Collective Action and Inclusive Value Chain
Collaboration of Small-scale Farmers
An examination of oil palm farmer association and value chain collaboration of small-scale farmers in Kwaebibirem District, Ghana
Guo Jiawenzhang
Research Master International Development Studies University of Amsterdam
Student ID: 10883193 July 2016
E-mail: guojiawenzhang@gmail.com
Supervisor: dr. ir. Y.P.B. (Yves) van Leynseele; University of Amsterdam, Netherlands Second Reader: dhr. dr. N.P.C. (Niels) Beerepoot; University of Amsterdam, Netherlands
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Acknowledgements
The dissertation would not be done without the help of a good many of people. First, I would like to express my gratitude to Dr. Yves van Leynseele, who has been supervising my research project and thesis writing during the past whole year. He shows great patience during the supervision and I really appreciate his professional advice and encouragement throughout this challenging project. I also want to thank other team members within the NWO-WOTRO project, who have offered me enormous assistance within the period of my fieldwork research. Secondly, I would like to thank all those who have worked with me during the six-month internship and fieldwork research in Ghana: my colleagues in OPRI Mr. Felix Swanzy, Nkansah Bismark, Philemon Ackom; my research assistant Lawrence Aniagyei; my friend Joseph Ohemeng, who connected me with the Ministry of Food and Agriculture in Kade, Oral Oil Company in Subi and many other farmers during my research; and my friend Zhang Yang, who kindly shared his accommodation with me. Next I would like to express my thanks to Dr. Niels Beerepoot, the second reader of my thesis, who also provided me some practical comments in thesis writing at the final stage. Finally, I want to thank my parents, for their persistent support for my study and for everything.
Abstract
Small-scale farmers are considered to take up 80% of the total oil palm production in Ghana, whereas they are faced with a series of constraints in farming practice and marketing, such as limited economic capital and access to market. Collective action, which is classified into spontaneous collective action (SCA) and advanced collective action (ACA) within this research, has been regarded as an efficient way to reduce these constraints. Transparency, past experience, social capital and external support are identified when examining effective collective action. However, collective action often fails in providing farmers with stabilized assistance when it is short of the support from external actors.
Value chain collaboration (VCC) aims to tackle the challenges faced by collective action through establishing a collaborative arrangement among value chain actors (refer particularly to private companies, input providers, etc., excluding small-scale farmers), support actors (government, research institute, etc.) and small-scale farmers. However, such form of organization is not always inclusive for farmers due to some common features shared by various types of VCC. These features can be classified into vertical aspects and horizontal aspects: the vertical aspect mainly refers to issues in risk sharing among members, knowledge and material flow within VCC and goal alignment, whilst the horizontal aspect is concerned with the embeddedness of value chain actors and support actors, which simply means how actors or VCC relate to farmers and the context by making use of social connectedness, geographical advantages or through institutional channels.
This research particularly focuses on the oil palm value chain in Ghana, aiming to map how the strategies of various value chain actors and support actors have helped to overcome the constraints of small-scale oil palm farmers and achieve inclusiveness, as well as to figure out how farmers improve performance in producing and marketing through collective action. The mixed-methods design of this thesis research starts with a policy analysis, followed by several group interviews and surveys with small-scale farmers, which intend to map the constraints they are facing in producing and marketing, as well as to document their experience in collective action and value chain collaboration. Semi-structured interviews with value chain actors and support actors were then used to explore how do they govern VCC and interact with small-scale farmers.
Evidence indicates that small-scale farmers are mainly facing financial and technical issues. SCA and ACA help reduce constraints by providing technical training and microfinance but they are both dependent on external support to a large extent. VCC tackles this challenge by establishing a more stable arrangement among farmers and actors, yet very few types of oil palm VCC are inclusive for small-scale farmers. This can be attributed to unidirectional knowledge flow within VCC or the failure in addressing risk sharing by actors.
Keywords: oil palm, collective action, inclusive value chain collaboration, small-scale
List of Abbreviations
AOPFA: Adom Oil Palm Farmer Association
ACA: Advanced Collective Action FAO: Food and Agriculture Organization
CoS-SIS: Convergence of Science: Strengthening Innovation Systems Programme
CPO: Crude Palm Oil
CSIR-OPRI: Council for Scientific and Industrial Research – Oil Palm Research Institute
CSPO: Certified Sustainable Palm Oil
CSR: Corporate Social Responsibilities
FFB: (Oil Palm) Fresh Fruit Bunches
FINE: Fairtrade Labelling Organizations International (FLO)
I International Fair Trade Association, World Fair Trade Organization (WFTO) N Network of European World shops
E European Fair Trade Association (EFTA)
GHC: Ghana Cedi
GOPDC: Ghana Oil Palm Development Company IFRI: International Forestry Resources and Institutions
KOPFA: Kusi Oil Palm Farmer Association
MASDAR: Master Plan Study report on the Oil Palm Industry in Ghana (2011) MOFA: Ministry of Food and Agriculture, Ghana
NGO: Non-governmental Organizations
NWO-WOTRO (Inclusive value chain collaboration): The Netherlands Organization for Scientific Research: Inclusive Value Chain Collaboration for Sustainable Landscapes and Greater Food Sovereignty among Tree Crop Farmers in Ghana and South Africa
PPPs: Public-Private Partnerships
RSPO: Roundtable Sustainable Palm Oil SCA: Spontaneous Collective Action VCC: Value Chain Collaboration
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List of figures, tables and pictures Figures
2.1 The common structure of out grower scheme in the oil palm sector 2.2 Conceptual Scheme
3.1 Visual Model for mixed-methods sequential design procedures
4.1 Visualization of the causal, final and normative relations of MASDAR 4.2 Necessary Steps for palm oil processing
4.3 The oil palm value chain of Ghana
5.1 The source of seedlings/seed nuts of farmer respondents 6.1 The social network of Joseph
6.2 The structure and the network of Kusi Oil Palm Farmer Association
7.1 The common structure of VCC among small-scale farmers, input providers/agronomists and support actors
7.2 The knowledge and material flow between MOFA and farmers within the farmer group 7.3 The structure of the out grower scheme of GOPDC
7.4 The Knowledge and material flow among small-scale farmers, OPRI and other value chain/support actors within innovation platform
Tables
2.1 Crucial factors for securing effective collective action 2.2 Overview of the Inclusive VCC framework
3.1 Overview of the sampling
5.1 Cross table: Village that respondents reside in * whether the respondent has experience in collective action/value chain collaboration
7.1 Overview of different value chain/support actors, their activities and inclusiveness of VCC
Pictures
3.1 Research Location
5.1 Ruminants in the oil palm farm of OPRI
6.1 Registration Certificate of Adom Oil Palm Farmers Association 6.2 Monthly meeting of the executive committee (KOPFA)
6.3 The Farmer Records Book offered by the farmer association 7.1 Breeding field of OPRI
Table of Contents
ACKNOWLEDGEMENTS 3
ABSTRACT 5
LIST OF ABBREVIATIONS 7
LIST OF FIGURES, TABLES AND PICTURES 8
TABLE OF CONTENTS 9 1. INTRODUCTION 12 2. THEORETICAL FRAMEWORK 16 2.1 Small-scale farmers and constraints in producing and marketing 16 2.2 Collective action of small-scale farmers 17 2.3 Value chain collaboration: concept and typical approaches 22 2.4 Inclusive value chain collaboration for small-scale farmers 28 2.5 Conceptual Scheme 31 2.6 Conclusion 32 3. RESEARCH METHODOLOGY 34 3.1 Research questions 34 3.2 Epistemological and ontological position 34 3.3 Operationalization 35 3.4 Research Location 35 3.5 Mixed-methods design 37 3.6 Sampling 39 3.7 Unit of analysis 40 3.8 Data analysis 41 3.9 Quality criteria and limitation of the research 41 3.10 Ethical Consideration 42 3.11 Conclusion 42
4. THE GHANAIAN OIL PALM SECTOR: POLICY CONTEXT AND CURRENT
TRENDS 43 4.1 Policy Analysis 43 4.1.1 Policy context for the oil palm sector since 1950s 43 4.1.2 MASDAR 44 4.1.2.1 Causal relations: being a net importer of palm oil and the underdeveloped supporting system 44 4.1.2.2 Final Relations: output promotion of palm oil and national plantation programme 45 4.1.2.3 Normative Relations: attracting foreign investment, policy intervention and smallholders focus 46 4.2 Linking the oil palm value chain to small-scale farmers in Ghana 46 4.3 Conclusion 48 5. PROFILE OF FARMERS 50
10 5.1 Gender 50 5.2 Age 50 5.3 Income 51 5.4 Land size 51 5.5 Producing and marketing activities 52 5.5.1 Producing 52 5.5.1.1 Seed nuts and seedlings 52 5.5.1.2 Planting and Intercropping 54 5.5.1.3 Other planting material and farming implements 55 5.5.1.4 Labour 55 5.5.2 Transportation to market / market access 55 5.6 Constraints faced by small-scale oil palm farmers in producing and marketing 56 5.7 The experience of farmers in collective action and VCC 57 5.8 Conclusion 58
6. SMALL-SCALE OIL PALM FARMERS AND COLLECTIVE ACTION 59
6.1 Case study: Adom Oil Palm Farmer Association 59 6.1.1 Social capital and past experience in collective action help to establish the farmer association 59 6.1.2 Governance structure of AOPFA 61 6.1.3 Support programme of AOPFA 62 6.1.4 Discussion 62 6.2 Case Study: Kusi Oil Palm Farmer Association 63 6.2.1 Social capital (trust) and external support help to establish the association 63 6.2.2 The governance structure of KOPFA 64 6.2.3 Support programme of KOPFA 65 6.2.4 Discussion 68 6.3 Conclusion 69
7. INCLUSIVE OIL PALM VCC FOR SMALL-SCALE FARMERS: MAPPING THE STRATEGIES OF VALUE CHAIN ACTORS/SUPPORT ACTORS IN
KWAEBIBIREM DISTRICT AND MEASURING TRADITIONAL/EMERGING VCC
THROUGH AN INCLUSIVE FRAMEWORK 71
7.1 Farmer group/farmer associations 71 7.1.1 Collaboration among small-scale farmers, Solidaridad (support actor), and other value chain/support actors (OPRI, fertilizer producer, etc.), 72 7.1.1.1 Introduction to CSIR-OPRI and Solidaridad 72 7.1.1.2 Examining the collaboration with the use of inclusive framework 74 7.1.1.3 Discussion 78 7.1.2 Farmer group established by MOFA and small-scale farmers 78 7.1.3 Farmer group established by Kwaebibirem District Bank and small-scale farmers 79 7.1.4 Discussion 80 7.2 Out grower scheme: GOPDC and Serendipalm Company 80 7.2.1 Introduction to GOPDC 80
7.2.2 Examining the out grower scheme of GOPDC with inclusive framework 80 7.2.3 Introduction to Serendipalm Company 82 7.2.4 Examining the out grower scheme of Serendipalm Company with inclusive framework 82 7.2.5 Discussion 84 7.3 Emerging VCC: certification scheme and innovation platform 84 7.3.1 Certification scheme 85 7.3.2 Innovation platform 85 7.4 The inclusiveness of different types of VCC in the oil palm sector of Kwaebibirem District 87 7.5 Conclusion 89 8. CONCLUSION 90 8.1 Synthesis of the research 90 8.2 Theoretical reflection: contribution to typology and shortage in framework 93 8.3 Policy recommendations 94 8.4 Recommendations for further research 95 APPENDIX 1 OPERATIONALIZATION CHART 96 APPENDIX 2. SURVEYS AND INTERVIEW GUIDE 98 APPENDIX 3 LIST OF THE RESPONDENTS 102 REFERENCE 104
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1. Introduction
Agriculture plays a crucial role to the livelihoods of a considerable amount of people around the world. It is important not only because it can help to promote the human wellbeing, but also in terms of its significant contribution to the national economic growth (Wolfenson, 2012). On the one hand, agricultural export products have been marked as a major source of foreign income by many developing countries, among which over half of them are located in Africa. On the other, one third of the economically active population obtains its livelihood from agriculture, most of who are small-scale farmers (FAO, 2011). Currently, small-scale farmers are considered to take up 90-95 percent of the farms and about 80 percent of the domestic agricultural production in developing countries (IFRI, 2008). Ensuring their better participation in value chain and their benefits fulfill the goal of many developing countries. However, besides insufficient economic capital and the limited access to market information, small-scale farmers are often faced with an absence of support or insufficient support provided by the government or the private sector.
As a result, small-scale farmers are acting collectively in order to make use of the effect of scale during the process of producing and marketing. The most common form of collective action is called as farmer association or farmer cooperative, which aims to facilitate the marketing process and reduce the transaction cost for small-scale farmers. Collective action is classified into two categories within this research, namely spontaneous collective action (SCA) and advanced collective action (ACA). The main difference lies upon the way they are established, managed and sustained (Chambers, 1988; OECD, 2013). Spontaneous collective action is often established by a group of farmers without the help from external actors, and the function of it remains limited since the organization depends largely on local resources or network (Davies et al, 2004). However, with professional support from external actors, farmers in advanced collective action are more likely to overcome the constraints in producing, cope with more strict producing standards, and therefore increase market access (OECD, 2013). In this study, two cases of farmer association in Ghana are compared in order to examine the difference of ‘spontaneous collective action’ and ‘advanced collective action’, as well as to study how they help small-scale farmers in various aspects. For the case of SCA in Chapter 6, farmers are not able to receive professional training in producing but the organization achieves success in providing space for farmers to help each other and it also contributes by providing the members with social welfare in collaboration with a local hospital. For the case of ACA in Chapter 6, the association is able to receive support from non-governmental organizations and apply it to producing and organization building, but it also faces high risks of collapse since the actors are planning to withdraw the support. Therefore, it is my contention that the classification of these two types of collective action does not necessarily mean that one surpasses the other. Although in most cases, collective action is supported by formal organizations i.e. ACA, attention should also be paid to SCA, where a group of people makes use of local network and resources to achieve short-term goals (Poteete and Ostrom, 2004). In other words, these two types of collective action could help small-scale farmers to reduce constraints in different ways and achieve effectiveness in
different aspects. As a result, a framework, which examines these two types of collective action, is developed; four factors are identified in order to secure effective collective action namely social capital, past experience in collective action, transparency and long-term external support (Hellin et al, 2007; FAO, 2001).
It is obvious that stable and sufficient external support marks a crucial part for both SCA and ACA: even there have been many success stories of collective action leading to effective farmer participation in value chain; both of these two types of collective action can fail in providing farmers with sufficient services when facing an absence of stable external support (Kaganzi et al., 2009). Despite the fact that collective action may be formed under the help of external actors or able to receive sufficient technical or financial support from external actors (ACA), it can also fail when external actors withdraw the support.
In order to tackle the challenges within collective action regarding insufficient external support and secure better participation of small-scale farmers into value chain, both value chain actors and support actors are trying to create various types of institutional arrangements to sustain the chain, which are often called as value chain collaboration (VCC). Within this research, small-scale farmers are separated from the concept of value chain actors, and value chain actors simply refer to input providers, processors, private companies and other actors who add value to the chain; support actors refer to those who are responsible for facilitating and providing support to the value chain but do not necessarily link to the chain economically, such as research institute, non-governmental organizations and often, the public sector.
Despite the fact that VCC has certain benefits, it is not always power-neutral and inclusive for small-scale farmers, problems that cannot be offset by rules and regulations are restricting farmers from using the resources provided by value chain actors and support actors (Ros-Tonen et al, 2015). This research focuses on the oil palm value chain in Ghana and tries to examine how different types of VCC help small-scale farmers reduce constraints in producing and marketing and achieve inclusiveness. An inclusive VCC framework thus is developed by integrating factors both in vertical and horizontal aspects. For the vertical aspect, emphasis is laid on the governance of VCC, which includes whether it has a formalized goal alignment, if the risk sharing is well addressed, as well as how the knowledge and material flow between farmers and value chain/support actors; in terms of the horizontal aspect, inclusiveness is mainly embodied in embeddedness, which can be achieved through locality, institutional channels and social connectedness.
Currently, common forms of VCC in agricultural sector include out grower scheme, farmer group, certification system, and agricultural innovation platform. Out grower scheme is a form of VCC that has long been criticized for its top-down structure, which may lead to monopsony and contract rigidity, but it still shows vitality in current agricultural sector (Porter and Howard, 1997). Farmer group has been the most common form of VCC that deployed by support actors, especially by non-governmental organizations, to work with farmers. It creates a favorable context for support actors and farmers to connect with each
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other, while it still faces challenges in sustainability issues when actors withdraw the support. These two forms of VCC are considered as traditional VCC, which have already widely utilized by value chain or support actors, but often fail in achieving inclusiveness due to unidirectional knowledge and material flow within the arrangement and a failure in addressing issues in risk sharing. In order to achieve greater inclusiveness in VCC, there have been two new forms of VCC emerging in recent oil palm sector. A trend, which is highly popular recently, is the spread of Fair trade and Certification in African agriculture industry. The concept of Fair Trade is to set an arrangement between companies in developed countries and producers in developing countries, in order to provide the producers with better prices, sustainable link to market and other general support (Raynolds et al., 2007). It aims for more sustainable and inclusive arrangement between farmers and private sector but the conditions for getting certified is still strict for most small-scale farmers. On the other hand, a recent development, which involves a prominent role for scientific actors and action research approaches, is to set up a platform, in which the practice-based knowledge and the scientific knowledge are integrated, mutual learning in communities, the empowerment of actors and institutional change are emphasized (Osei-Amponsah et al, 2012). The concept of such a platform, which generates from the agricultural innovation systems thinking, is increasingly used in interventions (Nederlof, 2012). Certification system and innovation platform are newly emerging types of VCC compared with traditional ones, and they are often considered to achieve greater inclusiveness by academia, which are classified as emerging value chain collaboration. However, such classification does not mean emerging VCC surpasses traditional VCC in every aspects, each of them have certain benefits and advantages. This research examines the difference between these two types of VCC and investigates how they help small-scale farmers to reduce the constraint and achieve inclusiveness in various ways. The oil palm value chain was selected in this research due to oil palm being regarded as a national priority crop by the Ghanaian government, and as having a huge potential in reducing poverty and ensuring food security. With the liberalization trend starting in 1990s, however, the government is gradually withdrawing the support towards the oil palm sector in order to create more space for the development of the private sector. As a result, a relevant policy system and official support structure for the oil palm sector remains underdeveloped, which has left a negative consequence on the development of the entire oil palm sector (MASDAR, 2011). In order to reduce the constraints in producing and marketing, small-scale farmers are either trying to act collectively or to collaborate with external actors in the form of VCC.
Therefore, the main research question for this research is How do small-scale oil palm
farmers reduce constraints in producing and marketing by acting collectively and how do the strategies of different value chain actors and support actors in Ghana to help reduce these constraints and promote inclusive value chain collaboration in the oil palm sector?
The thesis consists of eight chapters. The introduction chapter aims to provide some background information, as well as to explain the relevance of the research. Chapter two outlines the theoretical debate in collective action and VCC, followed by chapter 3 justifying
the methodology and ethical consideration. Chapter 4 presents a clear research background for the research, including the policy environment and the current situation of the oil palm industry in Ghana. Chapter 5, chapter 6 and chapter 7 are the main empirical chapters: chapter 5 presents the profile of farmers in the survey; Chapter 6 then examines the collective action of small-scale oil palm farmers through several case studies; chapter 7 examines several types of VCC in the oil palm sector of Ghana, together with an overview of the value chain actors and support actors that are involved in VCC. The final chapter provides answers to each research question, followed by a discussion on how SCA and ACA help small-scale farmers in various ways and how various types of VCC achieve inclusiveness in terms of governance and embeddedness; it then offers recommendations for policy-making and further research.
This research is conducted under the framework of the research programme on inclusive value chain collaboration for sustainable landscapes and greater food sovereignty among tree crop farmers in Ghana and South Africa (NWO-WOTRO).
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2. Theoretical framework
This chapter aims to review the theoretical debate upon collective action and VCC, as well as to develop a framework for inclusive VCC. It starts by defining small-scale farmers and summarizing their constraints based on literature, followed by a discussion on how small-scale farmers reduce the constraints by acting collectively. Two types of collective action are defined and introduced, and four crucial factors to secure effective collective action are identified. Moreover, the challenge faced by collective action will be outlined, which helps to bring in the discussion of VCC and better position it within the research. Next, the concept and several typical approaches of VCC will be introduced, among which farmer group/association, out grower scheme, certification scheme and innovation platform will be highlighted. This aims to examine how different strategies taken by value chain actors and support actors help to benefit the small-scale farmers and reduce their constraints. Finally, I’ll review some of the relevant research on VCC in order to develop an inclusive framework to analyze the collaboration between small-scale oil palm farmers and different actors.
2.1 Small-scale farmers and constraints in producing and marketing
‘Small-scale’ is a complicated concept that can be approached from many perspectives, and the definition of it is extremely diversified based on different geographical location or social context. This research targets at small-scale oil palm farmers in Ghana, which calls for a clear definition of ‘small-scale’ within this particular context.
According to Kirsten & Zyl (1998), "small-scale" is not backward, productive, non-commercial agriculture, and it does not solely link to farm size; it is a complicated concept concerned with economic features and efficiency. World Bank (2003) defines small-scale farmers as those with a low assets base, operating less than 2 hectares of cropland, while a FAO study (2004) considers small-scale farmers as farmers who “have limited resource endowments, relative to other farmers in the sector”. Van der Ploeg (2008) also insists on the need for a positive and substantive definition, which means that a definition should be made according to what they are rather than what they are not. As a result, he defines small-scale farmers as those who construct and maintain a self-controlled and autonomous resource base, such as land and labor.
Small-scale farmers in this research are defined with the use of three variables. The first one is the size of farm. This criterion varies greatly around the world: farmers whose farm size is under 5 hectares are considered as small-scale in Europe, while the number is 1 hectare for Asian countries. According to Osei-Amponsah (2013), however, the model size of small-scale oil palm farm in Ghana ranges from 2 acres to 10 acres. The second one is income source, which mainly refers to whether the farmer has income source other than agriculture (MASDAR, 2011). The last one refers to the farming practice: small-scale farmers usually produce goods for both markets and subsistence, and based mainly on family labor, which distinguishes them from medium and large scale producers (Cousins, 2010). Within this research, the farming practice embodied two aspects: labor use and marketing strategies; on
the one hand, the labor use of small-scale farmers often consists of family labor and short-term hired labor, which include both human labor and transportation resources; on the other, small-scale farmers produce goods both for subsistence and the market, and they usually prefer instant cash payment, which is often with local traders at the farm gate or in the community (Takane, 2009; WFP, 2016). Within the particular context of oil palm, however, the situation becomes even more complicated. The demands of instant cash payment and diversified harvesting schedules have jointly influenced on the marketing strategies of small-scale farmers. Unlike Cocoa, oil palm is a crop that requires harvesting throughout the year, though with a division of peak season and lean season. With such frequent and often, erratic harvesting schedule, most small-scale farmers tend to sell their products to local traders individually for instant cash payment, especially during lean season. Moreover, a long-term storage of palm fruits will significantly decrease the quality of the products, which also lets small-scale farmers choose to sell their products as soon as possible rather than storing them and wait for large-scale marketing (Osei-Amponsah, 2013).
Apart from the above characteristics, small-scale farmers often have similar types of constraints in producing and marketing. On the one hand, limited economic or financial capital has always been a problem for most small-scale farmers. On the other, given the limited access to resources and knowledge, small-scale farmers can suffer from problems of economies of scale, which makes it difficult for them to utilize certain types of technologies and services, since banks and marketing firms prefer to transact in large quantities rather than deal with many small production units (Amano, 1999). The constraints of small-scale farmers therefore can be sorted into two categories, namely assets constraints, which include land, agricultural inputs and other economic or material constraints, and institutional constraints, which is closely linked to access to market information and knowledge. In order to meet the requirements of the market, farmers are demanded to upgrade their products and adopt new market strategies continuously (Kaganzi et al., 2009). However, due to the limited access to technical and financial resources, small-scale farmers can be easily excluded from the market due to the low-quality products produced by them. Within this research context, small-scale oil palm farmers are targeted, which implies that the constraints being discussed are limited within the process of oil palm producing and palm fruits marketing. These constraints can be limited technical and professional knowledge in farming, limited economic capital and material in producing, as well as limited market access.
2.2 Collective action of small-scale farmers
Collective action has been regarded as a way for small-scale farmers to overcome the constraints in producing and marketing (Meinzen-Dick et al., 2004). This section starts by reviewing how collective action helps small-scale farmers reduce constraints in producing and marketing, followed by identifying key criteria for securing effective collective action. Finally, by classifying two types of collective action, namely spontaneous collective action (SCA) and advanced collective action (ACA), the section aims to examine how they help small-scale farmers in different ways, as well as to provide an analytical framework for the case studies in following chapters.
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• The concept of collective action and the distinction between SCA and ACA
Collective action, which is understood as ‘voluntary action taken by a group to achieve common interests’ in this research, is increasingly used by small-scale farmers as a way to overcome the constraints in producing and marketing (Meinzen-Dick et al., 2004). It is crucial in terms of promoting market access and value addition especially when farmers are faced with high transaction costs, policy incentives and support from external agents, such as non-governmental organizations. Transaction costs of farmers in this research is referred as observable and unobservable costs of market exchange, including (1) searching for buyers, (2) negotiating and bargaining and (3) screening, enforcement and supervision (Fischer and Qaim, 2011). High transaction costs may reduce and prevent the market exchange, and therefore lead to market failure. Fischer and Qaim (2012) demonstrate that price advantages in marketing through collective actions are generally significant and positive. It is especially significant for high value crops, which are characterized by high transaction costs. Besides, even though collective action sometimes does not provide clear benefits in accessing market for farmers, it can still function by providing the members some welfare services (Hellin et al, 2009).
Collective action typically demands a series of common features of the group members, e.g. similar economic size, shared norms, homogeneity of identities and interests. To establish commonly agreed rules and secure members’ commitment to obey the rules have always been a problem when organizing collective action. Mistrust between farmers, corruption of the staff from the sponsoring company and low transparency in financial and material management have been identified when examining the failed collective action (Hellin et al, 2009; FAO, 2001).
The most common form of collective action taken by farmers is farmer association, which is considered to be critical for it provides farmers with lower transaction cost, more input supply and market information, enabling members to improve their production, marketing or livelihoods in general (Fischer and Qaim, 2012; Markelova, Meinzen-Dick, Hellin & Dohrn, 2009). According to Chambers (1988), collective action can be classified into two types namely spontaneous collective action (SCA) and another type, which is jointly managed by farmers and officials within a certain project, often named as farmer joint management (FJR). However, such definition is simply concerned with the management style of the organization rather than covering other aspects such as the way collective action is sustained, which turns out to be crucial when studying collective action (OECD, 2013). In order to distinguish the second type collective action from the concept used by Chambers, it is named as advanced collective action (ACA) since it involves more actors and seems more formal. Davies et al. (2004) distinguish two types of collective action as follows: (i) cooperation: bottom-up, farmer-to-farmer collective action and (ii) coordination: top-down, agency-led collective action. This has shown an implicit concern with aspects other than management. OECD (2013), explicitly, points out that SCA often means that farmers initiate and sustain collective action without external support, and if the benefits overweigh the cost, they may provide
public goods in collaboration with neighbors and others. However, high initial transactions and policy uncertainty may hinder the development of such organization. Framers often find it difficult to overcome these constraints since they are faced with an absence of scientific knowledge, technical assistance and financial support (OECD, 2013). This implies that the difference between the two types of collective action lies in two aspects, namely people who initiate the organization and the way it is sustained: for the first aspect, SCA is established without the help of external actors while the establishment of ACA is often under the support of external actors, who can be public actors or non-governmental organizations; for the second aspect, SCA sustains the operation based on their own costs and benefits (such as delivering public goods when benefits overweigh the costs) while ACA often operate under the help of external actors. Since ACA is often a form of collaboration between farmers and value chain/support actors, it can also be linked to the discussion of VCC; I would however keep the discussion of it in both parts but from different perspectives. In terms of ACA, I will examine it mainly from the perspective of farmers’ collective action, while for farmer association in VCC; it will be examined from the perspective of VCC and value chain/support actors.
Despite the fact that ACA often benefits from scientific knowledge and often, financial support from external actors, it does not necessarily surpass SCA in every aspect. On the contrary, many scholars have argued that much of SCA is found not below but above the ‘outlet’ (Chambers, 1988). These two types of collective action both have their own advantages and disadvantages: for SCA, farmers are able to gain more control over the organization and tend to show more concern with the benefits of farmers (Glover and Kusterer, 1990). But as discussed above, it often fails in proving members with scientific knowledge and other types of technical assistance. Moreover, the structure of it is often informal, which may lead to potential corruption phenomena (Hounkonnou et al., 2012). For ACA, it often manages to provide farmers with technical, financial and institutional support but such way of operation faces high risks of collapsing when external actors withdraw the support.
In general, the classification of the two types of collective action is crucial since the analysis of collective action greatly lies upon the study of formal or informal organizations that support collective action. However, it is my contention that the classification of these two types of collective action does not necessarily mean that one surpasses the other. Although in most cases, collective action is supported by formal organizations (ACA), attention should also be paid to SCA, where a group of people makes use of local network and resources to achieve short-term goals (Poteete and Ostrom, 2004). In other words, these two types of collective action could help small-scale farmers to reduce constraints in different ways and achieve effectiveness in different aspects. As a result, next section aims to propose a framework to examine these two types of collective action in different aspects, which also provides insights for the case studies in following chapters.
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Collective action is crucial for small-scale farmers since it improves the agricultural environment, which is normally beyond the capacity of individual farmers (OECD, 2013). However, these organizations are not always contributive to its members even there have been many success stories of farmer associations leading to effective farmer participation in value chain (Fischer and Qaim, 2011). Barrett (2008) and Berdegue (2001) have argued that cooperative farming is proven to be successful for high-value crop, yet only a little amount of empirical evidence shows that it works for food grains and other staples. Moreover, a study on farmers’ collective action in Tanzania (2009) has shown that only a few farmer groups have improved the performance of food crop farmers in accessing market, while the influence for vegetable farmers has been positive overall. Moreover, the review of collective action is associated with social capital literature (Barham and Chitemi, 2009). Therefore, this section also aims to identify crucial factors for securing effective collective action.
The review of collective action is associated with social capital literature, which implies that social norms and bonds are important in the study of collective action (Barham and Chitemi, 2009; Pretty, 2003). The basic idea of “social capital” is that the associates of a certain person, either family members or friends constitute a set for one to call on when occurring crisis or to enjoy leveraged material gain. According to Uphoff and Wijayaratna (2000), structural forms of social capital, such as roles, rules, procedures and social networks, are considered to stimulate mutually beneficial collective action, which means that both farmers and people who are connected and contributed to collective action can benefit from the arrangement. Pretty and Ward (2001) have also indicated the significance of human and social capital in solving the development problems of communities, especially in terms of resource management. The analysis of social capital, according to Pretty (2003) simply includes four aspects: relations of trust; reciprocity and exchanges; common rules, norms, and sanctions; and connectedness in networks and groups. Relations of trust helps to facilitate collective action since trust reduces transaction cost and time. However, trust is also easily to be broken, which may lead to the collapse of cooperation. Reciprocity tackles this challenge and helps to build trust. Common rules and norms in this case help to ensure that group interest is complementary with that of individuals. Finally, the concept connectedness refers to the fact if and to what extent one connects with people with similar objects or even different views but are crucial in terms of providing resources.
Moreover, past research on farmers association has pointed out that the ‘success’ of such organization is based on the combination of collective learning (learning or receiving training in the form of groups), skills development and access to new farming technology, which mainly comes from a long-term external support (Kaganzi et al., 2009). As a result, public-private partnerships are considered to be crucial in terms of ensuring the inclusion of small-scale farmers in early stages of establishment of the farmer association (Barham and Chitemi, 2009). Given adequate support, small-scale farmers can cope with stringent producing standards (Narrod et al, 2009). Moreover, high transparency in financial and material management also contributes to effective collective action (Hellin et al, 2009; FAO, 2001).
Based on the discussion above, four crucial factors were identified in order to see if collective action is effective: the first one is long term external support, which enables farmers to develop skills and access farming technology in order to improve their performance in producing; the second criterion relates to transparency, which may include documents or reports upon the governance and financial management of the organization; the third one is past experience in collective action, which could provide a foundation for the formation of the new organization; the last one is social capital, which includes four sub-factors. The table below provides an overview of these factors:
Collective action Long-term external support Transparency Past experience in collective action Social capital
Table 2.1 Crucial factors for securing effective collective action (Fischer and Qaim, 2011; Markelova et al. 2009; Uphoff and Wijayaratna 2000; Pretty and Ward 2001, Pretty, 2003)
• Challenges faced by collective action and positioning value chain collaboration
In general, collective action is often regarded as a way for small-scale farmers to reduce transaction costs, increase access to the market, as well as to contribute to value addition. Previous sections review literature on two different types of collective action and how they help small-scale farmers to reduce constraints in different ways. Four crucial factors are also identified for securing effective collective action, namely long-term external support, trust among members, past experience in collective action and social capital, among which long-term external support is the most problematic aspect for the collective action in practice, as will be discussed in Chapter 6 (Fischer and Qaim, 2011; Markelova et al. 2009; Uphoff and Wijayaratna 2000; Pretty and Ward 2001).
There have been many success stories of collective action leading to effective farmer participation in value chain but collective action often fails in providing farmers with sufficient support in producing and marketing. This is often due to an absence of stable external support (Kaganzi et al., 2009). Despite the fact that collective action may be formed under the help of external actors or receives sufficient technical or financial support from external actors (ACA), it can also fail when faced with the withdrawal of the support. Therefore, another type of arrangement, which aims to tackle the challenge faced by collective action regarding insufficient external support is required. Moreover, Hounkonnou et al. (2012) point out within the African context, collective action is easy to breed ‘the big man syndrome’, which may easily lead to low-transparency, corruption issues in the arrangement.
This has led to the discussion of value chain collaboration, an institutional and collaborative arrangement set among small-scale farmers, value chain actors and support actors. The aim of
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VCC is the better inclusion of small-scale farmers and small and medium-sized enterprises (SMEs) into commercial chains by providing them with sufficient support. Such collaborative arrangements between farmers and value chain/support actors are increasingly popular to increase efficiency in the value chain, and especially to benefit the small-scale farmers. Value chain/support actors are collaborating with farmers through various approaches, such as out grower scheme and agriculture innovation platform. In next section, the concept and typical approaches of VCC will be introduced, in order to see how have different strategies taken by external actors have helped to reduce the constraints of farmers, as well as to study what are the advantages and disadvantages of these approaches and how is the collaboration governed by various actors within or out of the value chain.
2.3 Value chain collaboration: concept and typical approaches
Despite the fact that small-scale farmers are the dominant power in agricultural production, they can suffer from a series of constraints such as a lack of economic capital and limited access to market information. Therefore, many farmers try to act collectively during the process of producing and marketing in order to make use of the effect of scale, thus enabling learning, reducing transaction costs and increasing market access. However, this often results in failure due to an absence of sufficient support from value chain actors and non-chain actors.
• Concepts, advantages and disadvantages of VCC
In order to solve these problems and sustain the supply chain, many value chain actors have tried to create a mutually beneficial institutional and contractual arrangement with farmers, in which the farmers engage in farm-level production (usually on their own land), while the companies or private farms provide or arrange services, credit, technical advice and input support, at the same time as they control the bulk produce for marketing, and establish recommendations and quality control (Smalley, 2013). This is often called as ‘out grower scheme’ or ‘contract farming’, a business model that is widely spread in African countries, especially in tree crop sector, such as oil palm. Besides securing the market access, out grower scheme is also a way for donors to target the vulnerable groups, as well as to enable them to learn new skills.
Yet out grower scheme is only a form of value chain collaboration (VCC), which is defined in this research as voluntary, collaborative arrangements between different actors within a
chain, including producers and buyers and often, but not necessarily, other non-chain actors, i.e. government and non-governmental organizations, which have an institutionalized, and often, hierarchical structure and strive for a sustainability goal (Ros-tonen et al, 2015;
Helmsing and Vellema, 2011; Drost et al, 2012). Within this research, non-chain actors are named as support actors, who provide technical services or marketing support for value chain actors, e.g. producers, yet unnecessarily link to the chain economically (Hellin and Meijer, 2006). More specifically, supporting activities relate to facilitating activities but are not necessarily contributing the value added procedures. General support actors in agriculture
sector include non-governmental organizations, research institute, and often, relevant public agencies. VCC has following benefits: VCC facilitates the cooperation of participating members along the value chain to improve performance (Bowersox, 1990); moreover, VCC has improved stability over other forms of collaboration such as collective action since mutual benefits and risks are often shared among the actors (OECD, 2013); transactions are reduced due to information sharing and the transfer of best practices; VCC also enables innovation through combing the ideas from different actors. Within this specific research, the benefits of VCC lie upon the technology and benefit sharing, as well as more stable support when compared with collective action.
However, VCC is not always power-neutral. Beyond normative assessments on who should participate, collaboration often takes place within a context of existing resource and power asymmetries, which are not offset through formal rules pertaining to decision-making and representation (Bitzer and Glasbergen, 2015). In general, the partnerships are often faced with the challenge of reconciling diverse interests of different stakeholders, which can be economic, social and even political objectives.
According to Gereffi (1994), governance in value chain is the ‘authority and power relationships that determine how financial, material and human resources are allocated and flow within a chain’. Hence, the allocation and flow of the resources will be the main criteria to analyze how various types of VCC are governed, whilst the advantages and disadvantages of different approaches for farmers will be the core issue of this section.
Taking the out grower scheme for example: the contractual agreement between farmers and companies is often organized as follows: the farmers provide land, labors and tools, whilst the companies offer them inputs such as seeds and fertilizer. A well maintained out grower scheme can promote production and marketing of agriculture: World Bank has pointed out that contract farming provides farmers with modern technologies, market access and financial support. Moreover, out grower scheme is also crucial for public sector or donors to target vulnerable groups. However, such contractual agreement is usually set between unequal parties: medium and large scale companies on the one hand and economically feeblish farmers on the other. Watt et al. (1988) argues that farmers are compelled to work more extensively and for longer time under such arrangements. Moreover, Little (1994) argues that out grower scheme is often exploitive when involved in unequal power relations.
Recently, there have been an increasing number of critiques on account of the top-down structure and the imbalanced power relations existing in out grower scheme. The figure below has well illustrated the common structure of out grower scheme. Due to the implementation of new technology or the cultivation of new varieties, farmers may face the risk of production problems and therefore fail to be included in market. Moreover, issues that generate from the companies also have potential negative influences on VCC, such as corruption and giving first preference to the products of their own estates rather than the ones from farmers (Abwino and Rieks, 2007).
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Figure 2.1 The common structure of out grower scheme in the oil palm sector (Abwino and Rieks, 2006)
Next, several other typical approaches of value chain collaboration will be introduced, with an emphasis on the ones in the agriculture sector of African countries.
• Typical approaches of VCC
This section aims to introduce VCC mainly based on the typology proposed by Ros-tonen et al. (2015).
The first classic approach of value chain collaboration is known as public-private partnerships (PPPs). As a result of the spread of the neo-liberal reform in the 1980s, PPPs call for a shift from state governance to corporate governance, aiming to create a favorable environment for the development of private sector, as well as relieving the pressure of government. This has also been the trend within the oil palm sector of Ghana during the past decades, which has greatly shaped the pattern of the entire industry. The way it is organized is often by including private firms and the public sector, more specifically the government, and sometimes non-governmental organizations are also involved.
Given the fact that the private sector is usually equipped with abundant resources and sufficient knowledge within a certain field, cooperating with them provides the partners, no
matter the government or local farmers, with considerable opportunities. On the one hand, government could relieve their pressure of delivering services while still build trust with the citizens due to the high-quality social services delivered by private sector. On the other hand, for the private sector, it is also a way for them to access public funding and resources that are different from what they already have, which secures them with more opportunities on business and investment for their future development. However, since PPPs usually follows a top-down structure, public and the private sector often have absolute power in decision-making, voicing their demand and display their agencies (Regéczi, 2014). Hence, small-scale farmers, who are at the bottom of the structure, are often neglected during those processes. In agriculture sector, such form of partnerships is often organized in the form of farmer groups, which enable collective learning (learning or receiving training in the form of groups), skills development and access to new farming technology. Currently, farmer group has been the most common form of VCC that deployed by support actors, especially by non-governmental organizations, to work with small-scale farmers (Kaganzi, 2009). It creates a favorable context for support actors and farmers to connect with each other, while it still faces challenges in sustainability issues when actors withdraw the support.
The second approach of value chain collaboration emanated from the discourse of corporate social responsibilities (CSR). Consistent as McWilliams and Siegel (2001), CSR is understood as arrangements where the private sector goes beyond compliance and engages in ‘actions that appears further some social good, beyond the interests of firm and that which is required by the law. Unlike the PPPs, CSR demands the private sector to advance the social or economic conditions of the communities it operates on, which can both increase the competitiveness of it and benefit the local farmers (Ros-tonen et al, 2015). It is based on the theory that failing to address societal problems may lead to an increase of internal cost, such as limited labor productivity and waste of materials. In CSR, small-scale producers tend to be the beneficiaries rather than active participants (Ros-tonen, 2015)
However, critiques of CSR also claim that CSR is increasingly utilized by private sector to serve their financial interest and legitimize their power. Therefore, CSR is not an approach that solely benefits the local people; it is also a strategy for corporations to sustain their long-term economic benefit.
By summarizing these classic approaches in value chain collaboration, we can easily tell that both the PPPs and CSR have some disadvantages. For the PPPs, the private sector is regarded as the main actor within the partnerships due to the resources and knowledge they have, while the small farmers can seldom claim their needs in practice due to the top-down structure. For the CSR approach, it is also regarded as a way to increase economic benefit of corporations and legitimize their control over the local community even if the people are benefiting from the improvement of their livelihood, resulting in a further failure in addressing the fundamental issues faced by farmers. It became clear that institutional constraints in VCC are hampering farmers and other intended beneficiaries from putting the technologies to use and improving their livelihoods (Hounkonnou et al, 2014). By institutions, it refers to rules and regulations, norms and behaviors.
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A recent development aiming to overcome these issues, which involves a prominent role for scientific actors and action research approaches, is to set up a platform, in which the practice-based knowledge and the scientific knowledge are integrated, mutual learning in communities, the empowerment of actors and institutional change are emphasized (Osei-Amponsah et al, 2011). Moreover, there has been a trend among scholars to call for the private sector to ‘deliberately work beyond the farm-scale to support food production, ecosystem conservation, and rural livelihoods across entire landscapes in an integrated manner’. Such form of VCC is usually named as ‘beyond the chain’, which is a new form of collaboration between farmers, value chain actors, as well as non-chain actors. An example is the Convergence of Science: Strengthening Innovation Systems (CoS-SIS) Programme in West Africa. The concept of such a platform, which generates from the agricultural innovation systems thinking, is increasingly used in interventions (Nederlof, 2012). It is regarded as a way of bringing stakeholders within a value chain or from a sector together to enable transformative change, and these partnerships between private sector, non-governmental organizations, small-scale farmers and public agencies have managed to facilitate the inclusion of smallholders in value chains in some area. However, whether small-scale farmers are well included in the interaction of the platform or regarded as orientation in practice, if the platform can play a long-term role in promoting the value chain collaboration and how should the platform be improved all requires in-depth research and evaluation. Another trend, which is highly popular recently, is the spread of Fair trade and Certification scheme in African agriculture industry. The concept of Fair Trade is to set an arrangement between companies in developed countries and producers in developing countries, in order to provide the producers with better prices, sustainable link to market and other general support (Raynolds and Long 2007). In 2003, FINE, which is a joint alliance of several major Fair Trade label groups, develops a common framework, which defines Fair Trade as a trading partnership, based on dialogue, transparency and respect that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions, and securing simultaneously render more difficult the creation of alternative norms, rules and institutions within Fair Trade (Raynolds, 2012). The number of the certification schemes in the oil palm sector went through a dramatic increase during the past decade, among which Roundtable on Sustainable Palm Oil (RSPO) and International Sustainability and Carbon Certification (ISCC) play a dominant role.
Taking the RSPO for example: RSPO was first established in 2004, aiming to develop and implement global standards for sustainable palm oil. In collaboration with producers, processors and manufactures, RSPO has been transforming the global oil palm industry into a more sustainable pattern (RSPO, 2016). By complying with the criteria developed by RSPO, companies produce palm oil in a way that reduces the harm to the environment and society, thus receiving certification from RSPO. Considerable amount of countries and companies committed to 100% RSPO certified sustainable palm oil, which provides small-scale producers enormous opportunities in marketing.
In general, Fair Trade aims to provide the producers with better price, improved working conditions, stable access to credit, and some companies even ask for a prohibition of chemical use in production (Dragusanu, 2013). However, Fair trade has received substantial criticism due to following reasons: the first one is the distribution of benefits between fair trade companies and communities remains problematic; Moreover, the certification process is somewhat expensive: taking the coffee sector for example, an average size of group needs to pay 3000 euro to apply for application and 1000 euro to 2000 euro for renewal. Last but not least, individual farmers are often excluded for certification companies only endorse parties that belong to a certain cooperative.
• The significance for new categorization of VCC & the necessity for an inclusive
VCC framework
To summarize, previous section outlines mainly two typical approaches of VCC, together with four practical forms of VCC in the agriculture sector, namely out grower scheme, farmer group, certification and innovation platform. Based on the previous discussion, a new categorization of VCC, which particularly focuses on small-scale farmers is emerging: out of the four forms of VCC, out grower scheme and farmer group have long been utilized in agricultural sector, which have also received enormous critiques upon inclusive issues; while the other two types, which exist for a relatively short-period in the oil palm sector, especially for innovation platform, are named as emerging VCC. The most significant difference between traditional VCC and emerging VCC, as discussed previously, is that besides the aim for delivering knowledge and material support, emerging VCC is also committed to tackle institutional constraints faced by small-scale farmers. Thus, emerging VCC often involves more actors than traditional VCC in order to tackle these challenges. It aims for providing small-scale farmers with more balanced power relations and more space to interact with other actors within the collaborative arrangements. This is due to the fact that the governance of VCC approaches often follows a top-down structure, and various types of collaboration are not automatically inclusive (Ros-tonen et al, 2015). Farmers can be prevented from benefitting the collaboration due to the reasons that cannot be offset by rules and regulations. Given the fact that the value chain actors have various interests, the barriers for VCC are high and may involve trade-offs and a reduction of their autonomy (Ros-tonen et al, 2015). Therefore it is obvious that emerging VCC is considered as more inclusive than traditional ones. However, it is my contention in this research that both types of VCC have certain advantages, and could therefore help small-scale farmers reduce constraints in different ways. Within this research, cases of out grower scheme, farmer group, certification system and several other forms of VCC will be studied in order to provide evidence for such arguments. In order to examine the individual case in the field, a framework thus is required. However, during the past decade, global value chain analysis has been increasingly utilized by international organizations and donors in their work in developing countries The typical approach of global value chain analysis, which has been narrowly focused on functional ‘upgrading’, does not consider the issue of if and how can the poor people be better included
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in value chains (Ros-tonen et al., 2015). As a result, the next section aims for developing an inclusive framework for the study of VCC in the research.
2.4 Inclusive value chain collaboration for small-scale farmers
According to Bitzer et al (2010), the value of VCC is embedded in the possibility to create win-win situations between private sector and producers. However, corporations tend to focus on the ‘low hanging fruit’ and ‘easy win-win projects’ instead of contributing to solve the fundamental social and environmental problems (Ros-tonen et al, 2015). Therefore, a series of extra factors are required to secure a more inclusive VCC. This section starts with a review of value chain collaboration framework, followed by developing an inclusive framework for analyzing different forms of VCC in the fieldwork research.
• Vertical aspect: the governance of VCC
According to Gereffi (1994), governance in value chain is the ‘authority and power relationships that determine how financial, material and human resources are allocated and flow within a chain’, which implies that the way knowledge and material are allocated and flow is a crucial indicator of the governance structure of VCC. Besides, Cooper and Ellram (1993) have pointed out that successful value chain management requires a long-term orientation with the sharing of risks and rewards balanced over time between partners. Frankel et al (2002) identify five factors as being key to successful collaboration: a willingness to innovate and change, understanding the other partner’s business, common goals and objectives, appropriate measures and incentives, and information sharing. Simatupang and Sridharan (2005) used a conceptual piece to similarly advocate that collaborations must have information sharing, decision synchronization, and incentive alignment amongst firms in supply chain partnerships. Moreover, Drost et al (2012) argue five crucial factors that are considered to have positive impact in promoting inclusive VCC. The first one is formalized goal alignment, which is the core part of collaboration and implies the fundamental value of it. Next, risks and resources sharing also make a crucial part. Additionally, stakeholder embeddedness and involvement is regarded as factors that can generate “proto-institutions”, which can also be adopted by other organizations. Moreover, a clear and formalized governance structure is required in order to sustain inclusive collaboration. Last but not least, transparency in decision-making and other processes can also decrease the risks of collaboration.
To conclude, in terms of the study of VCC and the argument upon inclusive VCC, most of the literature has emphasized the significance of bidirectional or multidirectional knowledge flow/information and material sharing within VCC, which, according to Gereffi (1994), often secures a more transparent governance structure of VCC. Besides, formalized goal alignment among members, which can be examined from the policy document of each value chain/support actor, as well as from the strategies they use, is another crucial factor for inclusive VCC (Drost, 2012). The last one simply addresses the issue of risk sharing: the risks need to be equally shared by actors. It became clear that most scholars show concerns
over the governance structure of VCC when arguing about the crucial factors for inclusive VCC, which can be seen as the vertical aspect of VCC, while seldom do they pay attention to the horizontal elements of VCC, i.e. embeddedness.
• Horizontal aspect: embeddedness
The concept of embeddedness was pioneered by Polanyi (1944): in his famous book The
Great Transformation he argues that embeddedness is the basic condition of economy since
individuals are always primarily social beings rather than economic ones. Embeddedness therefore is considered to be crucial in analysis upon economic behaviors, with no exception to VCC. Embeddedness encourages actors to take risks, innovate, pass on novel ideas, and exchange valued personnel since the work experience of actors can be applied elsewhere within the same area if they fail in a certain programme (Staber, 1996). Moreover, past studies have indicated that collaborative participants may be socially embedded, and therefore establish trust and create value. Granovetter (1985) proposes that embeddedness refers to the phenomena that the action chosen by individuals is affected by social relations within which they function. This contention has several implications: on the one hand, the actions chosen by individuals are importantly refracted by social relations of them; on the other, economic activity is dependent on more general social structure such as networks rather than social groups or categories.
Schmidt (2016) points out embeddedness approach claims that the preference of actors can only be interpreted within relational, institutional and cultural contexts, which is in contrast with economic approaches, such as rational choice theory. This means that embeddedness simply focuses on different conditions within which social action takes place and upon which it is dependent. Bourdieu (1992) interprets these ‘conditions’ and ‘context’ as a network in which actors are interconnected. He then points out the core part of such network is what in between rather than the grand narratives or micro studies.
As a result, the analysis should focus on how the tie (what is in-between) affects individuals and the relations, and therefore determines behaviors. Within this research, embeddedness therefore is to what extent VCC or actors is connected/related to the local context, which is a tie created by value chain and support actors to facilitate VCC. If vertical aspect is concerned with the structure within the collaboration, embbededness thus is the context which the collaboration takes place in.
This brings back the argument of Pretty (2003), which claims that social connectedness helps people to gain support from those with similar object or even different views but are crucial in terms of providing resources. So the social network (mainly connectedness) of value chain/support actors and how does it contribute to the development of VCC is a core issue when examining the embeddedness of different VCC.
Another factor, which is proved to contribute to better connectedness and extensive social network, and therefore to embeddedness is geographical location. I would however discuss it
