Motivational aspects of development of strategic network partnership in the agro-industrial complex

The purpose of this paper was to determine motivational factors of structural changes in the agro-industrial sector of Ukraine, which will strengthen the ability of business entities to generate larger added value flows and increase efficiency through the development of strategic network partnerships.

Methodology / approach. While writing the article the following methods were used: methods of economic and statistical analysis - to study the dynamic of indicators that reflect the results of sectoral structural changes of the enterprises ' activities in the sector of agriculture, forestry and fisheries of Ukraine during 2016-2019; critical analysis - to identify shortcomings in the legislative field of Ukraine, which deform motivational vectors, negatively affect the development of agroindustrial complex; morphological analysis and synthesis -- to prove the feasibility of interpreting the term “network capital” in a narrow and broad sense; scientific abstraction and graphic visualization - to build the model of formation of network capital and use in the processes of organizational interaction of participants in a strategic business partnership; mathematical modelling - to formalize the conditions under which the network partnership participants will avoid manipulation by the expert environment in the apportionment of the costs and revenues from the implementation of business projects.

Results. It has been studied the dynamic of indicators that reflect the results of the sectoral and structural changes in activities of Ukrainian enterprises in the agriculture, forestry, and fisheries sector during 2016-2019. It has been highlighted shortcomings in the legislative field of Ukraine, which distort the vectors of motivational influence on the development of agro-industrial complex, causing the corruption schemes spread in the decisions and actions of economic agents. The essential content of the term “network capital” in a narrow and broad interpretation has been differentiated and the motivational basis for its increase by the business network participants has been highlighted. The processes offormation and use of network capital in the inter-organizational interaction of participants of strategic business partnership have been modelled. Nash equilibrium theory has been applied to increase the reliability of the position assessment of business network participants in the total costs and revenues apportionment and it has been proved that this forms the motivational basis for long-term cooperation.

Originality / scientific novelty. The author 's interpretation of the term “network capital” in a broad and narrow sense with emphasis on motivational aspects of this capital increasing in the agro-industrial business network has been proposed. The model of network capital formation and use in the processes of organizational interaction of participants in a strategic business partnership has been constructed. There have been modelled the conditions under which the participants of the network partnership will avoid manipulation by the expert environment in the apportionment processes of costs and revenues from the business projects implementation, which will improve their motivation to cooperate.

Practical value / implications. The main results of the study can be used for (i) elimination of some gaps in the institutional environment of Ukraine, which distort the motivational vectors of agricultural development; (ii) managing growth processes of network capital to increase the aggregate ability of business network participants to create new consumer value with high added value; (iii) improving the motivational basis for long-term cooperation of business network participants by increasing the reliability of their positions assessment in the total costs and revenues apportionment.

Key words: sustainable development, institutional gaps, sectoral changes, agro-industrial business network, network capital, consumer value, added value, Nash equilibrium, Ukraine.

Introduction and review of literature

The agro-industrial sector plays an important role in the Ukrainian socio-economic development. Firstly, it solves the country food security problem, secondly, it forms a significant share of its export potential, and thirdly, it makes a significant contribution to gross domestic product. At the same time, given the favourable climatic opportunities for agribusiness in Ukraine, such contribution could be much greater. Therefore, a significant number of domestic scientists study the problems and determine the prospects for the industry development.

In particular, in recent years, a lot of research has been conducted in line with the concept of sustainable development, which combines the tasks of economic growth, environmental security and social progress [1-3]. In the agricultural sector, this implies the development of organic farming and “green entrepreneurship”, which is emphasized, in particular, by M. Ihnatenko and N. Novak [4], A. Kucher [5], L. Kucher, S. Drokin and Y. Ulko [6], A. Shevchenko and O. Petrenko [7], O. Skydan, O. Nykolyuk, P. Pyvovar and I. Martynchuk [8]. These and other scientists, outlining the problems of agricultural (including organic) production in Ukraine, are focused on the fact that many of them could be avoided if the state took more effective measures to regulate economic activity in the agro-industrial complex. These measures should stimulate agribusiness development in the direction of increasing the level of agricultural product processing and increasing the cost structure of added value. This would upgrowth the number of workplaces, raise incomes and improve the quality of life of the rural population, and also preserve the environment for future generations, in line with the concept of “sustainable development”. For Ukraine, the solution of these problems is one of the priorities, this confirms the relevance of the stated research topic, both on the identification of motivational factors for their implementation, and the selection of organizational forms of the agribusiness development adequate to the modern challenges, in particular, the creation of business networks.

Motivational factors of building and participating in strategic business networks in the modern economic literature are considered both from the standpoint of the state and society, and participating companies. Special attention is paid to this in publications of the authors who examine various sectoral cooperation in the agroindustrial complex.

In particular, in the work “Securing the future of US agriculture: The case for investing in new entry sustainable farmers” [9], it is considered the problem of entry into the agricultural sector of newcomers who face barriers of critical access to assets, land, capital, markets, equipment, labour, training and technical assistance needed to succeed. The possibility of overcoming these problems with the participation of the state in the partial financing of projects to create a business network in the form of agricultural cooperatives is indicated. In our opinion, such an approach has a selective motivational effect, as it will motivate only one project. Moreover, it is not free from subjectivity of people who make decisions in state management structures and the lack of clear criteria for project selection may carry risks of corruption.

Another option for using motivational factors to involve partners in strategic participation in business networks is offered by J. Cardoso, F. Casarotto and C. Marcon [10]. They determine the motivational basis of network cooperation in the form of a common goal and competitive income from interaction between partners. The authors describe organizational strategies and management tools that ensure the effectiveness of networks of small organic farming enterprises, based on the networking general principles. However, they consider organizational interaction only in the context of performing the functions assigned to network members, without delving into the study of the reasons that may impair the motivational basis of the strategic partnership.

Interesting in terms of expanding the scope of motivational influence on potential participants in strategic network partnerships is the research of M. Savarese, K. Chamberlain and G. Gragna [11]. Their work central element is the research of the practice of community support for the activities of farms that conduct their business on the sustainable development principles. The motives for creating such a business network are to change the food consumption classic model to the active participation concept of consumers as economic, social and environmental values guardians. This forms a new ideology of cooperation with producers based on the creation of common value for development because at the same time the interests of the farmers and consumers of their products are satisfied. Such cooperation is beneficial for everyone, motivating local producers, consumers and the community as a whole to participate in the business network along the consumer value chain. However, its motivational reinforcement is local in nature and applies mainly to small-scale development projects.

An important motivational element of enterprises effective cooperation in the business networks of agricultural sector is the creation of business value. According to V. Sadovska, L. Axelson, and C. Mark-Herbert this ensures the sustainability of the business in the market [12]. Researchers have identified the need to rethink value creation in agriculture and related industries to implement a development strategy. This process should be based on innovation, knowledge acquisition and cooperation with external stakeholders. In business networks, this is facilitated by nine factors - opportunities for collaboration, communication, knowledge, production, diversification, entrepreneurship, financing, policy and inclusion, which are evaluated by financial, environmental and social measuring instruments. As the authors rightly point out, the benefit of farmers from participating in business networks is the ability to form a long-term development strategy as opposed to the traditional strategies of enterprises in the industry, which are to reach a “short-term point”.

Domestic scientists also pay considerable attention to the strategic prospects for the development of agricultural production in the form of network business partnerships. In particular, Yu. Pasichnyk studies these processes from the standpoint of expanding the export potential of the Ukrainian economy [13]. He rightly points out that the main obstacle for increasing export of agricultural products is their raw material nature. The main thesis of this research is to emphasize the need to expand the production of ready-to-eat foods. This is in the interests of agricultural producers, who will be able to increase the efficiency of the available resources use for opening new activity areas. At the same time, it is beneficial for the state due to the jobs number growth and the budget revenues increase at all levels. Of course, the arguments presented by Yu. Pasichnyk are into the motives list for the development of strategic partnerships in agricultural business networks, which may include enterprises in related industries. We believe that such a partnership also brings social benefits to Ukraine, as the new jobs creation makes it possible to reduce the workers abroad outflow, which is growing every year and may become catastrophic for the national economy. However, in this work, purely motivational levers are not paid attention neither by the state nor within the strategic partnership. In particular, there are no specific recommendations for improving the motivational basis for partnerships between participants in agricultural business networks, although their motivational preferences may change over time and this will affect the cooperation effectiveness.

One of the options to improve the conditions of cooperation in agro-industrial business networks, we proposed in a previous paper, modelling options for implementing competitive strategies in the field of “green entrepreneurship” [14]. Also, the strategic priorities of such agricultural enterprises' cooperation were considered by us in [15] the context of the development of Ukrainian industrial sector. However, we focused on expanding the innovation and investment opportunities of business network members, only briefly pointing out that these opportunities may increase due to preferential lending rates of joint business structures.

Thus, the analysis of recent research on the development of strategic network partnerships in the agricultural production field has shown that scientists focus more on the functional factors of such interaction, ignoring the specifics of motivational processes in today's business environment. Obviously, it should be systemic in nature, combining external and internal motivational influences on participants in the processes of creating consumer values and directing the motivational vector in line with the concept of sustainable development. The relevance of this problem for the enterprises of the agro-industrial sector of the Ukrainian economy has determined the purpose and objectives of our study.

The purpose of the article was to determine motivational factors of structural changes in the agro-industrial sector of Ukraine, which will strengthen the ability of business entities to generate larger added value flows and increase efficiency through the development of strategic network partnerships.

The objectives of the article were: (i) analysis of trends in the development of entrepreneurship in the agricultural production field in Ukraine, their correlation with the sustainable development goals and identification of motivational factors that determine its sectoral changes; (ii) substantiation of development expediency of the agribusiness integrated organizational forms on the basis of increasing concept of the network capital; (iii) development of recommendations for improving motivational basis of the strategic network partnership in the agro-industrial complex of Ukraine.

Methodology

The dynamics of indicators that reflect the results of sectoral structural changes of the enterprises' activities in the sector of agriculture, forestry and fisheries of Ukraine during 2016-2019 have been studied by methods of economic and statistical analysis. With the critical analysis methods, it has been identified shortcomings in the legislative field of Ukraine, which deform motivational vectors, negatively affect the Ukraine agro-industrial complex development and cause the spread of corruption schemes in the decisions and actions of economic agents. The essential content of the term “network capital” in a narrow and broad interpretation has been differentiated and its motivational bases have been distinguished by morphological analysis and synthesis methods. A logical model of network capital formation and use in the processes of participants ' organizational interaction in a strategic business partnership has been built by methods of scientific abstraction and graphic visualization. The method of mathematical modelling has been used to formalize the conditions under which the participants of the network partnership will avoid manipulation by the expert environment in the distribution of costs and revenues from the implementation of business projects.

Results and discussions

agro industrial network partnerships

Important tasks of the structural transformation of national economy are the development of those sectors which resource and market potential can provide a tangible positive impact on the overall economic dynamics. Among them is the agro-industrial sector, which in Ukraine is developing quite strongly, increasing the volume of production every year (Fig. 1). It carries out a large number of economic activities by the enterprises of various organizational and legal forms and scales. These are both large agricultural holdings and medium-sized agricultural companies, small farms, and micro-enterprises with only a few people stuff. Each of them develops its strategy of behaviour in the market, striving to gain a foothold and dominate it. This is especially true for large agricultural holdings that specialize in growing and exporting industrial and grain crops. This strategy provides them with significant income and the opportunity to expand their market presence. It is obvious that as the scale of activity increases, they should increase their contribution to total production.

However, the graphs show that with the constant growth of agricultural production during 2013-2019, the contribution of large enterprises to the total industry since 2015 was decreasing and fell to 8,8 % in 2017, that was - 1,9 times. In the following years, this indicator gained positive dynamics and in 2019 amounted to 12.7 %. Taking into account that in 2015 there was still fighting in eastern Ukraine and this had a significant impact on the activities of large agricultural holdings, it is advisable not to take this year into account for further analysis. And though in 20162017 the negative trend in the activities of enterprises in this sector continued, in the following years it was overcome - the large enterprises' products share increased from 8,8 to 12.7 %.

Note: numerator - 2016 year; denominator - 2019 year.

Source: calculated by the authors on the basis of the State Statistics Service of Ukraine [1618].

The above data show that in 2019 in the field of agricultural production the volume of products produced by large enterprises was increased compared to 2016 by 40.4 %, and their share in total (see Table 1) during this time increased only slightly (from 12.4 to 12.7 %); at the same time, the number of large enterprises was increased 1.7 times (34 against 20 in 2016). At the same time, in the medium-sized business sector, quantitative changes were of a different nature - with a 27.3 % increase in production, their share was decreased only 3.7 percentage points, and the number of enterprises was decreased by 8.8 % (220 units).

A simple comparison of these changes indicates that in agricultural sector of Ukraine in 2019 there were created more favorable conditions for business growth. Although the consolidation could take place only nominally - due to the changes in the legal status of some enterprises that were part of agricultural holdings but formed separate accounting to optimize taxation terms. Declared by the Ukrainian government struggle to bring out such “optimization schemes” of the shadows made them too risky and forced business owners to disclose the true scale of their activities. This automatically turned such agricultural enterprises into large ones and even prompted 9 public agricultural companies to place their shares on stock exchanges - 7 on the Warsaw Stock Exchange and 2 on the London Stock Exchange. And the favorable situation on the agricultural products market in 2020 provided a significant capitalization of these companies. According to the press service of the “Ukrainian Club of Agrarian Business” [19], the shares of Ukrainian agricultural companies in October 2020 were increased by an average of 10 %. The total capitalization from October to November was increased by 10.8 % (191.5 USD million) and amounted to 1.93 USD billion as of November 12, 2020 (Table 2).

Table 2

Growth of market value of some Ukrainian agricultural companies (November / October 2020)