Diversification Decisions in Agriculture: The Case of Agritourism in Kansas

The thesis of this paper is that diversification decisions may be described by a three-stage sequential framework. The framework begins with the choice between on-farm and off-farm investments and ends with the selection of activities that decision-makers believe would be more effective in addressing their needs. The paper tests this thesis using data collected from participants in an agritourism workshop in Kansas. The test begins at the framework’s second stage, where decision-makers decide between intensifying current operations to take advantage of scale and/or size economies, and diversifying to deploy slack resources in other businesses. The third stage involves the selection of alternative enterprises to meet decision-makers’ desired objectives. It is hypothesized that the second stage decision choice is defined by decision-makers’ demographic characteristics and their motivational factors. Demographic characteristics, such as age and education, also serve as proxies for decision-makers’ embedded capabilities. The results show that for this case study, all demographic characteristics but gender are statistically significant, with education exhibiting the highest positive impact on the decision to diversify at the second stage. Economics was also determined to be a positive motivating factor in the intention to choose marketing, tourism and fishing and hunting enterprises at the third stage. However, personal satisfaction was a positive motivating factor for all enterprises except fishing and hunting. The impact of community as a motivation for any of these enterprises was split. It was negative for marketing and positive for accommodation and food service and statistically insignificant for tourism and fishing and hunting. The study provides an empirical foundation for exploring the diversification decision process and choices among smallholder producers as well as challenging policymakers to carefully determine how these decisions and choices actually get made given people’s situations and characteristics