Chain Failure and Chain Goods: Re-thinking Value Chain Upgrading and Promotion in Developing Countries

Abstract

The concept of value chain upgrading and promotion has been proposed as a vehicle for small-holder farmers in developing countries to gain access to higher value markets and thus generate greater income for their families and communities. However, there are many instances where investments in upgrading have not generated the expected outcomes. One of the contributing factors has been that existing approaches focus more on who does what rather than the real problem to be addressed. A chain failure framework on the other hand focuses attention on the core problem and the appropriate response, rather than on who does what. It takes a system view rather than a function or component view, and it starts from the supposition that the only reason for intervening in a value chain is to increase chain surplus, where chain surplus is properly measured to include any chain or social externalities. In this paper we review some of the existing literature on value chain upgrading and promotion as proposed for developing country situations, outline the essential elements of the chain failure/chain good theory and its relationship to the club goods literature, and then assess whether the chain upgrading and promotion literature can be reconfigured as a chain failure/chain good problem, using a number of published case studies. Finally, we discuss various types of governance models used in agricultural value chains in developing countries and suggest how well they might align with the chain failure/chain good approach.