2.4.2. Internal and External Factors and Catalysts

Internal factors include a cultural context that is relatively homogeneous and open to group activities, and social capital (trust, relationships, reciprocity and social norms) that facilitate cooperation and collective action; a rationale for group formation such as advocating for better roads, bulk purchase of inputs or access to markets; members’ knowledge and resources-those who have similar interests and economic status are more likely to be a cohesive group; and leadership abilities that include knowledge, experience and the trust and respect of members.

External factors that affect group formation include government policies and regulations that facilitate group formation and formalization and promote business; infrastructure such as roads, electricity, communications systems, markets and warehousing facilities; and the nature and competitiveness of the industry or service–if markets are weak and there is little demand for the product or service, or if the industry is not competitive due to detrimental government policies or an inability to upgrade, horizontal linkages may not be able to help overcome the constraint.

An internal catalyst can be a respected or innovative chief, business leader or farmer who realizes that cooperation can help remove obstacles to achieving a common goal. Internal catalysts are able to apply social pressure on potential members to participate, but they can be hampered by knowledge and resource limitations, social norm constraints, and members who want the benefits of membership, but not the responsibilities and who free ride rather than contribute.

External catalysts that drive cooperation and group formation can be a lead firm, NGO, donor or government entity. Private-sector catalysts are usually market-driven and savvy about business and the cooperation they foster is more purpose-bound, clear about costs and benefits and easier to initiate than that of others. On the other hand, external catalyst objectives may differ from members'; they can have difficulty getting members to commit to and own the group; and they themselves rarely have a long-term commitment to the group.