Regulation and organizational change in the governance of agri-food value chains

Regulation and organizational change in the governance of agri-food value chains

Article Type: Guest editorial From: British Food Journal, Volume 117, Issue 10.

This special issue is the result of an academic journey which started in 2012, when the four guest editors decided to set up and organize a number of seminars and workshops to discuss the “state of the art” of economic and organizational issues in agri-food value chains[1]. At that time they observed that the financial crisis, and a number of other institutional and regulatory changes, increased the uncertainty and complexity of the agri-food value chain considerably, as well as the intensity of interconnection and dependency between different actors worldwide. Based on these considerations they started reflecting on the adequacy of “traditional” organizational arrangements at agri-food value chain level to address these changes and challenges. Even more importantly, it raised questions as to whether as scholars and practitioners we have developed a sufficiently accurate and diverse conceptual and methodological toolbox to understand them.

During this “journey” a number of interesting developments occurred. For example, the reform process of the European Union (EU) agricultural policy framework has been indicated as an interesting “laboratory” in which the relations among different actors of agri-food value chains have been intensively reshaped. Historically, the Common Agricultural Policy (CAP) has been one of the first comprehensive EU-wide policy frameworks. The CAP's instruments of intervention and protectionism have therefore been the main drivers of – or barriers to – organizational change in the agri-food sector since the creation of the EU. In recent years, the CAP has been increasingly under stress – as a result of growing budgetary constraints and international pressure – to become less interventionist and to allow the agri-food sector to become more responsive to market pressures. This has led to a number of significant reforms of the institutional environment under which the agricultural sector in Europe operates. At the same time, many scholars highlighted the increasing relevance of issues such as food safety and quality, sustainability and innovation. For example, new developments in the policy arena – such as the strengthening of the European Food Law to address food safety issues – introduced new regulations that not only affect the agricultural sector but the whole agri-food system. Moreover, not only are public standards for food safety and quality being implemented but also private initiatives – such as voluntary third-party standards concerning farm-to-fork supply; sustainable food production and animal welfare conditions – are increasingly changing the environment in which agri-food factors make business decisions. These dynamics have important consequences for the organization of agri-food systems at a global scale.

Although considerable attention has been given to the analysis and determination of organizational arrangements characterising agri-food value chains, the relationship between regulatory and organizational changes has received limited attention in the literature. Empirical evidence from agri-food value chains suggests that very often actors involved in similar transactions and activities combine different organizational solutions. This coexistence is puzzling and has challenged theoreticians as well as empiricists. Several alternative and often divergent theories of organization have been developed and used to better understand these empirical observations: transaction cost economics, agency theory, property rights theory and a mix of resource-based and evolutionary perspectives represent the leading approaches. The development of competing explanations reflects an increasing interest for the nature of organizations in agri-food value chains. However, it also suggests that we still lack an integrated theory. Moreover, the general literature on organizational arrangements and forms gives limited attention to the agri-food sector. For instance, most organizational theories have been developed with reference to the industrial sector. Against this background, and in light of the partially unexplored interplay between regulatory and organizational changes in agri-food value chains, this special issue collects ideas from different scholars around three focal points:

1. The conceptualization of organizational change: the Economics of Governance, for instance, sees change as adaptation of the organizational structure to unforeseen contingencies (Williamson, 1991; Gibbons, 2005; Gibbons et al., 2013). On the other hand, organizational law considerations (Grandori, 2010a) see organizational change as a result of the emergence of new typologies of services of resources and of renewed managerial beliefs and perspectives (Grandori, 2010b).

2. The roots of change, specifically linking this with the pressure coming from the institutional environment: a critical question concerns how the incentives that are provided by the regulatory framework affect the behaviour and beliefs of agents and how these are framed and fostered in changing organizations (Aoki, 2011).

3. Wider reflections about the implications of the relationship between organizations and the extent of the law.

The remaining papers in this special issue include contributions from scholars involved in research from different disciplinary fields, including the Economics of Governance, Institutional and Policy Analysis, Organization and Decision Science and Agricultural and Agribusiness Economics and Management. The majority of the papers (seven out of 12) deals with European issues, however, papers dealing with topics related to emerging economies and global issues have also been included.

Grandori's paper provides an overview of the variety and possible change of organizational forms in the agri-business industry, comparing and contrasting theoretical elements with empirical evidence from several cases across the globe.

The papers by Van Herck and Swinnen, and Falkowski and colleagues discuss organizational changes in agri-food value chains operating in transition countries (Bulgaria and Poland), for which the element of institutional “uncertainty” is highly relevant. Particularly, they focus on farmer adaptation to a changing transactional and institutional environment, while assessing the effects of these changes. Di Fonzo and Russo adopt a more industrial organization and game theoretical perspective, and discuss “institutional experimentation” related to food quality and geographical indications. Two manuscripts deal with agricultural cooperatives, one of the most studied organizational forms in the agri-food value chain literature. Nilsson and Lind discuss how institutional changes in Sweden influenced the way in which cooperatives operate in the meat industry. They also reflect on the implication of their work in the wider context of the theory of institutional change as presented by Aoki (2011). Grau and colleagues discuss how dairy cooperatives have been affected by policy changes in the EU. Through the analysis of several cases in the German dairy sector, they highlight the emergence of new organizational forms and hybrids between cooperatives, and between cooperatives and investor-owned firms. In so doing they reflect on the evolution of this type of organization, and the “long-term” perspective of cooperatives in the agri-food value chain.

Soares and colleagues provide an analytic overview of the Brazilian ethanol industry, focusing on the governance structures adopted by the distributors with their trading partners in fuel retail. In the same line Vellema and D'Haese as well as Passuello and colleagues investigate buyer-seller relationships in contexts of market and institutional changes. The former uses empirical evidence from the sugar cane industry in South Africa, and analyses decisions about the choice of hybrid forms. The latter focuses on the effects of GMO-labelling on processor-retailer governance relations.

Two manuscripts have a farmer decision-making focus, namely the papers by Ambrosius and colleagues, and Cai and Ma. In both papers a multidisciplinary approach is used to explain the role of key social and psychological factors, such as trust and social norms, in contract enforcement and market participation mechanisms and dynamics. Finally, the paper by Chatzopoulou discusses issues of food governance and regulatory changes at a transnational and global level. Giving the increased interest in developing quality standards at an international and global level, this work tackles the relevant issue of how to manage this process, and the tensions between public and private actors' objectives and interests.

Based on the rich and diverse works collected in this special issue, we believe that a small step has been made towards a better understanding of the complexity of governance and organisation of agri-food value chains, and the interplay between organizational and institutional/regulatory changes. We also think further steps in this direction need to be made in the future. In this respect, we interpret this special issue as a starting point rather than as a destination.

Dr Stefano Pascucci - Management Studies, Wageningen University, Wageningen, The Netherlands

Dr Liesbeth Dries - Agricultural Economics and Rural Policy, Wageningen University, Wageningen, The Netherlands

Professor Konstantinos Karantininis - Swedish University of Agricultural Sciences, SLU, Uppsala, Sweden

Professor Gaetano Martino - University of Perugia, Perugia, Italy

Note

1. The special issue has benefited especially from contributions to the 140th Seminar of the European Association of Agricultural Economists “Theories and Empirical Applications on Policy and Governance of Agri-food Value Chains” and the Jean Monnet project (EACEA/P2/MLFM/LDF 542857) “Governing and organizing the agro-food supply systems in the European Union countries: institutional environments, governance modes and policy patterns”.

References

Aoki, M. (2011), “Institutions as cognitive media between strategic interactions and individual beliefs”, Journal of Economic Organization and Behavior, Vol. 79 Nos 1-2, pp. 20-34

Gibbons, R. (2005), “Four formal(izable) theories of the firm?”, Journal of Economic Behaviour & Organization, Vol. 58 No. 2, pp. 200-245

Gibbons, R., Matouscheck, N. and Roberts, J. (2013), “Decisions in organizations”, in Gibbon, R. and Roberts, J. (Eds), Handbook of Organizational Economics, Princeton University Press, Princeton, NJ, pp. 373-430

Grandori, A. (2010a), “Asset commitment, constitutional governance and the nature of the firm”, Journal of Institutional Economics, Vol. 6 No. 3, pp. 351-375

Grandori, A. (2010b), “A rational heuristic model of economic decision making”, Rationality and Society, Vol. 22 No. 4, pp. 477-504

Williamson, O.E. (1991), “Comparative economic organization: the analysis of discrete structural alternatives”, Administrative Science Quarterly, Vol. 36 No. 2, pp. 259-296