Understanding the diversification and specialization of farm businesses

This paper addresses the development of farm businesses in Sweden, 2000-2007, with regard to their specialization in single farm enterprises, diversified agricultural production and diversification with new income-generating ventures. Furthermore, regression analysis is used to study the impact of farm characteristics on the observed specialization and diversification. The study is based a panel data set of about 900 farms participating in the Swedish Agricultural Economics Survey. Results show that farms are increasingly engaging in diversified activities, though in most firms these activities make only minor contributions to total revenue. Results also show that the degrees of specialization and diversification are influenced by characteristics of firms' business structure, financial and demographic conditions. These results contribute to the understanding of farm business development, as well as show the need for policy makers and farm advisors to consider the differences between farms pursuing different development strategies in their efforts to influence behavior.