CHESTNUT GROWER INC.: A CASE STUDY ON THE IMPORTANCE OF SOCIAL
CAPITAL IN THE SUCCESS OF ENTREPRENEURIAL VENTURES
By
Nathaniel Victor

A THESIS
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
MASTER OF SCIENCE
Agricultural, Food, and Resource Economics
2012

ABSTRACT
CHESTNUT GROWER INC.: A CASE STUDY ON THE IMPORTANCE OF SOCIAL
CAPITAL IN THE SUCCESS OF ENTREPRENEURIAL VENTURES
By
Nathaniel Victor
Entrepreneurial ventures often require the active participation of groups of
entrepreneurs or multiple stakeholders to be successful. This is particularly true in the
context of nascent agri-food industries. One type of group that is common in agriculture
and food industries is that of a cooperative. Cooperatives allow members to pool
resources to achieve economies of scale and scope to take advantage of potential
market opportunities. However, such cooperatives also face significant barriers,
particularly in terms of the coordination of members.
One such cooperative that was formed to exploit a market opportunity is CGI
(Chestnut Growers Inc.). This cooperative was formed with the goal of raising
awareness of chestnut products to help farmers expand their consumer base and
realize higher prices for their chestnuts. Many threats to the group’s profitability exist
including inherent risk factors such as frost and a lack of full cooperation from group
members. Despite these existing risk factors, CGI has the potential to succeed based
upon the group members’ strong attachment value for the cooperative (and therefore
willingness to donate human capital to see the group succeed). Therefore the group
members’ social capital can be seen as an intangible asset and a source of competitive
advantage for the cooperative.

Acknowledgements
I would like to briefly thank a few individuals that helped me along this journey.
Thank you to Dr. Brent Ross for taking a chance on a fresh-faced graduate student with
an abundance of intellectual curiosity looking for a direction to focus his energies. Thank
you to Dr. Lindon Robison and Dr. Dennis Fulbright for sharing their passion for social
capital and chestnuts with me. I hope to have captured a small picture of your two’s life
work. Thank you to all the professors and students in the AFRE program for creating a
congenial community that encouraged and challenged me to learn new things every
day. Thank you to my family for providing support and learning all about chestnuts with
me. Thank you to Chestnut Growers Inc. for agreeing to be a part of the interactive
exploration of their organization and to the members that opened their homes to me
during the interview process. This thesis would not have come about without the
support and encouragement of a variety of individuals, and I thank and acknowledge
everyone’s contribution.

iii

Table of Contents
List of Tables ................................................................................................................... v
List of Figures ..................................................................................................................vi
Section I: Introduction...................................................................................................... 1
Section II: Snapshot of Case ........................................................................................... 5
Chestnut Industry Background ..................................................................................... 5
Michigan Chestnut Industry: A History of Chestnut Growers Inc.................................. 6
Section III: Literature Review ........................................................................................ 11
Cooperatives .............................................................................................................. 11
Organizational Identity ............................................................................................... 13
Social Capital ............................................................................................................. 16
Section IV: Research Methodology ............................................................................... 20
The Case Study Research Method ............................................................................ 20
Survey ........................................................................................................................ 23
Interviews ................................................................................................................... 24
Section V: Qualitative Methods Results ........................................................................ 26
Survey Results ........................................................................................................... 26
Interview Results ........................................................................................................ 38
Section VI: Conclusion .................................................................................................. 61
Recommendations & Actionable Strategies for CGI .................................................. 61
Limitations of Current Research and Future Research Proposals ............................. 63
Appendices ................................................................................................................... 65
Exhibit A.1: Midwest Chestnut Growers Survey ......................................................... 66
Exhibit A.2: Cover Letter for Survey ........................................................................... 90
Exhibit A.3: A Survey of Midwest Chestnut Growers: A Qualitative Overview ........... 91
Bibliography ................................................................................................................ 118

iv

List of Tables
Table 1.1: Circular Causation of CGI-----------------------------------------------------------------3
Table 5.1: Sales Outlets---------------------------------------------------------------------------------29
Table 5.2: Group Member Perceptions of CGI----------------------------------------------------31
Table 5.3: Group Member Perceptions of CGI’s Current Values-----------------------------33
Table 5.4: Group Member Values (What the Co-op Should Value)--------------------------34
Table 5.5: Measuring Group Attachment Value Questions & Responses------------------44
Table 5.6: Scenario Analysis Questions & Responses------------------------------------------47
Table 5.7: Pricing Questions & Responses---------------------------------------------------------50
Table 5.8: Economic Incentives Questions & Responses--------------------------------------51
Table 5.9: Knowledge Sources Questions & Responses---------------------------------------54
Table 5.10: Organizational Legitimacy Questions and Responses--------------------------57
Table 5.11: Conclusions Questions & Responses-----------------------------------------------58
Table A.1: Orchard Activities Performed-----------------------------------------------------------96
Table A.2: Current Sales Outlets--------------------------------------------------------------------101
Table A.3: Desired Sales Outlets--------------------------------------------------------------------102
Table A.4: Respondents’ Perceptions of General Cooperatives-----------------------------104
Table A.5: Group Member Perceptions of CGI---------------------------------------------------105
Table A.6: Group Member Perceptions of CGI’s values---------------------------------------107
Table A.7: Group Member Values (What the Co-op Should Value)------------------------108

v

List of Figures
Figure 1.1: Circular Causation of CGI-----------------------------------------------------------------3
Figure 5.1: Farm Size vs. Chestnut Orchard Size-------------------------------------------------27
Figure 5.2: Initial Attraction to Chestnuts------------------------------------------------------------28
Figure 5.3: Respondents’ Participation Levels in CGI--------------------------------------------30
Figure 5.4: Dissonance Between Perceived CGI Values and Group Member Values--35
Figure 5.5: Net Income from Chestnut Production------------------------------------------------37
Figure 5.6: % Current Harvest Given to CGI, Retirement---------------------------------------41
Figure 5.7: % Current Harvest Given to CGI, Commercial--------------------------------------41
Figure 5.8: % Future Harvest Given to CGI, Retirement----------------------------------------41
Figure 5.9: % Future Harvest Given to CGI: Commercial---------------------------------------41
Figure A.1: Farm Size vs. Chestnut Orchard Size------------------------------------------------91
Figure A.2: Initial Attraction to Chestnuts-----------------------------------------------------------92
Figure A.3: How Respondents Started Their Orchard-------------------------------------------94
Figure A.4: Tasks Performed to Prepare Orchard------------------------------------------------95
Figure A.5: Crop Lost Due to Frost-------------------------------------------------------------------97
Figure A.6: Harvesting Methods-----------------------------------------------------------------------98
Figure A.7: Percentage of Orchard Harvested-----------------------------------------------------97
Figure A.8: Variation in Yield: Year to Year---------------------------------------------------------99
Figure A.9: Respondents’ Participation Levels in CGI------------------------------------------103
Figure A.10: Dissonance Between Perceived CGI Values and Group Member
Values------------------------------------------------------------------------------------------------------109
Figure A.11: Co-op Values: Business vs. Family------------------------------------------------110

vi

Figure A.12: Net Income from Chestnut Production--------------------------------------------111
Figure A.13: Important Factors in Improving Profitability and the Factors Which Are the
Competitive Advantages of a Successful Chestnut Producer--------------------------------112

vii

Section I: Introduction
A cooperative is a user-owned and controlled business that distributes benefits
based upon each member’s use or patronage (Barton, 1989). Cooperatives have a
significant impact on the US economy. A 2009 study by the National Cooperative
Business Association and the University of Wisconsin Center for Cooperatives reported
that in 2009, nearly 30,000 cooperatives in the US owned over $3T in assets, generated
greater than $500B in revenue, distributed over $25B in wages, and claimed 350M
cooperative memberships (Deller, Hoyt, Hueth, & Sundaram-Stukel, 2009).
Cooperatives are a major component of the US economy, but what differentiates an
agricultural cooperative from other types of co-ops?
Agricultural cooperatives can be classified into three general activity categories;
marketing cooperatives (which aggregate all of the members outputs, crops, to bargain
for better prices through increased volume and the establishment of brand name), farm
supply cooperatives (in which farmers pool their resources to achieve economies of
scale when purchasing inputs such as seeds and farm equipment), and service
cooperatives (which provide services such as storage and crop processing that require
relatively large fixed cost investment to establish) (Cropp & Ingalsbe, 1989). Agricultural
cooperatives vary in size, but most are relatively small. In 1999, 50% of cooperatives in
the US had sales of less than $5 million (Cropp R. , 2002).
Chestnut Growers Inc. (CGI) was established as a marketing cooperative1, with
the goal of collecting chestnuts and selling them under the CGI name. As the group has

1

Marketing cooperatives can be defined as an organization with a special type of
vertical integration, wherein farmers own assets in another tier of the production and
1

evolved, they have begun undertaking activities similar to a service cooperative. For
example, they purchased a chestnut scorer, a fixed asset that required an initial
investment of $26,000 dollars through a grant from the Rogers Reserve (see Section I
for a more detailed background on the evolution of CGI).
What factors determine a successful agricultural cooperative? Bruynis, et. all
(2001) identified six independent variables which affect the probability of success,
“sufficient equity before start up, maintaining an adequate business volume, keeping
and distributing accurate financial records, importance of previous cooperative
experience and continued management training for both the board and manager, and
marketing agreements.” (14). CGI is currently taking actions to address each of these
factors. For example, they are actively seeking marketing agreements with large
customers to help maintain adequate business volume. Even though they can interest
buyers in their potential chestnut crop, they do not have enough member participation
(in the form of chestnuts sold by members to the cooperative) to meet the potential
demand.
Another way to explain the fundamental issue that CGI faces is to look at how
one member’s actions affect the cooperative, and in turn affects all other members. This
can be best described by the cumulative causation concept defined by Schmid (1999),
“a relationship between an initial change in an independent variable and the dependent
variable, whereby the dependent variable in turn causes a change in the formerly
independent variable in the same direction as the initial movement” (Schmid, 1999). In
our case, the choice variable for farmers is the percentage of their crop that they give to
distribution system. For a further exploration of this topic see Cook 1995, Hendrikse and
Bijman 2002.
2

the co-op. Ideally, this choice variable is most significantly affected by the price they
receive from the co-op. However, the co-op currently offers lower prices than other
market outlets as they don’t have the volume to fulfill the more profitable orders.
Therefore in the next harvest season, the farmer gives the co-op their leftover poor
quality nuts. And the cycle continues. This feedback cycle inhibits the growth of the
cooperative (see Figure 1.1).
Figure 1.1: Circular Causation of CGI
5. Co-op
offers
lowest price
to farmers

1. Farmers sell
best nuts on
farm at high
price

4. Co-op
cannot fulfill
most profitable
orders

2. Farmers
give small %
of harvest to
co-op
3. Co-op
has small
unsteady
supply of
poor nuts

However, this description does not fully explain the behavior of all cooperative
members. Such as, why do certain farmers sell their entire crop to the co-op despite
receiving a lower price than available elsewhere? We will explore this question through
the application of two separate schools of thought – social capital and organizational
identity.

3

Purpose of Study
The purpose of this thesis paper is to explore the issue of social capita,
attachment value for the cooperative, and organizational identity as it applies to a case
study of Michigan chestnut farmers involved in the cooperative Chestnut Growers Inc.
The central question that we are trying to address is: How does an individual’s affiliation
level with the cooperative affect their participation level and in turn the performance
(profitability) of the cooperative. By addressing this question, we can examine whether
cooperatives and other non-corporate organizations need social capital to survive and
flourish.
What follows is divided into five sections. The first section of this paper provides
a snapshot of our case study, Chestnut Growers Inc. The second section reviews
relevant literature including cooperatives, social capital, attachment value theory, and
organizational identity theory. The third section will explore the multi-method research
approach, discussing the merits of the case study research method and how qualitative
data such as interviews and surveys can help enrich our case study. The fourth section
describes the results of our qualitative data collection and applies preliminary
connections between the literature and the actual case study. The fifth section
summarizes important conclusions and provides guidance for further development of
the subject.

4

Section II: Snapshot of Case
Chestnut Industry Background
The Midwest chestnut industry is still in its relative infancy. Volume of production
is low – in a 2004 national survey, 80% reported less than $5,000 in annual sales for
producers. Also, most chestnut producers have been in business less than fifteen years
and are just now starting to produce commercially (Gold, Cernusca, & Godsey,
Chestnut Market Analysis: Producers' Perspective, 2006). Chestnut consumption is also
relatively nonexistent in the U.S. – consumers in the U.S. eat only 0.1 lbs. of chestnuts
per capita. Europeans eat approximately 1 lbs. per capita and Koreans are the world’s
largest consumers at 4 lbs. per capita (Bodet, 2001). To provide a background on the
chestnut industry as a whole, we will first discuss the national chestnut industry and
consumer preferences regarding chestnuts. The most comprehensive resource for
information on the national chestnut market is the work by the University of Missouri
Center for Agroforestry which we can compare to our own data which we gathered from
surveying and interviewing individuals in Chestnut Growers Inc.
From a national survey of chestnut growers (Gold, Cernusca, & Godsey,
Chestnut Market Analysis: Producers' Perspective, 2006), we can present a portrait of
the U.S. chestnut industry: Current production volume is estimated at less than 1.5
million pounds nationwide. National chestnut production is so insignificant that it is not
even included in the United States Department of Agriculture’s annual “Noncitrus Fruits
and Nuts” report (USDA, 2011). U.S. chestnut producers are mainly part-timers or
hobbyists where only 20% of respondents are full time farmers. Orchard operations are
small, with 76% of respondents reporting orchards of less than 10 acres. Commercial

5

production (i.e. at least 10lbs./tree) can be reached in six to nine years with 50 trees per
acre and under appropriate management.
One important factor affecting industry profitability not discussed above is frost.
Frost is an extremely important risk factor for most CGI members as it literally knocks
out years of viable chestnut crops. Therefore costly preventative actions must be
undertaken to limit the impact of frost on the farmer’s crops. This issue will be explored
further in Section III.
Through a longitudinal study (Aguilar, Cernusca, & Gold, 2009) performed
annually at the Missouri Chestnut Roast festival, we are able to begin to understand
consumer preferences regarding chestnuts: Quality, locally grown and nutrition
concerns were consistently the most important attributes influencing chestnut
purchasing decisions. Consumers prefer local U.S. grown chestnuts to imports,
organically certified chestnuts, and medium sized chestnuts. Growers that provide
chestnuts that meet these three characteristics are able to capture price premiums for
their products. Over the five year time period, repeated exposure to chestnuts by
Missouri Chestnut Roast festival visitors increased their interest and in turn
consumption of chestnuts.
So how does the snapshot of the national chestnut industry provided by the
Missouri dataset compare to the Michigan chestnut industry? To explore this question,
we must look at Chestnut Growers Inc. to understand their view of the chestnut industry.
Michigan Chestnut Industry: A History of Chestnut Growers Inc.
Chestnut Growers Inc. (CGI) is a cooperative located in Southwest Michigan.
CGI was established in 2000 with roughly 20 members and has now grown to over 40

6

members. The members are a very diverse group, with individuals owning varying sizes
of chestnut orchards which were established at different points in time, and some
farmers not performing the daily operations of the farm. Although membership has
grown and expanded beyond Michigan to members in Washington and Iowa, active
participants are less than half the group total. Active participants are measured as
individuals who regularly give part of their chestnut crop to the cooperative.
CGI was not the first chestnut venture in Michigan. A few of CGI’s founders first
belonged to a group established over 30 years ago, the Chestnut Alliance. An interview
with a Michigan chestnut expert helped shed light on this early chestnut organization:
“The chestnut Alliance arose out of a “get rich quick” mentality
perpetuated by a chestnut seedling salesman who sold a group of farmers
the dream that they could turn a quick profit by planting chestnuts. This
group grew a diverse number of cheap seedlings based upon the model of
three or four orchards planted in around the middle of the 20th century in
southern Ohio. However the land they planted on was not on the same
parallel (thus different microclimate) and was also cheap, worn out land.
These individuals were hobbyists trying to quickly become commercial
farmers and they ultimately failed miserably as chestnut blight and the low
quality of the seedlings lead to a success rate of only 25 out of every 500
planted trees” (personal correspondence, 02/07/2011).

Out of the ashes of this first group arose a few farmers that still wanted to pursue
chestnuts as a viable, long-term crop. These individuals came together to create
Chestnut Growers Inc.
Despite the best intentions of these pioneers, the very nature of chestnuts does
not lend itself to instant profitability as; 1) there is a significant lag time (between 5-10
years) between planting and when the tree begins to bear fruit, and 2) chestnuts are a
relatively unknown crop to the Michigan microclimate and the American consumer.
7

Chestnuts have been cultivated for thousands of years as a staple part of the diet of
populations in western Asia and southern Europe. They are native to moist temperate
regions of the northern hemisphere (Miller, 2003). The American chestnut was once a
major tree species along the Appalachians, until chestnut blight (from an imported
fungus) caused their near extinction in the beginning of the 20th century (Anagnostakis,
1987). Despite the abundance of this plant, chestnut trees were used mainly for its high
quality wood, not as a row crop. American chestnuts are typically the sweetest and
therefore the most preferred by consumers (Gold & Cernusca, Consumer Preferences
for Chestnuts, Eastern Black Walnuts, and Pecans, 2004). In response to chestnut
blight, new hybrids are being tested to determine the ideal genotype for the Michigan
microclimate. Chinese chestnuts are the most resistant to chestnut blight, but this trait is
highly variable and the nuts are of smaller size and are less sweet. As such, according
to an industry expert with experience working with CGI (personal communication,
February 7, 2011), CGI members are transitioning from Chinese seedlings to Colossal
cultivars, a hybrid of European-Japanese descent. This experimentation is one of the
main factors impeding profitability for CGI. The process of establishing the ideal
genotype for the Michigan climate takes years of trial and error. For reference, it took
thousands of years to establish the best apple cultivars and apple harvesting methods.
CGI recently established marketing connections to help raise awareness of their
product and introduce chestnuts to new markets. For example they frequent the annual
“Meet the Buyers” conference, a get-together of producers and buyers of the Great
Lakes region. CGI spent $15,000 to receive a $100,000 grant from the Michigan
Department of Agriculture to use towards the creation of value-added products. This

8

money was first used to hire an agri-business consultant with expertise in grocery store
supply chains, who emphasized the development of a new value-added chestnut
product, sliced chestnuts. With funds from the Rogers Reserve, CGI purchased a
chestnut-slicer for $26,000 for this purpose.
However, the market for this value-added product has been slow to develop and
as a result the CGI membership has become divided. This point was emphasized
during a visit to the orchard of one of the current board members of CGI, where the
interviewee brought out dozens of boxes filled with bags of unsold chestnut slices. They
had used their new slicing machine to create a new value-added product. Although the
technical knowledge and equipment exists to create value-added products, but the
market has yet to be established for these products. Because of this failed business
experiment, much of the group doubts the profitability of value-added ventures and
prefers to carry-on the “tried and true” method of collecting nuts, finding an outlet for
fresh chestnuts, and distributing the resulting profits amongst the members.
Essentially, the current co-op members believe they are guinea pigs (term used
on many occasions by both co-op members and experts in describing their role in the
evolution of CGI). Because they all started their orchards at different points in time,
used a diverse set of seedlings/cultivars and employed a variety of different growing
methods, no optimal growing, harvesting and marketing methods have been
established. As revealed by interviews with industry experts and growers, there is a
shared belief that CGI should ideally start with a new group of growers employing the
same methods and using the same cultivars. The lack of clear profitability from their
chestnut orchards has led to tension arising within the group at their frustration with a

9

crop they originally perceived as a quick profit opportunity. This tension is compounded
by the group’s diverse motivations, as some members see chestnuts as a retirement
hobby while others seek to treat chestnuts as a commercial crop (see results of the
initial survey in Section III). Essentially, the first group farms simply because they have
land and are experimental, they are willing to do anything regardless of cost because
farming is a passion and not a primary source of income. While the second group thinks
more economically, as they want to know the full financial costs upfront (personal
communication with self-identified commercial farmer, March 3, 2011). Therefore for this
group to succeed economically, these different motivations need to be reconciled.
These differing motivations will be further explored through qualitative research
methods discussed in Section III, as we seek to address how the characteristics of each
individual co-op member affects their participation within the group and in turn the
performance of the cooperative. The next section provides a background on the theory
that we will apply to our specific case study.

10

Section III: Literature Review
Cooperatives
Chestnut Growers Inc. (CGI) is an agricultural cooperative. As an agricultural
cooperative, CGI fits the description of Cook & Plunket’s collective entrepreneurship
(2006), wherein CGI is a formal group of individuals seeking profitable returns for its
members by combining, “the institutional frameworks of investor-driven shareholders
firms and patronage driven forms of collective action (421).”
Agricultural cooperatives emerge in situations where problems of asymmetric
information between suppliers and customers, problems of publicness (i.e. nonrivalry or
nonexcludability), or both exist. Traditionally, co-ops adopted defensive strategies and
organizational structures which arose to counter the extraction of monopoly rents2 by
input suppliers or customers. Cooperatives were created to ensure that the farmers
were on both sides of the transaction, to reduce their costs and lock-in their on-farm
returns (a form of real options3 in a sense).
Recent studies on agricultural cooperatives (Hendrikse, 1998) and (Hendrikse &
Bijman, 2002) highlight incentive alignment challenges regarding, “residual distribution
and risk capital accumulation”. The new studies suggest that we expect to see new
organizational structures emerge to address these market failures. These organizations
2

Economic rents are distinguished into three types; Ricardian, Pareto, and Monopoly
rent. In this case we are referring to Ricardian rents which are defined as returns from a
quasi-fixed asset that are in excess of the cost required to maintain that asset
(Jacobsen, 1988).
3
The pertinent real option in a defensive co-op is the value of the follow-on investment
opportunities at the farm level. As Cook & Plunkett (2006) describe, “A defensive
cooperative investment could be thought of as a call option, in that the value of a
successful initial cooperative investment could underpin a much larger payoff from
subsequent investment at the farm level.” A low return at the co-op level could be
counterbalanced by a high expected on-farm return.
11

are best described by both Merret & Walzer’s (2001) work on New Generation
Cooperatives (wherein new cooperatives adopt a more liquid property rights structure)
and Chaddad & Cook (2004) who develop a property rights-based taxonomy of seven
emerging cooperative organizational models. New Generation Cooperatives have, “a
more clearly defined membership policy (closed or well-defined), a secondary market
for members’ residual claims, patronage and residual claimant status restrictions, and
enforceable member pre-commitment mechanism. This is in contrast to traditional coops, whose property rights structure is characterized by open membership, capital
generated through earnings from patronage, and illiquid ownership rights.” (Cook &
Plunkett, 2006, p. 424). CGI was initially established as a marketing cooperative in the
traditional agricultural cooperative model. In response to a lack of consistent member
participation, they set about instituting enforceable commitment rules requiring
members to sell a fixed percentage of their harvest to the cooperative. As such, CGI is
transitioning from a traditional cooperative to a New Generation Cooperative to address
this market failure (lack of member participation).
The evolution of traditional single-commodity cooperatives mirrors the
development of CGI wherein they, “started as minimally capital-intensive bargaining
cooperatives and then evolved into marketing/processing cooperatives attempting to
bypass investor-owned firms to avoid monopsonistic rent extraction. Over time, these
cooperatives acquired processing and distribution facilities and invested in intangible
assets such as brand names. They sought to leverage their defensive reason for
formation into offensive rent extraction.” (Cook & Plunket, 2006, p. 425). Chestnuts
Growers Inc. is a single commodity cooperative that is attempting to establish a brand

12

name so that they can extract higher rent (i.e. receive higher payment for their
chestnuts than they could receive selling individually on the farm or at the local farmers
market).
The concept of collective action, as developed by Cook & Plunket, can be further
explored by understanding the literature surrounding organizational identity. The
evolution, maintenance, and projection of an organization’s identity is vital to
understanding the success of a particular group. Collective action is the term used to
describe the acts which define what exactly an organization is, in other words, their
organizational identity.
Organizational Identity
In his original works on organizational identity, Albert (1977) combines the theory
of the identity interaction model and the works of the development psychologist
Erickson (1968) on identity formation as a series of comparisons. This leads directly to
Albert’s initial definition of organizational identity which is formed by a process of
“ordered inter-organizational comparisons and reflections upon them over time.” (Albert
& Whetten, 1985, p.98).
Later, in their seminal article in 1985, Albert and Whetten set about establishing
their definitive definition of organizational identity. This version defines organizational
identity as those characteristics which are central, distinctive and enduring (Albert &
Whetten, 1985). These characteristics were tweaked in Whetten’s later work (2006)
which provides a stronger version of the original piece and aligns the organizational
identity concept as an analogue to individual identity. Whetten proposes that the true
theory of organizational identity is defined as the “central and enduring attributes of an

13

organization that distinguish it from other organizations.” (219). These attributes are
referred to as organizational identity claims which are actions that the group must
undertake to maintain their established identity. It is important to distinguish between
the identity of collective action (organizational identity) and the identity of a collection of
actors4. This differentiation is explored in various works which posit that modern society
treats organizations as if they were individuals5 and therefore grants them the same
rights and responsibilities as collective social actors (i.e. individuals), see (Coleman,
1974) and (Zuckerman, 1999). CGI is an organization, and as such is composed of a
collection of individuals. Each individual has their own motivations and actions (e.g.
decide to plant seedlings rather than grafting chestnuts) and this aggregate is
considered the identity of a collection of actors. However, actions performed under the
CGI banner (e.g. group of farmers promoting CGI chestnuts at a local farmers market)
are what define the identity of the organization – the identity of collective action.
Identity as a classification leads to two issues: distinguishing between public and
private identity and how that identity is conveyed to others. This leads Whetten (2006)
to three hypotheses; greater the discrepancy between the insiders and outsiders view of
the organization the more the “health” of the organization will be impaired, publically

4

The beginnings of social capital are shared kernels of commonality (Robison, Schmid,
& Siles, 2002). By exploring the common identity claims amongst members to establish
a group identity, we can begin to see how the concepts of social capital and
organizational identity complement each other.
5
For a more current example see the 2010 Supreme Court ruling in Citizens United v.
Federal Election Commission which advanced the debate on corporate personhood.
They ruled that corporate political spending was protected under the First Amendment,
and thus corporations have protections under the First Amendment and therefore are
“persons”.
14

presented identity will typically be more positive, and a more monolithic than internally
perceived identity will be presented.
Ultimately, Whetten (2006) advances the notion that analyzing and composing an
organizational identity is a last measure, when other explanations won’t do. Since this
process is both mentally and socially exhausting requiring much group introspection,
organizations only attempt to address the identity question when easier avenues have
been exhausted and will only provide as minimally sufficient an answer as possible.
The question of organizational identity is especially salient during particular life
cycle events, most notably, in the formation of the organization. Strong identities that
are simple, clear, and unanimous are frequently associated with successful startup
ventures (Hogg & Terry, 2000). Other advantages of a unitary identity include; creates a
sense of unity that can help drive future success (Castanias & Helfat, 1991) and can
encourage group members to resolve issues that threaten the established identity
(Dutton, Dukerich, & Harquail, 1994). However, a unitary organizational identity can
inhibit organizational actions, interpretations, and potential for change (Pratt & Foreman,
2000). Therefore a strong identity can be both a liability and an asset when an
organization is faced with fundamental change. A stable organizational identity
(centered around a few core values rather than repeated behaviors) that is able to
dynamically adjust in response to continually changing external variables can be a
source of multiple temporary advantages (Fiol, 2001). Thus for CGI to properly evolve
from a loose agreement between fellow chestnut farmers to a collective
entrepreneurship venture, they must maintain clear values to establish a strong yet
flexible organizational identity.

15

It is important to note that with collective action “… unless the number of
individuals in a group is quite small, or unless there is coercion or some other special
device to make individuals act in their common interest, rational, self-interested
individuals will not act to achieve their common or group interests” (Olson, 1965, p. 2).
Therefore if the group’s common interest is to make money for members, why does the
participation rate vary so much between members when the current financial returns are
so low? We hypothesize that different members are motivated by different incentives
(identity of a collection of actors) which results in a muddled identity of collective action
(organizational identity). One explanation for this phenomenon could be social capital –
different members have varying levels of attachment value with the group and therefore
participate according to their level of social capital. To properly understand this concept,
we must first explore what social capital is and the evolution of social capital theory.
Social Capital
Neoclassical economic thought posits that humans act perfectly rational and
base their decisions solely upon maximizing their utility through the allocation of scarce
resources6. This is referred to as the selfishness of preferences assumption by Quirk
and Saposnik (1968). By this logic, in any economic transaction each individual acts
only in his own (selfish) interest. Violations of this principle are commonly observed7.
For example, when analyzing the transactions of farmland sales, researchers
discovered that farmland sellers provide a discount to family and friends while requiring
6

See Colander’s (2000) declaration of The Death of Neoclassical Economics for a
thorough review of the history and development of the term “neoclassical” and why that
term does not accurately describe modern economic theory.
7
Robison’s early work in his article In Search of Social Capital (1996) provides a
succinct overview with different examples of how relationships alter economic
behaviors.
16

a higher price for unfriendly neighbors. In this specific example, just 33% of the person’s
motivations can be fully explained by neoclassical economic thought (i.e. solely
maximizing selling price) (Robison, Myers, & Siles, 2002). Therefore there must an
unknown factor that would explain the other two-thirds of the individual’s motivations.
We believe that this anomaly can best be described by the term social capital, more
pointedly an individual’s sympathy for another.
Another study measured the relative importance of motives through both
hypothetical surveys and non-hypothetical experiments. They found that social capital
motives allowed a subject’s well-being to be affected by his sympathetic relationship
with others. Therefore the central assumption that selfishness explains nearly all of
resource allocation decisions can be rejected (Robison, Shupp, Jin, Siles, & Ferrainni,
2012).
The concept of sympathy in economic terms was first discussed as far back as
Adam Smith (1759, p. 3) who wrote in The Theory of Moral Sentiments:
“How selfish soever man may be supposed, there are evidently some
principles in his nature, which invest him in the fortune of others, and
render their happiness necessary to him, though he derives nothing from
it, except the pleasure of seeing it”
This inherently makes sense, as in life, we are not merely purely rational robots who
constantly compute differential equations to maximize our utility. No, we are human
beings driven by a complex, ever-changing combination of emotions, logic, and a drive
to achieve a sense of belonging. Think of the last time you helped your neighbor or
visited your favorite coffee shop. You performed these activities not because you were
financially compensated for helping your neighbor move or paying a cheaper price for
coffee, it was because you internalized the well-being of your neighbor or associated an
17

attachment value8 to your favorite coffee and were willing to pay a little more for the
familiarity. This phenomenon can best be described by the term social capital.
So what exactly is social capital? With many different definitions floating around
in academic literature that attempt to encompass what social capital is, where it resides,
and how it can be changed, it is important to establish a definitive definition. For our
purposes, we will use the definition advanced by Robison, Schmid, and Siles (2002):
“Social capital is a person’s or group’s sympathy toward another person or
group that may produce a potential benefit, advantage, and preferential
treatment for another person or group of persons beyond that expected in
an exchange relationship.” (Robison, Schmid, & Siles, 2002).
Social capital can produce socio-emotional goods, while other forms of capital
can produce physical goods and services. Socio-emotional goods are, “expressed
emotions between persons that validate, express caring, or provide information that
increase self-awareness and self-regard.” (Robison & Flora, 2003, p. 1188). Essentially,
socio-emotional goods make a person feel good inside. This idea touches on Maslow’s
hierarchy of needs (1962), with socio-emotional goods fitting under the love/belonging
and esteem needs – all of which fall under the most basic level of human needs.
Because socio-emotional goods are exchanged in nearly every interpersonal
interaction, it is pertinent to understand how socio-emotional goods add or subtract

8

Attachment value is the change in value of a good/service above and beyond the
economic cost. These are goods that are embedded with socio-emotional goods. For
example, a picture of your family vacation to the Grand Canyon is embedded with socioemotional goods for you (brings back happy memories and reminds you of your youth).
This picture is worth more to you (and you would be willing to financially pay more for it)
than a stranger because they have no attachment value with the picture. See Robison
and Ritchie’s Relationship Economics (2010) for a deeper exploration.
18

value from a transaction. In our case, we will analyze whether socio-emotional goods
add or subtract value in the economic exchanges between the cooperative and its
individual members.
In our data collection we are not setting out to explicitly measure social capital.
Rather, we are attempting to discern whether the difference in participation rate (percent
of individual farmer’s harvest sold to co-op) is influenced by social capital and the
exchange of socio-emotional goods. Similar to Robison and Flora’s (2003) proposal, we
can use the difference in participation rate as an indirect measure of social capital’s
influence. We can then cross-check this explicit measure with their general level of
sympathy for the group (established through a series of hypothetical questions
regarding their attachment and association levels with the cooperative and group
members). Thus, through our two data collection methods, we will attempt to ascertain
whether an individual’s sympathy level for the group can help explain their participation
level in the group.
The next section will address how we established the story around our data and
the data gathering methods. Namely, it will discuss the methods we used to best create
a rich background upon which we can test our social capital and organizational identity
theory.

19

Section IV: Research Methodology
This study utilizes the case study methodology to examine the effects of
organizational identity and social capital on organizational performance within the
context of an emerging agri-food co-operative, Chestnut Growers, Inc. Case studies
are common in social science research as they are a robust tool that allows the
researcher to “retain the holistic and meaningful characteristics of real life events” (Yin,
2003; Eisenhardt, 1989; Hamel, 1992). The case study approach is the optimal
research strategy for our study given that we will analyze a single phenomenon within
its current environment and since contextual conditions are extremely pertinent for our
study. Furthermore, given the nature of this study, it is difficult to dissociate the true
level of attachment value each co-op member has for the group. This study will use a
multi-method qualitative approach (i.e. survey, interview) to collect and analyze data for
the case study.
The Case Study Research Method
Case studies are defined as a comprehensive research strategy which includes the
logic of design, techniques of data collection and the explicit approaches to data
analysis (Yin, 2003). Yin expounds upon this definition to add two sections to the
technical definition of the case study as a research strategy:
1. A case study is an empirical inquiry that explores a current phenomenon within
its real-life context (i.e. not a controlled experiment) and is especially appropriate
when the boundaries between the context and phenomenon are not clearly
defined.

20

2. The case study research method copes with the difficult situation where there
are less data points than variables of interest by both relying on multiple sources
of evidence and using previous theory development to help guide data collection.
Both parts of Yin’s technical definition of a case study apply directly to our
situation. First, the contextual conditions are extremely pertinent for our study, as it is
extremely difficult to dissociate the true level of social capital each group member has
for the group. The very nature of the research problem is undefined and unexplored.
The chestnut industry is still in a nascent stage of development without profitable, wellestablished harvesting methods, distribution channels or inputs (i.e. cultivars) optimized
to grow the highest quality chestnut trees in the Michigan microclimate. The unit of
analysis for the case study is Chestnut Growers Inc., which is a relatively new
cooperative organization that was established ten years ago. As with many nascent
organizations, the cooperative continues to struggle to define both its identity and
purpose. Thus, for our research situation, “boundaries between the context and
phenomenon are not truly defined.” The second part of Yin’s definition touches upon the
lack of comprehensive available data and the flexibility and creativity that the case study
method allows to help address our research question. Our original single data point is
CGI, a nascent cooperative struggling with profitability operating in an underdeveloped
market. Next we use multiple sources of evidence, particularly surveys and interviews,
to provide additional data points to help frame our case study. To bring all of these
observations together towards a logical conclusion, previous theory development (i.e.
social capital and group identity) is used to provide a concrete conclusion to our original

21

hypothesis. Thus our research situation meets both criteria for the case study research
method.
In this situation a case study must be undertaken because of nature of the issue
being explored. The case study research method has strengths in dealing with multiple
forms of evidence. Using the COSMOS research design table developed by Yin
(COSMOS corp.), case studies have a distinct advantage when it; a) addresses the how
and why of the research question, b) requires no control of behavioral events, and c)
focuses on contemporary events. Our study focuses on contemporary events which
cannot be controlled in an experiment. We are attempting to analyze a living group and
understand individuals’ perceptions and how these perceptions effect their actions
within the group. We are trying to understand both the why (why do participation levels
vary among group members?) and the how (how are group members’ attachment value
with the cooperative constructed/changed?). Therefore the case study research method
is most appropriate in addressing our central research question.
As with any scientific study, we need to gather data to address our research
question. The inherent benefit of the case study research method is that the data both
shapes, informs and guides the research. In other words, an exploratory case study
(Yin, 2003). By beginning with a concrete research question, we can use different
primary data gathering methods to inform the case. Because the topic is so
underdeveloped, the best method for gathering data would be performing surveys and
interviews to establish a framework to guide our research.

22

Survey
The survey was administered to 46 chestnut farmers associated with CGI. This
was our target population, which includes all of the current and former members of CGI.
We received a response rate of 70% as 32 individuals responded. The survey was pretested with 12 group members who attended the annual cooperative meeting in April
2009. This meeting is held once a year to discuss co-op business, learn new chestnut
research results and elect new board members. The topic of participation (and the lack
thereof) will be further explored in Section V. To ensure maximum participation among
the co-op members, a survey package was put together and mailed to the remaining
group members. A cover letter9 was attached, informing participants of the purpose of
the research and importance of their participation.
This initial survey helped shape and inform the case study. The analysis of the
survey results was the first attempt to outline the basic characteristics of the Michigan
chestnut industry and Chestnut Growers Inc. as an organization. The survey covered
basic demographics, production and marketing methods, and most importantly attitudes
regarding cooperatives and CGI specifically. A summary of this report is as follows: 1)
chestnut orchards were found to be only minimally profitable at the time of the study,
2),as operation size increases the potential for achieving healthy profit margins exists
(20%), 3) CGI group members identify strongly with the organization, but their actions
do not appear support their positive perceptions of the organization (i.e. co-op
participation was low), finally 4) the combination of inherent risk factors in chestnut
production (frost) and a lack of a consistent supply of quality nuts to the co-op threaten

9

See Appendix Exhibit A.3
23

the growth and future profitability potential of CGI. Please see Appendix Exhibits A.1
and A.2 to review the initial survey and for a full report of the survey results.
Given this initial analysis, we structured follow-up interviews with CGI members
to further inform our case study and to address our original research question.
Interviews
At the end of the initial survey, we asked respondents to indicate whether they
would be interested in participating further in the study through interviews or group
discussions. Half of the respondents (16/32) indicated their acceptance and from this list
we selected a sample of 10 farmers for interviews using expert opinion to get
geographic, demographic and group status diversity. First a letter was sent to each of
the 10 selected farmers and email follow-ups were conducted to coordinate individual
interview times.
It was emphasized at the outset of each survey that all results were confidential,
no one within CGI would learn of their individual responses and that there were no
correct answers to any questions, we merely wanted to garner their opinions. The
survey was divided into four main sections. The first section verified previous
demographic questions to establish a baseline of their participation level (i.e. how much
of their harvest they gave to the co-op). The second section explored social capital
incentives, starting with their specific relationships with other cooperative members and
then transitioned to a set of hypothetical questions to determine the consistency of their
actual behavior (associating with co-op members outside of business transactions) with
their perceived level of social capital (offer to give a co-op member a ride to the next
meeting). The third section asked respondents about economic incentives such as

24

prices and access to equipment and how these factors would affect their behavior.
Finally, the fourth section garnered the respondents’ overall impression of CGI as an
organization and what they perceived the goal/mission of CGI to be.
The interview questions were composed of both quantitative and qualitative
questions (see Appendix Exhibit A.4 for the interview protocol used). Where possible,
closed-ended questions were crafted to increase the ease of comparability between
subjects (Dillman, Smyth, & Christian, 2009). By requiring participants to give a specific
answer (either along a seven point Likert10 scale or by limiting responses to a range of
specific choices), we can limit participant’s responses and more easily compare them to
other participants. However, much of the nature of our research relies on qualitative
observations, which can only be addressed through open-ended questions. Therefore
questions regarding feelings, perceptions and opinions utilized this format.
We are studying a single phenomenon without any scientific controls and limited
data points to address newly developed theory. The research and data gathering
process informs the case study which is constantly evolving. Both a survey and
interviews were undertaken to shape the case study, and both of these tools were
influenced by our previous exploration of social capital and group identity theory. To
maintain the direction and integrity of the case study, all research was conducted under
the overarching theme of our research question. Because of the nature of our study, a
case study is the most appropriate research method to address the varying participation
levels and underlying profitability drivers of the cooperative Chestnut Growers Inc.
10

The Likert scale was first proposed in 1932 as a summated scale for the assessment
of survey respondent’s attitudes (Likert, 1932) With a Likert scale, we are attempting to
measure the underlying/latent continuous variable who value drives a respondent’s
general attitudes and opinions (Clason & Dormondy, 1994).
25

Section V: Qualitative Methods Results
Survey Results
Our first data collection method was an exploratory survey of the CGI
membership. This was chosen to help provide general background information about
the group so that we could determine which topics were important for further exploration
in subsequent research activities.
In this initial survey, we received a response rate of 70% as 32 of the 40
cooperative members responded. All of the farmers were from Michigan with the
exception of one respondent; this member did not ship their chestnuts to CGI. The
average farm size is a total of 64 acres but most farms are within the lower end of this
average. The average percentage of the farm that is dedicated to chestnut production is
24% with a mean of 8.60 acres. Figure 5.1 compares the size of the entire farm to each
farm’s chestnut operation, in acres. As shown below, the smaller hobby/retirement
operations have a much larger portion of their farm dedicated to chestnut production.
Larger farms use a smaller percentage of the farm for chestnuts because they mainly
see chestnuts as a way to diversify and decrease their exposure to a single crop.

26

Figure 5.1: Farm Size vs. Chestnut Orchard Size
300

Farm Size

Chestnut Orchard Size

250

Acres

200
150
100
50
0

Respondent

Note: For interpretation of the references to color in this and all other figures, the reader
is referred to the electronic version of this thesis.
Farming is not the primary source of income for most survey respondents; 88%
of farmers stated 0-10% of household income is generated from their farm. Possible
explanations for this could be that farmers are harvesting chestnuts as a retirement
hobby or that many chestnut orchards are still maturing, have yet to reach yield
capacity, and are therefore not currently turning a profit.
There are two different age cohorts of chestnut farmers, as farmers either started
their chestnut orchards 5-8 years or 15 plus years ago. Respondents cited different
reasons for establishing a chestnut orchard. Farmers were initially attracted because of
the potential for profit (40%), alternate source of retirement income, and as a low
maintenance or unique/interesting crop. One additional significant reason is that 12.5%
of respondents purchased land with pre-established chestnut trees. Figure 5.2 outlines
their motivations for establishing an orchard. Respondents are extremely bullish
regarding their chestnut operations as 72% anticipate expanding their chestnut orchard
27

within the next five years; 25% will maintain the same size chestnut operation, while
only one respondent anticipates decreasing the size of their chestnut operation. This
optimism is also directly reflected in responses to questions related to their financial
situations, where 86% of respondents expect chestnut prices to rise within the next five
years.
Figure 5.2: Initial Attraction to Chestnuts

41%

47%
13%

Potential for Profits

Interest in Chestnuts

Other

When asked about explicit risk factors deterring more chestnut producers from entry
into this industry, a lack of resources was not deemed to be a pertinent issue. Rather,
almost all respondents cited a general lack of knowledge about chestnut production or
uncertainty of the chestnut market. Other alternate explanations that were cited
included: “Lack of profitability”, “Lack of economic analysis”, the age of farmers or
hobby/retirement farming, frost and other difficulties in keeping trees alive, and no
mechanization which requires a high amount of labor input.
Table 5.1 details the actual outlets through which farmer sell their chestnuts. As
shown in the table, most farmers sell to CGI and direct-to-consumers on the farm. The
highest average prices received, however, are from farmers markets and online directto-customers.
28

Table 5.1: Sales Outlets

Ranking

Outlet

%
Farmers

Avg. Price
Received

1

Chestnut Growers Inc.

72%

$1.50

2

Direct on farm sales

41%

$2.50

3

Farmers market

24%

$5.00

4

Upscale grocery stores

14%

$3.00

4

Wholesalers

14%

$2.50

4

Restaurants

14%

$3.50

7

Other (usually u-pick)

10%

N/A

8

Distributor

4%

$3.00

9

Online, direct to
customers

4%

$5.50

Note also that although many farmers sell to different outlets, they sell the largest
percentage of their harvest either to CGI on directly on the farm. Only a few
respondents sell exclusively to higher end outlets such as upscale grocery stores or
restaurants. Although co-op members are required by the CGI bylaws to sell a
percentage of their harvest to CGI, many do not sell any nuts to CGI at all.
What factors affect these varying levels of participation? Of the 32 respondents
involved in the survey, 82% (26 people) are members of the cooperative. Figure 5.3
provides a graphical breakdown of group membership. Note that of the 26 people in the
co-op, eight are directly involved in the leadership of the cooperative.

29

Figure 5.3: Respondents’ Participation Levels in CGI

3%

3%

13%

Member
Officer/Director

25%

56%

Employee
Other

Not involved

In response to whether group members would seek out another co-op if CGI shut
down, respondents were unlikely to find a new co-op. On a 7 point Likert scale, the
average response was 5.26 (1 being very likely to seek another co-op and 7 being very
unlikely to seek another co-op); 37% are extremely unlikely (score of 7) to seek another
co-op, 9% are indifferent (score of 4), and 11% are very likely (score of 1) to seek
another co-op (note that all of these individuals are directly involved in the management
of CGI). Leaders of the co-op are more likely than others to seek out another
cooperative. Perhaps because most growers have yet to realize positive economic
profits from their participation in CGI, they are reluctant to seek other similar
organizations.
Table 5.2 below begins to touch on respondents’ specific perceptions about
Chestnut Growers Inc. In general, group members feel a sense of belonging to CGI.
The cooperative fosters a strong sense of community wherein group members feel a
part of the CGI family and directly involved in the fair and equitable decision-making
process of the co-op. This strong communal environment is manifested in group
members investing time and effort into CGI above and beyond group norms. Just as
30

importantly, group members develop a psychological attachment as well (i.e. “In
general, I have invested a great deal of myself into CGI”). This is a clear example of
attachment value.
Table 5.2: Group Member Perceptions of CGI
Strongly
Agree
1 2 3
I receive a fair price for my chestnuts
I do not feel a sense of belonging to CGI
The voting rights and procedures are fair and
equitable
I feel included in the decision-making
processes of CGI
I do not feel like a part of the family at CGI
I feel I have too few options to consider
leaving CGI
In general, I have invested a great deal of
myself into CGI
I have not given much of my time or effort to
CGI and its success or failure
Management makes me feel that my
opinions are valued
I do not feel emotionally attached to CGI
In general, I believe that what happens to me
is my own doing
CGI has a great deal of personal meaning for
me
It would be very difficult for me to leave CGI
now even if I wanted to
If I had a choice, I would never have invested
in a chestnut orchard

Strongly Variance
Disagree
4
5 6 7
4.5
2.1
5.1
4.2
2.7

2.6

3.1

3.2
5.7
4.8

3.3

3.1
4.3
3.0

4.7
3.0

5.0
3.1

4.4

4.4
2.1

2.2
3.6

3.2

4.1

5.0
5.5

3.4

It is important to note that group members take on a large amount of personal
responsibility (they strongly agree that they control their own destiny). This determined
attitude is also apparent in the respondents’ strong disagreement with the statement, “If
I had a choice, I would never have invested in a chestnut orchard”. This implies that

31

group members are both emotionally and financially invested in seeing their chestnut
orchard succeed and are willing to do whatever it takes to see it through.
The price received for their chestnuts is the single most important factor in
determining a member’s participation level (i.e. how much of their crop they sell to CGI).
Table 8 shows that members believe that the “Price of products or services” is very
important to group members with a score of 1.5 on a 7 point Likert scale. Table 5.3
shows that members slightly disagree that they receive a fair price from CGI for their
chestnuts. During co-op meetings this is the main point of contention between group
members (personal observation). CGI provides the lowest average price11 for the
farmer’s chestnuts. This is due to many factors, but one of the most important and often
cited is the lack of a consistent supply of chestnuts from group members. Because the
cooperative cannot rely on a consistent supply of chestnuts, they are hindered from
entering into long-term contracts with large retailers. These types of relationships would
likely enable the co-op to provide higher chestnut returns to members. Although
cooperatives traditionally provide services for its members as both a business and
“family”, group members place the price received for their chestnuts as the single most
important factor in determining member participation level and in turn the strength of the
organization.

Tables 5.3 and 5.4 display the congruence between CGI values and group
member values. Figure 11 highlights the differences between what group members
perceive that CGI currently values and what group members believe that CGI should
value.
11

See Appendix Exhibit A.2 for a further explanation.
32

Table 5.3: Group Member Perceptions of CGI’s Current Values
Very
Important
1 2 3
Price of products or services

4

Not
Important
5
6
7

2.8

Variance

3.0

Members’ input in decision-making process

3.5

3.1

Variety of products / services offered

3.2

3.0

Customer service

3.0

2.5

Professionalism / expertise of staff

2.8

2.5

Quality of products / services

2.4

Agricultural education and training

1.7
3.6

Member ownership and control in the co-op

4.6

3.0

3.1

Proximity / convenience / ease of use

3.6

3.0

Social relationships with other members

3.8

3.8

Return on equity

3.3

Community involvement

5.2
4.2

Value of products or services

2.5

Commitment to the traditional cooperative
ideals

3.3

33

3.5
2.7
3.1

Table 5.4: Group Member Values (What the Co-op Should Value)
Very

Not

Important

Important

1
Price of products or services

2

3

4

5

1.5

6

Variance
7
0.3

Members’ input in decision-making process

2.3

1.3

Variety of products / services offered

2.5

2.6

Customer service

1.5

0.4

Professionalism / expertise of staff

1.6

0.6

Quality of products / services

1.2

Agricultural education and training

0.3
2.8

Member ownership and control in the co-op

3.3

1.9

Proximity / convenience / ease of use

0.9
2.6

Social relationships with other members

1.0
3.9

Return on equity

1.6

1.6

Community involvement

4.3

Value of products or services

1.9

Commitment to the traditional cooperative
ideals

2.1
1.0

2.8

34

2.7

2.0

Figure 5.4: Dissonance Between Perceived CGI Values and Group Member Values
Return on equity
Customer service
Price of products
Expertise of staff
Members’ input in decisions
Quality of products
Variety of products offered
Member ownership in co-op
Ag. education and training
Proximity / convenience / ease of…
Value of products
Commitment to traditional co-op…
Community involvement
Social relationships with other…
-0.50

0.00

0.50

Less Important

1.00

1.50

2.00

More Important

Note: Positive values suggest that respondents believe the cooperative should place
more emphasis on that characteristic.
Figure 5.4 clearly shows that in general, co-op members believe that the
organization is not placing enough importance on business related issues. For example,
return on equity (i.e. money received by members from investments in the co-op) and
the price of products have the largest positive difference between what group members
perceive that CGI values and what group members believe CGI should value. The only
two issues that group members believe that CGI should place less emphasis on are
community involvement and social relationships among the co-op members. These two
categories fall under the “family” aspect of a traditional cooperative as the group
members do not believe that these two items should be as important to the co-op as
they currently are. This theme is reinforced by respondents’ beliefs that the co-op
should be more business oriented than in its current state. In response to the question

35

regarding co-ops as both a part family and part business organization, 8% want the coop to have a more family focus, 50% want a more business focus, and 42% are
indifferent. Group members believe that cooperatives in general and CGI specifically
should be more business focused.
Although group members identify with the organization (as shown in Table 5.2),
for the organization to truly succeed they need a consistent supply of chestnuts from coop members. It is widely shared among the members that CGI cannot succeed without
a consistent high quality supply of chestnuts, but farmers do not have the economic
incentives to provide this supply because of the low price offered by CGI. Combining
this factor with the inherent risks in growing chestnuts (e.g. frost damage, pests, etc.),
the future prosperity of CGI is not certain. One solution that may increase participation
rates and in turn improve group performance might be to implement strategies that
reinforce members’ identity with the cooperative and to increase attachment values
associated with the success of the group.
According to one farmer at the 2010 CGI annual meeting, “A farmer is a
businessman, and that’s the bottom line.” If farmers are businessmen, then why would
they plant chestnuts if they do not currently turn a profit? Less than half (43%) of the
respondents reported a negative net income for chestnut production. Of the 57% of
farmers generating a positive profit, 59% reported minimal net incomes of less than
$1,000 from their chestnut orchard. It should be note that there is long lag period
between planting and first harvest: it takes roughly 7.5 years until trees begin reaching
maturity and the orchard can start to be profitable. Figure 5.5 details the net income
breakdown for the respondents’ chestnut orchards.

36

Figure 5.5: Net Income from Chestnut Production

13%

10%

43%

<$0
$1-$1,000
$1,001-$2,500

33%

>$2500

Survey Conclusion
The depth of the survey questions allows us to analyze quantitatively the
differences between farmers. This data paints a broad picture of the typical Michigan
chestnut farmer. From this dataset, we can divide our sample into qualitatively distinct
subgroups; chestnut enthusiasts/retirement farmers and commercial diversification
farmers. Three quantitative variables help differentiate between the two subgroups;
percentage of total farm dedicated to chestnut production, sales generated by chestnut
orchard, and percentage of total farming time dedicated to chestnut production.
Chestnut enthusiasts/retirement farmers – These farmers devote a large
proportion of their time and farm acreage to chestnut production. However, most of
these farmers do not derive a large proportion of their farm income from their chestnut
orchard. Half of the respondents reported between 0%-5% of farm income from
chestnut production. These farmers also tend to have young orchards. The other half of
the retirement farmers derive all of their farm income from chestnuts, but they all have
less than $5,000 in gross sales.

37

Commercial diversification farmers – These farmers have larger plots of land,
with a much smaller proportion of farm land dedicated to chestnuts. Three of these
farmers reported greater than $5,000 in sales, while the other farmers have yet to have
their chestnut orchard reach full capacity. Chestnuts compose roughly 10% of total farm
income. For these farmers, chestnuts are used as a diversification tool (i.e. lower risk
and exposure to price fluctuations of their other crops).
“The first group farms simply because they have land and are
experimental, willing to do anything regardless of cost because farming is
a passion and not a primary source of income. The second group thinks
more economically, as they want to know the full financial costs upfront”
- Chestnut enthusiast/retirement farmer
It is important to understand the different subgroups within CGI, as we will use these
same terms (chestnut enthusiasts/retirement farmers vs. commercial diversification
farmers) to determine what other factors differentiate the members and affect their
participation rate.
Interview Results
At the end of our first data collection method, the survey, respondents were
asked whether they were willing to participate further in the study through either
interviews or group discussions. Half of the respondents (16/32) indicated further
interest. We discussed this list with a CGI expert who has been working with the
chestnut farmers for over fifteen years. From this review nine interviewees were
selected based on geographic, demographic, and group status (core members and noncore members) diversity. First, a letter was sent to each of the nine selected farmers
and email follow-ups were conducted to coordinate individual interviews at each
farmer’s home. The goal of the interviews was to determine if an individual’s level of
38

social capital (i.e. how they identified with CGI) influenced their participation rate (i.e.
how much of their crop they gave to the group) in the cooperative. Using the
retirement/commercial dichotomy developed above in the initial survey, we can explore
if social capital is the underlying motivational factor. The results of these interviews
follow below.
Interview Section I: Demographics
The purpose of the individual interviews was to understand the underlying
motivations of each member and what incentives influenced their decisions. The first
section of the interviews verified background information from the survey and set to
establish each interviewee along the retirement/commercial farmer dichotomy. This
differentiation was based on the quantitative variables discussed in the initial survey
(e.g. farm size, amount of time spent on chestnuts, chestnut sales) and more
importantly a new proxy variable for social capital – percentage of harvest sold to the
cooperative. The theory is that individuals who internalize the well-being of the group
(cooperative) have higher levels of social capital and therefore participate more in the
co-op. The proxy variable for this participation rate is therefore the percentage of
harvest sold to the co-op.
Question: How large is your farm? What percentage is dedicated to chestnuts? How
much of your farming time do you dedicate to chestnuts?
There is no direct correlation between the size of the respondent’s farm and the
percentage of farm area dedicated to chestnuts. Whether a retirement or commercial
farmer, the size of each individual farm varies from over 100 acres to just 17.5 acres.
However, there is an explicit difference in the amount of time spent working on their

39

chestnut orchard. Retirement famers spend over half of their farming time on their
chestnut orchard. This “farming time” is also significantly more than commercial farmers
as commercial farmers devote more of their time to other business ventures such as
other crops or their primary source of income (e.g. one of the commercial farmers is a
full-time barber).
The 2010 growing season was a bad year for chestnut farmers in Michigan. Frost
wiped out many farmers’ crops. As such, all of the farmers interviewed had lower crop
yields than expected, and all expected crop yields to at least double in the next
harvesting season12. All respondents take this same positive outlook for the future in
terms of their participation level with the co-op. The figures below outline the stark
discrepancy between the retirement and commercial farmers, as retirement farmers
currently give 83% of their crop to CGI (Figure 5.6) while commercial farmers deliver
only 30% of their crop (Figure 5.7). Both groups have positive expectations for the co-op
and expect to increase their participation levels in the next (i.e. 2011) harvest season
(Figures 5.8-5.9).

12

During the next harvesting season, chestnut farmers realized record yields in 2011.
40

Figure 5.6: % Current Harvest
Given to CGI, Retirement
17%

Figure 5.7: % Current Harvest
Given to CGI, Commercial

Sell to CGI

83%

30%
70%

Sell to
Other

Figure 5.8: % Future Harvest
Given to CGI, Retirement

Sell to
Other

Figure 5.9: % Future Harvest
Given to CGI: Commercial

12%
Sell to CGI
88%

Sell to CGI

40%
60%

Sell to
Other

Sell to CGI
Sell to
Other

Interview Section II: Measuring Group Attachment Value
These set of questions set out to establish a baseline of each respondent’s level
of social capital with the co-op. After analyzing these responses, we will explore the
hypothesis that respondents with high social capital (as measured by positive
responses to the questions below) are likely to be the most active participants in the
cooperative (as measured above in percentage of harvest given to the co-op).
Question: Do you associate with co-op members outside of business transactions?
All of the respondents answered yes. However, their answers varied greatly from
sharing information and offering to work on each other’s orchards (retirement farmers),
to “Yes, but minimal. Distance is a big factor.” (commercial farmer). This distance factor

41

affects all of the respondents universally. Since the group is so geographically
dispersed, in most cases it is unfeasible to associate with the other CGI members
outside of CGI business. The respondents are therefore not likely members of the same
social groups (e.g. church, rotary club, etc.).
Despite not being members of the same social group, a few co-op members
perform business with cooperative members outside of CGI business. This involves
sharing resources such as pruning equipment or reselling poor quality chestnuts to
friends. These transactions help strengthen ties between co-op members, and it is
telling that two-thirds of the individuals who engage in this behavior are retirement
farmers.
Question: Do you share the same political philosophy/worldview as most other co-op
members?
Co-op members are a diverse group, and as such a diverse array of responses
was garnered to the above question. For example one farmer stated, “No, I don’t have
the same point of view as the others as they are mostly retired government workers.”
While respondents might have differing political or worldviews, there emerged a pattern
regarding the individual’s knowledge of other co-op member’s worldviews. The typical
retirement farmer viewpoint is reflected in the response, “No, we all have different
political and business points of view. The cooperative is a family and everyone brings
different viewpoints.” This contrasts with a commercial farmer’s response of, “I have
never talked to them so I do not know.” There was no correlation between type of
worldview and type of farmer (i.e. retirement farmers are not universally liberal or
conservative). This lack of a coherent worldview speaks to the dissonance within the

42

group and the lack of cohesion in group goals as some are short term and the others
take a long-term point of view. This dynamic will be further explored in the last section of
interview questions where respondents are asked about their perceptions of the
purpose of the cooperative.
While respondents might have differing political or worldviews, there emerged a
pattern regarding the individual’s knowledge of other co-op member’s worldviews. The
typical retirement farmer viewpoint is reflected in the response, “No, we all have
different political and business points of view. The cooperative is a family and everyone
brings different viewpoints.” This contrasts with a commercial farmer’s response of “I
have never talked to them so I do not know.”
Table 5.5 outlines each respondent’s reaction to the second set of questions.
Each of the nine respondents are divided into their respective category of retirement
farmer and commercial. The letter “Y” implies a positive answer to the question, the
letter “N” implies a negative answer to the question, and when a neutral response was
given a “-” is used. For example, the first respondent is categorized as a retirement
farmer (they give most of their crop to the co-op and derive most of their farm income
from chestnuts). Farmer 1’s responses to social capital incentives questions:
1. This farmer spends time with CGI members outside of co-op business.
1a. This farmer would be members of the same social group as other CGI
members, if they were close (distance) enough.
2. This farmer does not perform business with co-op members outside of
chestnuts.
3. This farmer is not related to any other CGI members.

43

4. This famer shares the same political philosophy as some of the other
members, but disagrees with some of the other farmers’ short-term focused
viewpoint.
It is noted that retirement farmers are more actively involved in social activities with
other cooperative members. They also are more likely to engage in business with other
CGI members outside of chestnuts. There is no distinct differentiation in a farmer’s
worldview/political philosophy, but this question will become more distinct along the
commercial/retirement divide when we discuss the respondents’ views on CGI as an
organization.

44

Table 5.5: Measuring Group Attachment Value Questions & Responses

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Q1.
Spend
time with
members
outside
CGI?
Y
N
Y
Y
Y
N
Y
Y
Y

Q1a.

Q2.
Q3.
Q4.
Business
with
members
Same
outside
Related to political
chestnuts? members? philosophy?
N
N
N
N
Y
Y
N
N
N
N
Y
Y
N
Y
N
N
Y
N
N
N
N
N
N
N
N

Same
social
group?
N
N
N
N
N
N
N

45

Interview Section III: Hypothetical Scenario Analysis
This set of questions presented the interviewees with a series of hypothetical
scenarios meant to garner their reactions quickly so that the respondent could only give
an intuitive answer. The questions were created as reciprocal scenarios: If you became
sick for a long period of time (more than a month), would you expect other co-op
members to sincerely offer to help run your farm or in other ways assist you help
maintain your business? If another co-op member became sick for a long period of time,
would you take care of their farm or in other ways offer substantial help if asked?
Question: If you had a wedding, would you invite other cooperative members? If yes,
how many? How many do you think would attend?
All of the retirement farmers answered in the affirmative, with one retirement
farmer stating, “Yes I would invite other members. I only know half, but all would attend.
I have good relationships with co-op members.” Despite most farmers stating that they
would invite co-op members, there was a noticeable lack of reciprocity. Although most
farmers would invite co-op members to their wedding, half of that sample did not believe
that they would be invited to another co-op member’s wedding. This lack of reciprocity is
exhibited in every hypothetical question. The respondent is more likely to offer help,
time, or money than to expect the same kindness from other cooperative members. For
example, twice as many people would offer help to a sick co-op member than would
expect help if they were sick themselves.
These hypothetical questions helped further differentiate the subjects along the
retirement/commercial dichotomy. The retirement farmers were significantly more likely
to offer help to other cooperative members and were also more likely to expect help

46

from other co-op members as they have established relationships with all of these
individuals. Commercial farmers were less likely to offer help and almost never
expected help in return. Their point of view can best be summarized by one commercial
farmer who stated, “We share only one common interest with members, chestnuts.”
The results of this section (shown in Table 5.6) further highlight the differences
between the two subgroups, as this led retirement farmers to state that “We are in this
together. We can’t throw friends under the bus for a couple bucks.” This mindset directly
contrasts with the commercial point of view that “I liken co-op members to a trade
association, not a family.” This attitude influences each respondent’s answers to all of
their subsequent questions.

47

Table 5.6: Scenario Analysis Questions & Responses

Q1.

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Invite coop to
wedding?
Y
Y
N
Y
Y
N
Y
N
Y

Q2.
Co-op
invite you
to
wedding?
N
N
Y
Y
N
Y
N
-

Q3.
If sick,
expect
help from
co-op?
N
Y
N
Y
Y
N
Y
N
N

Q4.
Help
another
sick
member?
Y
N
Y
Y
Y
Y
Y

48

Q5.
If car
broke, ask
co-op for
ride?
N
Y
Y
Y
Y
Y
Y
Y
Y

Q6.
Offer ride
to
member?
Y
Y
Y
Y
Y
Y
Y
Y
Y

Q7.

Q8.

Would you
offer a
Expect
loan?
loan offer?
N
N
N
N
N
N
Y
N
N
N
N
Y
N
N
N
Y
Y

Interview Sections IV-V: Prices & Economic Incentives
The next set of questions set out to understand the impact of different incentives
on the behavior of co-op members. These incentives vary from pricing schemes to
different group services provided by the cooperative. The hypothesis is that commercial
farmers will adjust their behavior depending on economic incentives while retirement
farmers’ behavior will not change regardless of economic incentives offered.
Hypothetically, commercial farmers are driven by the ultimate profitability of their
decisions while retirement farmers internalize the well-being of the cooperative and
therefore are not motivated by economic considerations.
Question: If the cooperative offered the same price as other outlets (i.e. on farm,
farmers market) for your fresh chestnuts, how much of your crop would you sell to the
cooperative (percentage)?
As a small, niche and fragmented market, there is no established industry
standard for setting chestnut prices. Almost every cooperative member receives a
higher price for their chestnuts through other retail outlets (e.g. farmers markets or atthe-gate sales). This is the most pertinent current issue for co-op members. Therefore,
every single member stated that they would give more chestnuts to the cooperative if
the co-op offered the same price as other outlets.
Question: Let’s say that your local farmers market is offering $3/lb. for your fresh
chestnuts, what is the minimum price that the co-op would have to offer you so that you
give them the same amount of chestnuts you currently do?
Commercial farmers have a higher average threshold of $2.06 to maintain their
current participation levels, while 75% of retirement farmers would still give their entire

49

crop to the cooperative regardless of price. All of the farmers support the idea of a tiered
compensation scheme, determined either by nut size and quality or by percentage of an
individual’s harvest sold to the cooperative. All except two interviewees are in favor of
receiving a guaranteed payment upfront, which speaks to the risk-averse nature of the
group. Table 5.7 outlines these responses.
Overall, all of the proposed incentives would not significantly change any
retirement farmer’s behavior as one stated, “Loyalty is already intact. I do not need extra
incentives to change my behavior.” So regardless of the incentives offered, the
retirement farmers will still give most of their crop to the cooperative. In regards to
commercial farmers, different incentives induce different behaviors (see Table 5.8). One
respondent cited the specific $500 round-trip price to drop chestnuts off at the
processing facility in Clarksville. Commercial farmers quantified the direct economic
impact of a proposed incentive (e.g. an additional $50 for processing costs), versus
retirement farmers who did not even consider the economic impact of the proposed
incentives.

50

Table 5.7: Pricing Questions & Responses
Q1.

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Co-op offer
same price
as other
outlets?
↑
↑
↑
↑
↑
↑
↑
-

Q2.
Minimum
price from
co-op to
maintain
current level?
$2.25
$1.50
$2.50
$2.00
$1.50
-

Q3.

Q4.

Co-op offers
fixed price?
↑
↑
-

51

Q5.

Compensation Compensation
based on
based on % of
quality?
harvest?
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y

Q6.
Fixed
payment
upfront or
wait?
Upfront
Upfront
Upfront
Wait
Upfront
Wait
Upfront
Upfront
Upfront

Table 5.8: Economic Incentives Questions & Responses
Q1.

Q2.
Closer to
processing
facility?
↑
↑
-

Q3.

Q4.

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Access to CGI
harvesting
equipment?
↑
↑
↑
↑

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Q6.
How would you allocate between fresh and value-added? Present vs. future?
Give all nuts to CGI, as board member want to diversify.
100%, money there. No change over time.
Some manner in practice (not always have the harvest).
60-40. No change, initially 100% value-added. No market for peeled/fresh-frozen.
80-20, don't have enough nuts. In 5 yrs 60-40.
25-75, assume fresh is stable and growth in value-added
Prefer 25-75 because more money, but market dictates 80-20
25-75, stay constant to reach 80K lbs. Have to continually replace customer base.
75-25, move towards 50-50

Pick-up service?
↑
↑
↑
↑
-

52

Legally obligated
to sell part of
harvest to CGI?
Y
N
Y
Y
Y
Y
Y
Y
Y

Q5.
Members be
forced out if give
no nuts?
Y
N
Y
Y
Y
N
Y

Interview Sections VI-VII: Knowledge Sources & Access to Markets
This section sets out to determine how much of the cooperative members trust
different information sources. One important asset of CGI is their partnership with
Michigan State University. MSU works with CGI to help develop new products, research
proper cultivars, and establish best-practices for chestnut farmers. This information is
transmitted to the growers from two different sources, directly from professors or
extension agents, or through CGI at their regular meetings. All of the interviewees
greatly respect any advice offered by the individual that experiments with techniques in
the chestnut orchard at the Roger’s Reserve. Their responses ranged from, “Yes,
absolutely, worth weight in gold” to “Yes, access to people like that are invaluable”.
When asked about the professor that works directly with the co-op, there was no
unanimous response, as respondents varied their answers along the
retirement/commercial dichotomy. For example, retirement farmers typically stated,
“Yes, a great deal, save all information, otherwise I make more mistakes. Dr. X is
intelligent and passionate.” Commercial farmers either do not follow his
recommendations or do so begrudgingly, “Yes, unfortunately we follow his advice.”
Question: On a scale of 1 to 10, how much do you trust the leadership of CGI to act in
the best interest of CGI?
The average score for retirement farmers was 8.25. The average score for
commercial farmers was 5.40. Retirement farmers obviously trust the leadership of CGI
more than commercial farmers. This question speaks to two different dynamics:
commercial farmers are more concerned with short-term financial returns and most of
the board members are composed of retirement farmers. Commercial farmers view their

53

chestnut farms as an important source of income, and therefore rely on the current
financial returns of their chestnut orchard to live. On the other hand, retirement farmers
view their chestnut orchard as something to fill their time after retirement. Therefore
because the cooperative is still not profitable, commercial farmers do not believe as
strongly in the leadership of CGI. Of the nine interviewees, four were on the CGI board
of directors and three of those four are classified as “retirement” farmers. Because
commercial farmers feel that they do not have a voice in the direction of the
organization, they are much less likely to trust in the leadership of CGI and this may be
on reason that they participate at lower levels (i.e. give less percentage of crop to CGI).
Less involved individuals in the cooperative also have lower association levels with the
co-op, which reinforces their low participation levels. See Table 5.9 for an outline of their
responses.
In regards to questions about access to different markets, there would no effect
on respondent’s behaviors. None of the proposed scenarios would change interviewees’
behavior, as one person summarized, “No change. This is not a current issue as we do
not yet have the supply for this to be an issue.”

54

Table 5.9: Knowledge Sources Questions & Responses

RETIREMENT
COMMERCIAL
COMMERCIAL
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL
RETIREMENT

Q1.
Implement
techniques
recommended
by Dr.
Fulbright?
Y
N
Y
Y
N
Y
Y
Y

55

Q2.

Q3.

Value advice
from Mario?
Y
Y
Y
Y
Y
Y
Y
Y
Y

Trust
leadership?
Scale 1-10.
8
3
5
7
7
9
10
3
8

Interview Section VIII: Organizational Legitimacy
This set of questions set out to explore whether perceived organizational
legitimacy13 affected cooperative member participation rates. One way to measure the
legitimacy of the organization is to determine if the membership has consistent views of
the organization and its activities, such as its brand. According to the CGI members
interviewed for this study, there are decidedly mixed results as to whether CGI is an
established brand name or not. Table 5.10 outlines their responses. Five of the nine
interviewees expressed that CGI is in fact an established brand name, while the other
four did not agree. These responses were divided equally among the retirement and
commercial famers. However, the follow-up question clearly highlighted the
retirement/commercial dichotomy. All of the retirement famers felt that it is easier to
market their crop through the cooperative, “This is the purpose of the co-op.” Three of
the five commercial farmers believed that is easier to market the chestnuts themselves,
“Far easier to market individually, more work dealing with co-op.” Thus, while CGI may
not be an established brand, retirement farmers believe that it is easier to market their
crop through CGI, another reason why they may participate at higher levels (i.e. give
more of their crop to CGI) than commercial farmers.
Q3a. Do you receive higher returns as a member of the co-op or not?
Q3b. If no, then why are you a member of the co-op?
13

Organizational legitimacy, which falls under the organizational identity school of
thought, is best defined by Suchman (1995), “Legitimacy is a generalized perception or
assumption that the actions of an entity are desirable, proper, or appropriate within
some socially constructed system of norms, values, beliefs, and definitions.” For our
purposes, we set out to ascertain whether perceived organizational legitimacy affected
interviewee behavior. Note that the legitimacy of an organization is negatively affected
by inconsistencies in the conveyance of said organizational identity (Meyer & Scott,
1983).
56

Only one of the nine interviewees receives a higher financial return through the
co-op than other market outlets. Despite a lower financial return, all the interview
subjects identify themselves as members of the cooperative. Why? Each individual
gave different reasons, but the underlying theme was the potential for increased
financial return in the future. These responses included, “Look towards the future”,
“Trivial, not paying attention to current financial return”, and “Will be more profitable in
the future.” There is a universal belief in the co-op, and the farmers realize that they
must develop the organization to realize a healthy future economic return on their
chestnut orchards. It is important to note that both retirement and commercial farmers
stated the same fundamental reason for belonging to CGI, the potential for greater
financial return in the future.

57

Table 5.10: Organizational Legitimacy Questions and Responses

Q1.

Q2.

Is CGI an
established
brand name?

Easier to
market
through coop than
individually?

Q3.a
Receive
higher
financial
return as
member of
co-op?

If no higher profit, then why are you a
member of CGI?

RETIREMENT

Y

Y

N

Will be more profitable in the future

COMMERCIAL

Y

N

N

Continuing tradition of deceased father

COMMERCIAL

N

N

N

Because I am forward looking

COMMERCIAL

N

Y

N

RETIREMENT

Y

Y

N

COMMERCIAL

Y

Y

N

Look towards the future
Believe in potential, but need proper cultivar
and storage techniques
Trivial, not paying attention to current
financial return

RETIREMENT

N

Y

-

-

COMMERCIAL

N

N

N

More to it than money, access to people

RETIREMENT

Y

Y

Y

No processing costs as a member

58

Q3.b

Interview Section IX. Conclusion
The final set of questions set out to determine how the cooperative’s perceived
goals align with what each individual farmer believes these goals should be. Each
interviewee expressed a slighltly different opinion on the goal of the co-op (see Table
5.11). However, the underlying theme of each response is that the goal of the
cooperative is financial, “The goal of the cooperative is to sell chestnuts and make
money for the members.” This aligns with eight of the nine farmer’s belief of what the
goal of the co-op should be. For example, one commercial farmer stated, “Farmers
don’t want to be told what to do. Grow what they want, when they want.” Another
commercial farmer voiced the dissonance between the percieved goals of the co-op and
what they believe the co-op goals should be, “No shared interest in growing chestnuts
as communal production.” This farmer does not perceive the group acting as one body,
rather a loosely connected group of individuals with individual profit-maximizing
motivations.
The interview subjects were divided into two sub-groups, retirement and
commercial. The retirement farmers particpate more in the co-op by giving a larger
percentage of their harvest to CGI. They are also more actively involved in the
management of the organization. As such, they identify more with the group and are in
agreement that the goals of the cooperative match their own.

59

Table 5.11: Conclusions Questions & Responses
Q1.

RETIREMENT
COMMERCIAL

COMMERCIAL
COMMERCIAL

RETIREMENT
COMMERCIAL
RETIREMENT
COMMERCIAL

RETIREMENT

What do you believe is the
purpose/goal/mission of
CGI?
Sell chestnuts, make
money for members.
Service large volume of
chestnuts, and use excess
for value-added
To be forward looking,
prepare for the future,
address issues as they
arise.
Extension of my farm.
If people cooperate, help
chestnut industry grow and
make chestnuts a viable
commodity.
Make money for growers.
Figure out what people
want and give it to them.
To grow and sell chestnuts
PROFITABLY.
To establish a market for
chestnuts
Develop and grow
community and chestnut
industry in MI with a
sustainable chestnut crop.

Q2.
Do you agree
with this
purpose/goal/
mission?

Q3.

Y

What do you think the goal of the co-op should be?
Make money for growers. Social group is MMPC,
while CGI is a business.

Y

-

N
Y

-

Y

Make chestnuts a viable commodity.

Y

Outlet for good growers to take chestnuts and max
profitability.

Y
Y

To grow and sell chestnuts PROFITABLY.
To enhance the marketability of chestnuts, elevate
perceived retail price.

Y

Need to do better to commit to price, come with time.
60

Section VI: Conclusion
This thesis set out to address a specific question – why do cooperative members
sell different amounts of chestnuts to the co-op? From this simple question we were
able to explore how organizational structure and identity affected members’ behavior.
We determined that since these individuals associated attachment value with the
organization (i.e. developed social capital), they internalized the welfare of the
cooperative and were willing to overlook the fact that they received a lower price for
their crop than could be achieved through other markets. We hypothesize that other
groups with similar organizational features (i.e. small, young entrepreneurial ventures)
exhibit the same pattern of behavior, and that successful organizations rely on social
capital to mature into established profitable firms.
An additional hypothesis can also help explain this phenomenon – risk adverse
individuals will join the cooperative because the co-op provides a guaranteed market for
their chestnuts. Chestnuts are still a relatively unknown product to consumers.
Therefore if a farmer has a good year and cannot sell all of his nuts on-the-farm, he
needs another sales outlet to take his product. For reference, see Section IV. where the
most common risk factors to profitability for farmers were; how to grow and harvest the
best chestnuts, and lack of knowledge of where and how to market their chestnuts. The
cooperative was created to explicitly address both of these issues.
Recommendations & Actionable Strategies for CGI
1. Increase group member’s attachment values with the cooperative – This study has
shown that social capital can be a competitive advantage for cooperatives. This
intangible asset holds the group together during the entrepreneurial growth stage, as

61

economic returns are yet to be realized. Members internalize the well-being of the
organization and go above and beyond standard member requirements to ensure
the success of the group. As a member’s association and identification with
cooperative’s identity increases, so does their participation rate and in turn firm
performance. A basic level of sympathy within group members for the organization is
in a sense necessary for entrepreneurial ventures to succeed and advance beyond
their first growth stage to where the firm can begin creating true economic profit. By
this logic, we would propose that cooperatives should actively promote activities that
increase co-op members’ attachment values with the organization.
2. Emphasize and quantify the value created by the cooperative – The survey and
interview data has shown that group members have different perceptions of what
activities the co-op performs. The cooperative needs to do a better job of explicitly
communicating the activities they provide; cleaning, cold storage, sizing, bagging,
shipping, advertising, etc. Because members do not internalize all of their own costs
(for example they do not associate a financial value for all of the time they spend
ending their orchard), they balk at the explicit costs of the activities that the co-op
performs. Rather than just comparing the end price received, the farmers should
base their decisions on net profit. By emphasizing the value-added activities that the
cooperative provides and outlining these benefits explicitly, the co-op can encourage
greater participation and in turn achieve economies-of-scale in processing,
marketing, and the sale of chestnuts (the base tenants of a marketing cooperative).
3. Hire a manager with experience running a similar organization – The current
management structure is composed of a president and various senior officers that

62

make up roughly one-fourth of the total membership. Only one of these individuals
self-identified as a commercial farmer. This only reinforces the perception that the
leadership lacks business/farming experience. For example in Figure 11, there is a
large dissonance between member’s expectations and the perceived performance of
the co-op. Hiring a manager with experience or time to dedicate to the management
functions of the cooperative would help alleviate that gap and improve member’s
association and participation within CGI14.
Limitations of Current Research and Future Research Proposals
Through the application of the case study research method, we were able to
create a rich story about the unique dynamics of Chestnut Growers Inc. By primary data
collection methods, including a survey and interview, we were able to explore the
underlying motivations of cooperative members’ behaviors. The inherent characteristics
of the target population led to research constraints. The sample size was small, which
ruled out the use of any type of econometric analysis as the small sample size would
lead to bias. Another limitation of the research is that we first had to establish the story
of the situation, paint a picture of the typical chestnut farmer. These type of questions
ascertained what actions the farmers performed, but ideally we would like to explore
more types of questions that asked why they performed the actions they did.
Future research should analyze different types of organizations, to determine
whether the structure of the organization affects a member’s attachment value for that
organization. For example, do members of a large public company associate the same
levels of affinity to their organization as members of a small firm composed of a single
14

Update: In 2012, the director of CGI retired from his government job and now devotes
100% of his time managing CGI.
63

family? Does group homogenization affect the level of social capital? Further studies
could analyze how social capital was built within a group and how this asset increases
or decreases over time. Along the same theme, a longitudinal study of a variety of
cooperatives could help determine whether all cooperatives rely on member attachment
values to flourish. Perhaps social capital is a necessary condition for entrepreneurial
ventures to succeed, as members need a different motivation during the initial time
period of inadequate financial returns.
We believe that the research has helped establish new links and enriched the
literature on factors affecting cooperative performance and provided a specific case
study example of social capital as an intangible asset and a source of competitive
advantage for organizations.

64

Appendices

65

Exhibit A.1: Midwest Chestnut Growers Survey
Survey Number______

Survey of Midwest Chestnut Growers

August 22nd, 2010

Thank you for agreeing to participate in this survey of Midwest chestnut growers. The
information that you provide in this exercise will be treated confidentially and used
exclusively for scientific research and will not be shared with anyone outside of this
research project. This survey is a part of a large research project looking at ways to
enhance the viability and profitability of the Michigan Chestnut Industry. We encourage
you to make your best educated estimates when providing information on your chestnut
production. It is expected that this survey will take approximately 45 minutes to
complete.

Instructions
Words in bold are questions. Words in italics are instructions to help you answer the
question. When answering a question with a list of possible answers, please circle the
letter corresponding with your choice. For example:

Z01. What are Michigan State’s colors?
A

Black and Blue

B

Red and White

C

Green and White

66

I. TELL US ABOUT YOUR FARM
This section is to help us learn about the general characteristics of your farm.

A01. Where is your farm located (zip code)?
________________

A02. How large is your entire farm in acres?
________________

A02a. What percentage of your household income is generated from your farm?
A

0-10%

B

11-25%

C

26-40%

D

41-60%

E

61-80%

F

81-100%

A03. How many acres on your farm are dedicated to chestnut production?
________________

A03a. What percentage of your farm activity (time) is dedicated to chestnut
production?
A

0-10%

B

11-25%

C

26-40%

67

D

41-60%

E

61-80%

F

81-100%

A04. What is the current tree planting density (trees/acre) in your orchard?
________________

A05. How many years have you grown chestnut trees?
________________

A06. What is the average age of your orchard (trees) in years?
________________

A07. When was the first year that you grew chestnuts for the purpose of selling
nuts? ________________

A08. What types of chestnut trees (from seedlings) do you have on your farm?
Please list your top 5 and their percentage of the total orchard. For example
Dunstan or European.
Seedlings

% of Orchard

A09. What types of chestnut trees (from cultivars) do you have on your farm?
Please list your top 5 and their percentage of the total orchard. For example
Bouche de Betizac or Colossal.
68

Cultivars

% of Orchard

A10. What initially attracted you to producing chestnuts?
A

Potential for profits

B

Interest in chestnut related factors

C

Other________________

Explain__________________________________________________________
___________________________________________________________

A11. Over the next five years, which of the following statements best describes
your expectations for the size of your chestnut operation?
A

I expect that it will grow substantially

B

I expect that it will grow by a little bit

C

I expect that it will be about the same as it is now

D

I expect that it will be smaller

E

I expect to no longer be growing and selling chestnuts

A12. In your opinion, which factor is most important in deterring more chestnut
producers?
A

Lack of resources

B

Uncertainty of chestnut market

C

Lack of knowledge about chestnuts

D

Other
69

Explain_____________________________________________________
___________________________________________________________

70

II. STARTING A CHESTNUT ORHARD
When first establishing your chestnut farm, which of the following activities did you
perform?

B01. How did you start your orchard?
A

Purchased seedlings

B

Purchased grafted cultivars

C

Purchased seedlings and do own grafting

D

Produced seedlings and do own grafting

E

Bought previously established chestnut orchard

F

Other________________

B02. How do you grow or restock your orchard?
A

Purchase seedlings

B

Purchase grafted cultivars

C

Purchase seedlings and do own grafting

D

Produce seedlings and do own grafting

E

Other_________________

B03. If you purchase stock, on average, how much does each seedling or
cultivar cost ($)?
Seedling

Cultivar

A

0-5

A

0-5

B

6-10

B

6-10

C

11-15

C

11-15

D

16-20

D

16-20

71

E

21-25

E

21-25

F

>26

F

>26

B04. Did you prepare the ground (tilled, leveled, rolled, etc.) for the orchard?
A

Yes

B

No

B05. Did you place fencing around the orchard or around trees?
A

Yes

B

No

B06. Did you install an irrigation system?
A

Yes

B

No

B07. Did you paint the tree trunks to prevent sun scald?
A

Yes

B

No

B08. Did you install stakes?
A

Yes

B

No

72

III. ORCHARD MANAGEMENT
For each activity circle either Yes or No. Frequency refers to the number of times this
operation is performed in a crop cycle (1 Year).
Question

Activity

Performed

Frequency
(est.)

Total Cost
(est.)

C01.

Mowing

Yes or No

$

C02.

Pruning

Yes or No

$

C03.

Fertilizer

Yes or No

$

C04.

Pesticide

Yes or No

$

C05.

Trimming

Yes or No

$

C06.

Mulching

Yes or No

$

C07.

Herbicide

Yes or No

$

C08.

Irrigation

Yes or No

$

C09. How many trees died in the last year (i.e. 2009 growing season including
this past winter)?
________________

C10. How many trees did you replace/add in the last year (i.e. 2009)?
________________

C11. Have you ever lost a crop or part of a crop due to frost?
A

Full crop

B

Part of a crop

C

Both A & B

D

Never
73

IV. CHESTNUT HARVEST

D01. On average, how long is your harvest season (in
days)?____________________

D02. At different times of harvest, how many times do you pick a week?
Beginning

Middle

End

Times Per Week
D03. At different times of harvest, how many hours do you spend per pick?
Beginning

Middle

End

Machine

Outside Labor

Hours Per Pick
D04. How do you perform your harvest?
Self
% of Total Harvest
D05. What percentage of your orchard did you harvest last season (2009)?
A

0%

B

1-25%

C

26-50%

D

51-99%

E

100%

D06. For the last three years, what was the average yield on your orchard (in
lbs.)?
________________

74

D07. For this harvesting season, what is your expected yield at orchard maturity
(in lbs.)?
________________

D08. How much does the yield of your orchard vary from year to year?
Low Variation
1

2

High Variation
3

4

75

5

6

7

V. CHESTNUT MARKETING & PACKAGING
E01. Do you self-grade your chestnuts?
A

Yes

B

No (SKIP to question E02)

E01a. If YES to previous question, then how?
A

Eyeball

B

Machine sorter

C

Other (please specify) ________________

E02. How would you rate the average quality of you chestnuts?
Low Quality
1

High Quality
2

3

4

5

6

7

E02a. How much does the quality of your chestnuts vary within one harvest?
Low Variation
1

2

High Variation
3

4

5

6

7

E02b. How much does the relative quality of your chestnuts vary year to year?
Low Variation
1

2

High Variation
3

4

E03. Do you store your chestnuts on farm?
A

Yes

B

No (SKIP to question E04)
76

5

6

7

E03a. If YES to previous question, for how many days are chestnuts in storage
before delivery?
____________

E04. Do you wash chestnuts before storage?
A

Yes

B

No (SKIP to question E05)

E04a. If YES to previous question, what do you wash them with?
A

Water

B

Preserver

E

Other (please specify) ________________

E05. How do you transport your chestnuts?
A

Deliver with own truck

B

Buyer picks up

C

Share transportation with other producer

D

Sell all on farm

E

Other (please specify) ________________

E05a. What is your estimated total cost for transportation?
________________

E06. How do you package your chestnuts?
A

Crates supplied by you or receiver

77

B

Buyer picks up

C

5-10 lbs. bags

D

25 lbs. bags

E

Other (please specify) ________________

E06a. What is your estimated total cost for packaging?
________________

E07. Do you advertise your chestnut products?
A

Yes

B

No (SKIP to question E08)

E07a. If YES to previous question, then how do you advertise?
Circle all that apply.
A

Website

B

Newspaper

C

Flyer

D

Magazine

E

Billboard/Roadside signage

F

Catalog

G

Radio

H

TV

I

Roasting/demonstration

J

Other (please specify)________________

78

E08. What types of chestnut products do you sell?
Circle all that apply.
A

Fresh chestnuts in bulk

B

Fresh chestnuts, packaged

C

Value-added products (Please answer question E08a.)

D

Seedlings

E

Chestnut seeds

F

Chestnut related products

G

Grafted cultivars

E08a. If YES to C, then what types of value-added products?
Circle all that apply.
A

Chestnut flour

B

Dried chestnut kernels

C

Frozen chestnuts, peeled

D

Chestnut soup mix

E

Gift packs

F

Chestnut slices

G

Other________________

79

E09. Where do you currently sell your chestnuts or chestnut products?
Outlet
E09.a
E09.b
E09.c
E09.d
E09.e
E09.f
E09.g
E09.h
E09.i

% of Harvest

Direct on farm sales
Chestnut Growers, Inc.
Restaurants
Distributor
Upscale grocery stores
Online, direct to customer
Wholesalers
Farmers market
Other____________________

E10. Who would you prefer to sell your chestnuts products to?
Rank your top 5 from 1-5.
E10.a
E10.b
E10.c
E10.d
E10.e
E10.f
E10.g
E10.h
E10.i
E10.j
E10.l
E10.m
E10.n
E10.o
E10.p
E10.q
E10.r

Outlet
Direct on farm sales
Chestnut Growers, Inc.
Restaurants
Distributor
Upscale grocery stores
Online, direct to customer
Wholesalers
Farmers market
Ethnic Store
Health store
National chain grocery store
Individual reseller
Discount grocery store
Other farm’s outlet
Catalog Sales
Nursery
Other____________________

Rank

80

Avg. price
received

VI. ATTITUDES REGARDING COOPERATIVES
Please indicate the extent to which you agree or disagree with each of the following
statements. Give us your responses based on agricultural cooperatives in general.
Please circle the best response using the scale below.
F01. In general, I believe that co-ops:

F01.a
F01.b
F01.c
F01.d
F01.e
F01.f
F01.g
F01.h
F01.i
F01.j
F01.k

Are the lifeblood of the rural community
Have outlived their usefulness
Need to become more business oriented
Have forgotten how important their members
are
Will be successful only if they compete on the
basis of price
Are of little value to the large farmer
Should listen to members more
Should not tolerate the financial setbacks of
some members that place a burden on the
rest of the members
Are struggling to find their niche in
agribusiness
Should focus more on strengthening the
social fiber of our community
Are of little value to the small famer

Strongly
Agree
1
2
1
2
1
2
1
2

3
3
3
3

4
4
4
4

Strongly
Disagree
5
6
7
5
6
7
5
6
7
5
6
7

1

2

3

4

5

6

7

1
1
1

2
2
2

3
3
3

4
4
4

5
5
5

6
6
6

7
7
7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

F02. What is your current level of participation in CGI (Chestnut Growers Inc.)?
A.

Member

B.

Officer/Director

C.

Employee

D.

Other________________

E.

Not involved in CGI (SKIP to section VII. CHESTNUT ORCHARD
FINANCIALS)

F03. For how many years have you been associated with CGI?
________________
81

F04. IF CGI ceased its operations, how likely are you to seek out another co-op
organization to meet these same needs?
Very Likely
1

Very Unlikely
2

3

4

5

6

7

F05. To what extent do you agree or disagree with the following statements, in
relation to Chestnut Growers Inc.:

F05.a
F05.b
F05.c

I receive a fair price for my chestnuts
I do not feel a sense of belonging to CGI
The voting rights and procedures are fair
and equitable
F05.d I feel included in the decision-making
processes of CGI
F05.e I do not feel like a part of the family at CGI
F05.f I feel I have too few options to consider
leaving CGI
F05.g In general, I have invested a great deal of
myself into CGI
F05.h I have not given much of my time or effort to
CGI and its success or failure
F05.i
Management makes me feel that my
opinions are valued
F05.j
I do not feel emotionally attached to CGI
F05.k In general, I believe that what happens to
me is my own doing
F05.l
CGI has a great deal of personal meaning
for me
F05.m It would be very difficult for me to leave CGI
now even if I wanted to
F05.n If I had the choice, I never would have
invested in a chestnut orchard

82

Strongly
Agree
1
2
3
1
2
3
1
2
3

4
4
4

Strongly
Disagree
5
6
7
5
6
7
5
6
7

1

2

3

4

5

6

7

1
1

2
2

3
3

4
4

5
5

6
6

7
7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

1
1

2
2

3
3

4
4

5
5

6
6

7
7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

1

2

3

4

5

6

7

F06. Please indicate your perception of the importance Chestnut Growers Inc.
places on each of the following items:

F06.a
F06.b
F06.c
F06.d
F06.e
F06.f
F06.g
F06.h
F06.i
F06.j
F06.k
F06.l
F06.m
F06.n

Price of products or services
Members’ input in decision-making process
Variety of products / services offered
Customer service
Professionalism / expertise of staff
Quality of products / services
Agricultural education and training
Member ownership and control in the co-op
Proximity / convenience / ease of use
Social relationships with other members
Return on equity
Community involvement
Value of products or services
Commitment to the traditional cooperative
ideals

Strongly
Agree
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2

3
3
3
3
3
3
3
3
3
3
3
3
3
3

4
4
4
4
4
4
4
4
4
4
4
4
4
4

Strongly
Disagree
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7

F07. Now please indicate how important you feel these items should be to the
co-op:

F07.a
F07.b
F07.c
F07.d
F07.e
F07.f
F07.g
F07.h
F07.i
F07.j
F07.k
F07.l
F07.m
F07.n

Price of products or services
Members’ input in decision-making process
Variety of products / services offered
Customer service
Professionalism / expertise of staff
Quality of products / services
Agricultural education and training
Member ownership and control in the co-op
Proximity / convenience / ease of use
Social relationships with other members
Return on equity
Community involvement
Value of products or services
Commitment to the traditional cooperative
ideals

83

Strongly
Agree
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2
1
2

3
3
3
3
3
3
3
3
3
3
3
3
3
3

4
4
4
4
4
4
4
4
4
4
4
4
4
4

Strongly
Disagree
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7
5
6
7

F08. Some experts have characterized co-ops as “part business, part family”.
That is, they contain both the economic elements of a business and the
social, or relational, elements of a family. On the following scales please
indicate where you feel the focus of the typical co-op is currently and
where you feel they should be focused.
Business
F08.a Where the co-op is now
F08.b Where the co-op should be

1
1

84

2
2

Family
3
3

4
4

5
5

6
6

7
7

VII. CHESTNUT ORCHARD FINANCIALS

G01. What percentage of your farm income is generated from chestnut
production?
________________

G02. What were your gross sales generated from chestnut production last year?
A

No sales

B

<$5,000

C

$5,001-$10,000

D

$10,001-$50,000

E

> $50,000

G03. What was your net income generated from chestnut production last year?
A

<$0

B

$1-$1,000

C

$1,001-$2,500

D

$2,501 -$5,000

E

$5,001 -$20,000

F

>$20,000

G04. How long after establishment was it until you received over $100 in revenue
on the chestnut orchard?
A

Less than 5 yrs.

B

5-10 yrs.

C

11-15 yrs.

D

Greater than 15 yrs.
85

G05. How long after establishment was it until your chestnut orchard became
profitable?
A

Less than 5 yrs.

B

5-10 yrs.

C

11-15 yrs.

D

Greater than 15 yrs.

E

Still not profitable (SKIP to question G06.)

G05a. Was this longer or shorter than your expectations?
A

Longer

B

Shorter

C

Same

G06. Do you foresee the wholesale price of fresh chestnuts rising in the future?
A

Increasing

B

Decreasing

86

G07. What are the most critical factors that are needed to improve the profitably
of chestnut production? Please rank the following factors (circle one
number for each question).
(1 being least important, 7 being most important).
Factor

Ranking

G07.a

Knowledge of how to market

1

2

3

4

5

6

7

G07.b

Knowledge of potential buyers

1

2

3

4

5

6

7

G07.c

Knowledge of market outlets

1

2

3

4

5

6

7

G07.d

Knowledge of suppliers

1

2

3

4

5

6

7

G07.e

Knowledge of distributors

1

2

3

4

5

6

7

G07.f

Information on cultivar selection

1

2

3

4

5

6

7

G07.g

Information on orchard management

1

2

3

4

5

6

7

G07.h

Information on pest control

1

2

3

4

5

6

7

G07.i

Information on irrigation

1

2

3

4

5

6

7

G07.j

Information on weed control

1

2

3

4

5

6

7

G07.k

Information on grafting

1

2

3

4

5

6

7

G07.l

Better tools and equipment

1

2

3

4

5

6

7

G07.m More financial resources

1

2

3

4

5

6

7

G07.n

Labor availability

1

2

3

4

5

6

7

G07.o

Other_____________________________

1

2

3

4

5

6

7

87

G08. What is the competitive advantage of successful chestnut producers?
Please rank the following factors (circle one number for each question).
(1 being least important, 7 being most important).
Factor

Ranking

G08.a

Knowledge of how to market

1

2

3

4

5

6

7

G08.b

Knowledge of potential buyers

1

2

3

4

5

6

7

G08.c

Knowledge of market outlets

1

2

3

4

5

6

7

G08.d

Knowledge of suppliers

1

2

3

4

5

6

7

G08.e

Knowledge of distributors

1

2

3

4

5

6

7

G08.f

Information on cultivar selection

1

2

3

4

5

6

7

G08.g

Information on orchard management

1

2

3

4

5

6

7

G08.h

Information on pest control

1

2

3

4

5

6

7

G08.i

Information on irrigation

1

2

3

4

5

6

7

G08.j

Information on weed control

1

2

3

4

5

6

7

G08.k

Information on grafting

1

2

3

4

5

6

7

G08.l

Better tools and equipment

1

2

3

4

5

6

7

G08.m More financial resources

1

2

3

4

5

6

7

G08.n

Labor availability

1

2

3

4

5

6

7

G08.o

Other_____________________________

1

2

3

4

5

6

7

88

Thank You!

Thank you for participating in our survey. The information you provided will help in our
research analyzing the Michigan chestnut industry.

Please feel free to contact Dr. Brent Ross with any questions you might have about our
research. He can be contacted at: 317B Agriculture Hall, Michigan State University,
East Lansing, MI 48824; by phone (517) 355-2266; or by email rross@msu.edu

If you are willing to participate further in this study by being involved in interviews or
focus groups please leave your contact information below.

Name______________________________

Email_______________________________

Phone #______________________________

89

Exhibit A.2: Cover Letter for Survey

September 15th, 2010
Nathaniel Victor
108 Cook Hall
Michigan State University,
East Lansing, MI 48824

Dear__________________________
In collaboration with Dr. Brent Ross at Michigan State University and the Midwest
Nut Growers Association, I am conducting a survey of chestnut marketing and
production practices in Michigan. I would greatly appreciate your assistance in this
investigation. You have been identified as both an active chestnut grower in Michigan
and as a member of Chestnut Growers, Inc. and the information that you provide will be
of great importance to us in helping to enhance the viability of the Michigan chestnut
industry. Upon completion of the study, the results of the survey, including a report of
best management practices and chestnut budgets, will be made available for you to use
in your own chestnut operations.
Please find the enclosed the chestnut practices survey and consent form. The
survey should take approximately 30 minutes to complete. I have also enclosed a selfaddressed, stamped return envelope for you to use to return your completed survey.
Thank you in advance for your participation.

Sincerely,

Nathaniel Victor

90

Exhibit A.3: A Survey of Midwest Chestnut Growers: A Qualitative Overview
Survey Results
Our first data collection method was a survey. This was chosen to help provide general
background information about the group so that we could determine which topics were
ripe for further exploration in subsequent data collection. We received a response rate
of 70% as 32 of the 40 cooperative members responded.

I. Tell Us About Your Farm
The first section details basic facts about each farm’s operation such as farm size, years
in the chestnut business, and the factors that initially attracted them to chestnuts.
All of the respondents are from Michigan, except one from Iowa who does not ship their
chestnuts to CGI. There were 32 respondents (congruent with the small size and niche
characteristic of the Michigan chestnut industry).
The average farm size is a total of 64 acres but most farms are within the lower end of
this average. The average percentage of farm dedicated to chestnut production is 24%
with a mean of 8.60 acres. The following graph compares the size of the entire farm to
each farm’s chestnut operation, in acres. As you can see, the smaller hobby/retirement
operations have a much larger portion of farm dedicated to chestnut production. Larger
farms use a smaller percentage of the farm for chestnuts because they mainly see
chestnuts as a way to diversify and decrease their exposure to just one crop.
Figure A.1: Farm Size vs. Chestnut Orchard Size
300

Farm Size

Chestnut Orchard Size

250

Acres

200
150
100
50
0

Respondent
91

Farming is not the primary source of income for most survey respondents. 88% of
farmers stated 0-10% of household income is generated from their farm. Possible
explanations for this could be that farmers are harvesting chestnuts as a retirement
hobby or that many chestnut orchards are still growing and are not yet fully developed
and therefore not turning a profit.
Roughly 50% of the respondents’ farm activity time is dedicated to chestnuts. This
question helps differentiate survey respondents as attendees at the conference
averaged 60% while the mailed-in responses averaged significantly less at 40%.
Therefore, mailed-in respondents see chestnuts as more of a hobby/retirement, not a
cash crop. There is also a slight correlation between time spent on chestnuts and
percentage of farm dedicated to chestnut production.
On average, farmers reported a chestnut tree density of 90 trees per acre. The average
age of the respondents’ orchard is 11 years. In addition, these farmers have an average
of 17 years of experience growing chestnut trees. Also, 1997 is the average starting
year for chestnut production. There are two different generations of chestnut farmers, as
farmers either started their chestnut orchards 5-8 years or 15 plus years ago.
Chinese is the most popular seedling with many farms reporting 100% Chinese
seedlings. However, most famers are transitioning from seedlings to grafted and are
grafting their seedlings. Colossal is the most popular cultivar with many reporting over
50% colossal (if used at all).
Survey respondents cited different reasons for establishing a chestnut orchard. Farmers
were initially attracted because of potential for profit (40%), alternate source of
retirement income, and as a low maintenance or unique/interesting crop. One additional
significant reason is that 12.5% of respondents purchased land with pre-established
chestnut trees. The following graph summarizes these reasons.
Figure A.2: Initial Attraction to Chestnuts

41%

47%
13%

Potential for Profits

Interest in Chestnuts

92

Other

Respondents are extremely bullish regarding their chestnut operations as 72%
anticipate expanding their chestnut orchard within the next five years. 25% will maintain
the same size chestnut operation while only one respondent anticipates decreasing the
size of their chestnut operation. This optimistic point of view directly relates to Section
VII. Chestnut Orchard Financials where 86% of respondents expect chestnut prices to
rise within the next five years.
When asked about factors deterring more chestnut producers, a lack of resources was
not deemed a pertinent issue. Rather almost all respondents cited a general lack of
knowledge about chestnut production or uncertainty of the chestnut market. Many other
alternate explanations were cited such as:
 “Lack of profitability”
 “Lack of economic analysis”
 Age of farmers or hobby/retirement farming
 Frost and other difficulties in keeping trees alive
 No mechanization which requires a high amount of labor input

93

II. Establishing an Orchard
This section explores how respondents started their chestnut orchard, inquiring about
both types of plants used and tasks performed to prepare the orchard.
Half started their orchard by purchasing seedlings, 31% by purchasing grafted cultivars,
13% bought a previously established orchard and two respondents did a combination of
seedlings and their own grafting. Note that all those who originally purchased seedlings
had to buy grafted cultivars to restock their orchard after the initial seedlings did not
properly grow.
Figure A.3: How Respondents Started Their Orchard

6%

Purchased
Seedlings

13%
50%

31%

Purchased
Grafted Cultivars
Produce
Seedlings & Graft
Purchased
Chestnut Orchard

In response to how respondents restock their orchard, there was no uniform way
reported. Typically respondents either purchase grafted cultivars exclusively or
purchase grafted cultivars and use seedlings to do their own grafting. Only one
respondent exclusively purchases seedlings.
Almost all of the respondents restock their orchard with cultivars. Half use either
seedlings exclusively or both seedlings and cultivars. Cultivars average double the price
of seedlings at $17 versus $8.50.
The following activities are performed by the farmers to prepare new land for chestnuts:

94

Figure A.4: Tasks Performed to Prepare Orchard
Stakes
Paint Trunks
Prepare Ground
Irrigation
Fencing
0%

50%
Percentage of Respondents

100%

Farmers on average do three out of the five tasks listed above to prepare the land. Of
the respondents, 19% perform all of the five tasks and 16% only perform one of the five
tasks.
It is necessary for most farmers to protect their chestnut trees from various natural risk
factors such as deer and other small animals, sun scald, and blight. These unavoidable
risk factors are why respondents performed an average of three of tasks listed above.
Cost is a major factor as some of the tasks are more expensive than others, which is
why most farmers (80%) perform the basic and cheapest tasks of painting the trunks
and installing stakes around the trees.

95

III. Orchard Management
This section asked farmers about the normal tasks they performed to maintain their
orchards, number of trees lost and replaced per year and how important frost is as a
risk factor to chestnut farmers.
As stated explicitly by a few respondents in their surveys, chestnuts are a high labor
input crop. Although the co-op recently purchased new harvesting equipment, all of the
tasks required to maintain a healthy orchard requires many labor hours. Table A.1
provides an overview of the main tasks performed in this upkeep. Mowing, pruning and
fertilizing are the most commons activities. Although the data was incomplete and highly
variable on the total cost for each activity, fertilizer was reported as on average being
the most expensive task performed compared to mulching which was relatively
inexpensive.

Activity

Table A.1: Orchard Activities Performed
% Performed
Frequency

Mowing

97%

Varies from 3-52
times/yr.

Pruning

88%

1-2 times/yr.

Fertilizer

84%

1-2 times/yr.

Pesticide

59%

2-3 times/yr. as
needed

Trimming

56%

1-2 times/yr.

Mulching

25%

1 time/yr.

Herbicide

63%

2-3 times/yr.

Irrigation

41%

Highly variable

On average, famers lost 10 trees last year (2009). To compensate for these loses,
farmers replaced/added roughly 20 trees last year. This results in an average net gain
of 10 trees per year as orchards are expanding (as discussed in Section I. Tell Us about
Your Farm). Note that most farmers only lost 1 or 2 trees last year but the data is
skewed because one farmer lost 130 and replaced 260.
96

All chestnut farmers have been affected by frost. Frost is major risk factor for farmers in
Michigan. To combat this ever-present risk, farmers have installed irrigation systems
and tested new growing methods (such as elevating the roots). These practices are
meant to protect the chestnut trees from frost and smooth out the highly volatile yearly
crop yield as discussed in the next section. Figure 6 details how serious a risk factor
frost is for chestnut farmers.
Figure A.5: Crop Lost Due to Frost
10%
32%

Full Crop
Part of Crop
58%

Both Part & Full
Never

97

IV. Chestnut Harvest
This section explores harvesting methods, harvesting frequencies and harvesting yields.
It is important to note that only 28 out the 32 farmers are actively harvesting. The
average harvest season is 25 days.
Almost half (46%) of harvesting respondents spend 7 days a week picking. However,
these people average only 2 hours per pick. The other 54% of harvesting respondents
spend 2.5-3.5 days a week picking and they average roughly 7-8 hours per pick. Days
per week slightly varies through the harvest season (peaking in the middle), hours per
pick is more variable with period of harvest also peaking in the middle
With the lack of established (and cheap) harvesting equipment, all the harvesting is
performed by hand. 90% of farmers perform harvesting by themselves while the other
10% exclusively use outside labor. It is important to note that how the harvest is
performed is not correlated with chestnut orchard size. The next graph displays
harvesting methods.
Figure A.6: Harvesting Methods

10%
14%
17%

Self
59%

Self & Outside
Self & U-Pick
Outside

In terms of percentage of orchard harvested, remember that 12.5% of respondents are
not harvesting. Figure A.7 outlines the distribution of percentage of orchard harvested
by respondents in 2009.

98

Percentage of Orchard
Harvested

Figure A.7: Percentage of Orchard Harvested
100 Perc.
51-99 Perc.
26-50 Perc.
1-25% Perc.
0 Perc.
0%

5%

10%
15%
20%
25%
Percentage of Respondents

30%

The average yield for the last three years was 1,300 lbs. per farmer. Comparing this
number to the yield expected for this harvesting season; 42% are expecting a lower
crop yield with frost cited as the primary reason, three respondents are expecting zero
yield this season due to frost, while 47% are expecting a larger yield than average.
Respondents reported a relatively high yield variation year to year. On a 7 point Likert15
scale (1 is low variation and 7 is high variation), the average response was 4.87,
indicating high yearly variation.

Number of
Respondents

Figure A.8: Variation in Yield: Year to Year
8
7
6
5
4
3
2
1
0
Low
Variation

15

High
Variation

See footnote 11 for an explanation of the Likert scale.
99

V. Chestnut Marketing & Packaging
This section addresses how respondents package their chestnuts, different products
produced, and market outlets where they sell their chestnuts.
Grading:
66% of respondents self-grade their chestnuts, either using a shaker, floating or using a
size grader to judge the quality of each chestnut. On average, farmers rate their
chestnuts as high quality with a score of 5.63 on a 7 point scale. This quality does not
vary significantly either year to year or within one harvesting season as respondents
reported low variation in both of these categories.
Storage:
80% of farmers store their chestnuts on farm for roughly one week and at most up to
one month. 90% of respondents wash their chestnuts before storage. Half use only
water while the other half use a combination of water and Storox/Clorox.
Transportation:
All (except 4 farmers) transport their chestnuts with their own truck. The four exceptions
sell their entire product on farm or share transportation with another producer. The
average price of transport is highly variable with a rough average of $100 skewed
towards the smaller values. However, a few respondents explicitly wrote on their survey
that transportation was a major cost deterrent in their participation in the co-op. To
transport, famers use either crates supplied by receivers or different size bags:
 35% use crates
 55% use a variety of different size bags to package their chestnuts
 5% uses a combination of crates and individual sales
 Average cost for packaging difficult to discern, mainly in $10-$20 range
o CGI takes care of packaging costs for all non on-farm sales
Advertising:
23% of respondents advertise. All of these respondents generated positive income from
their chestnuts. They all use a variety of advertisements with website, roadside signage,
newspaper and roasting/demonstration cited as the most popular.
Value-Added Products:
Of those selling chestnuts, only 2 respondents (8% of those selling chestnuts) sell
value-added products. These include; chestnut flour, frozen peeled chestnuts, gift
packs, cherry chestnut salsa and chestnut slices. All but one of those selling chestnuts
100

sell fresh chestnuts in bulk (this respondent sells fresh chestnuts packaged). Most of the
respondents (60%) sell only fresh chestnuts in bulk.
Sales Outlets:
Table A.2 details the actual outlets that each farmer sells to. As shown in the table,
most farmers sell to CGI and directly on the farm. The highest average prices received
however are from farmers markets and online direct to customers.
Table A.2: Current Sales Outlets
Ranking Outlet
%
Avg. Price
Farmers Received
1

Chestnut Growers Inc.

72%

$1.50

2

Direct on farm sales

41%

$2.50

3

Farmers market

24%

$5.00

4

Upscale grocery stores

14%

$3.00

4

Wholesalers

14%

$2.50

4

Restaurants

14%

$3.50

7

Other (usually u-pick)

10%

N/A

8

Distributor

4%

$3.00

9

Online, direct to
customers

4%

$5.50

Note that although many farmers sell to different outlets, they sell the largest
percentage of their harvest either to CGI on directly on the farm. Only a few
respondents sell exclusively to higher end outlets such as upscale grocery stores or
restaurants.
The next survey question inquired as to respondents desired sales outlets by ranking
each individual’s top five choices (1st choice vote receives 5 points). Congruent to the
previous table, CGI and direct on farm sales were the most popular followed by farmers
markets. This can be due to a general lack of knowledge/exposure to other sales
outlets. This also highlights the general hope among CGI cooperative members that
CGI will lever its size and create profitable contracts with the other more profitable sales
outlets.
101

Table A.3: Desired Sales Outlets
Outlet
# of
Points

Ranking

% Voted

1

Chestnut Growers Inc.

96

74%

2

Direct on farm sales

82

68%

3

Farmers market

49

45%

4

Upscale grocery store

26

26%

5

Wholesalers

24

19%

6

Restaurants

22

26%

7

Individual reseller

18

19%

8

Distributor

16

16%

9

Ethnic store

15

13%

10

National chain grocery store

13

16%

10

Other farm’s outlet

13

13%

12

Health store

12

16%

12

Nursery

12

10%

12

Discount grocery store

12

13%

15

Online, direct to customers

9

13%

16

U-Pick

7

6%

17

Catalog sales

5

3%

102

VI. Attitudes Regarding Cooperatives
This section attempts to gauge the farmers’ perceptions of cooperative in general and
their specific feelings and perceptions of their own cooperative, CGI.
Of the 32 respondents involved in the survey, 82% (26 people) are members of the
cooperative. Figure 12 provides a graphical breakdown of group membership. Note that
of the 26 people in the co-op, eight are directly involved in the leadership of the
cooperative.
Figure A.9: Respondents’ Participation Levels in CGI

3%

3%

13%

Member
Officer/Director

25%

56%

Employee
Other
Not involved

The average length of involvement for each group member is 7.5 years. The co-op was
founded 10 years ago and 58% of the self-identified group members have been
involved since the group’s inception. There are three other different recruiting cycles as
the remaining cooperative members joined either 2, 5, or 7 years ago.
In response to whether group members would seek out another co-op if CGI shut down,
respondents were unlikely to find a new co-op. On a 7 point Likert scale, the average
response was 5.26 (1 being very likely to seek another co-op and 7 being very unlikely
to seek another co-op); 37% are extremely unlikely (score of 7) to seek another co-op,
9% are indifferent (score of 4), and 11% are very likely (score of 1) to seek another coop (note that all of these individuals are directly involved in the management of CGI.
Table A.4 provides the average response to each question and the variance of
respondents answers. Using a 7 point Likert scale, a score of 1 implies that respondents

103

strongly agree with the statement and a score of 7 implies that respondents strongly
disagree with the statement.
Table A.4: Respondents’ Perceptions of General Cooperatives
Strongly
Strongly Variance
Agree
Disagree
1
Are the lifeblood of the rural community

2

3

4

5

6

3.6

3.1

Have outlived their usefulness

6.1

Need to become more business oriented

7

3.3

1.3
2.9

Have forgotten how important their members
are

4.8

Will be successful only if they compete on
the basis of price

4.4

Are of little value to the large farmer

3.8
3.1

5.5

2.6

Should listen to members more

3.7

2.9

Should not tolerate the financial setbacks of
some members that place a burden on the
rest of the members

3.4

1.8

Are struggling to find their niche in
agribusiness

4.0

Should focus more on strengthening the
social fiber of our community

3.4
5.0

Are of little value to the small famer

5.4

1.5
3.9

This table shows that in general, respondents believe that cooperatives should become
more business oriented. In line with this point of view, co-ops should also not support
members that are struggling financially as this would put too much of a burden on other
group members. There is slight agreement that cooperatives are essential to rural
communities. This point of view is congruent with the respondents’ perception that coops are of large value to the small farmer but of little value to large farmers. In sum,
respondents believe that cooperatives are still important and have not outlived their
usefulness but these organizations should be more business oriented, as aspects such

104

as community involvement are unimportant to survey respondents. The next set of
questions asked respondents their specific perceptions about Chestnut Growers Inc.
Table A.5: Group Member Perceptions of CGI
Strongly
Strongly Variance
Agree
Disagree
1

2

3

4

I receive a fair price for my chestnuts

5

6

4.5

I do not feel a sense of belonging to CGI

2.1
5.1

The voting rights and procedures are fair and
equitable

2.6

I feel included in the decision-making
processes of CGI

3.2

I do not feel like a part of the family at CGI

5.7

I feel I have too few options to consider
leaving CGI

4.8
3.3

I have not given much of my time or effort to
CGI and its success or failure
3.0

4.4

CGI has a great deal of personal meaning for
me
It would be very difficult for me to leave CGI
now even if I wanted to
If I had a choice, I would never have invested
in a chestnut orchard

105

4.3

5.0
3.1

I do not feel emotionally attached to CGI
In general, I believe that what happens to me
is my own doing

3.1

3.0
4.7

Management makes me feel that my
opinions are valued

4.2
2.7

3.1

In general, I have invested a great deal of
myself into CGI

7

4.4

2.2

2.1
3.6

3.2

4.1

5.0
5.5

3.4

In general, group members feel a sense of belonging to CGI. The cooperative fosters a
strong community wherein group members feel a part of the CGI family and directly
involved in the fair and equitable decision-making process of the co-op. This strong
communal environment manifests itself in group members investing time and effort into
CGI above and beyond group norms. Just as importantly, group members develop a
psychological attachment as well (i.e. “In general, I have invested a great deal of myself
into CGI”).
It is important to note that group members take on a large amount of personal
responsibility (they strongly agree that they control their own destiny). This determined
attitude is also apparent in the respondents’ strong disagreement with the statement, “If
I had a choice, I would never have invested in a chestnut orchard”. This implies that
group members are both emotionally and financially invested in seeing their chestnut
orchard succeed and are willing to do whatever it takes to see if through.
The price received for their chestnuts is the single most important factor in determining
a member’s participation level (i.e. how much of their crop they sell to CGI). Table A.7
shows that members believe that “Price of products or services” is very important to
group members with a score of 1.5 on a 7 point Likert scale. Table A.5 shows that
members slightly disagree that they receive a fair price from CGI for their chestnuts.
During co-op meetings this is the main point of contention between group members. As
shown in Section V: Chestnut Marketing & Packaging, CGI provides the lowest average
price for the farmer’s chestnuts. This is due to many factors, but one of the most
important and often cited is the lack of a consistent supply of chestnuts from group
members. Because the cooperative cannot rely on a consistent supply of chestnuts,
they cannot enter into long-term contracts with large retailers. Only once these contracts
are established can the co-op provide a higher price to members. Although
cooperatives traditionally provide services for its members as both a business and
“family”, group members place the price received for their chestnuts as the single most
important factor in determining member participation level and in turn cooperative
strength as an organization.
The next two tables display the congruence between CGI values and group member
values. Table 17 highlights the differences between what group members perceive that
CGI currently values and what group members believe that CGI should value.

106

Table A.6: Group Member Perceptions of CGI’s values
Strongly
Strongly Variance
Agree
Disagree
1
Price of products or services

2

3

4

5

6

2.8

3.0

Members’ input in decision-making process

3.5

Variety of products / services offered

3.1

3.2

Customer service

3.0

3.0

Professionalism / expertise of staff

2.5

2.8

Quality of products / services

2.5

2.4

1.7

Agricultural education and training

3.6

Member ownership and control in the co-op

7

4.6

3.0

3.1

Proximity / convenience / ease of use

3.6

3.0

Social relationships with other members

3.8

3.8

Return on equity

3.3

Community involvement

5.2
4.2

Value of products or services

2.5

Commitment to the traditional cooperative
ideals

2.7
3.3

107

3.5

3.1

Table A.7: Group Member Values (What the Co-op Should Value)
Strongly
Strongly Variance
Agree
Disagree
1
Price of products or services

2

3

4

5

6

7

1.5

Members’ input in decision-making process

0.3
2.3

Variety of products / services offered

1.3

2.5

2.6

Customer service

1.5

0.4

Professionalism / expertise of staff

1.6

0.6

Quality of products / services

1.2

0.3

Agricultural education and training

2.8

Member ownership and control in the co-op

3.3

1.9

Proximity / convenience / ease of use

0.9
2.6

Social relationships with other members

1.0
3.9

Return on equity

2.7

1.6

1.6

Community involvement

4.3

Value of products or services

1.9

Commitment to the traditional cooperative
ideals

1.0
2.8

108

2.1

2.0

Figure A.10: Dissonance Between Perceived CGI Values and Group Member
Values
Return on equity
Customer service
Price of products
Expertise of staff
Members’ input in decisions
Quality of products
Variety of products offered
Member ownership in co-op
Ag. education and training
Proximity / convenience / ease of use
Value of products
Commitment to traditional co-op…
Community involvement
Social relationships with other…
-0.50

0.00

Less Important

0.50

1.00

1.50

2.00

More Important

Note: A positive number for a given issue implies that group members believe that the
issue should be more important to the co-op than it currently is while a negative number
implies that group members believe that co-op should place less importance on that
issue than they currently do.
Figure A.10 clearly shows that in general, co-op members believe that the organization
is not placing enough importance on business related issues. For example, return on
equity (money received by members from investments in the co-op) and price of
products have the largest positive difference between what group members perceive
that CGI values and what group members believe CGI should value. The only two
issues that group members believe that CGI should place less emphasis on are
community involvement and social relationships among the co-op. These two categories
fall under the “family” aspect of a traditional cooperative as the group members do not
believe that these two items should be as important to the co-op as they currently are.
This theme is clearly shown in the next question, where respondents believe that the
co-op should be more business oriented than in its current state. In response to the
question, “Some experts have characterized co-ops as part business, part family. That
is, they contain both the economic elements of a business and the social, or relational,
elements of a family. On the following scales please indicate where you feel the focus of
the typical co-op is currently and where you feel they should be focused. 8% want a
more family focus, 50% want a more business focus, and 42% are indifferent. Group
109

members believe that cooperatives in general and CGI specifically should be more
business focused.
Figure A.11 compares where each respondent thinks the cooperative is now (on the
business vs. family scale) and where they believe the co-op should be. Note that most
respondents believe that the co-op is currently more family focused than what they think
the co-op should be. This is shown graphically as the red bars (where the co-op is
currently perceived to be) are generally larger than the blue bars (where the co-op
should be).
Figure A.11: Co-op Values: Business vs. Family
Co-op Now

Respondents

Co-op Should Be

0

1

2

3

4

5

6

7
Family

Business

Although group members identify with the organization (as shown in Table A.5), for the
organization to truly succeed it needs a consistent supply of chestnuts from group
members. The co-op cannot succeed without a consistent high quality supply of
chestnuts, but farmers do not have the incentives to provide this because of the low
price offered by CGI. Combining this factor with the inherent risks in growing chestnuts
(for example frost), the future prosperity of CGI cannot be guaranteed.

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VII. Chestnut Orchard Financials
“A farmer is a businessman, and that’s the bottom line.” This quote from the 2010 CGI
annual meeting best summarizes the primary motivating factor for cooperative
members. This section addresses that issue by analyzing the profitability of each
farmer’s chestnut operation and explores what factors respondents believe are the most
important in improving profitability.
43% of respondents reported a negative net income for chestnut production. Of the 57%
of farmers generating a positive profit, 59% reported minimal net incomes of less than
$1,000 from their chestnut orchard. However, those farmers with large amounts of
chestnut sales (greater than $5,000) exhibited healthy profit margins of roughly 20%.
This is merely a rough estimation however as proper financial analysis of each farm’s
accounting statements would engender a more accurate profit margin estimation.
Figure A.12 details the net income breakdown for the respondents’ chestnut orchards.
Figure A.12: Net Income from Chestnut Production
13%

10%

43%

<$0
$1-$1,000
$1,001-$2,500

33%

>$2500

Planting a chestnut orchard is a time-intensive investment and there is a long latent
period between initial planting and when trees reach full nut-bearing capacity.
Respondents reported roughly 6.5 years until they received their first $100 in revenue
from chestnuts, but this does not imply that the trees are fully mature in 6.5 years. On
average it takes at least another year after trees begin bearing fruit until the orchard
becomes profitable, although 43% are still not turning a profit.
In general this time period is longer than the farmer’s original expectations, with only
one reporting shorter than expectations. Also, farmers are very optimistic in their
prediction for future chestnut prices with 86% expecting the wholesale price of
chestnuts to rise in the future.

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Lastly, this section addressed what critical factors respondents deemed necessary to
improve the profitability of chestnut production and the competitive advantages shared
by successful chestnut producers.
Figure A.13: Important Factors in Improving Profitability and the Factors Which
Are the Competitive Advantages of a Successful Chestnut Producer
Competitive Advantage

Improve Profitability

Labor availability
More financial resources
Better tools and equipment
Information on grafting
Information on weed control
Information on irrigation
Information on pest control
Information on orchard…
Information on cultivar…
Knowledge of distributors
Knowledge of suppliers
Knowledge of market outlets
Knowledge of potential…
Knowledge of how to market
0
Least Important

2

4

6
Most Important

In general, farmers perceive production and distribution as the most important
determinants in both improving profitability and what composes a farmer’s competitive
advantage. For example, knowledge of potential buyers, information on cultivar
selection and information on grafting had the highest average aggregate scores.
According to this survey, respondents do not believe that labor availability and
knowledge of distributors are important determinants of improving profitability.

112

Appendix Exhibit A.4: Interview Questions Template
Date _________________________
Interviewee ____________________
First, I would like to mention that this interview is a continuation of the survey we first
sent out where we are trying to understand methods to increase performance of CGI.
For this interview I would just like to have an informal conversation with you about the
co-op. This is not meant to be a test, there are no right answers and I just want to get
your opinion on a few questions. Some questions you may not believe are relevant but I
would still appreciate your feedback. It is important that I reiterate that this interview is
confidential, I will not share you answers with anyone else and you do not need to
answer all of the questions.
Demographics:
First I would just like to verify some demographic type questions from our initial survey.
1. How large is your farm (acres)?
a. How many acres are dedicated to chestnuts?
2. How many hours of your total farming time did you devote to your chestnut
orchard?
3. What was your harvest yield last year?
a. Expected yield this year?
b. Average yield last five years?
4. What percentage of your last harvest do you give to CGI?
a. Expected percentage this year?
b. Average percentage of last five years?

Measuring Group Social Capital:
Next I would like to ask you a few questions about your general relationships with the
other cooperative members.
1. Do you associate with co-op members outside of business transactions (outside
of co-op business)?
a. Are you members of the same social groups (i.e. church, rotary club,
etc.)?
b. Are your children involved in the same activities?

113

2. Do you perform any other business with the other co-op members outside of
CGI?
a. Buy fertilizer together
b. Share equipment
3. Are you related to any of the other co-op members? Are you connected to other
co-op members through marriage or though the associations of your children?
4. Do you share the same political philosophy/worldview as most other co-op
members?

Next I would like to ask you a few hypothetical questions, try not to think too hard
about your answer and just tell me the first thing that comes to mind.
1. If you had a wedding, would you invite other cooperative members? If yes, how
many? How many do you think would attend?
2. If another cooperative member had a wedding, do you think they would invite
you? Would you attend if invited?
3. If you became sick for a long period of time (more than a month), would you
expect other co-op members to sincerely offer to help run your farm or in other
ways assist you maintain your business?
4. If another co-op member became sick for a long period of time, would you take
care of their farm or in other ways offer substantial help if asked?
5. If your car broke down and you needed a ride to the next annual co-op meeting,
would you ask one of your other co-op members for a ride? How far do you think
they would be willing to drive you?
6. If one of your fellow co-op members needed a ride to the next annual co-op
meeting, would you offer them a ride? How far would you be willing to drive to
pick them up?
7. What if another co-op member was suffering a short-term emergency, would you
offer them a personal loan? What would the amount be?
8. What if you needed a short-term loan because of an emergency. Do you think
another co-op member would offer you a loan? How much?
114

The next set of questions relates to prices.
1. If the cooperative offered the same price as other outlets (i.e. on farm, farmers
market) for your fresh chestnuts, how much of your crop would you sell to the
cooperative (percentage)?
2. Let’s say that your local farmers market is offering $3/lbs. for your fresh
chestnuts, what is the minimum price that the co-op would have to offer you so
that you give them the same amount of chestnuts you currently do?
1.00 1.25 1.50 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75
3. On a scale of 1 to 10, if the cooperative offered you a fixed price at the end of
harvest for your chestnuts, how would this affect your behavior?
Give Less Nuts
Give More
Nuts
1
2
3
4
5
6
7
8
9
10
4. On a scale of 1 to 10, how would a tiered compensation scheme based on the
quality (higher quality, higher price) of nuts given to the co-op affect your
behavior?
Give Less Nuts
Give More
Nuts
1
2
3
4
5
6
7
8
9
10
5. On a scale of 1 to 10, how would your behavior change if the co-op offered you
an increased price if you gave a larger quantity (percentage) of nuts?
Give Less Nuts
Give More
Nuts
1
2
3
4
5
6
7
8
9
10
6. Would you prefer to receive $3 for chestnuts upfront from CGI, or wait for the
potential of sales to chefs or restaurants wherein the price would be either $2 or
$4 with equal probability?

115

Economic Incentives:
1. On a scale of 1 to 10, how would access to CGI harvesting equipment affect your
behavior?
Give Less Nuts
Give More Nuts
1
2
3
4
5
6
7
8
9
10
2. How much closer to CGI’s processing facility would you have to live to change
your level of participation?
a. 0 miles
b. 10 miles
c. 30 miles
d. 100 miles
e. 200 miles
3. On a scale of 1 to 10, if CGI offered a pick-up service wherein they would pick-up
your clean and sorted chestnuts, how would this affect your behavior?
Give Less Nuts
Give More Nuts
1
2
3
4
5
6
7
8
9
10
4. How would you feel if you were legally obligated (through cooperative by-laws) to
sell part of your harvest to CGI? Would you still want to be part of the co-op?
a. Do you think members should be forced out of the cooperative if they do
not give any nuts to the co-op?
5. Let’s say that at the end of the harvest this year, you had 100 pounds of
chestnuts. How would you allocate these chestnuts between fresh and valueadded (i.e. chestnut slices, flour or frozen peeled chestnuts)?
a. How would you expect to allocate 100 pounds of chestnuts in 5 years?

116

Access to knowledge/expertise:
1. Do you implement the harvesting methods and/or cultivars suggested by Dr.
Fulbright?
2. Do you value the knowledge provided by the MAES and Mario Mandujano?
3. On a scale of 1 to 10, how much do you trust the leadership of CGI to act in the
best interest of CGI? (Remember that all questions are confidential)
a. To act in the best interest of you?

Access to markets:
1. If the co-op developed new markets (i.e. restaurants or supermarkets), how
would this change your behavior?
2. What do you think is the future of the CGI, fresh chestnuts or other chestnut
related products (chestnut slices, flour and peeled frozen chestnuts)?

Legitimacy:
1. Do you think CGI is an established brand name?
2. Is it easier for you to market your chestnuts individually or through the co-op?
3. Do you receive higher return as a member of the co-op or not?
a. If no, then why are you a member of the co-op?

Summary:
1. What do you believe is the purpose/goals/mission of CGI?
2. Do you agree with this purpose/goals/mission of the co-op?
3. What do you think the goals of the co-op should be?
4. How would you evaluate the performance of your farm?
a. Of CGI?

117

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118

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