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 - [email protected] UFSM
Karina De Déa Roglio - [email protected] 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
9
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
13
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
18
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.
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