How do transaction costs, capabilities and networks influence the procurement strategies of small agri-food firms? Evidence from the wine industry

Abstract

PurposeThe purpose of this study is to disentangle the drivers of adoption of procurement strategies in situations where small agri-food firms deal with constrained organizational choices. More specifically, the authors investigate the role of transaction costs, capabilities and networks in the definition of feasible “make-or-buy” choices in emerging wine regions.Design/methodology/approachThis article analyzes a unique dataset of small wineries from five US states: Illinois, Michigan, Missouri, New York and Vermont. The reported results derive from both a hurdle model (i.e. a probit model and a truncated regression model) and a tobit model.FindingsThe results suggest the importance of trust as a replacement for formal governance structures whenever small firms deal with highly constrained sets of organizational choices. On the other hand, the level of dependence on a limited mix of winegrape varieties and the perception that these varieties are fundamental in building legitimacy help to explain higher rates of vertical integration.Originality/valueThis study is important because it sheds light on organizational constraints that affect millions of farmers across the globe. The study of “make-or-buy” decisions in agri-food supply chains has mostly relied on the implicit assumption that all organizational choices are available to every firm. Nevertheless, limited capabilities and the participation in low-density networks may constrain the ability of a firm to adopt a governance mechanism. Stated organizational preferences and actual organizational choices may thus differ.

Horizontal network collaboration by entrepreneurial ventures: a supply chain finance perspective

“…Main limitations are related to the specific research context and method, as case studies are subjective and do not lend themselves to generalization; however, they “facilitate an understanding of process by studying a subject within the context of its existence” (Deakins et al ., 2002, p. 10). Within the same network-case, it might be interesting to follow future developments along the supply chains that measure the working capital advantages and the upstream on the procurement side (Varella Miranda et al ., 2022), and also extend the study of the impacts on customers’ customers and suppliers’ suppliers from an end-to-end supply chain point of view. This type of study deserves to be better explored in future research in light of interesting developments, not least because the potential SCF market still has many open margins for the expansion of interests by both academics and practitioners.…”

“…Finally, the AR method, adopted as a cyclical process, enables future directions that stimulate team members to seek new and additional areas in which to collaborate, with a view to developing other interface processes and upstream vertical coordination mechanisms (Varella Miranda et al ., 2022). Because of the downstream experience, the integration will be expanded upstream for procurement activities.…”