A case of uncertainty in the vertical integration decision
[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI-COLUMBIA AT AUTHOR'S REQUEST.] Since the 1970s, sugar beet processors in the United States have undergone a shift from investor-owned firms to producer-owned firms. In 1970, all nine processors in operation were invest-owned, however, by the 1980s three producer-controlled firms had emerged. Today, all nine processors in operation are grower-owned (Reynolds, 2010). Interestingly, not only do these sugar beet processors share a similar class of owners (i.e. sugar beet growers), but these firms also share a common governance structure, known as the new generation cooperative model. Having identified this unique homogeneity in both ownership type and governance choice, we began to question: 1) What has motivated sugar beet producers in the U.S. to collectively work together to jointly vertically integrate their buyer? 2) Why have the sugar beet processors transitioned from being once exclusively held by investor-owned firms to now being predominantly controlled by patron-owned entities? 3) Why is the new generation cooperative model the preferred choice of organization for these patroncontrolled firms? In this thesis, we began to investigate these important questions by utilizing the transaction cost economics (TCE) framework to study the influential factors in the producers' decision to horizontally and vertically coordinate.
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