TCE determinants and governance forms in the EU “Non-GMO” soybean supply chain

Coordinating food quality: How do quality standards influence contract arrangements? A study on Uruguayan food supply chains

“…This finding for upstream transactions is in line with findings on private brand names (Raynaud et al , 2005), non-GMO standards (Ghozzi et al , 2016, 2018) and voluntary traceability standards (Banterle and Stranieri, 2008), which all lead to more hierarchy-type contract arrangements. In line with TCE predictions, we found that quality standards increase specific investments and quality uncertainty for upstream transactions.…”

“…For private quality standards, Raynaud et al (2005) find that private brand names lead to more hierarchy-type arrangements. These results are in line with Ghozzi et al (2016, 2018) and Banterle and Stranieri (2008), who find that, respectively, non-genetically modified organism (GMO) standards in Europe and voluntary traceability standards in Italy lead to more hierarchy-type contract arrangements. Private quality standards reduce uncertainty, but increase asset specificity and therefore bilateral dependency – resulting in higher transaction costs, and thus more hierarchy-type contract arrangements.…”

“…In conclusion, the effects of quality standards on contract arrangements seem to depend on their ability to influence the transaction characteristics. Especially, whether investments for a quality standard by transaction partners are truly transaction specific – which seems to be the case for private standards, contrary to public standards – affect levels of asset specificity and related levels of quality uncertainty that increase the risks of hold-up (Williamson, 1985; David and Han, 2004), and explains shifts to more market- or hierarchy-type contract arrangements (Ghozzi et al , 2018).…”

“…These studies focus on reasons for supply chain actors to adopt quality standards (Stranieri et al , 2017), their preferred enforcement mechanisms (van der Merwe et al , 2019), quality performance (López-Bayón et al , 2018) and quality control (Jraisat and Sawalha, 2013). A specific field of studies analyzes how quality standards affect bilateral contract arrangements between supply chain actors (Raynaud et al , 2005; Banterle and Stranieri, 2008; Wever et al , 2010; Ghozzi et al , 2016, 2018; Fernández-Barcala et al , 2017). Transaction cost economics (TCE) is the most used theory in these studies, explaining the choice for a contract arrangement based on the need of supply chain actors to keep transaction costs as low as possible (Williamson, 1991).…”

“…Quality standards are considered to influence the choice of contract arrangement by affecting the transaction characteristics (Young and Hobbs, 2002). To reach quality coordination, some studies claim that quality standards lead to additional quality coordination in hierarchy-type contract arrangements (Banterle and Stranieri, 2008; Ghozzi et al , 2018), whereas others find standards to lead to reduced quality coordination in market-type contract arrangements (Raynaud et al , 2005; Fernández-Barcala et al , 2017). Thus, existing studies yield mixed results on the influence of quality standards on contract arrangements.…”