Vertical coordination from the angle of farmer loyalty and access to credit. Evidence from the Polish dairy sector.

Numerous studies have shown that processing and retail industries have actively engaged in assisting farmers to join the modern food marketing systems. Data from the Polish dairy sector shows that assistance is provided not only for the traditional-channel farmers wishing to modernise, but also for farmers already included in the modern marketing channel. Drawing on the literature two explanations could be provided to account for this phenomenon: 1) even the modern-channel farmers lack sufficient funds to maintain required quality/quantity on their own; 2) after undertaking the necessary adjustments the modern-channel farmers are more likely to quit their relationship with current processor and turn elsewhere so the assistance is needed to prevent them from doing that. Basing on the household data, it is robustly found that these hypotheses could provide at most partial explanation for vertical linkages observed between modern-channel processors and farms. The present paper takes advantage of logit models, instrumental variables’ approach, panel data estimations as well as propensity score matching methods.