In the transition from subsistence to commercial agriculture, smallholders in Lao PDR need to get better organised to match market demand in terms of product volume and quality. This paper investigates the conditions for the emergence of cooperatives from existing farmers' groups. Our study revealed the importance of social networks and power relations as a factor of cohesion within groups. Local leadership plays a crucial role in connecting group members to the village and district institutions. Recommendations are provided to improve group management rules as a pre-requisite to turn groups into farmers' cooperatives.