Traceability and vertical co-ordination in the Italian dairy chain: A transaction cost approach

Abstract

The purpose of this paper is to analyse how the introduction of a voluntary traceability system affects the organisation of economic relationships throughout the Italian dairy chain. Using the theoretical framework of transaction cost economics, we assess whether traceability increases the degree of vertical co-ordination and changes the level of the transaction key features, i.e. degree of asset specificity, uncertainty and frequency of transactions. A survey was conducted by questionnaire to assess changes in vertical relations, and to underline the different organisational solutions of dairy firms we carried out factor and cluster analysis. The results show increased bilateral dependency among the economic agents as a consequence of the rise in human, physical and site assets. At the same time, growth in the frequency and quantity of information exchanged is observed. Moreover, for medium-sized firms economic incentives play an important role in guaranteeing the safeguarding of transactions, whereas big firms adopt contractual supports.