ANALYSIS OF THE INFLUENCES OF INSTITUTIONAL LOGICS DYNAMICS ON THE DECISION PROCESS OF A BRAZILIAN COOPERATIVE, LATIN AMERICA’S LARGEST FLOWER TRADE CENTER

Maisa Teixeira - 85maisatx@gmail.com UFSM

Karina De Déa Roglio - karinaroglio@gmail.com UFPR

SIG: BUSINESS & SOCIETY

TRACK: INSTITUTIONS AND CHANGE

Access to this paper is restricted to registered delegates of the EURAM 2013 (European Academy of Management) Conference.

ANALYSIS OF THE INFLUENCES OF INSTITUTIONAL LOGICS DYNAMICS ON THE DECISION PROCESS OF A BRAZILIAN COOPERATIVE, LATIN AMERICA’S LARGEST FLOWER TRADE CENTER

ABSTRACT

The objective of this paper is to analyze the influences of institutional logics dynamics on

changes in an agricultural cooperative. The literature review was based on the concept of

institutional logics and the management of cooperative organizations. We argue that

cooperatives are hybrid organizations and, as such, report to institutional complexity adopting

practices and beliefs consistent with characteristics of more than one institutional logic. In this

sense, we draw upon a qualitative case study, based on oral history, at Veiling Holambra

Cooperative, a Brazilian cooperative founded by Dutch immigrants that is now the largest trading

center of flowers and ornamental plants in Latin America. The fieldwork was based on semi-

structured interviews, non-participant observations and document analysis. Thus it was possible

to identify in the history of the cooperative, elements that relate to different institutional logics.

Over time, despite the pressures involved and the changes in the organization, the cooperative

was able to preserve its identity while integrating elements of innovation. The conclusions of

this research reinforces that influences of different institutional logics can coexist at the same

organization and contributes for a better understanding of the hybridism phenomenon in

organizations. Thus, its contribution relates to the re-evaluation in organizations of the apparent

contradiction between social and market oriented practices.

Keywords: Institutional logics, Cooperatives, Hybridism

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ANALYSIS OF THE INFLUENCES OF INSTITUTIONAL LOGICS DYNAMICS ON THE DECISION PROCESS OF A BRAZILIAN COOPERATIVE, LATIN AMERICA’S LARGEST

FLOWER TRADE CENTER

ABSTRACT The objective of this paper is to analyze the influences of institutional logics dynamics on

changes in an agricultural cooperative. The literature review was based on the concept of

institutional logics and the management of cooperative organizations. We argue that cooperatives

are hybrid organizations and, as such, report to institutional complexity adopting practices and

beliefs consistent with characteristics of more than one institutional logic. In this sense, we draw

upon a qualitative case study, based on oral history, at Veiling Holambra Cooperative, a Brazilian

cooperative founded by Dutch immigrants that is now the largest trading center of flowers and

ornamental plants in Latin America. The fieldwork was based on semi-structured interviews,

non-participant observations and document analysis. Thus it was possible to identify in the

history of the cooperative, elements that relate to different institutional logics. Over time, despite

the pressures involved and the changes in the organization, the cooperative was able to preserve

its identity while integrating elements of innovation. The conclusions of this research reinforces

that influences of different institutional logics can coexist at the same organization and

contributes for a better understanding of the hybridism phenomenon in organizations. Thus, its

contribution relates to the re-evaluation in organizations of the apparent contradiction between

social and market oriented practices.

Key Words: Institutional theory, Institutional logics, Cooperatives, Hybridism.

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INTRODUCTION

The research reported in this article aims to analyze the influence of the institutional logics

dynamics in the history of Veiling Holambra Cooperative from 1948 to 2011. The concept of

institutional logics has been used to comprehend the organizational dynamics, allowing an integrated

analysis of organizations’ behavior taking in consideration broader societal structures. Thus, accounts

on effects on micro or meso level can be linked to changes in the macro level without the need for

adopting a perspective of uniformity and homogeneity, as assumed in the models of isomorphism.

According to the institutional logics’ approach, institutional complexity is crucial to

understand the organizational phenomena. This conception, as Kraatz and Block (2008) explain, takes

into consideration that, although organizations are confronted and constrained by institutions, the

institutional systems are not necessarily unified or coherent. Organizations are part of contexts in

which ‘competitive institutional pulls’ (Kostova & Roth, 2002, p.215) provide the existence of

different forms of organizational arrangements, as they create conditions for fragmentations and

conflicts.

Therefore, the study of cooperative organizations is an interesting field for analyzing the

coexistence of institutional logics. During the 1990s, administrative inefficiency and unproductive

operations were present in the most of Brazilian Cooperatives. As a result of the country trade

opening and exposure to global competition, these organizations became threatened. Trade

liberalization caused severe difficulties to these cooperatives, and some of them had to discontinue

their activities. However, with changes in terms of cooperative identity and strategies, the system has

been restructured and cooperative organizations emerged in various economic sectors.

These changes compromised the image of cooperatives as a third way of development as they

embraced practices clearly related with the economic model. Cooperativism was considered a third

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via since it has been developed in parallel to major economic doctrines constituting an alternative

model for social development: at the same time preserving the idea of profit and private ownership

from capitalism and the sense of solidarity and social justice from socialism (MELO, online, 2011).

Some studies (e.g. Saraiva, 2010; Taylor 1994) reveal that the institutional environment of

cooperative organizations’ develops under increasing influence of the market institutional logic. This

has a number of implications in terms of administrative practices and standards adopted by these

organizations. However, taking into account its dual nature, historically conditioned, the process of

changing in cooperatives does not happen directly, as an inexorable course. This assumption stresses

micro or meso approaches that enable identifying motivations, interests and inter-subjective values

that rely on different institutional logics to understand how they are engaged in conflicts, decisions

and strategies.

One contribution of the present research to institutional theory is the investigation of

analytical perspectives of the intra-organizational approach as suggested by Kirschbaum (2010). This

author claims that notwithstanding the impact of the work of DiMaggio (1991), which calls for more

attention to the “micro” and “meso” aspects to advance on neo-institutionalism, he perceives little

effort in this direction. Studies of this nature are those which can effectively connect managers’ sense

of action with the institutional dynamics that intersect the organization (Kirschbaum, 2010).

Another contribution relates to the appreciation of the decision process in a historical perspective

in order to grasp how the dynamics in the institutional context become tangible in action and

specific governance practices. In this sense, decision making is assumed as a social practice

(Cabantous, Gond & Johnson-Cramer, 2010) by which the actors mediate the established

practices and everyday activities in the organization and hybridism can be approached as a social

construction.

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This article is structured in this way: after this introduction, we present the theoretical

references, the methods used in the field work, an analysis and discussion of data, and the

conclusions, research implications, and ideas for future research.

INSTITUTIONAL LOGICS AND COOPERATIVES

The conception of institutional logics emerged with the ideas of Friedland and Alford

(1991). These authors define institutional logic as “the set of material practices and symbolic

constructions which constitutes the organizational principles of an institutional order and

provides vocabularies of motives and a sense of 'self ' to social actors” (Friedland & Alford,

1991:248). The institutional orders from which the logics flow to provide guidance to western

society are: capitalism, the State, democracy, family, religion and science.

Thornton (2004); Thornton, Jones and Kury (2005); Thornton and Ocasio (2008) assume

that the major societal institutions or orders of Western society are: market, corporation,

profession, State, family and religion, as showed in Table 1. As the principles of the institutional

logics approach become recurrent in research for understanding processes of institutional change,

one can see a convergence with the implications of institutional logics in organizational decision

making and adoption of practices and organizational structures. Thus, the challenge made by

Thornton (2002) to the universality of the assumption of economic rationality is strengthened.

This author states that “Although economic forces impinge on organizations, how actors interpret

the meaning and the consequences of those economic forces is contingent on higher order

institutional logics” (Thornton, 2002: 82).

Insert Table 1 about here

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Based on the previous statements, cooperatives are an important field for analyzing the

coexistence of institutional logics, particularly if we consider the hybrid nature of this type of

organization and the recent changes in their institutional structure. However, studies on

cooperatives are predominantly based on behavioral models of organizations founded on

economic principles. According to Jäger and Beyes (2010), this means that there has been a

preference in the studies of cooperatives for rationalists’ models, which make their fundamental

assumptions about organizational actors’ ability of strategic choice and efficiency goals.

Therefore, cooperatives’ peculiarities as organizations with potentially diverse historical and

cultural context are lost as explanatory categories.

The cooperative ideal was created along with the labors movement of the nineteenth

century, which sought to overcome the adversities imposed by the capitalist model. With

cooperative organizations, they intended to provide alternative forms of work than those found in

capitalist enterprises, emphasizing a different social environment to give greater dignity to the

worker. It was believed, according to Schneider (1999), that the creation and multiplication of

cooperatives could be an instrument to alleviate situations of dependence and capitalist

exploitation for the proletariat. Thus, while they sought different work conditions, they did not

wish to break with capitalism, but provide means for the workers to also take advantage of the

system. Therefore, cooperatives fit the concept of hybrid organizations presented by D'Aunno,

Sutton and Price (1991).

Hybrid organizations, as expressed by D'Aunno, Sutton and Price (1991), are those who

adopt practices and beliefs consistent with characteristics of more than one institutional

environment. The premises at the base of this definition refer to Meyer and Rowan (1977: 356),

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who affirm that organizations take too many risks in choosing between various beliefs for which

to adopt internally consistent practices. Hence, they incorporate several types of incompatible

structural elements, seeking external support. The central argument in the work of D'Aunno,

Sutton and Price (1991) is the growing development of inter-institutional contradictions in daily

practices of contemporary organizations. Conflicts in the institutional environment are being

mapped in the structure and practices of these organizations.

In cooperatives, the dual dimension encompassed by the enterprise is explained by

Bialoskorski (2002) who highlights, at one hand, the market perspective which emphasizes the

economic logic of maximizing returns, competition and pricing. On the other hand, the societal

vision values the elevation of the wealth of the associates, contractual loyalty, solidarity and

business ethics, transparency and the development of all those involved, with equitable

distribution of results. Cooperative principles are held as a criterion for membership with the

International Cooperative Alliance (ICA), reason by which the coexistence of these two

dimensions is strengthened in the cooperatives. For Schneider (1999:49), the cooperative

principles represent the values “that illuminate and guide the experience of any cooperative

organization” and allow identifying the typical feature of this type of organization anywhere in

the world. Despite the possibility of adaptation to the peculiarities of each region, continues this

author, “in essence, cooperatives shall seek to be free organizations, autonomous, inspired by

self-help and by the predominance of the process of cooperation over competition”.

In recent decades, the challenge of adaptation to the conditions imposed by a capitalist

society was particularly difficult for cooperatives. In Brazil, with trade liberalization in the 1990s,

cooperatives faced severe difficulties, but most of them was able to adapt to the new market

conditions and emerged in different economic segments. These changes represented the transition

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to new orientation of institutional logics for cooperatives, with an increased use of practices and

structures with characteristics more consistent with market and corporation logics and distancing

from the State, professions and family logics (see Table 1).

Saraiva (2010) identified changes in Brazilian Credit Cooperatives related to the

employment of practices typical of capitalist banking organizations. Among these practices, the

author mentions the vertical organizational structure, the emphasis on growth and profitability,

efficiency measured in terms of return on capital and market share, techniques for improvement

of members’ loyalty and internationalization of business through partnerships. In the agricultural

sector, Taylor (1994) found that the new scenario caused a weakening of collective goals to a

lower level in cooperatives decision making processes. As a result, the supply of services to small

farmers and the reduction of social inequality were no longer targeted, and the promotion of

agricultural production of industrial style (agribusiness) became the target. Furthermore,

incentives for executives were adopted and the focus on centralized management was extended.

Claiming that the move to a new orientation of logic in the field of cooperative

organizations was being portrayed through simple and direct transfer of strategic management

approaches, Jäger and Beyes (2010) suggest caution. Notwithstanding the merit of demonstrating

the progressive movement of cooperatives to a model in which economic rationality prevails, the

authors warn that displacements of rationality in hybrid organizations should be analyzed by

deeply observing the particularities of these organizations. The positioning of the authors, in this

sense, converges with the proposition of hybrid institutional logics.

Rao, Monin and Durand (2003) describe hybridization as the institutional setting by means

of bottom-up processes, wherein elements of the new demands are integrated without replacing

the traditional identity. Glynn and Lounsbury (2005) report that, despite the fusion of institutional

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logics in some dimensions of behavior, other dimensions remain unchanged. This has

implications, according to Rao, Monin and Durand (2003), in the decision-making process of

organizations that should try to reconcile the new demands that come from the environment and

the traditional identity of the organization.

Haveman and Rao (2006) propose that hybridism presents, also, a relevant role in the

refunding of organizations, through the integration of new facets, while preserving aspects of

their history and their ideology. It is worth noting that, although these authors explicitly relate

hybridism to organizational change, they integrate elements of persistence and stability in their

appreciation of the phenomenon when proposing the retention of traditional elements as a result

of the hybridization process. The possibility of considering change and stability in an inclusive

way, as potentially compatible in the analysis of hybridism allows embracing the alternative

conception of stability and change as a duality proposed by Farjoun (2010). With this

perspective, the author wishes to break with dichotomous assumptions of the dualistic models

expressed, for example, in models of punctuated equilibrium.

According to Romanelli and Tushman (1994), conceiving change in this way, organizations

evolve through relatively long periods of stability in their basic patterns of activity until they are

driven by triggers of fundamental change in relatively short periods. Without the shocks, changes

would be committed only incrementally, because there are several restrictions: durability of

institutions, pressures of actors interested in maintaining the status quo, etc. In the present study,

rather than considering radical and incremental change as temporally separate instances, we

consider them as Farjoun (2010) suggests: mutually reinforcing themselves.

Understanding how organizations manage conflict through hybridism, as highlighted by

Thornton, Jones and Kury (2005:162), stands out as an important direction for research. As a

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recommendation for further studies, the authors emphasize the consideration of micro processes

arising from the movements in institutional logics. This could contribute in advancing the

question of how the mechanisms of hybridization can affect the possibilities of variation,

selection and retention of cognitive schemas. The research reported in this paper aims to

overcome this gap by examining how the dynamics in institutional logics influences changes in

an agricultural cooperative during the period from 1948 to 2011.

METHODOLOGY

The fieldwork was based on a qualitative case study supported by oral history as we were

searching for influences of institutional logics dynamics in the cooperative’s trajectory. The

research was conducted during the year of 2011 at the Veiling Holambra Cooperative (VHC),

which has characteristics that justify the choice of a single case. Firstly, the purposes and

conditions of its founding and the initial characteristics of the organization, consistent with the

cooperative doctrine, promote the case as being representative or “typical”. Moreover, the

Veiling Holambra Cooperative is the only Brazilian cooperative that was able to rebuild itself so

expressively after the crisis in the 1990s, when many cooperative organizations faced severe

difficulties. VHC is now the largest trading center of flowers and ornamental plants in Brazil,

accounting for about 45% of the national market (VEILING HOLAMBRA..., online, 2011). In

recent years, the organization has adopted audacious management practices seeking its

competitiveness. Taking this into account, the case can be considered particular (Creswell, 2007).

The oral history method provided support to the field research. According to Joutard

(2005), historical knowledge represents a fundamental element without which organizational

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reality couldn’t be grasped in its essence. Thus, the research was accomplished by means of

cross-sectional and longitudinal perspective.

In order to address issues of qualitative research validity, we used strategies of data

triangulation and thick description, as proposed by Creswell (2007). Regarding the triangulation,

data were collected from different audiences in the cooperative (directors, managers, elected

members and common members), which enabled contrasting different experiences with the

phenomenon in question. Data sources were documental analysis, semi-structured interviews, and

non-participant observation.

The documents analyzed were composed by several historical books and published papers

regarding the Cooperative issues. Also, the official records of Board meetings and Members

Assemblies; personal notes of the President of the Cooperative; the Cooperative Statute; Annual

Reports, and photos provided by the organization integrated the material used in document

analysis.

We interviewed nineteen members of the Cooperative. Interviews took from 1.5 to 2

hours each, were tape recorded and transcribed literally. To preserve confidentiality, the name of

these members is not mentioned; each member will be referred to by the identification presented

on Table 2. The quotes used to illustrate the results are drawn directly from interview records

and given minor editing for grammatical errors and inappropriate language. In addition, we used

‘focused observation’ which, according to Angrosino and Pérez (1994), necessarily involves

interviews and centers on well-defined groups of activities.. We focused our observations on two

phases of the decision process: informational and voting meetings.

Insert Table 2 about here

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Data analyses were based on the method of content analysis, supported by the historical

analysis. The fundamental idea in the content analysis, according to Weber (1999:12), is the

reduction of the text into a much smaller number of content categories. The application of

qualitative content analysis, as the author argues, provides a structured way to reduce the data

into distinct categories or themes. These categories are suggested both a priori of theory as

inductively by the data. This facilitates the subsequent analysis, with the recovery of material

directly related to the research interest.To support the analyses, we used the software Atlas.TI,.

Considering the methodology used, we recognize that the analyses and conclusions

presented in the next sections are not suitable to generalization. The influence of researchers’

subjectivity on data analysis and discussion, a common limitation to qualitative approach, needs

to be considered while reading the results. This study seeks to attenuate this factor through the

use of different data sources and a careful process of confirmation and reconfirmation of

categories that emerged from data analysis.

RESULTS AND DISCUSSION

The literature review on the history of the Cooperatives’ development confirmed the

coexistence of different institutional logics: socially oriented logics (collectivist, communitarian

and State) and corporate and market logics. In Figure 1, these logics are identified in different

events in organization’s history, from 1948 to 2011. Following, the major events of each period,

the main decisions taken by the organization and how they relate to the different orientations of

institutional logic are presented and discussed.

Insert Figure 1 about here

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The Holambra Agriculture Cooperative (HAC) was founded in 1948 as part of the

emigration project between Brazil and the Netherlands to allow the maintenance and

development of the community. The initial project was coordinated by the secretary of the

Catholic and Dutch Association of Farmers and Horticulturists (KNBTB, in Dutch). At that time,

according to Corrêa (2011), there was a belief that the absorption of the young by the industry

would lead to the loss of religiosity. This would have motivated the entity's involvement in the

postwar projects of emigration.

Under the command of KNBTB's secretary, the cooperative structure was based on the

concept of a collective farm or kibbutz, and its guidelines were mutual aid, collective work and

the sharing of its results. All profits from the work of the cooperative members were reverted

back to the community, divided equitably, regardless of their financial contribution. The

community was very small and closed, standing in a remote region at the time it was constituted,

which is indicative of the importance of the collectivist and communitarian logics.

The HAC coordinated the occupation of the land, supplying social deficiencies during the

first decades of immigration. As reported by Samenwerking (2008), the cooperative has played

the role of an informal town hall, organizing and structuring the groundwork for the infrastructure

of the current city. At this point, we can see clearly the orientation from State logic in

organizational practices.

In 1951, due to difficulties in adapting to climate and topography and new market

conditions, the initial agricultural crops and Dutch cattle frustrated the colony of immigrants.

Rietjens (2003) noted the democratic and very costly administration and the uneconomic attitudes

as direct causes of the financial crisis in the cooperative, which almost caused its premature

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dissolution. A comment from one member, who witnessed the events of this period, helps to

understand what happened:

The financial situation was chaotic. Mr. Heymeijer [name of KNBTB's secretary] was a good

person, sort of philanthropic. He barely understood anything about the economy, let alone in a

completely strange country, huh? And... he went to Holland to make a loan and the bank there

granted it under certain conditions, to send someone, sort of like the IMF now, a tutor [...]. Mr.

Heymeijer thought more of the social side, but when you have no money, what are you going to

do? (Corrêa, 2011:169)

This text describes the moment when it was necessary to ask the Dutch government for

resources to continue the project. Financial aid was sent. However, it was subject to a careful

evaluation by an intervenor, in order to ensure the project sustainability. This intervenor,

according to Broek (2008), had a rigid business position and came with a different perspective of

what was being implemented earlier in the project. He would assume the presidency of the

cooperative for 20 years. From this moment, according to Broek (2008), the Cooperative’s Board

assumed a more professional posture. According to Rietjens (2003:25), at this moment, “the

idealism came to an end”.

During this period, Holland was in a situation of dependency from the United States

which, through the Marshall Plan, directed efforts for the European restructuring. Thus, the initial

plan of emigration to Brazilian lands, since it was financially dependent on Holland, deviated

from its original purposes, as illustrated below.

To ask for assistance, Mr. Heymeijer - with a collectivist ideal - reported to a Holland that was

directed to capitalist exploitation, therefore it wasn’t interesting for its government to invest in a

colony whose base was the communitarian work and the division of profits among members.

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Thus, for accomplishing the Dutch investment, one of the requirements would have been the

departure of the President of the Cooperative, to be occupied by someone more in line with the

Dutch capitalist intentions (CORRÊA, 2011:167).

The reforms that followed in the HAC Cooperative, according to Samenwerking (2008),

resulted in financial restructuring, diversification of products, changes in production structures,

among others. As a consequence of the new organization direction, it had to diversify its

activities. This point indicates a deviation on the orientation of the institutional logic from State

to Corporation logic, whose key feature of the organizational strategies becomes increasing the

size and diversification of the firm (see Table 1).

The commercial cultivation of flowers and ornamental plants in Holambra began around

1954. Starting from year 1960, convinced of the growing demand for flowers in Brazil, many

farmers associated to HAC - who didn’t regard floriculture before as a serious farming activity -

adhered to it. Until the middle of this decade, according to Tsuboi and Tsurushima (2009),

revenue from the sale of flowers in the cooperative represented only 1 to 2% of total revenue.

However, in 1971, the revenue from the sale of flowers surpasses that of other sectors for the first

time, stimulating the opening of the floriculture sales department (HAC-Flowers) at HAC in

1974. After this, according to the authors, the sale of flowers and plants firmly began.

Between 1982-85, after a restructuring, the production area of the cooperative was limited

to seven points: ration mill, refrigerated slaughterhouse, egg commercialization, citrus fruit

packing house, station for pig breeding, flowers and plants shed and financial sector. At this

period, HAC emerged in the business world as an economic power. However, Rietjens (2003)

notes that economic advances, were directed to the impairment of social goals of greater

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amplitude within the community. The Cooperative assumed responsibility for the medical center,

recreational areas and social club, old age care, daycare, and other social activities. Based on

these settings, it is possible to analyze that, at this period, in the cooperative there was still some

proportionality regarding the importance given to the guidelines favoring collectivist and

communitarian aspects, on the one hand, and corporate and marketing aspects on the other.

However, over the years, greater specialization, formalization, professionalization and reduced

social activities reflect transitions in the dynamics of institutional logics. Professionalization,

according to the statements of Counselor 6 and 4, occurred as a requirement of the strategy to

increase in size, consistent with the corporation logic.

The cooperative was also undergoing a transformation, because it was practically a Dutch

cooperative. At the time there were many farmers, either Dutch or descendants of Dutchmen, and

the cooperative needed to grow, so luckily, me being on the board and having good relations with

Brazilian, Japanese farmers, could largely help this development and we managed to greatly

expand in this period. (CE6)

Until 10-15 years ago, the cooperative was much more regionalist, much from the region of

Holambra. So everything was closer, all much more familiar: – “oh, that's my neighbor”, and so

on. But the cooperative began to grow, and it started going to other regions, bringing people from

other regions, beginning a miscegenation of cultures. Because once it was primarily Dutch, and

they understood each other. Then the cooperative began to grow, then the management had to start

being more professional. (CE4)

At this point, it is important to note that the growth strategy of the Cooperative became

greater than the restricted communitarian concern that existed before. To grow and centralize

greater quantity and variety of products in the organization, it was necessary to embrace new

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cultures and groups, even the Nikkei farmers, who somehow competed with the Dutch in the

production of flowers. As showed in Table 3, except for the first period when the Cooperative

was structured with the arrival of immigrants, the growing number of members occurred more

sharply between 1982 and 1989, which indicates a higher weight of the corporation logic in this

period and later, from 1989 to 1991.

Insert Table 3 about here

The business segment of flowers and ornamental plants grew in importance in Brazil in the

first half of the 1980s and, to answer to that, the cooperative had a robust wholesale distributor. It

was composed of six sale warehouses (deposits) in the Brazilian main capitals, more than 100

lines to supply the regional market and a fleet of trucks for distribution. At the time, the number

of employees of the cooperative increased to over 1000. In mid-1980, HAC became the largest

flower wholesaler (Tsuboi & Tsurushima, 2009). Rietjens (2003) points out, however, that the

system was very expensive due to inefficiencies in the various links in the chain and, therefore,

despite the success of the business, the Cooperative was facing difficulties to remain solvent. It

should be noted that this was a period of rampant inflation; in such circumstances the HAC

entered its second crisis.

The Brazilian economy in 1986 was marked by the “Cruzado Economic Plan” that affected

directly the administration of HAC. At this time, the agricultural sector suffered much from the

price freeze since it was in full harvest period and, therefore, had lower prices on the products,.

As the Cooperative functioned as a kind of bank, making loans without solid guarantees of

payment, it is possible that at least part of the bank debt it had in 1996 might have been generated

at this time. In this respect, Rietjens (2003:54) notes that the indebtedness of the Cooperative, in

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1996, was R$ 171,470,502.64 (almost 86 million Dollars). With the comment from Counselor 3,

we can understand how financial transfer operations happened at that time:

So, that was historic because when I first came here in 1985, there weren't even banks in

Holambra yet. So everyone did their banking in this office at the cooperative. It was all considered

an advance of production. I had to repay my loan with production later. So who needed money,

got the money on paper because they would deliver the production in three, four months. Over

those three months you paid the interest. [...] And the interests of this financial turnover were

merged with the personal interests of the cooperative (CE3).

In the HAC-Flowers department, crisis was more directly related to the failure to control

the 150 vendors that had too much power in the selling process. The balance of the first semester

of the Cooperative in 1987 showed poor results, leading to the bankruptcy of the HAC-Flowers

department (Tsuboi & Tsurushima, 2009). At this point, the cooperative’s managers decided on

selling the wholesale distributor business and the auction system, or public sale, was introduced.

This event is a milestone for the organization, as can be seen in the testimony of Counselor 3. A

member of the Administrative Council (CONAD) explains that the crisis sparked a movement to

turn the departments into units. When he says “here begins autonomy”, he means that the actions

taken during this period relate to subsequent events, which culminated in the independence and

constitution of the Veiling Holambra Cooperative.

Holambra started losing track because it was focused on those Calandivas (kind of flower) and

then the Calandiva began to plummet. From 10 million dozens, it collapsed in a matter of four

years to 3 million dozens, and could not adapt to the new situation. This resulted, in 1987, in the

near bankruptcy of the flower department. Flower growers spoke roughly to the counselors and

the board: – "Now, it's up to us and we will solve it”. There began autonomy. Every year there

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were battles between the farmers and directors in the flower area, but in 1989, it resulted that we

started with our public sale. (CE3)

The above report provides an overview about the active posture of members and

reinforces the assumption of change in the collective guidance that kept departments united. The

collectivist parameter at this point starts being, not the HAC Cooperative, but the Flowers

Department. The beginning of activities with the public sale was a result of the events of this

period, as a symbol of victory of florist farmers over the HAC Board. In 1989, the Flowers

Department started to operate as a wholesaler market, intermediating transactions between

members and resellers. Simultaneously, the movements to dismember the department sectors

started. Since then, the public sale clock or the public sale practice became the symbol of the

Cooperative. It represented, mainly, the entry into a new era of transparency, impartiality,

professionalism and management under the auspices of the market and its supply and demand

laws. The name of the department of flowers began to include it: Veiling means public sale in

Dutch, which denotes it as a strong element of representation.

In 1991, services such as road maintenance, water and sewer, among others, were

transferred to the first municipal administration of Holambra, and an abrupt reduction in staff was

initiated.

Then the cooperative begun to... for example, it is already disengaged from the health part. They

warned everyone: – “Look, we will not take care of this anymore, if you want, you can go ahead

and found your own association”. That's what happened. After that, it was schooling too, they

said: – “Look, I'm not going to take care of schooling anymore”. This has happened in the 1980s,

and they said: – "We will not take care of schooling, we will not take care of mail, we will not

take care of this sort of thing”. Then, in 1980, they disengaged from a lot of things, but they still

19

paved the main street, they still took care of the water supply. They did that for many years. Also,

many other things remained internal until 1995. (C4)

The description of this moment of HAC, supported by the excerpt from the interview,

reinforces the distancing from collectivist and state logic orientations. The individuals in the

cooperative group shall be considered no more an inseparable part of the organization, of which it

is responsible. The contemplated tendency to cooperation and compliance with the others was

reviewed. Consistent with this, in this period, the Veiling Holambra unit canceled the technical

assistance to farmers.

From the beginning of the 1990’s, the cooperative started the process of management

professionalization, by hiring executives with experience in managing non-cooperative business.

Trade-offs emerged between the cooperative and the executives who came from the “outside”,

with which the cooperative had to deal. Some clashes between these stakeholders made many

executives to leave the Cooperative:

After the failure of co-management (management system when cooperative members assume

simultaneously positions of directors), “outside” professionals were hired. They might have been

good professionals, but they could not get along with the members in general, and perhaps did not

understand what a cooperative was, let alone the “Holambra culture”. This created serious

conflicts that culminated in the departure of the executives and/or breaking of the business unit.

All this happened between 1990 and 1996 (Former President of HAC).

Maybe that's the big motive of the crash: there were many people who were only employees. They

were not giving their life for it. What does that mean? You work in a company, and it's like that

company is your own. (C5)

20

The discussion of professionalization in Cooperatives is part of a larger debate on the

business development of cooperatives that became effusive in the 1990s. The growing awareness

of the need to compete with non-cooperative companies pressed organizations to expand their

operations, either in scale or in products’ diversification. The requirements to maintain complex

organizations often exceeded the administrative capacity of the partners who have been turning to

professional managers.

Another thing, who are these people who normally supervise the cooperative, the board, the

counsel? They are people from here too, a cousin, someone who plays soccer with the board, a

relative, etc.... So, a father has to monitor his son, a son has to oversee the father. And does this

work? It doesn't work. (Former President of HAC)

As the counselor was so involved, he thinks that he is better able to solve the issue! Then, in the

moment of transition, there is a difficulty. Why? Because there comes a new marketing

professional, he has another vision. A different way to work, then there is a conflict. There is a

conflict because the counselor thinks he knows... Since he was so involved, he thinks he knows

better. (CE5)

The conflict mentioned by Counselor 5 reflects a common difficulty in Brazilian

Cooperatives that try to adopt separate structures of ownership and control. However, the case of

HAC is illustrative of the problems due to the concentrated structure, as shown in C4 statement.

The situation was already bad for the sake of management, of bad administration. Mismanagement

of resources, mismanagement of business. The business didn't bring any money in, had no profit,

and folks kept insisting, insisting in not improving the administration or even closing. Saying: –

“There is no future, no income, no profit, so let's close it”. [...] The boat was going in a direction

21

that the board hardly knew. [...] There was no exemption and since they were in a dependency

situation, they could not face the directors (C4).

The management of the cooperative proved to be permeated by conflicts of interest,

political movements and decisions based on favoritism and issues unrelated to the pre-set criteria.

Another problem at this time, as reported in many interviews, was related to the provision of

some internal bank services. In the following utterance, Counselor 5 clarifies this important event

in the history of the Cooperative.

Well, each member alone was too small to take a loan. The operating cost of a loan was too high

for a single member, so the “mother” cooperative (HAC) took the money and reissued bank notes

to their members. It made a single bank note with the bank and handed out smaller notes, and the

guarantor of this operation was the “mother” cooperative. Well, for every ten new members who

took a loan, maybe six managed to pay their bill, four did not. Who was the guarantor? The

“mother” cooperative. This, among other things, caused the bankruptcy of the cooperative. (CE5)

The lack of control and lack of criteria that characterized this period is commented by

Counselor 3:

The flower crisis began in 1986-88 and six years later they were already bankrupt. Because they

began to finance farmers to encourage production, including those who had no technical

conditions, that weren’t businessmen […] They began funding units that lacked viability, building

silos in places where there wasn't really a need for them, instead of creating silos next to the ration

mill,. They began funding farmers in the Goiás region, very far away, just because they are Dutch.

So, they financed everywhere, without discretion, without asking for warranty, without asking for

membership or involvement of farmers in those units. (CE3)

22

The communitarian logic that permeated the behavior of the Cooperative at this time

standed out strongly when Counselour 3 mentioned the fact that financing and investment

decisions in Goiás, for example, have been taken without considering issues of payment

possibilities and technical feasibility. The only aspect taken into account was that the farmers had

the same Dutch nationality. The behavior and political ideology, the notion of the State as a

mechanism of redistribution and the welfare capitalism - in other words, the inclination towards

prosperity and well-being - are also highlighted in the description of the Cooperative

management. These characteristics compose key features of the State logic, depicted in Table 1,

which refer, respectively, to the source of authority and identity, the natural effect of the

symbolic analogy and the economic system,

In 1994, a restructuring process was conducted by an international consulting firm.

According to the HAC Former President, this process had the objective to realign the Cooperative

“toward the market and increased productivity”. However, this effort was not enough to remedy

the insolvency of the Cooperative in June 1995:

I started to produce flowers in 1989. But at that time the cooperative was one, which was called

HAC. It was just one. This cooperative broke, this old model of the 40's or 50's, when the

cooperative was founded with the Dutch immigration. In 1995 this cooperative actually exploded

or imploded, not sure which is the right word. It was in crisis at the time, shortly after the “Real

Plan”, maybe a year. Many cooperatives broke then. (CE2)

At this moment, Brazilian Cooperatives in general have been harshly criticized for its

paternalistic and non-economic behavior. In this sense, the social mission of these organizations,

in many cases, has been reformulated seeking to be consistent with the principles of the

23

institutional logic of the market. The interviews supported this position and expressed different

levels of contestation of the orientation that based the decision making so far. This is clear, for

example, when the supervisory board member comments on how the social mission in VHC

currently relates to the economic purposes of the Cooperative.

Ah, I don't see a social mission. I don't like these things. I don't think it has to have social mission.

Because with social missions you think that one who is very well has to help a poor fellow. But I

think it is a bit socialist, you know? And I don't like it. (...) In the past (the cooperative) supported

more when Holambra wasn't a municipality and the cooperative was almost Holambra's city hall.

But in the end, you saw what happened, right? It went broke! (CE1)

Counselor 5 and 1 revealed that the concern with the social mission of the cooperative

would currently be tied to what determines the Brazilian cooperative legislation. That is, in their

opinion, the performance of the social role of the cooperative must target only formal

compliance:

The part of the cooperative's assistance, it has laws and we have to be within the law. And what is

the law? The law is the FATES fund (Fund for Social and Educational Technical Assistance), is

an investment in the member, in the employee... in the region where the cooperative operates, and

that's it. So we cannot really... It is not our role as a cooperative: – “We have a group of small

farmers we need to give attention to!” It is not our role. (...) The cooperative cannot solve the

problem, the social problem of cooperative members. It has to, yes, do its part and that's the legal

part, that is the FATES fund. Everything has been very well studied; it is the law of cooperatives.

That's why there is a law of cooperatives, which created funds for development. These funds are

our obligation (CE5)

24

For us to attract farm members, we have to be good, we have to be efficient, we have to have

advantages for them and advantage is not welfare, not paternalism, it isn't like: – “Come here, we

will help”. Because this is a cooperative, but each one (cooperative member) has their product,

each one has their business, their strategies and nobody helps ... nobody helps, nobody. (CE1)

Although the actors highlight that they still comply formally to ‘Cooperative-

communitarian’ practices, the overall analysis indicates that the decisional praxis, with its

material and symbolic resources, transitioned into a new order. With the investigation, it is

possible to note that market models, theories, established standards and analytical techniques

began to populate the speeches and activities of organizational members. Changes in the

organization meet the new institutional role, i.e., a new normative reference in the field of

cooperative organizations.

The almost dissolution in 1995 represented the third crisis in the history of the Cooperative.

In response to it, ten units considered unproductive were closed and the three remaining

cooperatives (Flowers and Plants, Livestock and Inputs) were dismembered. These decisions

reinforce the emphasis on efficiency. Therefore, the time of the division marks the move from the

primarily corporation logic orientation to the market logic by the cooperative leaders and other

participants in the decision-making process. It is clear, here, that the strategies “size increase and

diversification” were replaced by the strategies “increase efficiency of transactions”.

This transition was confirmed when, in 2009, the Cooperative group of representatives

decided to incorporate corporate governance principles. Here its clear the tendency to turn to

organizational practices more closely with investor capitalism characteristics of economic system

(see Table 1), representing the more solid embodiment of business and market logic in the

25

organization. The decision-making structure based on models of corporate governance represents

a response to deal with the economic pressures that present themselves to the organization in

order to make it more efficient, softening the political and opportunistic behavior of the

cooperative while keeping controlled the management of directors. Thus, with the adoption of the

corporate governance principles, members’ assignments became clearer in the Cooperative, as

well as the structure more transparent to question and/or charge the compliance with duties. With

regard to the form of participation of the members, statements from Counselor 1 and Director 2

are illustrative of the effects that the corporate governance principles had on the cooperative.

While the cooperative was little, it was basically formed by Dutch members of the community

who stayed inside Holambra, which was very close to everybody, everybody felt like owners in

the literal sense: – “I can boss everyone around, I can boss the director around, I can boss the

employee around...”. “My product has to be like that, has to be like this…”. And, as the

cooperative grew, necessities started to appear... they said: – “Hey guys, hold on... it's not like

that”. If everyone comes and talks to the employee who pulls the cart: – “Look, pull my product

first.” Then what happens? So they began to say: – “Let's make it clear how a cooperative works,

what is a cooperative, what are the roles, rights and obligations of the cooperative memeber, what

are the responsibilities”. Thus began a real awareness program. (CE1)

I think it became more transparent to them [members in general]. You know that mismanagement

thing? There was a lot of that and you know that we have almost 300 members, so it is very

complicated if everyone gives orders, right? And when you don't know from which way to come,

any way works, and the result can be completely compromised. So, in my case, the big change

that I can see was this, you know? And, for the company, it is essential especially when we think

of a hierarchy within a cooperative. (D2)

26

About the employment of principles of corporate governance, it is noticeable that it meets

the deficiency of the definition of roles in the Cooperative. It represents the formalization of

organizational processes in the Veiling Holambra Cooperative, which, according to Hall (2004),

is linked to the attempt to promote the order, consistency and predictability, and therefore,

efficiency. Highlighted by Lima (1998), in a functionalist perspective, organizational

formalization presupposes activities guided by a series of standardized, predetermined steps; such

as, it would be essential to avoid complex decision making processes, which involve loss of time

in coordination.

Therefore, the decision to adopt the corporate governance principles in the Cooperative

reinforces the tendency to give more weight to the market logic, without eliminate elements of

the State logic, which are still present in the Cooperative. The understanding that democratic

participation is effective, supported by analysis of the interviews and episodes of non-participant

observation gives strength to this remark. Despite the dominance of market logic, it is possible to

identify the hybridism of logics and its effects in the Cooperative.

Relying on democratic participation, source of legitimacy of the State logic, the board of

VHC achieved the acceptance of a practice that embodies the market logic. In this case, the

fusion of State logic with market logic, permeating the adoption of this practice, has resulted in a

hybrid practice: democracy and the participation of society in decision-making were preserved,

while the control and formalization of the cooperative were promoted.

The thesis of hybridism of institutional logic, adopted in the present research, calls attention

to the influence of the actors in the decision-making process, in order to accommodate changes in

some aspects of behavior, without replacing the traditional identity of the organization. The

incremental change is revealed, while aspects of the history and ideology of the Cooperative are

27

preserved, reconciling themselves with the new logic. An analysis often used to explain the

reconciliation of different assumptions for organizational, fundamental and incremental change,

rests on models of punctuated equilibrium, which often support the understanding of institutional

change in institutionalism.

Examination of drastic organizational events, such as the three crises described at the HAC

Cooperative, reinforces the suitability of the punctuated equilibrium model; but relying on

Farjoun (2010), the concept of duality is also present. In the view of punctuated equilibrium,

practices, processes and organizational forms support change or stability; considering them as

incompatible or mutually exclusive. Consequently, they should present themselves at separate

times. In this study, the paradox between the two concepts is rejected, analyzing the phenomenon

of hybridism as a mechanism of simultaneous change and stability.

Elements of ideology and tradition are seen as 'institutional remnants' that, in accordance

with Dacin and Dacin (2008:334), have “important normative implications for the continuity of

the past in defining what is considered appropriate in the present”. This process denotes a

concern for self-preservation, because, when symbolizing the aspirations of the organizational

community and its sense of identity, organizations acquire greater resistance to change. However,

while it takes into account the hybridism of organizational forms as a way to incite change and

innovation, it is possible to understand the organizational behavior from an emphasis on duality,

unlike dualism (Farjoun, 2010). In other words, the essential elements of resistance and change,

stability and flexibility, preservation and innovation are considered as interdependent, mutually

conditioning constituents from one another and not the opposite.

Farjoun (2010) argues that punctuated equilibrium models, when temporally separating the

tension between stability and change, lose the ability to grasp the quality of these elements

28

simultaneously. Thus, it risks letting the influence of logics hybridism go unnoticed in the

decision process of the Veiling Holambra Cooperative; it was through the renegotiation of certain

structural elements, keeping others intact, that significant changes happened in the Cooperative

history. Change occurs through the elements of stability and not despite them. Therefore, the

analysis of the case presented here reinforces the assumption of duality in the renewal of

organizations in which “internal and external continuities and commitments are used by

organizations as anchors to introduce more drastic changes” (Farjoun, 2010:219).

CONCLUSION

The objective of this paper was to analyze the influences of institutional logics dynamics on

changes in an agricultural cooperative. By examining the history of Veiling Holambra

Cooperative from 1948 to 2011 and the events that followed three critical events – the crises in

1953, 1986 and 1995 – we identified a pattern emerging from them. This pattern reinforces the

tendency of the cooperative to be guided by corporate and market logics. In general, the

influences of corporate and market logics were more evident in the crises: (i) the first with the

replacement of the President of the cooperative; (ii ) the second with the implementation of the

Veiling system; and (iii ) the third with the shutdown of ten business units and the introduction of

the corporate governance model in response to the crisis.

However, as D'Aunno, Sutton and Price (1991) suggest for hybrid organizations, conflicts

in the institutional environment were identified in the structure and practices of Veiling

Holambra. This study showed that the hybrid nature of institutional logics in this Cooperative

manifests itself as lasting, as revealed in decision-making episodes with historical and traditional

principles of democracy, equality and participation intertwined with administrative strategies for

29

growth and increased efficiency. Data analysis showed evidences of the State logic, collectivist

and communitarian logics concomitant with features of market and corporation logics. Although

the market logic involves elements of democracy, equality and participation, these elements are

combined with competition and economic efficiency, while according to the “cooperativist

logic”, the aim is cooperation and the sharing of results. These findings reinforce that market

logics can provide a foundation for action that supports the arguments and interests of those who

stand aware of and critic to the impacts’ of market creep, as has been suggested by Mars and

Lounsbury (2009). These authors have argued that the basis for resistance to the very distorting

market aspects can be imbued with principles of market logic.

As a theoretical implication, this study showed the importance of including the socio-

historical context and the different rationales to comprehend the mechanisms of decision making

processes. The contribution of the institutional logics approach is stressed with the possibility of

an inclusive analysis of both cognitive aspects and cultural elements, the economic rationality

along with other historically rooted orientations that motivate action. This analysis includes also

the adoption of a historical perspective of decisions, as their study in isolation wouldn’t be

appropriate. Attributions of irrationality in organizations, therefore, may be considered hasty

judgments, made without analytic attention.

By addressing the issue of how market logics are being combined with socially oriented

logics, this research provides reflections on the hybridism of institutional logics phenomenon and

analyzes its implications in a cooperative. However, its practical importance goes beyond the

cooperative organizations, since the typical market companies are increasingly adopting social

community behavior. This can be noticed, for instance, with the growing concern of

organizations to adapt to a sustainability-oriented culture.

30

Moreover, based on Greenwood et al. (2011), this study is relevant in assisting policy

makers in acquiring a better understanding of the forces that are driving behaviors in

organizational contexts. In this way, it can contribute to the design and implementation of more

appropriate regulations.

Regarding future studies, initial public offerings (IPO) are consistent with market logic

characteristics, although still unfeasible for Brazilian Cooperatives. In Brazil, this practice is

prohibited to Cooperatives by law; but in the UK and Canada there are cooperatives that take

advantage of this capitalization strategy. There is a great debate in Brazil for changes in the law,

however, for now, Bialoskorski Neto (2012) explains that the Brazilian cooperatives can benefit

on the capital market only indirectly, by creating strategic alliances with non-cooperative

companies. Other studies could investigate how organizations are mobilizing to that effect and if

the Brazilian cooperative legislation responds to this trend.

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Table 1: Institutional Logics of Societal Sectors

Feature Market Corporations Professions State Families Religions

Economic system

Investor Capitalism

Managerial capitalism

Personal capitalism

Collective welfare capitalism

Personal capitalism

Western capitalism

Effect of symbolic analogy

Market as transaction

Hierarchy as a corporation

Professions as a relational network

State as a redistribution mechanism

Family as firm

Temple as bank

Sources of identity

Faceless Bureaucratic roles / quantity production

Personal reputation / quality of innovation

Political ideology of social class

Family reputation / parent-child relationships

Occupational and vocational association with deities

Sources of legitimacy

Share price Market position of the firm

Specialization staff

Democratic Participation

Unconditional loyalty

Summoning supernatural

Sources of authority

Shareholder activism

Board of directors / management

Professional associations

Bureaucratic domination / political parties

Patriarchal domination

Personal charisma of the prophet / power and status of the priesthood

Base of strategies:

increase of...

Efficiency of transactions

Size and diversification of the firm

Reputation / quality of craft

Collective good

Honor, family solidarity and security

Supernatural symbology of natural events

Informal mechanisms of

control

Analysis of the industrial

segment

Organizational culture

Professional celebrity

Backstage of politicking Family policy Cult

Formal mechanisms of

control

Imposition of regulation

Authority of board and

management

Internal / external

supervision

Enforcement of legislation

Rules of inheritance

and succession

Rationalization of usury / taboos

standard

Organizational form

Market M-Form Network organization

Legal Bureaucracy

Family Partnership

Religious congregation

Investment logic

Capital committed to capital market

Capital committed to corporation

Capital committed to the bond of relationship

Capital committed to public policy

Capital committed to home

Capital committed to salvation

Font: Adapted from Thornton (2004:44), Thornton, Jones and Kury (2005:168).

Figure 1: Dynamic of Institutional Logics in the Cooperative History

37

Table 2: Identification of the Participants in the Interviews

Code Participant Time at the Cooperative

D1 Director 6 years

D2 Director 10 years

G1 Manager 7 years

G2 Manager 10 years

G3 Manager 16 years

CE1 Supervisory counselor 2 years

CE2 Counselor 16 years

CE3 Counselor 9 years

CE4 Counselor 6 years

CE5 Counselor 21 years

CE6 Counselor 17 years

CE7 Counselor 16 years

C1 Member 22 years (Associate)

C2 Member 5 years (Associate)

C3 Member 6 years (Employee) 9 years (Associate)

C4 Member 6 years (Employee) 9 years (Associate)

C5 Member 21 years (Associate)

C6 Member 2 years (Associate)

HAC Former President HAC Former President 15 years

Table 3: Growth of Holambra Agriculture Cooperative represented by the number of members

Periods Variation in number of members Growth rate for period

1954 - 1964 76 -135 77%

1964 - 1974 135 -140 3%

1974 - 1982 140 - 171 22%

1982 - 1989 171 - 240 40%

1989 - 1991 240 - 304 27%

1991 - 1996 304 - 295 -0,03

Font: HAC’s Book Record of members affiliation.