Institutional and technological innovations and the changing form of business relationships: Evidence from the food industry

This study proposes a conceptual framework to examine the choice of different organizational forms that firms use to govern their business relationships. The study centers around two linked questions: (1) What drives the form of business relationships in a supply chain? (2) To the extent that firms can choose the form of their vertical relationships, when would certain types of organizational forms be more desirable than others for the competitiveness of firms?; Through the development of a conceptual framework and application of that model in two case studies for the food industry, it is found that the presence of institutional innovations and the interaction between institutional innovations and the business characteristics of firms (i.e., technological and managerial characteristics) influence the optimal choice, change, and coexistence of a diversity of organizational forms in an industry.; The conceptual framework examines how a firm chooses the governance form of its business transactions. Organizational form choices are mainly driven by firms' investments in information and site specific assets and by institutions that affect the costs of making transactions and exchanging information. The first case study compares changes in organizational form patterns for the American and Dutch swine industry. It is found that institutions make a significant difference in the producer's choice of an organizational form. The second case study examines vertical coordination changes between supermarket stores and their suppliers. It is found that, given an institutional framework, the store's choice of an organizational form depends on the informational and site specific investments of firms.; The findings from this study suggest that developing institutions is an important factor for inducing organizational form changes and that the choice of an organizational form matters for the efficiency of firms. This study also suggests that increases in the relative importance of market information and the development of an institutional framework can induce firms to adopt organizational forms that imply more vertical coordination between transactors.