Food Value Chain Coordination in Practice: European and Australian Case Studies of the Creation of Chain Good Innovations

Abstract

Food value chain businesses form alliances with horizontal and/or vertical partners to take collective action to either overcome or ameliorate chain failure, or to take advantage of new opportunities available due to innovations in products or processes. The desired outcomes from the collective action would no t be possible to achieve if these businesses acted independently. While such alliances and collaborations may take many forms, depending on the degree of commitment, the kind of governance and infrastructure linkages, they can often be thought of as “clubs ” for the purpose of economic analysis. Several different types of clubs can be identified, thus the path to collective action chosen by clubs may vary according to existing capabilities and the scope for collaboration, particularly in relation to the potential for value-creating innovation. The result of the collective action is the provision of a chain good or service, which usually leads to greater and more valuable chain coordination. By collectively identifying, funding and acting to capture positive externalities associated with innovation, businesses in many parts of a food value chain can widen opportunities to increase whole-of-chain surplus as well as private profits. In this paper five mini-case studies are presented to demonstrate the breadth of past collective actions undertaken by businesses in food value chains, two in Europe and three in Australia. These are the Euro Pool System, and Global Standards certification in Europe and globally, as well as Meat Standards Australia, an Australian beef organic producer alliance (OBE Organic®), and the supply of food to households during Covid-19 lockdown in Australia. Each case study yields insights into the rationale of how businesses in different food value chains in different countries have acted as a club to use their joint resources to internalise positive innovation and coordination externalities.