Relationship characteristics and performance in fresh produce supply chains: the case of the Mexican avocado industry

Abstract

Inter-organisational relations research has shown that relationship characteristics can influence performance in seller-buyer transactions. Using a transaction cost economics approach, this research shows that relational elements such as expectation of continuity reduce the transaction risks related to behavioural uncertainty or asset specificity. However, transaction costs are not only caused by transaction risks but also by the need to coordinate the individual activities of the buyer and the seller. Inter-organisational coordination is important in transactions with perishable products and products with credence attributes, such as in fresh produce supply chains. To study the impact of different relationship characteristics on the efficiency of transactions in a fresh produce supply chain, we collected and analyzed data from 122 avocado producers in Mexico. We found that information exchange and producer expectation of continuity of the relationship positively affect performance in the seller-buyer transaction. While expectation of continuity leads to lower transaction costs associated with behavioural uncertainty, information exchange facilitates the efficient alignment of interdependent activities.