The purpose of this study is to examine the determinants of the choice of organizational form under the view of New Institutional Economics (NIE) and present its implications for Korean agriculture.
Organizational forms in agriculture are classified by their transaction methods, which are spot markets, marketing or production contracts, and vertical integration. It is a worldwide trend that organizations using agricultural contracts or vertical integration are increasing.
There are some previous studies conducted using the theory of NIE to analyze factors of the choice of contracts or vertical integration. The core of NIE is transaction costs that affect organization's buy-or-make decisions. In other words, organizational form is changed to minimize its transaction costs from a spot market-oriented one to a contract or vertical integration-oriented organization.
From the current state of US agricultural contracts, we derived several determinants of organizational choice under the view of NIE, which are size of the farm, asset specificity, transaction uncertainty and agricultural policy. The theory of NIE is applicable in various fields in Korean agricultural contracts and organization. Although some studies applied the theory of NIE in the Korean livestock sector, there are many other applicable sectors and commodities.
In order to broadly apply NIE to agricultural organizations and contracts, data has to be periodically collected. Contract data is mostly considered as business secrets of an organization. Therefore, survey questionnaires should be well designed, and public or government organizations have to regularly collect agricultural contract data.


Researcher: Kim Tae Hun
Research period: 2012. 8. - 2013. 5.
E-mail address: taehun@krei.re.kr