Department of Agriculture and Food Systems
Agribusiness Review - Vol. 4 - 1996
National Competitive Advantage and Agribusiness Scholarship as a Strategic Resource
1 - Steve Sonka, Professor, Department of Agricultural and Consumer Economics, University of Illinios, Urbana-Champaign.
This paper examines the role of agribusiness research within the context of international competitiveness, explores the existing gap between the potential and actual roles of agribusiness scholarship, and proposes an alternative conceptual framework to enhance the societal effectiveness of agribusiness research. The essence of the paper is depicted in Figure], which indicates:
We argue that agribusiness research scholarship can play an important role in maintaining and enhancing competitive advantage, if that balanced perspective can be achieved.
In the late 1980s, considerable attention was devoted to higher education activities focused on agribusiness and agribusiness management National Agribusiness Education Commission 1989: Collins and Dunne 1996). These efforts have had several effects. The most pronounced of these are:
Two examples of such organisations are the Agribusiness Association of Australia and the International Food and Agribusiness Management Association.
Although these results are noteworthy, similar success has not been achieved in the area of research scholarship. What would success in research scholarship look like? In our opinion, success will be achieved when there are a significant number of agribusiness management programs around the world that provide both:
Measured against these criterion, we believe that a significant gulf still remains between the potential users of academic research (managers) and those who should be suppliers of academic research information focused on improving managerial performance within agribusiness firms (academics).
The purpose of this paper is to rekindle dialogue on this important topic. To accomplish this task, the following sections of this paper:
A number of prior contributions have addressed the agenda for relevant agribusiness and agribusiness management research ( Sporleder 1986; Sonka and Hudson 1989; Dobson and Akridge 1989; Cook 1990; Conley 1990). As a group, these offerings have three general characteristics. They:
Thus, these exercises concentrate on the desired outputs from the research enterprise. Building upon those contributions, this discussion focuses on desired outcomes - that agribusiness research 3 programs exist as strategic resources to enhance international competitiveness of their clientele.
For business managers, a key characteristic of the 1990s (and likely beyond) is continually increasing levels of global competition within turbulent business environments. Forces fuelling this trend include international agreements to reduce trade barriers, advanced information technology facilitating low cost global communication, and the heightened awareness among managers of the benefits and threats involved in international competition. In spite of a strong heritage of international trade in agricultural commodities, managers in the food and agribusiness management sector are being challenged to optimally exploit and respond to these emerging global opportunities.
Academic examination of the determinants of international competitiveness is certainly not a new topic, with much of the early intellectual effort in economics focused on understanding and explaining international comparative advantage ( Smith 1776; Ricardo 1951). In recent years the attention paid to this topic has intensified, and expanded well beyond the walls of intellectual scholarship ( Thurow 1992). Agricultural economists, quite naturally, have contributed to both the academic and public policy dimensions of this debate ( Martin et.al. 1991).
Comparative advantage of fixed physical resources, however, is not satisfactory as a total explanation of international competitiveness of firms or nations, and sheds little light on the role of intellectual capital and academic scholarship. This section of the paper draws on two rather disparate sources to conceptually link academic scholarship and national competitiveness. Porter (1990), in The Competitive Advantage of Nations, explores the determinants of international competitiveness. His model of the determinants of a nation's competitive advantage includes four attributes that shape the competitiveness of that nation's firms (p 71):
Factor conditions are of particular interest in this discussion because the perspective is explicitly expanded beyond the traditional physical factors of land, labour and capital. Here a nation's factor endowment is defined to include human resources, knowledge resources, physical resources, capital resources, and infrastructure.
Within this context of national factor endowment, the role of academic scholarship becomes apparent. Clear linkages exist between research and educational activities and the effectiveness of a nation's human and knowledge resources. Interestingly, the Land Grant system in the United States is an oft-cited example of these linkages. Although U.S. competitiveness in agricultural commodities is surely a function of that nation's physical resources, the contributing activities of the Cooperative Extension Service and. its supporting research and resident instruction functions are well recognised.
Factor endowments can be further classified along two dimensions: basic versus advanced and generalised versus specialised ( Porter 1990). The definition of these terms are nearly self-explanatory, where basic factors primarily refer to physical resources and advanced factors are illustrated by sophisticated, technology intense capabilities. Similarly, generalised factors, such as highways, can be used by many sectors whereas specialised factors have focused application opportunities, for example a large pool of food technology expertise in a specific region. Porter (1990) observes that the most substantial competitive advantage accrues to exploitation of factors, which are both advanced and specialised. Within the agribusiness sector, the long-term success of the Danish pork industry and the growth of the California wine industry support that observation.
The dynamic nature of national competitive advantage is particularly intriguing. Critical questions include: How are activities initiated to create key factor endowments that do not currently exist? How are institutions that are critical to sustaining key factor endowments maintained and enhanced? Although Porter 's (1990) analysis alludes to the dynamic nature of competition, the conceptual underpinning's of this dynamic dimension are somewhat limited.
The strategic management literature, however, has seen a recent flurry of effort focused on the resource-based theory of strategy that offers the potential to overcome this deficiency ( Mahoney and Pandian 1992; Williams 1992). The resource-based approach starts from the premise that a firm's resources should be the central focus of strategic analysis. As was the case in the international competitiveness analysis, the definition of a resource extends beyond land, labour and capital to include knowledge, intangible assets, and the processes by which a firm is run. The deployment of these resources will determine whether the firm is able to earn above-normal returns (quasi-rents) in the marketplace.
The essence of strategic success then is measurable in terms of whether firms can consistently earn quasi-rents over time. Williams (1992) stresses that apparently similar firms (in terms of traditional input measures) can earn markedly differing streams of quasi-rents over time. These differing results emerge from the future vision and the decision-making processes of managers in those firms.
Westgren (1994) is the first agribusiness-oriented scholar to link competitiveness and the resource-based based strategy approach. Using this approach, he identifies deficiencies in traditional measures of international competitiveness and advances a framework for competitive analysis. That framework can be used to identify means that the public sector can employ in enhancing competitiveness of private sector firms.
Drawing together the international competitiveness analysis and the resource-based strategy approach reveals the role of agribusiness management scholarship as an advanced, specialised, resource. The effectiveness of that resource m contributing to the competitive advantage of individual firms will, of course, depend on the capability of each firm's managers to exploit that resource. However, the quality of the resource that is available will be the result of numerous decisions within the private and public sectors, as well as in academia.
As noted previously, the historic contribution of the Land Grant system to the competitive success of U.S. agricultural commodities is well known. However, it is not appropriate to assume that the historic Land Grant model can be directly transferred and applied to the goal of enhancing competitiveness within the broader agribusiness sector. The agribusiness sector encompasses production agriculture but also is comprised of an array of differing organisational structures and societal interests ( Sonka and Hudson 1989).
Historically, when agricultural colleges focused on advancing production agriculture, faculty members and administrators instrumental in shaping the college's mission and activities had personal perspective's that helped them implicitly relate to the needs of production agriculture. These perspective's were the natural result of two factors:
Today, far fewer faculty come from farm or rural backgrounds. Further, the food and agribusiness sector, although a major economic sector, is very diverse and does not have the same visibility as a single entity. Even at the production level, industrialisation is altering traditional arms-length market linkages with input suppliers and processors ( Urban 1991; Drabenstott 1994). Therefore, it is important to understand the motivations of scholars and administrators in evaluating academia as a potential strategic resource. The remainder of this section employs a stakeholder analysis approach to examine these perspective's.
Stakeholders for agribusiness research can be divided into three general groups; (a) private firms 4 (b) public entities, and (c) the university community ( Mazzocco and Sonka 1991). Each group has distinctly differing interests in the methods and output of university research. The suggested perspective encompasses all levels of management and the responsibilities of both strategy and operations. This group also includes support industries for private enterprise such as accounting/MIS firms, providers of financing, and consulting firms. Stakeholders for agribusiness research can be divided into three general groups; (a) private firms 4 (b) public entities, and (c) the university community ( Mazzocco and Sonka 1991). Each group has distinctly differing interests in the methods and output of university research. The suggested perspective encompasses all levels of management and the responsibilities of both strategy and operations. This group also includes support industries for private enterprise such as accounting/MIS firms, providers of financing, and consulting firms.
The public entities group consists of all levels of public activity, from local and state agencies to national and international entities. The relevant elements range from elected officials to administrators in program agencies which implement policies.
The university community also has a number of different elements. These include the traditional use of university research by other researchers to further knowledge and build upon prior work. Students, who engage in research for building both a future knowledge base and their own critical thinking skills, also must be considered. University administrators also have an interest in research, especially with regard to monitoring its quality and integrity.
The capacity for academic research consists mainly of human capital. However, the term, human capital, tends to mask the reality that this resource is actually comprised of people responding to needs of various stakeholder groups. These needs are analogous to market demands. The efficient deployment of this research capacity, therefore, requires knowledge of the characteristics of the research products desired by each stakeholder type. Table 1 displays four such characteristics: The capacity for academic research consists mainly of human capital. However, the term, human capital, tends to mask the reality that this resource is actually comprised of people responding to needs of various stakeholder groups. These needs are analogous to market demands. The efficient deployment of this research capacity, therefore, requires knowledge of the characteristics of the research products desired by each stakeholder type. Table 1 displays four such characteristics:
The conflicting needs of each stakeholder group with respect to these characteristics deserve closer examination and are described in each row of Table 1.
Table 1 : Desired research characteristics by stakeholder group
Looking first at the response time category, private firms generally have a very short window of opportunity in which to gather necessary information and make a decision. For example, consider a food-processing firm making a plant location decision. The decision window may be one month or less. In contrast, state and local public entities wanting to attract businesses may need a four to five month study of the economic impact of various types of businesses and how each will effect employment, the tax base, and infrastructure needs. Conversely, the university community typically would have a much longer response time, with the major output being a journal article published two or three years after the study commences.
The nature of the output required by each of the stakeholder groups also varies. Continuing the same example, private firms generally require a recommendation in the form of either well-documented decision advice or a framework with which to analyse the problem. Public entities need facts and figures for policy development, implementation, and monitoring. In contrast, the university community is interested in the development of knowledge and tools, often embodied in students and faculty.
With respect to the specificity category, private firms are interested in forces or decisions affecting their individual firm or industry. Here research output needs to be extremely focused to be useful. Public entities need research results that are consistent with the level of aggregation of their constituents. For example, researchers may develop impact and planning scenarios for municipalities or regions, and the associated budgetary impacts. In contrast, the university community desires research output in forms that can be generalised widely to other industries, other regions, or other problems. Furthermore, academic research generally is publicly available, which can conflict with the proprietary interests of individual private firms.
When defining research quality, each of the stakeholder groups again has different criteria. Private firms require accuracy and realism if the research output is to be the basis of a decision. Public entities place heavy reliance on the credibility and objectivity of the researcher, the academic institution, and the methods employed. Basing public policy on other criteria may jeopardise the integrity and outcome of programs, thereby casting doubt on the judgement of the public officials. The university community defines quality on the basis of peer recognition, often in the form of refereed journal articles and graduate student applications.
The preceding discussion illustrates the conflicting needs of the stakeholder groups for agribusiness. It is clear that university-based researchers today tend to focus on the needs of the university community, as depicted in Figure 1. In doing so they often exclude the research characteristics desired by the other stakeholder groups in choosing problems and methods.
It is important to emphasise that the tendency of university researchers to focus on the needs of the university community is a behaviour that is not unique to the agribusiness subject area. Indeed, critiques of higher education over the last decade consistently have identified this inward focus as a negative factor - whether the specific issue referred to science and engineering, the general education of undergraduates, and/or agribusiness research. Research faculties in business schools also are susceptible to this tendency. A striking illustration is reported in an interview with Richard R. West, Dean of New York University's Graduate School of Business ( Bryne 1990). West asked a small group of his management faculty whether Peter Drucker, the famous management scholar, could get tenure at their institution today. The consensus response was that he probably could not. Despite the major impact of his writing on business managers and academics, Drucker's work evidently did not exemplify the characteristics that the university community values most highly.
Figure 1 : Shifting the focus of agribusiness research.
Although scholarship in the classic liberal arts tradition undoubtedly is a valuable asset, its role is that of a generalised factor endowment (within the previous international competitiveness framework). And it could be argued that such a generalised approach to research and education has contributed to the differing interest alignments described in the preceding stakeholder analysis. If agribusiness scholarship is to be a source of national competitive advantage, it is clear that a more balanced perspective among stakeholder interests needs to be achieved. However, although attaining a more balanced perspective is necessary, it is not likely to be sufficient.
Today's agribusiness environment is increasingly characterised by rapid and novel change ( Ansoff 1984). Reliance upon the traditional model of technology transfer, with discoveries occurring in academia and then transferred to the private sector, is not likely to be sufficiently responsive in these conditions ( Holt and Sonka 1995). Rapid evolution to new forms of relationships among private sector managers, academics, and public sector decision-makers is required to revitalise academic scholarship capabilities.
Implementing the concept of agribusiness scholarship as a strategic resource is likely to require a fundamental shift in the perspective of both academics and their clientele. Part of this shift involves recognising that the perception of academia as the primary source of new knowledge is no longer valid. Indeed numerous agribusiness firms are heavily involved in knowledge creation as well as knowledge application. In this setting, the traditional unidirectional perspective of technology transfer (knowledge flows only from academia to the private sector) has limited value. Alternative perspective's regarding the academic's role must be developed and instituted. Doing so involves creation of a new paradigm regarding the interplay between academia and its clientele.
The scientific method was presented to most of us as an objective exercise in investigating phenomena with which we are unfamiliar. In laboratory and experimental settings, we learned a number of lessons about science and research. One of the most important of these is that the researcher controls the experiment. As individuals progress from being a graduate student to a faculty researcher, scholars become increasingly knowledgeable and competent in their ability, and increasingly responsible for the conduct of the research.
Although the worlds of chemistry laboratories and the other 'hard' sciences are greatly different than that of the social sciences and business, the scientific method also has been the accepted means of approaching problems in the larger fields. Implicit with that acceptance is adoption of the perception of the researcher as expert. Viewed through this 'pure' research lens, the decision-maker (if thought of at all) is treated as a passive subject. Even for applied research, the researcher's role is that of the expert who has primary responsibility for conducting the research and providing recommendations as to what courses of actions should be pursued. This tradition suggests that the decision-maker's primary roles are to (a) having the good sense to contact the researcher for assistance, (b) providing financial support, and (c) implementing the research recommendations.
As noted by Whyte (1991, p.7), "PAR involves practitioners in the research process from the initial design of the project through data gathering and analysis to final conclusions and actions arising out of the research". The researcher has primary responsibility for design and management of the research process but the obligations for the key steps of problem conceptualisation and result implementation are shared. It is noteworthy that first, the PAR approach brings the decision-maker into problem conceptualisation and, second, the researcher now accepts partial responsibility for implementation. The PAR method differs from the traditional view of science in that:
All agribusiness research stakeholders have a vested interest in moving to a new research paradigm such as suggested here. Researchers are provided the opportunity to enhance the relevance and societal usefulness of their efforts. Decision-makers, both in the private and public sectors, can gain from having new sources of expertise available and from shortening lead times necessary to develop innovations and respond to marketplace dynamics.
It is instructive to note that the physical and biological sciences in agriculture often have researchers based in each of the stakeholder groups, namely, private firms, public entities, and universities. They often have forums to foster and maintain relationships among each other, to exchange information, and to enhance the constructive dialogue between stakeholder groups. These interactions better sensitise academic researchers to the research requirements of other stakeholders. One example of such a forum is the Institute of Food Technologists, a group, which brings together researchers from each of the three stakeholder groups. Historically, agribusiness researchers have not had a natural forum to develop these relationships.
A fundamental issue facing the agribusiness research community is the need to develop an enhanced and more effective research capacity. The desired situation is characterised by a more balanced response to the interests of the non-university stakeholder groups. Building capacity in university-based research translates into acquiring or developing additional people who are familiar with the food and agribusiness sector and who are capable of quickly identifying and addressing relevant issues.
The goal of developing an enhanced agribusiness research capacity, which responds in a more balanced manner to differing stakeholder needs, suggests that academics will need to develop a differing view of the private sector. Traditionally, economic and business scholars may have viewed the private sector as their 'laboratory' to produce data. The analogy of industry as a laboratory suggests the researcher's role is that of a detached observer who discovers knowledge from analysis of experimental processes and delivers that knowledge to society. An alternative view of the private sector would see managers as possessors of essential elements of the knowledge required to solve problems. Research to enhance societal knowledge, therefore, must build upon and facilitate interchange between university, private sector, and government participants.
Although becoming irrelevant should be a serious threat for the academic community, Porter's national competitiveness perspective indicates that the risk of an ineffectual research support structure also should be a concern for agribusiness managers. In this increasingly information-driven global economy, the danger of losing competitive advantage is ever present. All of us concerned with achieving competitive advantage in agribusiness (whether in academia, private firms, or the public sector) need to strive to achieve the optimal role for agribusiness research in attaining that advantage.
3 - For the sake of brevity, agribusiness research as used here refers to both agribusiness research and agribusiness management research.
Date Created: 04 June 2005