Regional small and medium-size construction firms' entry into the agriculture sector: Firms' perceptions and constraints with respect to their agricultural businesses

Discussions on merits of the entry of non-agricultural firms into the agricultural sector have revealed both pros and cons, in particular in terms of agricultural land acquisition by such corporate firms. However, the recent situation that a growing number of non-agricultural firms have been entering into agriculture, calls for an analysis of the actual performance of such firms based on a rigorous survey. Recognizing this need, the present study, through a questionnaire based survey, aims to investigate the situations of regional small and medium-size construction firms' entry into the agricultural sector. Construction firms were chosen as the basis of our study because construction businesses share common features with agriculture in terms of the nature of land-related work. Results from the questionnaire revealed that many firms are suffering financial deficits. It also was found that the firms' behavior is still confined to speculation, although most of the firms have no intention to suspend their agricultural businesses. This implies that these firms put less emphasis on short-run economic viability, with profitability in a broader sense as a more important factor in conducting agricultural business. The performance of the main construction business and the firms' credibility within a community are recognized as part of such profitability. Nevertheless, many construction firms are currently faced with various problems in their agricultural businesses, including the lack of preparation for new business, the lack of knowledge of agricultural business, and the burden of additional investment such as initial costs for the recovery of abandoned land for re-farming. These problems that are considered constraints to sound management are likely to lead new entrants into difficult management conditions where, in some cases, the exit from agricultural business needs to be considered.