Commercialization of Smallholders: Is Market Participation Enough?

The literature on commercial transformation of smallholders makes little distinction between market orientation (production decision based on market signals) and market participation (sale of output). However, policy implications to enhance commercial transformation of subsistence agriculture drawn from the analysis of the determinants of household market participation alone could be inadequate, if in fact, the determinants of market orientation and market participation are not the same or not consistent with each other. This paper analyzes the determinants of market orientation and market participation in Ethiopia separately and examines if market orientation translates into market participation. Empirical results show that the determinants of market orientation and market participation in crop output markets are not the same, but market orientation translates strongly into market participation. Results imply that while interventions to enhance market orientation could also help in promoting market participation, interventions to promote market participation may not be adequate to promote market orientation.