Multifunctionality And Farm Diversification: A Case Of Rural Tourism

Despite the growing interest in rural tourism in rural communities, there has been little investigation of how to introduce this new activity into conventional farm management while taking advantage of agricultural multifunctionality. Considering rural tourism as a new farm activity that internalizes the externality of agricultural multifunctionality, this paper examines the evolutionary process of farm management by focusing on a farm household that operates a rural tourism business in Hiroshima, a mountainous area in western Japan. The following are the main points discussed in the paper: 1) To deal with farm diversification, we present a conceptual framework that characterises different markets: the urban market for traditional farm products and the rural market for rural tourism. The latter is service goods and is gaining importance in rural development. We should explicitly consider that the two markets exist in dealing with farm and rural diversification. 2) Health and recreational and educational functions are easier than other functions in a setting of multifunctionality to be internalised into rural tourism activity by individual farmers. This is because these functions tend to be easily converted into service goods that farmers can provide. Thus it is important to recognise the degree of difficulty for internalisation among multifunctionality. 3) The examination of a farm household pioneering rural tourism clarified that rural tourism activity was a product innovation in the farm activity whereas a traditional innovation in farming techniques was a process innovation. The former evolved from an interaction between multifunctionality and rural tourism activity. 4) Therefore, we should shift policy emphasis from a traditional policy focusing on process innovation to a new policy orientation towards promoting product innovation.