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production cooperatives in which production inputs, namely machinery and

capital, are pooled among members (Azadi et al. 2010). Generally, one of the
main stimuli behind cooperative-managed farms is the economy of scale (or return
to scale), which means firm increase in their size in order to remain competitive

(Jones and Kalmi 2012).

So far, many studies have been dedicated to examine, both theoretically
and empirically, the relationship between cooperation and efficiency. In the
literature, there are two main views towards cooperative in terms of efficiency;

one group claims that cooperative has more advantages compared to investor-

owned firms (IOFs) and can increase efficiency (Dhehibi et al. 2014; El Ghali et
al. 2012; Krasachat and Chimkul 2009) and the other group mainly focus on

disadvantages of cooperative (Sexton and Iskow 1993; Nilsson et al. 2009). As
mentioned by Soboh et al. (2009), the arguments of both groups are defensible.

Cooperatives have some positive external effects that can indirectly influence
efficiency. For instance, cooperative could increase the efficiency at

macroeconomic level (Royer, 2014), enhance environmental efficiency (El Ghali et
al., 2012), increase members’ technical efficiency (Abate et al., 2014), increase

the technical efficiency (TE) but decrease the scale efficiency (SE) (Krasachat and
Chimkul, 2009), increase cost efficiency (Hailu et al., 2005).

On the other hand, many studies point out that cooperatives are
technically and economically inefficient because of several reasons such as the

horizon problem, principle-agent problem, free riders, portfolio problem, member
heterogeneity and financial control of members (Cook 1995; Royer 1999; Soboh

et al. 2009). Moreover, a comprehensive study from Sexton and Iskow (1993)
noted that cooperative could be economically inefficient compared to profit firms.

The economic inefficiency might result in technical inefficiency and lead to
allocative inefficiency.

In the case of Iran, increasing efficiency has been a prominent goal for
policymakers in the agricultural market due to its low efficiency (Annual Report

2015). Meanwhile, this issue is substantially important for strategic crops like
sugar beet, which has become one of the strategic agricultural products. West

Azerbaijan province is one of the main producers of sugar beet in Iran (Annual
Report 2015). During the past few years, sugar beet production has experienced

a declining trend and decreased from 6.5 million to 3.89 million tonnes (Annual

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