Member participation and relational contracts in agribusiness co-operatives in Brazil

The institutional environment and uncertainty may influence the contractual design of producer-owned and controlled organizations in agribusiness. In Brazilian co-operatives, it is possible to observe more informal and relational behavior than formal written contractual relations. This essay discusses and explains why informal and relational contracts occur in co-operative organizations and searches for the logic of this kind of contract. A factorial analysis of empirical data shows the importance of co-operative economic performance for improving member participation and member relations. The paper concludes that informal and relational contracts may improve influence rights as residual rights in cooperatives that can minimize transaction costs in an uncertain institutional environment.