Does human capital competency affect the Ethiopian Coffee Cooperative performance?

Abstract

A nation's ability to generate income and expand is largely dependent on its human capital. Ethiopia, the fourth-largest coffee exporter and the fastest-growing coffee market, relies heavily on its human capital and coffee cooperatives. Numerous empirical studies have investigated the performance of coffee cooperatives in relation to the effective utilization of human capital. The existing literature has emphasized the impact of optimizing coffee cooperatives' performance through human capital, particularly using Structural Equation Modeling (SEM). This paper employs generalized Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and SEM approaches to explore this relationship. The empirical findings demonstrate a significant connection between the performance of Ethiopian coffee cooperatives and human capital competency. Additionally, the study challenges the prevailing notion that the development of human capital within coffee cooperatives has stagnated. According to the SEM analysis, the performance of a coffee cooperative can increase by 70.3% with a one standard deviation improvement in human capital, assuming other independent variables remain constant. Consequently, the study recommends that policymakers prioritize the development of human capital to enhance the performance of coffee cooperatives.