Supply chain relationships, supplier support programmes and stimulating investment: evidence from the Armenian dairy sector

The purpose of this paper is to evaluate the determinants of supply chain relationships, the provision of supplier support measures and the role that support measures play in stimulating investment by suppliers in emerging economies.

The paper draws on survey evidence for 300 commercial dairy farms in Armenia. The identification of potential determinants of supply chain relationships and support programmes is based on literature on supply chain management and transaction cost economics.

Positive determinants of supplier support programmes are the degree of exclusivity of the buyer-supplier relationship, initial capital of the supplier, co-operation between suppliers, and foreign ownership of the buyer. Support programmes are less likely to be offered in very competitive environments. Support measures such as loans, physical inputs and guaranteed prices facilitate supplier investments.

Research is limited to cross-sectional data for a single country and further testing would help assess the generalizability of the findings.

The findings highlight the gains that can be made from openness to international firms. The negative competition effect suggests that buyers are constrained in their ability to monitor use of the provided services in an environment where a lot of buyers are competing for the same supply. Improving the enforcement capability of companies under these circumstances is an important challenge for the industry and policy makers.

The novelty of the study lies in the investigation of the relationships between the nature of supply chain linkages and suppliers' investments.