Value-Creating Strategies in Dairy Farm Entrepreneurship: A Case Study in Northern Spain

Simple Summary The aim of this paper is to analyse the heterogeneity and the performance of the value-creating strategies applied by dairy farms in their diversification initiatives. This is a pertinent topic to study because the Common Agricultural Policy provides a role for value-added diversification strategies as an alternative to ensure the economic viability of small farms. Furthermore, the fostering of specialised policy initiatives requires empirical evidence on specific diversification strategies. Nevertheless, there are still few quantitative studies analysing the factors that influence the success of value-added initiatives in terms of their contribution to economic performance, which may be due to the difficulty of obtaining databases such as the one handled in this study. Our findings confirm that the strategies are associated with different combinations of contexts and entrepreneurial capabilities. In fact, the results of this research present practical implications for future entrepreneurs and for policymakers, contributing towards understanding how an adequate alignment between contextual factors and entrepreneurial capabilities can enable the implementation and sustainability of new business initiatives in rural areas. We also conclude that the diversification ventures of dairy farms are an appropriate element for guaranteeing the survival of certain local breeds, making their use profitable. This paper explores different value-creating strategies (VCS) used by dairy farmers engaged in on-farm diversification ventures. In order to explicitly identify the informal strategies followed by 49 farmers in their value-added ventures, we applied a theoretically informed business model framework combining three dimensions: value proposition linked to local food, customer engagement via quality schemes and shorter supply chains, and the key capabilities of the entrepreneur. Using cluster analysis, four different types of VCS were identified and labelled as 'Ecological', 'Single-product', 'Innovative', and 'Traditional'. Whilst we found that these strategies are influenced by contextual factors and the owner's entrepreneurial skills, in general, we did not observe significant differences in performance between them. The results suggest that farmers respond entrepreneurially to sectorial changes adopting those VCS that tend to align with their entrepreneurial capabilities and context, thus enabling them to succeed with any of the strategies pursued. Hence, our work contributes towards clarifying the relationship between VCS, entrepreneurial capabilities, and context. This is important for farmers and policymakers because it reveals the diversity of farm management and the resilience of farm systems. As a result, the potential challenges for Single-product VCS and Traditional VCS are discussed.