Ley 7 de 1991

The introduction of a fi nancial instrument supporting those who had undertaken an agri-environmental commitment, and in particular in the sphere of organic farming, was a factor that had a signifi cant impact on the development of the organic farming sector and of entrepreneurship in it in Bulgaria after 2006. This instrument led to the emergence of productive – but also of unproductive, including short-term – forms of organic entrepreneurship during the subsidized period. In the majority of cases in which we found organic entrepreneurs who had taken advantage of Measure 214 and other measures under the NRDP 2007-2013, they had either given up continuing their agri-environmental commitment at the time of the interview, or were planning to abandon organic farming and to switch to other types of activities – conventional, or entirely non-agricultural ones. In other cases we found organic entrepreneurs who, at the time of the interviews, had not decided whether they would continue their activity because they were waiting for changes in the NRDP for the new programme period, 2014-2020, and more specifi cally for information about the size of the subsidies. In still other cases, we found actors who had not taken advantage of any of the available fi nancial instruments and were relying on entirely different resources.

In the fi rst two types of cases (those who had abandoned, or were planning to abandon, organic farming, and those who had not made a decision yet), we found that subsidies were the major factor for internalization of organic farming as an entrepreneurial opportunity. In the academic literature on the subject, there is an extensive debate on the relationship between subsidies and entrepreneurship and its role in the development of various economic sectors, and in particular in agriculture. A number of studies (e.g. Baumol 1990) show that subsidies can be a factor promoting or constraining productivity in a given sector. Although this article does not seek to examine this debate in depth, it cannot ignore several cases of organic entrepreneurship which show that the undertaking of a commitment to produce organic products was done solely for the purpose of rent-seeking and did not involve looking for ways to add value to those products and to market them. In these cases, organic farming practices were undertaken with the aim of winning project funding and subsidies under one of the measures in the NRDP 2007-2013 – namely, “Setting up of young farmers” (Measure 112). Although undertaking organic farming was only one of the activities eligible for funding under this measure, it was awarded the highest score (points) in ranking project applications. In other words, undertaking a commitment to convert to organic farming made applicants “look more committed” (organic entrepreneur in vegetable farming) and gave them a competitive advantage:

It’s not that I’d decided to engage in organic production – it was because we had to earn maximum score points in order to be ranked higher up.

(Organic entrepreneur in mushroom farming) In order to be approved (…) so as not to submit just a bare project, so to speak (…) If you had organic farming [in your project application], you were given a higher score.

(Organic entrepreneur in vegetable farming – 2) In those cases organic farming was identifi ed as a means for winning funding for projects that do not directly involve agri-environmental activities. This type of instrumental use of organic farming was applied by actors who live mostly in rural areas and have experience in agriculture: their families were producing agricultural products for personal consumption, and in some cases, for sale. At the same time, those are people whose education and main line of business is not in agriculture. They undertook agri-environmental activities, and agriculture in general, under Measure 112 as a means of securing additional income (subsidies) and of achieving other ends. In one of the cases, for example, the respondent’s aim in applying for funding under Measure 112, which included undertaking an agri-environmental commitment (growing organic vegetables), was to build a nursery for conventional perennial plants. In another case, the aim was to buy farm machinery (a tractor) for the family farm. In yet another case, the aim was to build a guest house. After the commitment to organic farming had fulfi lled its function, that is, after their project applications were approved, the entrepreneurs changed their plans: after receiving the subsidies, they undertook other types of activities – conventional, or entirely non-agricultural ones. Those practices can be defi ned as entrepreneurial insofar as they presuppose the use of new methods (organic) of crop cultivation and of production of a new category of products. At the same time, however, ways for marketing the products were not sought in any of those cases. If the products were marketed at all, they were offered as conventional, not as organic, and were most often given away to friends and acquaintances. Those entrepreneurial practices do not create/add real value to the product and do not contribute to the development of an organic farming sector. If any value is created at all, it is solely with regard to the fact that application of organic methods contributes to environmental protection. The economic benefi t comes from the personal profi t from the subsidies received. In this sense, such a type of entrepreneurship is, in essence, unproductive. There are also examples of unproductive forms of entrepreneurship among the majority of organic entrepreneurs who had used the opportunity to receive compensatory payments for organic farming under Measure 214 and had since either abandoned, or were thinking about abandoning, organic farming and switching to other types of activities – conventional, or non-agricultural ones. The main argument in the discourse of those entrepreneurs was the size of the subsidies: those who had

abandoned organic farming defi ned them as low, while those who were thinking about abandoning organic farming were waiting for the changes in the new NRDP 2014-2020 in order to see how big they would be. In part of those cases, subsidy reception was not associated with an obligation or necessity of marketing the products. There are also cases in which the possibility for marketing was directly rejected. A case in point is a (now former) organic entrepreneur in organic vegetable farming, a benefi ciary under Measure 112, who rejected an offer for supplying products to several kindergartens. The main argument in the discourse of this entrepreneur was that he could not ensure regular supply because that would “take too much [of his] time” and he didn’t want to “to give up his profession” (a veterinarian). This example of unproductive organic entrepreneurship once again shows the absence of a subsidy–productivity–marketing link. In the cases in which we found that opportunities for marketing had been or were being sought, it is precisely the impossibility of fi nding such opportunities that was an additional reason for abandoning, or thinking about abandoning, organic farming. At the same time, it is precisely in the attempts to fi nd marketing opportunities that we found the specifi c role of certifi ers and of organizations of producers and traders of organic products. Contrary to the results of studies (Swaminathan & Wade 2001; Greve et al. 2006) showing the role of various professional organizations in creating pro-market opportunities, and in particular their role as specifi c intermediaries connecting entrepreneurs with consumers, partners, potential investors, in the Bulgarian case the fi ndings are different. The only organizations of organic producers (Bulgarian Organic Products Association – BOPA) and of organic traders (Bulgarian Organic Trade Association – BOTA) to date, established in 2009 and 2010 respectively, emerged as a response to the problems in the operation of Measure 214. In this sense, they can be interpreted as an attempt at institutional entrepreneurship in the organic farming sector. As an organic entrepreneur, a co-founder and present co- president of the BOPA, said:

Our Association fought hard for a change in some of the articles in the ordinances in order to make things easier. Especially at the beginning, in 2007-2009. (…) We were driven to it out of necessity. To look for like-minded people, to look for people who have the same problems as we do and to look for ways to save ourselves.

It is precisely the active role of those two organizations, and especially of the BOPA, which led to changes in the ordinances on implementing Measure 214, and more specifi cally, to simplifi cation of the documents for application and of administration of the Measure. At the same time, the role of those organizations in the development of the sector, including with regard to marketing opportunities, is not perceived as signifi cant in the discourse of the organic entrepreneurs interviewed in the study. Membership in those organizations is not regarded as a

valuable resource in the entrepreneurial process. For example, former members of BOPA or BOTA said they had left because those organizations “have no weight” in resolving the problems of organic producers and traders. On the other hand, those who are still members described their membership as rather “formal”. According to the organic entrepreneurs interviewed in the study, the role of such organizations should include providing concrete assistance in fi nding markets and marketing organic products; they should also provide information about “projects open for participation, look out for subsidies, report news from Brussels, provide information and mutual assistance about foods, imports” (organic entrepreneur in fi sh farming). Insofar as the expectations about the activity of those organizations have not been met to date, their role in creating opportunities for development of the sector and their potential to infl uence organic entrepreneurship are still limited. At the same time, some of the interviews confi rmed the thesis of Lee and Sine (2012) that certifi cation organizations strongly infl uence potential entrepreneurs’ perceptions of the possibilities for marketing new products and services, their utility and consumer value. More specifi cally, the discourse of organic entrepreneurs shows that this type of normative actors have an infl uence in identifying concrete market opportunities and reducing various transaction costs related to access to specifi c information. Quite a few of the interviewed organic entrepreneurs had turned to certifi ers for help and advice about marketing their products, fi nding markets and access to information:

Some organic producers simply start to produce because of the very idea that they want to produce some clean products, without having thought at all about where their will sell their products. So, for example, they start calling X and asking for contacts. (…) Sometimes they [certifi cation organizations] do what they can to help and give some contacts. But this isn’t their job. They are a certifi cation body, not a trade organization.

(Organic entrepreneur in strawberry and raspberry farming) This type of activity, which is in essence advisory and confl icts with their accreditation as control bodies, is not denied by the certifi cation organizations themselves, even though it is explained as providing “assistance” to clients who do not understand or have no access to various types of information:

We collect information and start providing assistance – which we shouldn’t be doing, because we are accredited only as a control and certifi cation organization. Advice about how to raise a given plant, crop or animal is provided by advisory organizations… But, willy-nilly, we help [by providing advice] as much as we can. This also applies when it comes to, say, plant protection products and fertilizers, right? Until recently there wasn’t much information. We collect information from various sources so as to provide it

to people when that’s possible. In order to make their lives easier. Because farmers have had to become also accountants, right? They’ve also had to become lawyers. Just before you came, I was talking to someone from Smolyan who has animals, horses, so on, quite a big [farm], and he told me he had no idea where to look for information. Because when he goes to a public offi ce they usually can’t tell him anything.

(Manager of a certifi cation organization) Although in most cases certifi ers “provide assistance” under pressure from clients asking for diffi cult-to-access information or for explanations about diffi cult- to-understand information, there are also cases in which a particular certifi er was chosen precisely because they were expected to provide contacts and help fi nd partners and access to markets. In fact, a certifi cation organization established in 2013 (a representative for Bulgaria of a foreign control body) attracts clients precisely because it offers opportunities for fi nding foreign partners and for access to European markets. As an organic entrepreneur operating a fi sh farm said:

We chose this company because in this way we have ensured more markets for our produce outside our country. When we are certifi ed by them, we are entered into these registers not just in Bulgaria but into their whole registration system, which is very good. And most of the buyers in Austria, Germany, Italy are found in this registration system (…).

This case demonstrates the role of certifi ers as a sort of intermediary for contacts between demanders and suppliers, a role that goes beyond their strictly certifi cation functions, creating an online market via the organization’s website:

You log on to their database which they already have [created]. They have [a database] in 36 countries and (...) you log on to their website and say, “I want such-and-such an organic mushroom.” And you fi nd fi ve people who grow this mushroom and who are certifi ed in different countries. So the person who’s searching decides where this mushroom is nearest so that they can go there and take it. Or order it.

(Same respondent) Thus, uncharacteristic activities such as providing advice and consultations to clients are justifi ed insofar as they compensate for the high transaction costs incurred by organic entrepreneurs: for example, for the diffi cult access to information about plant protection products, potential partners or markets, the ineffi ciency of various public offi ces and services, such as those providing advice about agriculture, or the high fees of advisory organizations which not all organic entrepreneurs are ready to pay.

The above examples of unproductive organic entrepreneurship do not mean that after 2006 it developed only in unproductive forms in Bulgaria. Our fi ndings include examples of production of organic products, as well as of practices that add value to those products through processing and/or trade and which are linked to marketing both in and outside Bulgaria. Moreover, the entrepreneurs engaged in those practices have a long-term interest in remaining in the sector and concrete plans for expanding their activity (for example, in addition to production, acquiring processing facilities), for diversifying their product range or crops, and so on. Most often those organic entrepreneurs had not applied, or said they did not intend to apply, for the available compensatory payments. They explained this with the fact that the NRDP 2007-2013 did not provide subsidies for some activities, such as processing and trade of organic products, but even if it did, subsidies would not have been a signifi cant factor for them. In the discourse of those entrepreneurs, subsidies “aren’t interesting” because they have already found ways to market their produce, mainly in the form of export and already established partnerships, or expect to fi nd such ways in the form of investment.32 This group also includes several cases of organic entrepreneurship infl uenced by the appearance of a new foreign donor (other than the Swiss ones). This is the Dutch Avalon Foundation, which fi nanced a Bulgarian-Dutch project called “New Thracian Gold” supporting the development of sustainable agricultural practices in the Eastern Rhodope Mountains. In the 2009-2013 period, several initiatives in the sphere of organic farming were fi nanced under this project. One of them was the establishment of an organic cooperative for the production and processing of organic sesame into tahini. The cooperative, consisting of seven independent producers, was established on the initiative of experts working on the project, who donated equipment for a tahini factory. Thanks to this support, the cooperative managed to close the production cycle and to begin selling organic tahini in the Bulgarian market. Another initiative was the establishment of a production line for organic fruit jams and preserves, part of the portfolio of a leading company in the food industry. In this particular case, the Bulgarian-Dutch project not only stimulated the company’s interest in organic production with the argument that there is “a global trend towards healthier eating, especially abroad”; it also provided fi nancial support for production and marketing, and fi nanced visits of company representatives to national and international trade fairs and exhibitions. Those examples once again show the role of normative elements of the institutional environment, and in particular of normative institutional actors, both in creating and in internalizing opportunities for entrepreneurship in the sphere of organic farming. What is more, in those particular examples the normative institutional actors were a factor enabling the emergence of productive forms of organic entrepreneurship. Simultaneously with those examples of good organic entrepreneurial practices, we cannot ignore data which show that since 2008, there

32 _{Among the factors for not applying for subsidies, we also found some cultural-cognitive}

and value-based ones. For an in-depth analysis of these problems, see Zdravka Georgieva’s article in this book.

has been a dramatic increase in entrepreneurial activity in the cultivation of crops (perennial crops like walnuts, almonds, hazelnuts and chestnuts, and aromatic crops like lavender and oil-bearing roses) that were eligible for the highest compensatory payments under Measure 214. Offi cial data show an exponential increase in certifi ed land planted with nuts: for example, from 1,544 ha in 2011 to 3,896 ha in 2012 to 5,889 ha in 2013 (Agrarian Report 2014). Although it is somewhat speculative to attribute this dramatic growth solely to the availability of subsidies for those crops, we cannot ignore the fact that the subsidies for them were the highest. Information from the control system of one of the certifi cation organizations which covers one- third of all organic operators in Bulgaria shows that 380 (almost 40%) out of a total 1,013 operators in 2012 were growing nuts (mostly walnuts). Most of the newly registered organic operators were growing almonds and hazelnuts. The so-called “walnut boom” is not unique to Bulgaria. In 2010 a number of cases of non-existent