchange (r= -.200, p< .01). The three control items about the level of control of the farmers on their own farm were excluded from analyses as many participants indicated interpretation discrepancies for these items. These different interpretations were likely to have yielded different responses from the participants, which made these items unworkable for further analyses.
TABLE 1 Descriptive statistics
Variable N Mean SD Min Max
Age 401 29,2 5,34 15 59 Gender 406 1,12 0,320 1 2 Education 406 6,13 1,214 2 8 Long-term orientation 408 5,81 0,62 1,00 7,00 Collectivist orientation 408 4,14 1,11 1,00 7,00 Trust 408 5,26 0,95 1,00 7,00 POS 408 4,18 0,99 1,00 6,50 Economic exchange 408 3,87 0,99 1,13 7,00 Social exchange 408 4,33 0,87 1,38 6,25
Internalization of firm vision and values 408 3,90 1,24 1,00 7,00
Economic innovation 408 4,55 0,99 1,40 7,00
Sustainability innovation 408 4,17 1,00 1,00 7,00
Note: Gender (1 = male, 2 = female), Education (1= no school, 2 = elementary,
23 TABLE 2
Correlational matrix
Note: ** Correlation is significant at the 0.01 level (2-tailed)
* Correlation is significant at the 0.05 level (2-tailed)
Hypotheses testing
24 TABLE 3
Linear regression for hypotheses 1-4
Economic exchange Social exchange
Predictor β p β p (Constant) 8,113 .000 .893 .032 Age .000 .995 -.010 .770 Gender -.028 .502 .019 .583 Education -.192 .000 .020 .564 Long-term orientation -.056 .196 .007 .844 Collectivist orientation -.070 .114 .079 .033 Trust -.216 .000 .281 .000 POS -.295 .000 .456 .000 R-Square .303 .507 F 24,882 58,796
Hypothesis 5 was tested using a linear regression analysis, results can be observed in Table 4. These results indicate that hypothesis 5, which predicted a positive relationship between economic exchange and economic innovation, is indeed significant (β= .408, p< .01). Furthermore there also appears to be a significant negative effect of economic exchange on sustainability innovation (β= -.140, p< .05). To test whether there also was a mediating effect of economic exchange on the relationship between the individual and situational characteristics and economic innovation, a mediation analysis was done. Results of this mediation analysis can be observed in Table 5. These results indicate no significant effects of long-term orientation (H6a: indirect effect= -.0381; 95% CI= -.1293 to .0429) and collectivist orientation (H6b: indirect effect= -.0182; 95% CI= -.0513 to .0187) towards economic innovation through economic exchange as the ranges in the confidence interval do contain zero. There are however significant indirect and negative effects of trust (H6C: indirect effect= .0597; 95% CI .1237 to .0071) and POS (H6d: indirect effect= .0734; 95% CI= -.1340 to -.0195) on economic innovation through economic exchange. Therefore, the results cannot confirm hypotheses 6a and 6b, but do confirm hypotheses 6c and 6d.
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.01), as can be observed in table 4. To test whether a mediation effect of social exchange and internalization of firm vision and values between the individual and situational characteristics and sustainability innovation existed, a mediation analyses was done as can be seen in Table 5. Results indicate there are no significant effects of long-term orientation towards sustainability innovation through social exchange and internalization of firm vision and values (H9a: indirect effect= -.0004; 95% CI= -.0150 to .0098). There are, however, significant positive effects of collectivist orientation (H9b: indirect effect= .0043; 95% CI= .0006 to .0156), trust (H9c: indirect effect= .0181; 95% CI= .0072 to .0387) and POS (H9d: indirect effect= .0290; 95% CI= .0118 to .0594) on sustainability innovation through social exchange and internalization of firm vision and values. Therefore, while the results cannot confirm hypothesis 9a they do confirm hypotheses 9b, 9c and 9d.
TABLE 4
Linear regression for hypotheses 5 and 8
Economic innovation Sustainability innovation
Predictor β P β p (Constant) 1,251 .051 3,933 .000 Long-term orientation .020 .680 -.009 .850 Collectivist orientation .037 .455 -.031 .515 Trust .050 .476 -.132 .051 POS .170 .029 .079 .294 Economic exchange .408 .000 -.140 .010 Social exchange .116 .096 .064 .337
Internalization of firm vision and values -.060 .305 .335 .000
R-Square .128 .186
26 TABLE 5
Mediation analyses of hypotheses 6 and 9
TABLE 6
Linear regression for hypothesis 7
Internalization of firm vision and values
27 Supplementary analysis
To asses which specific innovations are connected to economic or sustainable innovations, respondents were asked to indicate which specific innovations they implemented on their farm. A linear regression analyses was performed to correlate these specific innovations on both economic innovation, and sustainability innovation, resulting in the list in Table 7. As can be observed there are two specific innovations that are linked to economic innovations, being ‘economic return’ (β= .329, p< .01) and ‘own labor input’ (β= .145, p< .01). The specific innovations that are linked to sustainability innovation are ‘animal welfare’ (β= .270, p< .01), ‘own labor input’ (β= .157, p< .01), ‘environmental impact’ (β= .345, p< .01), ‘saving/ generating energy’ (β= .220, p< .01), ‘nature conservation’ (β= .114, p< .01), ‘outdoor grazing’ (β = .172, p< .01), ‘communication with stakeholders’ (β= .306, p< .01) and ‘second branch’ (β= .121, p< .01).
TABLE 7
Specific innovation linked to economic- or sustainability innovation
To summarize, all significant direct effects can be found in figure 2. FIGURE 2
28 DISCUSSION
The first main goal of this study was to determine whether individual characteristics of long-term orientation and collectivist orientation and situational characteristics of trust in the organization and POS negatively influence whether member-farmers engage in an economic exchange relationship, or positively influence whether member-farmers engage in a social exchange relationship with the cooperative. Results of the statistical analyses confirmed that trust and POS were indeed negatively related to economic exchange (H3a, H4a), and that collectivist orientation, trust and POS were positively related to social exchange (H2b, H3b, H4b). Furthermore this study showed that economic exchange relationships promote economic innovation (H5), and that social exchange relationships lead to the internalization of firm vision and values (H7) which in turn promotes sustainability innovation (H8). Mediation analyses subsequently elucidated the negative relationship between trust and POS through economic exchange towards economic innovation (H6c and H6d). This relationship implies that economic innovation decreases as a result of trust and POS through economic exchange, which follows through the direct negative effect of trust and POS on economic exchange. This reduced economic exchange then, in turn, reduces economic innovation, resulting in the negative mediation relationship. Furthermore these analyses demonstrated the positive relationships between collectivist orientation, trust and POS through social exchange and internalization of firm vision and values towards sustainability innovation (H9b, H9c and H9d). This implies that higher levels of collectivist orientation, trust and POS lead member-farmers to engage in a social exchange relationship. Engagement in social exchange relationships, in turn, creates the internalization of firm vision and values which promotes sustainability innovations of these member-farmers.
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Besides the hypothesized relationships, results also indicated some unexpected outcomes. In terms of the control variables, results demonstrated that age was negatively correlated with social exchange. This could be the case as older member-farmers are less involved with the dairy cooperative as they do not expect continuing benefits since they are closer to retirement from their dairy farm (Staatz, 1989). Another effect of the analysis of the control variables was the negative effect of the level of education on economic exchange. Currently no direct theoretical explanations as to why this effect occurs have been proposed in the relevant literature. One possible explanation is that member-farmers with higher education have a better insight into the future benefits of their relationship with the cooperative, which leads them to focus less on the short-term financial aspects of the relationship. This can further be explained by the concept of risk aversion, as research shows that risk aversion is negatively correlated with higher education (Outreville, 2013). This implies that people with higher education are less risk averse, which can explain why higher educated member-farmers focus less on these short-term financial benefits related to economic exchange, and why lower educated member-farmers, who are more risk averse, do value these explicit economic exchange norms.
Theoretical implications, potential limitations, suggestions for future research and practical implications will now be discussed.
Theoretical implications
Several theoretical implications can be derived from the results discussed above. First of all, while collectivist orientation has been used to describe exchange relationships, it has not been tested as a direct antecedent of these relationships (Ravlin et al., 2012). Collectivist orientation was assumed to negatively predict economic exchange and positively predict social exchange. Whilst the results of this study do not indicate a significant negative effect of collectivist orientation towards economic exchange, they do indicate a significant positive effect towards social exchange which confirms the notion that collectivist orientation can be an important predictor of social exchange relationships.
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dairy farmers, it also adds to these findings by demonstrating trust to have a negative relationship with economic exchange.
Besides the direct effects of individual and situational characteristics on social and economic exchange, this study also provided evidence that exchange theory is a valid theory to describe exchange relationships between dairy farmers and dairy cooperatives. This validation is required for different organizational relationships, as former research suggested that future research should explore whether job types and different kinds of industries may be important for understanding exchange relationships (Shore et al., 2006).
Furthermore this study attempted to link exchange theory to economic and sustainability innovation, as other authors concluded that in-depth research needed to investigate how psychological states activate or suppress the manifestation of creativity and innovation (Anderson et al., 2014). This study did so by elucidating that economic exchange relationships are directly tied to economic innovations. Moreover, it tied social exchange relationships to sustainability innovation through internalization of firm vision and values, which supports the notion that social exchange relationships encourage behavior that supports the goals of the organization (Blau, 1964; Eisenberger et al., 1990; Shore et al., 2006). The results of this study demonstrating a significant negative effect of economic exchange on sustainability innovation, further suggest that individuals only innovate in ways that fit their exchange relationship with the organization.
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strengthens these assumptions.
The other significant results of this study further add to the notion that exchange theory is a viable framework for investigating the relationships between individual and situational characteristics and innovation. The results provide new theoretical ground that shows economic exchange to have a negative mediating effect on the relationship between trust, POS and economic innovations. Furthermore it adds collectivist orientation as a significant factor in the mediating effect of social exchange on the relationship with sustainability innovation.
However, all these results should be interpreted with caution, as there are several limitations to this study, which will now be discussed.
Limitations and suggestions for future research
Regarding the validity of this research, some bias may occur due to the fact that the database of young farmers between 18 and 35 reduces the possibility to control for age biases. The first issue of this limited age range is that young farmers are more likely to engage in environmentally sound practices than older farmers (e.g. Jongeneel et al., 2008; Mathijs, 2003). The second issue is that older farmers are less involved in dairy-cooperatives, as they plan to retire eventually (Staatz, 1989), which is confirmed by the current study as the results yield small but significant negative effects of age on collectivist orientation, trust, POS and social exchange. Because of these two issues, future research should assess a wider range of age differences, when examining farmers in an exchange theory framework.
This directly leads to the second limitation of the current study, as it points out the weak generalizability of the results. The generalizability is limited as the results only cover a distinct industry (dairy), culture (the Netherlands) and group of individuals (dairy farmers). Further research should both broaden these groups and test the model on the general population to strengthen the generalizability of this study.
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outcomes of their relationship with the cooperative, as they were momentarily trying to survive in the rough financial environment. It could also have lead member-farmers to focus on joining cooperatives as they sought reinforcement from and social interaction with their peers. As the milk price is expected to rise in the coming years, and production costs are expected to stabilize, results of this study could become outdated. Future research should address this problem by further investigating these findings over a longer period of time to see whether they remain consistent.
A fourth limitation of this study is the less-than-ideal response to the long-term orientation variable, and the control variables about shared influence. A reason for the insignificant results obtained for the effects of the long-term orientation variable in both direct- and mediation relations could be that the internal consistency of the scale items was relatively low (Cronbach’s alpha of long-term orientation was .68.). Furthermore some respondents indicated that they were not sure how to interpret the context in which the long-term orientation items were to be answered, as they could either be interpreted to be about the individual, the farmer, or the member-farmer. Other interpretation discrepancies occurred at the three control variables in which participants had to indicate their own influence on the farm. Some respondents interpreted this question as having to share influence on their farm with the dairy cooperative, while the item intended to measure the shared influence with other workers on the farm. This was a problem as different interpretations of the question leads to different answers amongst participants (Krosnick, 1999; Tourangeau, & Rasinski, 1988), which affects both validity and reliability of the items. Therefore the control variables of shared influence were excluded from the analyses. Future research should, however, address the fact that member-farmers are not always the only decision maker on their farm, as there are important differences between idea generation and idea implementation. Therefore, future research should make a distinction between innovation and creativity, as the latter centers on idea generation whilst innovation emphasizes idea implementation. Hence, whereas creativity and innovation are related constructs, they are by no means identical (Anderson et al., 2014), as creativity is often seen as the first step of innovation (Amabile, 1996; Mumford & Gustafson, 1988; West, 2002).
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Wang, & Nam, 2015), agricultural innovations (Feder, & Umali, 1993) and the adoption of new technology (Feder, 1980).
In conclusion; age bias, a lack of generalizability, a limited time-horizon and items in which the context was unclear might have limited the usability of the results. Future research should therefore take these shortcomings in consideration, and address them accordingly. Additional research could also focus on the distinction between creativity and innovation, and possible effects of risk aversion.
Practical implications
Despite the research limitations, the results of this study do have some practical implications. While the practical implications of this study are especially relevant for the dairy cooperative under study they can also be applicable to other organizations that need to understand the exchange relationships with their employees or stakeholders, and how to use these exchange relationships to their own benefit. Former research stated that matching, clarifying, and/or hybridizing exchange norms are viable paths towards improved employer-employee relationships (Ravlin, et al., 2012). As individual values such as collectivist orientation are difficult to change, organizational interventions might do better to focus on attempts to reset exchange norms instead. So instead of trying to change the individual characteristics of the member-farmers, the dairy cooperative under study should try to work on the situational characteristics that influence the type of exchange relationship. Furthermore, the cooperative should try to match its policy towards the specific exchange relationship of its member-farmers.
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can stimulate their member-farmers to engage in social exchange relationships by increasing POS through raising perceptions that top management is trustworthy and supportive and by providing discretionary human resources practices implying investment in the employee (Shore & Shore, 1995). Besides stimulating member-farmers to engage in sustainability innovations, the social exchange relationship can have a positive effect on knowledge combinations (de Luca, & Atuahene-Gima, 2007), organizational commitment (Byrne, et al., 2011), feelings of obligation towards the organization (Eisenberger et al., 1986) and entrepreneurial behavior (Hornsby, et al., 2002; Kim, & Mauborgne, 1998; Kuratko, et al. 2005).
Whereas member-farmers with an economic exchange relationship exclusively focus themselves on economic innovations, member-farmers with a social exchange relationship seem to forget the important financial aspects of innovation. Therefore, the dairy cooperative should not only signal a clear firm vision and values for sustainability, but also work on ways to stimulate economic innovations. The cooperative can do this effectively by providing financial rewards for innovation with its vision and values for sustainability, so that the potentially negative financial effects of its vision and values are mitigated. Strong and clear vision and values would show the member-farmers crucial links between social, environmental and economic goals to better understand how to achieve economic growth that is in harmony with the natural systems within which we live and work (Farrell and Hart, 1998). This can further help organizations to better understand the process mechanisms behind innovation, which can in turn become a source of distinct competitive advantage (Anderson et al., 2004; West, 2002; Zhou , & Shalley, 2003).
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