Influence of Trust on Biomass Supply Decision-Making in China

Lingling Wang, Tsunemi Watanabe
2017 Energies  
Given the abundant straw resources in Northeast China and the huge external costs associated with fossil fuels, straw-based biomass power plants have emerged as a popular alternative to coal-fired power plants. The sustainability of these green alternatives depends on straw supply from farmers, yet little is known about their perceptions regarding such supply because of a lack of cooperation in the supply chain. To better understand farmers' opinions on supplying straw, this study examined
more » ... trust in middlemen, perceptions regarding risk in straw supply, the possibility of reducing transaction costs, and their willingness to supply straw. Data were collected from 275 farmers in the national bioenergy industry area in Wangkui County, Northeast China. We investigated the theoretical and empirical connections between trust and risk perception, trust and the possibility of reducing transaction costs, and trust and willingness to supply straw. The results indicated that education, income, and trust factors explained farmers' risk perceptions, the possibility that they will reduce transaction costs, and their willingness to supply straw. On the basis of the analysis, a model of the influence of trust on straw supply was established. The overall findings indicated that biomass power plants and middlemen must build trusting relationships with farmers to ensure sustainable biomass supply. development of biomass power generation necessitates building trust among stakeholders. Trust pertains to the belief of an individual that others will fulfill their promises [10] . It is an important component of social systems [11, 12] , serving to smoothen the functioning of society and providing a foundation for interpersonal communication [13] . These are equally true for rural China's straw supply chain, whose sustainability is impeded by issues of trust. In the rural regions of the country, farmers are the stakeholders who decide on the quantity of straw to be supplied to biomass power plants and are therefore critical in the operation of the chain. However, their willingness to cooperate with biomass power plants is affected by risk perceptions regarding straw supply [14] . Such perceptions can be minimized by increasing the trustworthiness of chain stakeholders, which in turn, facilitates the rapid establishment of relationships among farmers, who are the straw suppliers; middlemen, who serve as the straw collectors; and biomass power plants, which are the straw users. For middlemen and biomass power plants, reducing costs is one of the most important objectives toward earning profits. The presence of trust can reduce transaction costs because it serves not only as the basis of all chain interactions but also as an efficient mechanism for fostering cooperation between farmers and middlemen and reducing risk perceptions. No research has confirmed the mitigating role of trust in risk perceptions and transaction costs, and no study has been devoted to illuminating the function of trust in farmers' willingness to supply straw. The current study was conducted to create a win-win situation for biomass power plants, middlemen, and farmers. In interviews conducted for this research, biomass power plants and middlemen expressed their desire to mitigate transaction costs and risk perceptions as a means of augmenting straw supply and its resultant benefits. They also identified a desire for farmers to increasingly engage in straw supply activities. Meanwhile, farmers need assurance and low risk to be motivated to increase straw supply. These goals are likely achievable through trust. Accordingly, we determined how trust affects risk perceptions, transaction costs, and farmer engagement in straw supply activities. The aims of this work were threefold: (1) to contribute to the empirical understanding of farmers' perceptions of risk in supplying straw; (2) to identify opportunities for improving trust, reducing transaction costs, and increasing farmers' willingness to supply straw; and (3) to emphasize the importance of middlemen's behaviors in the motivation of farmers to supply straw. To these ends, we administered an opinion survey to 275 farmers in the national bioenergy industry area in Wangkui County, Northeast China in 2014. We inquired into the theoretical and empirical relationships between trust and risk perception, trust and the possibility of reducing transaction costs, and trust and willingness to supply straw. Multiple regression analysis was conducted to determine the factors that affect the aforementioned variables. The analytical results were then used as bases for constructing a model of the influence of trust on straw supply. The rest of the paper is structured as follows: Section 2 provides the background of the study. Section 3 introduces the hypothetical model constructed on the basis of the theoretical and empirical analyses. Section 4 describes the methodology, and Section 5 presents the results. Section 6 discusses the findings, and Section 7 provides the conclusion and policy implications. Study Background
doi:10.3390/en10111749 fatcat:3fshpwtpybdlnitduwp7eqbz2a