The Role of Intermediaries’ Power on Contracting Decision Between Farmers and Intermediaries.

Abstract

The paper investigates the determinants of farmers’ participation in contract farming (CF) in the context of a transition country, namely Albania. The focus is on intermediaries’ bargaining power effect on farmers’ engagement in CF. Exploratory factor analysis is used to develop measures for the latent variables, while a logit regression model is employed to test the hypothesized relationship. The results show that intermediaries’ bargaining power moderates negatively the relationship between farmers’ specific investments and CF participation. Farmers’ with high specific investment are reluctant to contract with buyers who have power because contracting with such a buyer implies that they can extract higher values from farmers’ specific investments. Other strong predictors of contracting decision are farmers’ trust on the intermediary, intermediary’s advice to the farmer and intermediary’s specific investment.

The effect of relationship quality on contract farming: The mediating role of conflict between trading partners in Albania

“…Therefore, the findings show that farmers with higher trust are more prone to contract farming compared to those with low trust in the trading relationship. This finding is in line with previous studies (Xhoxhi, Keco, Skreli, Imami, & Musabelliu, 2019;Zhang & Hu, 2011). Findings about the effect of satisfaction on contract farming contradict prior research, which has stated a significant positive relationship of the factors, such as contributions from Dedehouanou (2013), Dlamini-Mazibuko et al (2019, Keco et al (2019) etc.…”

The contractual relationships in the Italian durum wheat chain: empirical survey evidence

“…Modern market channels demand greater coordination along the supply chain and specific contracts between the agricultural producers and downstream operators (Worley and McCluskey, 2000;Reardon, Gulati, 2008;Fernández-Olmos and Vinuesa, 2009;Jang and Olson, 2010;Malorgio et al, 2016;Xhoxhi et al, 2019).…”

“…Some authors (Key and Runsten, 1999;Katchova and Miranda, 2004) have highlighted how a contract represents an institutional solution to problems of market failures. In particular, this form of relationship governance solves a number of productivity constrains for small farmers including reduced market risks, access to credit, inputs and information (Xhoxhi et al, 2019). Worley and McCluskey (2000) identify three main classes of contracts, according to increasing degrees of control by the contractor: marketing contracts, production management contracts, and production contracts with specified resources provided.…”

Non-financial factors affecting livestock farm’s performance in meat supply chain

“…Bargaining power can be defined as a party ability "to obtain a concession from another party by threatening to impose a cost, or withdraw a benefit, if the party does not grant the concession" (Kirkwood, 2005). Xhoxhi et al (2019) points out that farmers are reluctant to engage in contract farming with buyers with high bargaining power due to "fear" of intermediaries' opportunistic behavior which can result in extraction of higher rents from farmers' specific investments. In the same line, Sorrentino et al (2018) argues that in bargaining power models one can account for opportunistic behavior.…”