The effect of quality uncertainty and asset specificity on the coordination of fruit supply chains

This study explores how do firms manage the variability and the heterogeneity of apple and mango supply chains. Variability and heterogeneity are intrinsic attributes of agricultural products and strongly linked with food quality. Using a case study method, we gathered primary information, from firms at the grower-processor stage of the supply chains. Our study is framed in TCE and Institutional Analysis literature. Results show that transactors measure the characteristics of the products and coordinate transactions through technical specifications that correspond to micro institutions embedded in meso and macro institutional levels. As supply chains of apples and mangoes are mostly oriented to the fresh market, fruit not complying with technical requirements for fresh consumption, mostly related to appearance, are diverted to the processing channels. Growers dealing with niche markets such as baby food, allocate dedicated orchards to comply with specific requirements of this industry, these transactions are normally covered by pre-harvest contracts or by hierarchical governance. Firms participate in multiple configurations of the supply chains. These configurations of supply chains emerge from the fact that firms may play simultaneously different roles in the value chains.