Do, Thang NamNguyen, Kim HoanLe, Thi Ha LienNguyen, Nhat MaiChu, Long2026-07-062026-07-060743-0167ORCID:/0000-0002-2954-0575/work/219175638ORCID:/0000-0001-7365-2219/work/219176536ORCID:/0000-0002-9039-8117/work/219179053https://hdl.handle.net/1885/733813024Smallholder farmers in developing countries often face persistent barriers to productive investment arising from fragmented landholdings, limited collateral, and risk-averse decision-making, even where agricultural cooperatives provide valued services. This article examines why locally valued cooperatives struggle to move beyond service provision to mobilise farm investment. Using a mechanism-focused case study in Vietnam, we combine a household survey (n = 52), 15 interviews, financial analysis of irrigation provision, and a review of Vietnam's 2023 Cooperative Law to examine how cooperatives can become trapped in a low-investment equilibrium. While collective irrigation generates measurable cost savings, equality-centred governance, leadership risk aversion, informal land pooling, and subsidy-dependent finance constrain capital formation. More fundamentally, modest and uncertain returns dampen incentives to invest. Governance reform, land pooling, and selective climate-linked finance emerge as conditional pathways rather than straightforward solutions, each involving trade-offs over risk, control, and distribution. Cooperative upgrading is therefore best understood as a constrained and negotiated process rather than a linear transition from service provider to investment platform.enPublisher Copyright: © 2026 The Author(s).Agricultural cooperativesClimate financeCooperative governanceInvestment constraintsLand fragmentation and poolingSmallholder agricultureVietnam202610.1016/j.jrurstud.2026.104269105041333657