On the Emergence of Private Standards: An Industrial Organization Approach

Abstract

This contribution aims at providing a focused discussion on the main economic issues associated with the emergence of private standards in agrifood chains. Public and private modes for food safety management are explored. Based on a critical review of the recent developments of Industrial Organization (IO) approaches, this contribution examines the rationale behind the emergence of private strategies for food safety governance, their effects on the food supply chain organization, and the strategic interactions between public regulator and private actors in the provision of food safety in agrifood markets. The analysis then draws the attention on the interactions between public regulatory instances (notably between the legislation and the official control system) and on their influence on the incentive for firms to develop voluntary standards. By focusing on buyer-supplier relations in international food supply chains, and based on recent theoretical developments in the IO literature, a simple formalization is finally proposed to investigate the role of public "output standards" and control imperfections in shaping buyer incentive to impose "process standards" over suppliers for import safety management purposes.

Voluntary standards as meso‐institutions: A Bayesian investigation of their relationships with transaction governance and risks

“…They can take various forms, such as traceability systems and quality schemes, and can help to assure the desired level of quality attributes. They often require a reorganization of supply chain relationships that can include the redefinition of contracts, the reorganization of supply chain management practices, and direct control or involvement of a third‐party certifier for auditing and monitoring activities (Castellari et al, 2018; Hammoudi et al, 2015).…”

“…Such standards are “open,” in the sense that barriers to entry rely on technical requirements and not on legal privileges. Participation in these standards is open to a large group of firms, which is often the case for voluntary standards promoted by third‐party certifiers (Hammoudi et al, 2015). Giraud‐Héraud et al (2012) show that standards, even if designed by a small group of firms—such as retailers—can be made open access to increase the number of certified firms as much as possible.…”

“…In this case, the standard is necessarily private, and its setup and participation are limited to a specific firm and supply chain. In contrast with collective standards, a firm that designs and promotes its own voluntary standard (the “focal” firm) aims to differentiate its products based on several quality attributes (Hammoudi et al, 2015). The focal firm usually takes the lead and coordinates the implementation and monitoring of the practices required by the standard with supplying partners.…”

“…They also require the centralization of information flows within supply chains (Banterle & Stranieri, 2008). These mechanisms can be better managed when there is a direct relationship between the leading firm and upstream suppliers (Hammoudi et al, 2015). This direct relationship often requires transaction‐specific investments that increase asset specificity and bilateral dependency, further justifying expectations for a higher level of coordination along the supply chain (Banterle & Stranieri, 2008).…”

Adopting environmentally-friendly certifications: transaction cost and capabilities perspectives within the Italian wine supply chain

“…To date, there exists a large variety of such instruments (Marette, 2016). They can be both public and private and they can be of an individual or collective nature (Hammoudi et al , 2015). Moreover, they can be either sector-specific or not and they imply the certification of different product and process characteristics (Yokessa and Marette, 2019).…”