It is not just about power, but about the type of power - relational governance in the context of a transiton economy

Abstract

The paper analyses how intermediary’s bargaining power affects relational governance in the context of a transition economy, namely the case of Kosovo. There has been limited research and understanding about bargaining power and relational governance in developing and transition economies. Multinomial logistic regression is employed to investigate the factors affecting relational governance, which is operationalized as categorical variable: 1) Spot market transaction, 2) verbal contract and 3) written contract. The results of the study point out that intermediaries’ exercised power over farmers affects the farmers’ contracting decisions in different ways. When they exercise power over farmers’ margin, it reduces the likelihood of farmers’ participation in either verbal or written contracts, while power over product quality related activities increases the likelihood of farmers engagement in written contracts. Another key finding is that for products that require a specific standard and quality, written contracts are more likely than verbal ones.