Journal of Agricultural Science and Technology B 6 (2016) 307-320
doi: 10.17265/2161-6264/2016.05.004
Modeling Farm Management Modernization: Case Study
of Japanese Rice Farming Corporations
Yukio Kinoshita
1
and Nobuo Kimura
2
1. Department of Food Production and Environmental Management, Faculty of Agriculture, Iwate University, Morioka, Iwate
020-8550, Japan
2. Emeritus at Iwate University, Morioka, Iwate 020-8550, Japan
Abstract: While conventional family-owned and family-operated farms remain the most common structure, the number of Japanese
agricultural corporations has increased in recent years as a result of changing policies. Some of them are possibly starting to adopt
modern corporate management practices to remain viable in a more competitive environment. However, changes in the business
structure have not always been accompanied by changes in farm management practices. This study represents a theoretical and
empirical investigation into farm modernization practices to provide perspective and recommendations to enhance farm business.
Various aspects of farm modernization were considered, including temporal, economic and functional modernization. Critical
elements of farm modernization were examined using a structural equation model of surveys, wherein questionnaires were delivered
to 2,260 agricultural corporations across Japan in 2014 and 2016, generating 669 usable responses from rice farming corporations.
Overall, these corporations demonstrated moderate degrees of modernization, indicating that they have not yet completely
transitioned from conventional management styles to modern corporate management and that the farm-household complex system
still exists for many of them. It was also found that farm modernization is significantly affected by both production and business
management systems, although it was unclear whether a farmer’s managerial capabilities were critical for farm modernization. The
findings of this study indicate that current farming corporations may benefit from incorporating additional modernization practices.
The analytical framework and results will help farmers to better understand their management practices and can be used to provide
ideas for policy development to promote competitive farm businesses.
Key words: Farm business, farming corporations, modernization of management, structural equation model.
1. Introduction
Family-owned and family-operated farms, which
are a common business structure in agriculture, are
probably starting to adopt modern corporate
management practices in Japan. Over the last decade,
several agricultural policies have been developed to
boost the corporatization of business-orientated family
farms and the entry of non-agricultural corporations
into farming in Japan. For instance, a farming
corporation can benefit from official support programs,
such as preferential lending, if its brief business plan
is approved by the municipality in which it is located.
This has led to an increase in the number of
agricultural corporations to 23,158 in 2015 (Table 1)
Corresponding author: Yukio Kinoshita, Ph.D., research
field: farm management.
and the number of individual farms to 1.34 million.
Among these, 6,540 corporations, representing 28% of
all Japanese agricultural corporations, produced rice
as the main crop. Furthermore, there has been a
seven-fold increase in the entry of corporations from
non-agricultural sectors into the agricultural sector
following the deregulation of farmland use,
particularly since 2009. However, changes in the
business structure, such as the involvement of stock
corporations and agricultural producers’ cooperative
corporations, have not always been accompanied by
changes in farm management practices.
To remain viable, Japan’s agricultural industry
needs to become more competitive, particularly
if any possible trade arrangements result in more
rice being imported from countries that grow short- and
D
DAVID PUBLISHING
Modeling Farm Management Modernization: Case Study of
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Table 1 Numbers of agricultural corporations with sales in Japan.
Year
Number of agricultural corporations
2000 2005 2010 2015
Total 13,186 13,941 17,040 23,158
Producing rice as the main crop 1,922 1,928 3,861 6,540
Source: customized data from the Census of Agriculture and Forestry, Ministry of Agriculture, Forestry and Fisheries, Japan.
medium-grain varieties of Japonica rice (Oryza sativa)
and Japan’s five-decade-old rice-reduction program
faces abolition. Numerous potential determinants of
competitiveness in agricultural sectors have
previously been identified, including farm size, factor
intensity, farm specialization, human capital,
consumer demand, natural environment, density,
facilities, public investments in infrastructures, public
policies and regulations, and research and
development [1]. Previous studies have compared the
overall quantitative measures of the Japanese rice
industry, such as the industry’s economic efficiency,
physical productivity [2, 3], product quality and
consumer preference [4-6], with little consideration of
internal factors at the farm level, such as, business
strategy and management capability, as drivers of
farm management modernization.
Japanese rice farmers need to revamp their
strategies to adapt to domestic and international
changes in agricultural policy. Therefore, a theoretical
and empirical investigation into farm modernization
practices will provide a new perspective and
recommendations to enhance farm business in Japan.
Although Kimura [7] emphasized the critical factors
required for farm business growth, including
management systems, managerial capabilities and
modernization practices, the relationships among these
factors have not been completely assessed. This study
aimed to investigate the relationship between
production and business management systems,
managerial capabilities, and the modernization of farm
management. More specifically, each of these is first
described qualitatively and then analyzed
quantitatively to examine the modernization of
Japanese rice farming corporations.
2. Materials and Methods
2.1 Theoretical Framework
2.1.1 Farm Modernization
Previous literature has pointed out that tasks carried
out by farmers have been changing in modern
agriculture of developed countries, where farm
businesses were earlier mostly owned and operated by
families. Gasson and Errington [8] stated that with
recent changes in the farm business environment,
managerial task maybe come more important than
manual and technical tasks on farms, which poses the
question as to which managerial tasks were addressed
more generally in farm businesses. Hutson [9] claimed
that farmers should organize tasks adapting to the
modernization of sourcing farm inputs (e.g., family
and hired labor, capital and farmland) into their
management process. Kingwell [10] summarized that
future farmers may benefit more by managerial tasks,
such as planning and analyzing at office than by
outside tasks on farm; thus, they would involve more
and more planning, organizing and monitoring of farm
businesses.
With the increasing importance of managerial tasks,
the skills required by farmers in modern agriculture
have been specified through various case studies of
family farms from developed countries [11-14].
Olsson [11] stated that managerial tasks and
entrepreneurship of farmers would become essential
for future growth in farm businesses. McElwee and
Bosworth [13] implied that a wide range of tasks and
skills relating to entrepreneurship were required of
farmers who develop enterprising-oriented farm
businesses. Nuthall [12] revealed that
information-gathering and information-using skills
Modeling Farm Management Modernization: Case Study of
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were critical under more modernized agriculture, and
especially, the diffusion of information technology
serving well for farm management. Rikkonen et al.
[14] emphasized that managerial competence drew
attention when farmers addressed a market-driven
environment and invested in their business’ growth,
and especially that their development of a vision and
of a long-run business plan for the farm was
significant. Other studies noticed managerial behavior
as a factor influencing farm business profitability [15,
16]. For example, Kingwell [15] found that time
management at work was possibly critical for
improving profitability of farm business that faced a
more complex situation than before.
Furthermore, it had been emphasized that
conventional farm management differs from modern
corporate management [17-20]. Internationally, this
has been seen as a barrier to competing on a global
scale, so transitioning from conventional farm
management to modern corporate management is a
pressing challenge for farms in developed countries.
Specifically, Kimura [17] used two measures to
capture the progression from livelihood farming to
corporate farming: quantitative measures (farm size
and sales) and management styles (business strategies,
extent of modernization, management practices and
human resource development).
Since family-owned and family-operated farms are
a common business structure, farm entities often
represent a farm-household complex as individuals,
partnerships and occasionally private companies [21,
22]. Thus, there is an intimate relationship between
the farm and the family, which naturally leads to
conflict over capital and labor allocation. A further
difference between the farm-household complex and
public company arrangements is that the owners of the
former are not usually separated from the business in
space or in management, whereas those of the latter
are. Thus, the modernization of farm management is
considered to involve practices that allow a farm to be
split from the farm-household complex and managed
as a business to reduce conflict between the families.
According to Kimura [7], modernization requires
temporal, economic, functional and spatial changes,
all of which are critical for business growth in family
farms. More specifically, temporal modernization
involves the clear segregation of business hours from
private hours; economic modernization involves
controlling accounting and financial practices, and
isolating business budgets from household budgets;
functional modernization relates to organizing and
coordinating work duties and separating work and
family relationships; spatial modernization requires a
separate business and work space. Similarly, Nuthall
[21, 22] argued that temporal modernization is the
separation of the labor component of the farm from
the farm-household complex, economic modernization
is the separation of the capital component, and spatial
modernization is the separation of the spatial
component. Functional modernization is not clearly
referred to by Nuthall [21, 22], but may be related to
the separation of the management component.
Overall, the modernization of management is an
essential concept that examines the extent to which
modern corporate management has developed in
family-owned and family-operated farms. Among
these four dimensions of modernization, spatial
modernization is the least controllable at the farm
level, because, unlike the large-scale farms that are
found in the United States of America and Australia,
the predominant style of farm residences in the
Japanese countryside (and likely other parts of Asia)
have spatial structures, in which the living space is not
separated from the production space. Consequently,
this study focused on temporal, economic and
functional modernization, indicators for which are
provided in Table 2.
2.1.2 Management Systems
From the perspective of farm management systems,
the most basic type of infrastructure is the agricultural
land, which has traditionally been improved through
farmland readjustments, the construction of irrigation
Modeling Farm Management Modernization: Case Study of
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Table 2 Different aspects of management improvement intended for the modernization of farm management.
Temporal modernization
Holidays are periodically set and taken;
Time management is practiced (e.g., fixed daily work hours and breaks);
Employees are hired to reduce overworking during busy seasons;
Work is spread over the year to resolve slack seasons;
A systematic work plan is established and implemented.
Economic modernization
Periodic (e.g., monthly) salaries are paid to family workers;
Managers are paid to manage;
Farms are managed based on financial targets, such as revenues and expenses;
Accounting and financial management employ double-entry bookkeeping;
Results are analyzed, diagnosed and adopted in succeeding plans.
Functional modernization
Work roles are classified according to the technical level of difficulty;
Work roles are classified as managerial- or production-based;
Supervisors are assigned as required and provide the necessary authority;
Farmers receive training;
Positions in the workplace and the duties of each member are documented.
Source: Kimura [7].
and drainage facilities, soil improvement, farmland
maintenance, etc.. Investment in fixed equipment,
such as farm buildings or farm machinery, has also
been of fundamental importance to modern farms. In
addition, infrastructure for research and development
(R&D) systems and the introduction of advanced
technologies in production systems may also be
principal requirements for modern farming, and
occasionally for innovation in the production process.
However, in modern farm management, not only is
capital investment in infrastructure important for
achieving the primary objective of agricultural
production, but the installation of various equipment
and facilities for farm business management is also
becoming increasingly essential. Thus, a separate
business and workspace, and the installation of
information and communication technology (ICT) in
such spaces would affect the modernization of the
farm-household complex from a spatial perspective
and would help streamline the farm business.
2.1.3 Managerial Capabilities
From a human perspective, managerial capability is
a crucial driver of farm business viability [7, 17,
23-25]. For example, based on his own data and a
review of many other studies, Nuthall [24, 25]
revealed a wide range of managerial capabilities that
are required in farmers (e.g., technological,
observational and planning skills) and identified
several factors that may affect these capabilities.
Kimura [17] argued that farm managers need
superior skills associated with the three functions of
entrepreneurship, adaptability and administration, and
also listed specific skills and abilities that are ideally
and theoretically required to develop farm
management from the livelihood stage to the
corporation stage: farmers must first enhance their
capabilities as industrialists (“entrepreneurship”) in
the livelihood stage and then their capabilities as
managers (“administration”) in the corporation stage.
In addition, in the face of constant change and
uncertainty in the society and economy, farmers
should also cultivate their adaptive capability to make
their farm viable at any stage of the farm management
development process.
Specifically, entrepreneurial capability requires
philosophical values, hope and vision, the setting of
aggressive targets, entrepreneurial advancement and
risk-accepting behavior; adaptive capability requires
curiosity, predictive ability and preparedness;
administration capability requires an
information-gathering ability, rational thinking and
analytical behavior.
Modeling Farm Management Modernization: Case Study of
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2.2 Survey Method and Sample Data
A mail survey was used to obtain data from rice
farming corporations across Japan. The survey
questions explored five issues: (1) the operating
structure, including resources, such as the amount of
land and labor on the farm, and business tools; (2)
management attitudes, including the farming purpose
and managerial capabilities; (3) business strategies,
including goals and specific planning; (4) the
workforce and financial management; (5) sales and
marketing. It should be noted that the responses that
constituted the data and which the conclusions based
on, were self-assessments.
Because of the large number of linkages and
variables involved, a large sample size was desirable.
Therefore, this survey was sent to directory lists of
2,260 agricultural corporations across Japan provided
by private credit agencies in December 2014 and
February 2016, which generated 774 usable responses.
In this analysis, it was focused specifically on rice
farming corporations, which gave a sample size of 669
survey responses, representing approximately 10% of
all Japanese rice farming corporations as of February
2015 (Table 1). Bentler and Chou [26] and Hair et al.
[27] suggested that the minimum sample size should
be five times the number of parameters being
estimated. Therefore, 669 observations were considered
for statistical analysis in the final summary model.
Table 3 summarizes the characteristics of the
sampled Japanese rice farming corporations. The
respondents constituted a tolerably balanced sample in
terms of rice industry locations, which mainly
included the Hokuriku, Tohoku and Chugoku regions,
with relatively fewer respondents from other regions.
The respondents also constituted a tolerably
balanced sample in terms of legal status of the farm,
although there were relatively fewer agricultural
producers’ cooperative corporations represented based
on the Census of Agriculture and Forestry 2015, 38%
of Japanese rice farming corporations stand as both a
limited liability company and a stock corporation,
while 54% are an agricultural producers’ cooperative
corporation. Individual motivated farmers and
community-based farm cooperatives are the two types
of Japanese core farmers identified by the general
criteria [2]. Individual motivated farmers are typically
in the form of commercial enterprises, such as a
limited liability company and a stock corporation,
with the basic principle of maximizing their profit. In
contrast, community-based farm cooperatives are
composed of many small family farms and are often in
the form of agricultural producers’ cooperative
corporations with the spirit of mutual assistance.
Given an executing rate of 40% in a Japanese
rice-reduction program, it was estimated that all
Japanese rice farming corporations had a mean of 23.2
hectares of the total farmland. This value was
calculated from the Census of Agriculture and Forestry
2015,
showing a mean of 13.9 hectares allocated only for
rice planting out of the total farmland. Therefore, the
Table 3 Characteristics of the sampled Japanese rice
farming corporations.
Number of samples 669
Response rate 36%
Region
Hokkaido
Tohoku
Hokuriku
Kanto/Tozan
Tokai
Kinki
Chugoku
Shikoku
Kyusyu
8%
17%
32%
10%
4%
4%
17%
2%
5%
Organization type
Limited liability companies 21%
Stock corporations 26%
Agricultural producers’ cooperative
corporations
45%
Other 9%
Farmland scale
Mean
Median
35.9 ha
22.4 ha
Sales
Mean
41.8 million yen
(363,478 USD)
Median
27.2 million yen
(236,522 USD)
Sales have been converted at a rate of 115 yen to 1 USD.
Modeling Farm Management Modernization: Case Study of
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312
respondents were likely to be tolerably consistent with
the overall Japanese population in terms of farmland
scale, exhibiting mean scale of 35.9 hectares and
median scale of 22.4 hectares. Finally, the respondents
were likely to be fairly consistent with the overall
Japanese population in terms of sales, exhibiting mean
sales of 41.8 million yen and median sales of 27.2
million yen, compared with a mean of 41.2 million
yen across all Japanese rice farming corporations
according to the Economic Census 2012.
3. Results and Discussion
3.1 Model Development
The factors included in the model are shown in Fig. 1.
It is hypothesized that the extent of farm management
modernization is dependent on how production and
business management systems are developed, and how
the managerial capabilities of a farm manager are
assessed. Therefore, by drawing on the modernization
framework, a set of questions were developed (Table
2). One point was given for each practice that was
complied with, and the points were then summed.
Because there are five management practices for each
aspect of modernization, the total scores for each
ranged from 0 to 5 points. The final results for each
aspect are provided in Table 4, which show that
economic modernization was the most advanced (3-5
points for most farms), while functional modernization
was the least advanced (0-2 points for most farms).
Fig. 1 A structural model of farm modernization.
Table 4 Frequency distribution of the extent of farm modernization.
Score Temporal modernization Economic modernization Functional modernization
0
1
2
3
4
5
81
138
154
96
99
101
74
116
103
120
140
116
158
128
147
111
77
48
Total number of samples 669 669 669
Average of scores
Standard deviation
2.44
1.61
2.72
1.64
1.95
1.55
Investments
R&D
Office space
ICT devices
Entrepreneurship
Administration
Adaptability
Production management systems
Business management systems
Managers’ capabilities
Economic modernization
Functional modernization
Temporal modernization
Modeling Farm Management Modernization: Case Study of
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Production management systems have traditionally
been a major part of farm systems, and are expected to
have a greater influence on production management at
the field level than personnel and financial
management at the non-field level. However,
investment and research and development are
considered to be related to production management
systems, as they effectively support viable and
innovative farm business in the long term. By contrast,
business management systems are not always an
important part of farm systems, particularly in family
farms, as farm-household complexes often continue to
use conventional practices. These are of more
importance in farming corporations, as these are
business-oriented and more organized, operating at a
larger scale and with more hired workers.
Consequently, business management systems are
expected to have a large impact on practices relating
to personnel and financial management in farming
corporations. Furthermore, office space and ICT
devices are considered to be related to business
management systems, because these are generally
required in a modern business environment, including
farm businesses.
The managerial capabilities of a farm manager are
referred to as “managers’ capabilities”. These are
generally considered essential to allow a manager to
work across various functions in business
management, and the same would be true for a farmer,
particularly in a farming corporation setting. The
constituent elements of entrepreneurship, adaptability
and administration are considered to be related to the
managers’ capabilities to fulfill basic functions in
farm management, as previously explained.
Seven items relate to investment and R&D in
production management systems. Investment
predictors lead a farm manager to follow his/her prior
commitment to investment, investment strategy for
mechanization and investment strategy for advanced
technology, while R&D supports a prior commitment
to advancing technology, experimental fields,
experimental crops and the achievement of production
innovations. Six items relate to office space and ICT
devices in business management systems. Office
space is a predictor of the installation of office
buildings/rooms, a calendar of operations and a
trading name, while ICT devices help with the
installation of software for management, email/website
and a mobile phone for the farm business. A further 10
items are associated with entrepreneurship, adaptability
and administration in relation to managers’ capabilities.
Entrepreneurship is a predictor of values, hope and
vision, ambitious goal setting, entrepreneurial
development and risk-accepting behavior, while
adaptability is a predictor of curiosity, predictive ability
and preparedness, and administration is a predictor of
information-gathering, rational thinking and analytical
behavior.
All 23 of these variables were measured in this
survey. Thirteen of these were measured as dummy
variables (i.e., 1 = complied with, 0 = not complied
with). The remaining 10 were capability-related
questions that were self-rated on the Likert scale with
five levels; therefore, these were converted into
dummy variables (1 = a positive response of “agree”
or “strongly agree” and 0 = a neutral or negative
response of “disagree” or “strongly disagree”).
All the observed variables and constructions
outlined above were built into a structural equation
model that was an expansion of the general model
presented in Fig. 1. A schematic diagram of this
hypothesized model is shown in Fig. 2. The arrows
show the hypothesized direction of influence, each of
which represents a linear equation. For example, the
linear equation between production management
systems (PS) and temporal modernization (TM) is as
Eq. (1):
TM = a + bPS + e (1)
where, a = 2.444 and b = 1.000 (0.488 in a
standardized form).
Modeling Farm Management Modernization: Case Study of
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314
Fig. 2 Hierarchical structural equation model of farm modernization depicted as a path diagram.
The variables in rectangular boxes are the observed variables; the variables in the elliptical boxes represent latent variables as
independent variables or predictors, the values of which were obtained from the defined relationships; the variables in circles are
error terms (labeled e1-e36); the arrows indicate the hypothesized direction of influence.
e5
Observed variables
Prior commitment to
investment
Investment strategy for
mechanization
Investment strategy for
advanced technology
Experimental fields
Experimental crops
Prior commitment to
advancing technology
Rooms/buildings
Calendar of operations
Email/website
Software for management
work
Trading name
Mobile phone
Values, hope and vision
Setting ambitious goals
Curiosity
Risk-accepting behavior
Entrepreneurial development
Factors
(as predictors or independent variables)
Predictive ability
Preparedness
Information-gathering ability
Rational thinking
Analytical behavior
Investments
R&D
Office space
ICT devices
E
ntrepreneurship
Administratio
n
Adaptability
Production
management
systems
Business
management
systems
Managers’
capabilities
Economic
modernization
Functional
modernization
Temporal
modernization
Dependent variables
Achievement of production
innovations
e14
e15
e16
e17
e18
e19
e20
e21
e22
e23
e24
e7
e8
e9
e10
e11
e12
e4
e6
e3
e2
e1
e28
e36
e35
e34
e33
e32
e31
e30
e29
e27
e26
e25
e13
Modeling Farm Management Modernization: Case Study of
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315
Thus, taken together, the arrows provide a set of
simultaneous equations, making it possible to
determine the parameters for all of the equations,
including those for the latent variables, in any given
set.
The objective of this study was to determine which
variables influence the degree of farm modernization.
It was hypothesized that farm modernization depends
on the latent variables “production management
systems”, which contains the two predictors
“investments” and “R&D”; “business management
systems”, which contains the two predictors “office
space” and “ICT devices”; “managers’ capabilities”,
which contains the three predictors “entrepreneurship,”
“adaptability” and “administration”. None of these
variables were directly observed, but they were
inferred from their ultimate impact on the observed
variables.
3.2 Testing the Model: Causal Relationships between
the Factors Affecting Farm Modernization
Using the proposed model and the values for all the
observed variables, it was possible to calculate the
model parameters and “goodness of fit” statistics
using the structural equation modeling package IBM
SPSS Amos 20. The particular version of the model
presented was the culmination of many trials selected
on the basis of its compliance with argued logic
around farm modernization and its goodness of fit.
The “goodness of fit” parameters of the final model
indicated that it was statistically acceptable and
supported the farm modernization relationships. No
single statistic is used to assess structural equation
models. However, the most commonly used is
Chi-squared divided by the degrees of freedom
(CMIN/df), for which any value below 5 is considered
reasonable [28], and 2 or less is considered excellent.
The CMIN/df value for this model was 3.122,
representing a significance level < 0.001. Other
popular statistics are the “goodness of fit index” (GFI)
and “adjusted goodness of fit index” (AGFI). The GFI
is a measure of fit between the hypothesized model
and the observed covariance matrix [29], while the
AGFI corrects the GFI, which is affected by the
number of indicators of each latent variable. Both
these indices range from 0 to 1, with a value of over
0.9 generally indicating an excellent model fit. In this
case, the GFI was 0.901 and the AGFI was 0.879,
further indicating the acceptability of the hypothesized
model. Finally, the “root mean square of
approximation” (RMSEA) [30] is also often used,
which fits the model to the population moments rather
than the sample moments and requires a value of less
than 0.1. For this model, the value was 0.056, with a
significance level of 0.006.
Table 5 provides the relevant regression parameters,
including the significance levels, obtained from
solving the model. Since the objective of this study
was to determine the relationship between the latent
variables, the constants are not presented. The
standardized regression coefficients are also presented
to allow the relative importance of the variables to be
assessed since they have different units.
The majority of model parameters were acceptably
significant (Table 5). It was found that the latent
variables “production management systems”
“business management systems” and “managers’
capabilities” were most strongly related to economic
modernization (R
2
= 0.624), followed by temporal
modernization (R
2
= 0.499) and functional
modernization (R
2
= 0.438). Among these, production
management systems and business management
systems were of equal importance to economic
modernization, while managers’ capabilities were only
one-third as important as these. Similarly, managers’
capabilities were even less important than both
production and business management systems in
terms of temporal modernization. By contrast, neither
managers’ capabilities nor business management
systems were particularly important in terms of
functional modernization, whereas production
management systems were very important. Thus, overall,
Modeling Farm Management Modernization: Case Study of
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316
Table 5 Model parameters determining farm modernization.
Variable pair and relationship direction
(fromto)
Standardized regression coefficient Significance level
Production management systems Temporal modernization
Business management systems Temporal modernization
Managers’ capabilities Temporal modernization
Production management systems Economic modernization
Business management systems Economic modernization
Managers’ capabilities Economic modernization
Production management systems Functional modernization
Business management systems Functional modernization
Managers’ capabilities Functional modernization
Production management systems Investments
Production management systems R&D
Business management systems Office space
Business management systems ICT devices
Managers’ capabilities Entrepreneurship
Managers’ capabilities Adaptability
Managers’ capabilities Administration
Investments Prior commitment to investment
Investments Investing strategy for mechanization
Investments Investing strategy for advanced technology
R&D Prior commitment to advancing technology
R&D Experimental fields
R&D Experimental crops
R&D Achievement of production innovations
Office space Office buildings/rooms
Office space Calendar of operations
Office space Trading name
ICT devices Software for management work
ICT devices Email/website
ICT devices Mobile phones
Entrepreneurship Values, hope, and vision
Entrepreneurship Setting ambitious goals
Entrepreneurship Entrepreneurial development
Entrepreneurship Risk-accepting behavior
Adaptability
Curiosity
Adaptability Predictive ability
Adaptability Preparedness
Administration Information-gathering
Administration Rational thinking
Administration Analytical behavior
0.488
0.483
0.166
0.545
0.538
0.195
0.506
0.378
0.200
0.660
0.390
0.981
0.905
0.967
1.000
0.991
0.499
0.446
0.374
0.260
0.677
0.545
0.217
0.540
0.439
0.449
0.416
0.615
0.276
0.629
0.618
0.607
0.548
0.604
0.417
0.637
0.599
0.426
0.574
-
-
-
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
< 0.001
-
< 0.001
< 0.001
< 0.001
-
< 0.001
< 0.001
-
< 0.001
< 0.001
-
< 0.001
< 0.001
-
< 0.001
< 0.001
< 0.001
-
< 0.001
< 0.001
-
< 0.001
< 0.001
-: it was not possible to calculate a significance level since these variables are latent.
production management systems have a strong impact
on all three kinds of modernization, while business
management systems affect some types of
modernization, and managers’ capabilities have little
effect on any kind of modernization. This
demonstrates that useful and relevant production and
business management systems should be developed by
farms to promote their modernization.
Considering the latent variable “production
management systems” the strongest predictor was
“investments” (R
2
= 0.436), while “R&D” was very
weak (R
2
= 0.152). Investment reflects a prior
commitment to investment by farm management,
rather than which production input was strategically
invested in, while R&D reflects experimental
activities at the farm level.
Considering the latent variable “business
management systems”, both the predictors (“office
space” and “ICT devices”) were very significant (R
2
=
0.963 and 0.819, respectively). These high coefficients
indicate that a farm with a full complement of
business management systems will allocate specific
Modeling Farm Management Modernization: Case Study of
Japanese Rice Farming Corporations
317
business management space on the farm, and then
install ICT devices, such as a personal computer with
some software for business use in its management
space.
Considering the latent variable “managers’
capabilities”, “adaptability” (R
2
= 1.000),
“administration” (R
2
= 0.982) and “entrepreneurship”
(R
2
= 0.934) were all very significant. It was suggested
that a capable manager will have a wide range of
excellent skills that fulfill the functions of
entrepreneurship, adaptability and administration in
farm management. Among the ideal skills and abilities
for a farm manager listed by Kimura [17], this result
demonstrates the following specific skills and abilities:
a manager with fertile entrepreneurship skills will
have strong philosophical values, hopes and vision,
aggressive targets, entrepreneurial advancement and
risk-accepting behavior; a manager with great
adaptability will have preparedness and curiosity; and
a manager with perfect administration skills will
exhibit information-gathering and analytical
behaviors.
3.3 Implications toward Farm Management
Modernization
Ideally, farming corporations should adopt
management styles that are independent of the
household entity, as is generally the case with public
companies. However, the data shown in Table 4
indicate that the Japanese rice farming corporations
surveyed have not yet fully transitioned from
conventional management styles to modern corporate
management, as they did not comply with most of the
conditions relating to farm modernization. It was
expected that the farm-household complex system
would still remain for a lot of the Japanese farming
corporations. Compliance with certain conditions
could be explained by the formal and legal
requirements for the corporatization of a farm, such as
establishing working regulations, introducing
double-entry bookkeeping, and paying salaries and
management remunerations for tax purposes. These
requirements have partly enhanced temporal and
economic modernization. However, Japanese farming
corporations may benefit from incorporating
additional modernization practices, raising the
question of how a manager of farm corporations
should push for further modernization of the farm.
The model testing of this study showed that certain
practices and related factors had a particular effect on
the modernization of Japanese rice farming
corporations. For example, economic modernization
was greatly enhanced by both production and business
systems. One of the effective practices that related to
production systems was giving priority to investment
in farm management. This may help a farm manager
to consider a longer-term business plan with the view
of investment and finance. Another effective practice
that related to business systems was the installation of
software for management use in an office. This
practice may help a farm manager to efficiently and
accurately manage financial work.
Temporal modernization was also enhanced
through production and business systems, albeit to a
lesser extent than economic modernization. In this
context, some effective practices that related to
production systems were the pursuit of
capital-intensive farming by investing in machinery
and giving priority to investment in farm management.
These practices may help a farm manager to manage
farm work more rationally to improve labor
productivity. Another effective practice that related to
business systems was the installation of office space
with ICT devices. This practice may help a farm
manager to manage time more effectively, separating
work time on the farm from non-work time at home.
However, there will always be natural constraints on
time management on farms as a result of seasonal or
unstable production processes, meaning that temporal
modernization will be much more difficult to achieve
than for general businesses.
Functional modernization has not seen as much
Modeling Farm Management Modernization: Case Study of
Japanese Rice Farming Corporations
318
progress as economic or temporal modernization.
Japanese rice farming corporations are not yet well
organized, which implies that family-based
relationships are still at play even in farming
corporations. Nevertheless, functional modernization
was also more greatly enhanced by production
systems, rather than business systems or the
manager’s capability. Production systems with greater
mechanization may help a farm manager to rationally
manage operations in the field rather than in an office.
The model used in this study clearly demonstrates
that essential factors, such as entrepreneurship,
adaptability and administration, support the specific
capabilities of managers in Japanese rice farming
corporations. However, it is difficult to assert that a
farmer’s managerial capabilities are critical to farm
modernization, as none of the regression coefficients
of the managerial capabilities were strong for any type
of modernization in this model. It was not clear why a
gap existed between managers’ capabilities and the
extent of farm modernization, but it is possible that
even a farm manager with high capabilities may not
have enough know-how about workforce and financial
management. If this is the case, providing education
and training to managers to acquire the relevant
knowledge and skills would be effective in advancing
the modernization of Japanese rice farming
corporations. Alternatively, because of the weak link
between managers’ capabilities and modernization of
farm management, even a corporatized farm could
remain too unorganized for managers’ capabilities to
be effectively modernized. Further investigation of
how the capabilities of farm managers contribute to
performance in areas other than farm management
modernization would also be of interest, because they
are generally crucial drivers of farm business viability.
Meanwhile, increasing the scale of farming is
expected to have a positive effect on farm
management modernization. However, in any version
of the developed model among the culmination of
many trials, the scale of farmland had not been found
as a significant predictor of modernization. At this
point, it should be considered that in the sample data
invested in the study, different types of farms, such as
a limited liability company, a stock corporation and an
agricultural producers’ cooperative corporation, are
mixed, while the distribution of farmland scale was
similar in any types of farms. Many individual
motivated farmers in the form of commercial
enterprises would be keen on modernizing their farm
management practices, often by increasing the scale of
the business and hired labor. In contrast, most
agricultural producers’ cooperative corporations,
presumably, still remain as the farm-household
complex system containing conventional family farms,
even if those are corporatized just to increase their
farmland scale. Therefore, when developing a model,
the effect of difference in the farmland scale on
modernization could be confused with a similar effect
of difference in the legal status of the farm. As
emphasized by Kinoshita and Oikawa [31], this
implies that conditions, such as corporatization and
enlargement of the farm, are not enough as triggers
but just requirements for progressing modernization of
farm management.
Suggestively, the findings of this study will help
farmers to better understand their management
practices in the face of intensified global competition,
which particularly raises challenges for family-owned
and family-operated farms. It is important for farming
corporations to adapt their management practices so
that they can quickly respond to changing market and
policies. If corporatized farms are likely to be popular
in Japan as a result of international pressures and
changes in policy, the particular challenge that will
need to be addressed by researchers and policy makers
is to more clearly specify what the ideal and workable
management system is and what measures are helpful
for realizing such management in farming
corporations to promote competitive farm businesses.
More specifically, the extension of the financial
support policy that traditionally focuses on production
Modeling Farm Management Modernization: Case Study of
Japanese Rice Farming Corporations
319
systems (e.g., the introduction of larger machinery) to
include investments in business systems at the farm
level (e.g., ICT devices for management use) could
help in improving farm business viability.
4. Conclusions
To assess the factors that impact farm
modernization, the farm management practices carried
out by Japanese rice farming corporations that differ
from the conventional management of family farms
were analyzed. Also a suitable model was developed
to describe the factors that affect farm modernization.
Overall, investment in both production and business
systems is important for helping farms to modernize,
while the sample farms are halfway through the
modernization of their farm management practices.
Thus, Japanese rice farmers should incorporate such
investments into their competitive strategies.
Acknowledgments
This research was supported by JSPS KAKENHI,
Grant Number 15K03642. The authors would like to
thank Teikoku Databank, Ltd. and Tokyo Shoko
Research, Ltd. for the provision of directory lists.
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