Market-driven capabilities and sustainability of alliances by agricultural small and medium-sized enterprises

The role of small agricultural enterprises and thei effects on sustainable rural development has been studied both in developing countries (Ruben, Slingerland and Nijhoff, 2006; Latouche, 2007) and in developed ones (McCullough, Pingali and Stamoulis, 2008; Tasch, 2009). Agricultural enterprises in developed countries have found to face problems that drive them towards a more intense, and often less sustainable, way of growing crops. Maybe the most relevant problem derives from the fact that modern big food retailers demand a stable and large supply of fresh, raw and processed materials, ensuring year-round availability (Reardon, Timmer and Berdegue, 2008). When small farmers cannot warrant a large and continuous stream of products they have to sell their crops to raw commodities' brokers (Dolan and Humphrey, 2002) that further sell them to industrial processors or to distributors (Maloni and Brown, 2006). In fact, farmers are players in a more complex supply chain with a really small negotiation power (King and Phumpiu, 1996). Farmers use alliances and agreements to increase their negotiation power in order to keep a competitive position in the market, but it is not so obvious what are the effects of these strategies on sustainability of agricultural practices. To deepen our understanding of the sustainability of different models of alliances this chapter adopts the Bioeconomy model of sustainability (Passet, 1996) to evaluate how the different agricultural alliances follow its hierarchical order of economical, environmental and social dimensions and what kind of capabilities are needed to create and sustain a competitive advantage in these alliances. First we analyse the main impacts of agricultural practices on sustainable development processes, then we compile a framework that builds upon market driven capabilities to analyse opportunities and risks related to agricultural farms’ alliances. Finally we adopt the multiple case study method to investigate what kinds of capabilities are used in successful farmers’ alliances.