Why is diversification an attractive farm adjustment strategy? Insights from Texas farmers and ranchers

State agencies have been encouraging the development of different enterprises to diversify farm incomes in an effort to retain farmers in business, attract new entrants to agriculture and promote regional development. Entrepreneurship and farming are known to be driven by a complex set of goals including those which are economic and intrinsic in nature. However, little information is available regarding the set of goals that drive agriculture entrepreneurship, preventing state agencies to adequately target potential diversifiers. This paper provides a better understanding of the range of goals, both financial and nonfinancial, that are important in farmers' decisions to diversify their operations. The generation of additional income, the continuance of farming and ranching, and the enhancement of quality of life are among the most important diversification goals in Texas. A principal component factor analysis performed on the importance ratings of diversification goals resulted in six dimensions: (F1) Reduce Uncertainty and Risk; (F2) Grow and Service Markets; (F3) Enhanced Financial Condition; (F4) Individual Aspirations and Pursuits; (F5) Revenues Enhancement; and (F6) Family Connections. The study also examined the relationship between various entrepreneur and farm characteristics and the goal pursuit dimensions. Operator's age, number of generations the farm had been in the family, household income, number of farm employees, and distance to an urbanized area influence types of goals pursued through diversification.