155 ISSN 1822-6760. Management theory and studies for rural business and infrastructure development. 2011. Nr. 2 (26). Research papers. FARM DIVERSIFICATION MODELS: CAUSES AND TENDENCES Anna Liscova, Baiba Rivza, Maiga Kruzmetra Latvia University of Agriculture Under the present conditions, business diversification in agriculture has become a significant development trend that is caused by both domestic conditions and international trends. The studies conducted in Latvia show that there is an interest in business diversification on farms of various siz- es irrespective of their level of engagement in producing traditional agricultural products. The most appropriate business diversification directions are: rural tourism, processing of agricultural com- modities, wood processing, and energy production. Key words: diversification models, farming, Zemgale region. JEL codes: Q120, R120. Introduction As a result of the agricultural reform in Latvia in the 1990s, many small farms with limited capabilities for developing their agricultural output emerged. According to the statistical data for 2007, more than 90% of farms had a size of less than 40 ha. (Lauku..., 2008) Although the average area of utilised agricultural land per farm, ac- cording to the provisional data of the 2010 agricultural census, increased by 15%, the proportion of small farms is still to high in the country. (CSB..., 2011) Secondly, only 62.8% of farm managers have a higher or secondary professional education, whereas 37.2% of farm managers are individuals with a primary education or only practical ex- perience. The smaller is a farm in size, the more often its managers are individuals with only practical experience. (Lauku..., 2008, p. 18) Under such circumstances, farm business diversification has become a significant development direction in rural areas. Methodology of investigation. A theoretical review of farm diversification is made according to the approach for tackling employment problems in rural areas by J. H. Post and I. J. Terluin. (Post, 1997; Terluin, 2000) The farm divisions developed by the Latvian Central Statistical Bureau were used as a methodological basis for grouping farms and identifying farm diversification directions. (Results of..., 2008) The opinions of farm managers were found out in a survey (=573) in which repre- sentatives of all farm groups from both Zemgale region’s subregions (Zemgale -1 and Zemgale-2) were included. Results By using the indicators (Lauku..., 2009) characterising farms in both subre- gions and after analysing the result gained, the authors developed five farm models in which the following criteria were selected as the most important: belonging to a sub- region, economic size of farms in ha, and incomes from traditional and diversified farm business (Characteristics of the models are given in Table 1).