Guest editorial

Citation

Caiazza, R., Volpe, T. and Stanton, J.L. (2016), "Guest editorial", British Food Journal, Vol. 118 No. 6. https://doi.org/10.1108/BFJ-03-2016-0129

Guest editorial

Article Type: Guest editorial From: British Food Journal, Volume 118, Issue 6.

1. Innovation in agro-food value chain

1.1. Background to the agro-food industry

Agriculture refers to the production of both agricultural and horticultural products, as well as services. Agribusiness refers to commercial agriculture and related businesses that are directly involved in the production of final goods (Caiazza et al., 2016). Agro-food is a subset of agribusiness that refers to industries involved in the production, processing and inspection of food products made from agricultural commodities. It includes both the production of agriculture foods and their processing by industry. The agro-food sector is a fragmented industry involving a diverse range of various enterprises: farmers, processors, marketers and distributors. According to Caiazza et al. (2014), the agro-food system concerns an articulated set of activities, technologies, resources and organizations that contribute to the creation, transformation, distribution and commercialization of a specific product. Over the past two decades, the agro-food system has been transformed from a loosely coordinated local network of producers and consumers to a globalized system of formally regulated trade which links socially and spatially distant sites of production and consumption. It is affected by three main factors: natural resources, innovations and institutions.

Natural resources, such as the availability of arable land, fertile soil, climatic conditions and water, differ significantly across the world, with implications on agriculture and related businesses. Consequently, these factors affect investment, trade and localization of firms around the world. Even though some countries possess such natural resources, they are unable to become self-sufficient in food production which requires both technological and non-technological innovations (Caiazza, 2015).

Innovations in the agro-food industry concern the exploitation of new ideas to produce new products, processes, services or business practices. Technological innovation is the implementation of a new product or process that involves new techniques and equipment used to produce goods or services. Technological improvements are closely linked to private and public investments (Audretsch and Caiazza, 2015). Non-technological innovation in agro-food includes the introduction of both marketing and organizational practices that are new or significantly improved and the adoption of those that were developed by other companies or organizations (Caiazza et al., 2015). Organizational innovations in business practices include implementation of new procedures, routines among human resources, and division of labor. New organizational methods in external relations also involve the implementation of changes in networking with external private or public participants. Marketing innovation is the implementation of several changes in the packaging, positioning, promotion or price of food (Baregheh et al., 2012).

Most of the food innovations are incremental in nature and are characterized by a low degree of newness. Moreover, technological change is gaining a rising importance in the food sector, mainly due to innovations coming from industries operating in each stage of food processing. Beyond knowledge generated inside the food industry, knowledge generated in other industries becomes important. Most agro-food firms do not engage directly in research and development. They adopt innovations generated in other sectors of the economy, for example in the chemical industry, transportation, or new information and communication technologies. They benefit from the enhanced productivity that these innovations produce, as well as from possibilities of accessing new markets or developing new attributes for their products. Thus, cross-industry innovation, defined as the value created by knowledge, technologies and partners with a high cognitive distance from the agro-food industry can be observed in different settings where the food industry is involved. Besides the drivers internal to the firm, food companies seem to depend on knowledge coming from outside their own domain, in order to create innovations and new technological solutions. Consequently, collaborations with public and private organizations operating out of the agro-food industry are important drivers of innovation.

Starting from these considerations the papers in this special issue aim to demonstrate two key factors in the area of agribusiness innovation. First, they show a wide variety of directions that a firm can take in order to become more innovative or at least maintain their level of innovation. Second, these papers demonstrate that there has been a body of knowledge that can assist both the academic researcher in better understanding the role of innovation and agribusiness as well as providing guidelines for agribusiness practitioners to address innovation. It has been said many times by many people that a firm is either going forward or going backwards but it cannot stand still. Thus, these papers provide a basis for going forward.

The first paper entitled “Drivers of innovation in Italy: food versus pharmaceutical industry” by Stefano Ciliberti et al. has two objectives. The first is to investigate how internal and external drivers affect innovation performance in the Italian food industry. Second, these drivers are compared against those of the pharmaceutical industry. In total, 12 probit models are estimated in order to provide empirical evidence on drivers affecting innovation in the food and pharmaceutical industries.

Innovation can also be promoted by institutions differently in developed and developing countries. Government can play a role in determining all the possibilities offered by shifting consumer expectations. It can support the development of labels by establishing appropriate public or private frameworks. Government can also encourage co-operation among participants in the sector. Moreover, government can stimulate life science and eco-innovation for increasing the quality of products and protection of the environment. Life sciences or genetic engineering aims to modify plants to enhance productivity in adverse conditions or to design plants for new objectives such as altered nutritional content (Bitzer and Bijman, 2015). By contrast, agro-ecological engineering aims to design agricultural systems that require as few agro-chemicals and energy inputs as possible, instead relying on ecological interactions between biological components to enable agricultural systems to boost their own soil fertility, productivity and crop protection. Eco-innovation in agro-food can be a complex issue, due to the difficulties in measuring the sustainability level in relation to the challenge to both encompass all links in the food chain and to include environmental issues in an economic and profitable strategy. Eco-innovation has been studied in the literature, mainly as a redefinition of innovation including the protection for the environment. Environmental responsibility in new product development usually originates from an internal orientation of the firm, combined with the prospective market success. So, it is important to know the drivers and motivators for the adoption of eco-innovation by the companies (Caiazza and Volpe, 2014). Based on these concepts, the second paper by Marilia Bossle et al. “Why food companies go green? The determinant factors to adopt eco-innovations” develops a framework to show the influence of regulatory and normative pressures, co-operation and government support on the adoption of eco-innovation. Through a factor analysis on a survey of 581 firms, it proposes that all those factors can influence the adoption of eco-innovation by the companies, and affect the performance, both in economic and environmental terms.

With regard to genetic modification techniques, some countries have adopted strict labeling laws and set thresholds for triggering labeling of Genetic modification-content such as 0.9 percent in the EU and Russia and 1 percent in Australia and New Zealand. However, the delivery of a 100 percent pure product is virtually impossible given the widespread and increasing use of genetic modification technology in global agriculture. China is the fourth largest producer of genetically modified crops in the world and continues to support biotechnology research in an effort to sustain food self-sufficiency policies. Academic studies have reported positive attitudes toward genetically modified foods in China. Some reasons for positive attitudes are the positive media coverage and positive attitudes toward scientific discovery. However, China has experienced several food safety scandals that has led the Chinese central government to strongly support the green food market. The growing demand for green food raises questions about how Chinese consumers view genetically modified food. Because GM crops have been reported to be growing illegally in China, the Chinese government has been widely criticized for failing to control its spread (Caiazza et al., 2014).

The purpose of the paper by McCarthy, Liu and Chen entitled “Innovations in the agro-food system: adoption of certified organic food and green food by Chinese consumers” aims to address the issues raised in the previous paragraph and to identify the factors driving the adoption of “green innovations” notably green food and certified organic food and to examine the attitudes of Chinese consumers toward genetically modified food. A mixed methods approach was used. A total of 402 consumers responded to a structured questionnaire and 58 consumers responded to a survey designed to gather qualitative data. Quantitative data analysis took place using the probit model, frequency distributions and the t-test for two unrelated means. Qualitative data were analyzed using content analysis and word clouds. The study suggests that affluent, middle class Chinese citizens are opting out of the conventional food market (Bröring and Cloutier, 2008).

1.2. Value chain in agro-food industry

The value chain is a framework used for analyzing the sequence of activities, companies and governance mechanisms necessary for bringing a product from production stages to final customers (Gereffi, 1999). It includes activities of production of inputs feeding into agricultural production and leading into trading and logistics, processing and ultimately to retailing and thence to final consumers. It includes companies at the pre-production stage (farmers and suppliers of inputs such as seeds, chemicals and machinery) producers of agricultural goods (manufacturers of foods and beverages), and companies at the post-production stage (trading companies and retailers such as supermarkets) (Mattiacci and Vignali, 2004). Thus, it is possible to distinguish companies which are primarily located in the agricultural production segment of agribusiness and companies located in agriculture-related activities (Caiazza and Volpe, 2013). The second group involves firms of upstream or downstream stages of the value chain such as food processors/manufacturers, retailers, traders and suppliers of inputs. Based on the relative power of such firms, Gereffi (1999) identifies two ideal types of agro-food value chains. In producer driven chains, the concentration of capital and proprietary knowledge allows producers to dominate the industry. In buyer driven chains, brand-name distributors dominate the industry via their control over the design process and market access. However, recent studies challenge a simple dichotomous characterization of producer vs buyer driven chains. The approach to governance in the agro-food chain is now based on the idea that all the participants have to work together toward satisfying consumer expectations (Mikkola, 2008). Society now insists that the industry has to guarantee not only food safety but a whole range of complementary objectives related to health or the preservation of resources and the environment. Shifting social expectations in terms of health and environmental concerns should also spark the development of innovative products that are quite different from those traditionally offered by the agro-food sector. Thus, innovation should lead to the development of new production techniques and to a steady market supply of bioproducts made from renewable resources, as well as functional foods and food components that can offer greater health benefits than ordinary foods (Caiazza and Volpe, 2012) (Figure 1).

The development of innovation in the agro-food value chain demands insights into changing consumer habits, needs, preferences and values (Cannon, 1992). The aim of product innovation is to differentiate from the competition and to develop a unique selling proposition. The better a company can position its products with a unique selling proposition, the easier it is to achieve a quasi-monopolistic position in the mind of their consumers. As long as products are perceived as commodities they are vulnerable to price volatility because of global influences. Improving market orientation of rural entrepreneurs is a necessity for them to be successful (Lawson et al., 2008). But in most cases the wealthy potential consumers are located in cities, living a different lifestyle, having different values and preferences from those of the rural entrepreneur. Smallholder farmers have a lack of knowledge, know-how, resources and capacities to respond to market demands. They need facilitators, connectors and knowledge brokers who educate them about what and how to produce, and to empower them to form cooperatives and to cooperate. By means of cooperations small-scale farmers gain more market power and are better connected to markets. Quite often, smallholder farmers in developing countries are not aware of the possibility of co-operating with others. Even if they are aware of a potential co-operation opportunity, they do not know how to work together in practice. Institutional and business cultures can add further difficulties. Haas, Meixner and Petz address these very issues in their paper “Enabling community-powered co-innovation by connecting rural stakeholders with global knowledge brokers – a case study from Nepal.” The authors introduce the concept of the community-powered co-innovation as a possible approach to connect local rural communities with knowledge brokers and the market.

Both technological and non-technological innovation can involve each activity of the value chain moving them away from their traditional role (Costa-Font and Gil, 2012). The traditional role of retailers was to serve as an intermediary between suppliers and consumers. This involved the creation of product assortments, bulk breaking and offering a range of services. As retailing has become more market oriented in its approach, many have moved away from their traditional role. Retailers potentially play an important bridging function by identifying consumer demands and linking them to food producers and food scientists who possess the know-how for the development and production of innovative food products. Based on these assumptions, the paper “Retailers and technology-driven innovation in the food sector: caretakers of consumer interests or barriers to innovation?” by Esbjerg et al. uses interviews with retailers and food suppliers from Belgium, Denmark and the UK to show that in different ways retailers act as both caretakers of consumer interests and as barriers to innovation. This paper is significant because very few address the role of retailers in innovation in the food industry.

Finally, a relational approach is important to develop the value chain (Capitanio et al., 2009). Trust, commitment and transparency among the chain partners are key ingredients for economically sustainable supply chains. Successful value chains require collaboration and co-operation by the members. The five states of relationship development are pre-early, development, long term, and final. The paper by Hastings, Howieson and Lawley addresses the very issues of the role of relationships in creating successful value chains. Not surprisingly the title of the paper is “Creating value chains: the role of relationship development” and it seeks to identify the key characteristics of business-to-business relationships that influence the successful creation of value chains.

1.3. Types of governance structures and capabilities in agro-food value chain

The governance structure of inter-organizational relationships among participants is really important for creating value along the chain. Three basic types of governance structures can be identified: market, network and hierarchy. In the case of market there is no close relationships between buyer and supplier firms (Dunne, 2008). Networks can be divided in modular, relational and captive. In the modular network, inter-firm linkages are tighter than simple markets. Firms develop information-intensive relationships, frequently dividing essential competences between them. Suppliers produce to the customer's specifications, which, in the case of agricultural production involves farmers meeting standards such as those related to quality control or safety (Enzing et al., 2011). Lead firms may support farmers or other agricultural producers, for example through technical training, funding and provision of seeds. Relational networks involve mutual dependence between firms, regulated by trust, which may derive from reputation, family and ethnic ties and commonly held values. In captive networks the buyer exercises a high degree of control over other, less powerful and usually smaller firms in the chain (contract farming). Finally, in the case of hierarchy, governance is characterized by vertical integration and managerial control within firms (foreign direct investment) and affiliates (joint ventures).

Supply chain complexity is a central feature of the food industry because of the trade-offs that need to be made regarding availability, perishability and variability in supply and quality. These trade-offs are difficult to handle due to unpredictable process output and quality variation between producers, also within product lots. Moreover, seasonality of production, long production throughput time and shelf-life constraints make agro-food more complex and harder to manage than other supply chains (Folkerts and Koehorst, 1998). Thus, for facing such complexity it is likely to demonstrate that firms are involved in several supply chains in which they may play different roles. Pegah Amani and Lars-Erik Gadde address these very issues in their paper “Food supply in a network context – an alternative framing and managerial consequences.” They propose a framework for analyzing the food supply in terms of a directed network of business processes. The objective of the paper is to contribute to such innovative framing by widening the context even further and conceptualizing food supply from a network perspective.

Everyday a firm's technological capability plays an important role in achieving efficiency in a company's production process and degree of innovativeness (Fortuin and Omta, 2009). It is associated with the skills and knowledge necessary for a company to absorb, use, adapt, develop and transfer technologies. Its diffuse and tacit nature, its multidimensional aspect and interdependence with the productive activity profile imposes difficulties to identify elements that materialize the concept and allow its measurement. Evaluating the technological capability can be viewed as a multicriteria problem that includes a simultaneous consideration of both quantitative and qualitative requirements. Quantifying technological capability can help businesses understand their behavior and technology potentials, serving as a tool to analyze performance and support decision making, as well as the construction of references of the technology dynamics of companies within an industry or region.

Before one can adjust or change the level of corporate technology, one must have some mechanism to evaluate the current technological capacity of a company (Tepic et al., 2014). This stands to reason because a company cannot state it is making significant improvements if it does not have a baseline from which to judge the progress. The paper “A model for measuring technology capability in the agrifood industry companies” by Di Mori, Batalha and Alfranca presents an approach for measuring technology capability in the agro-food industry companies. It focusses on technology capability and develops a model for measuring it in agro-food industry companies. Using a combination of literature review, observation research (expert interviews), AHP multicriteria analysis method and case study research, the paper develops an index model. The model is applied to the case of dairy agribusiness complex in Brazil. Results show that the model was able to identify the different technology capacities of the companies studied and generated important information to identify bottlenecks and improvement opportunities for these companies.

Small firm size combined with a deficiency of management skills, often lack a clear vision of how to develop their business strategically (Fritz et al., 2009). They tend to act as producers and suppliers rather than as contractors, product developers, or expertise and experience to understand production as a whole (Morley et al., 2000). They are familiar with the regulations, but owners of small and medium-sized agro-food firms must be “all-rounders” to be succesful innovators. As generalists, they lack the specialist's focus on implement new ways of creating, delivering and capturing value. The agro-food entrepreneurs who have developed a more specialized managerial outlook usually have adopted a new business model based on the network approach. The network approach allows agro-food firms to overcome their size-related disadvantages while still retaining the advantages of small producer independency. In addition, these agro-food networks, with their focus on environmental sustainability and community involvement, support the position of the individual entrepreneurs as integrated members of society. The hybrid organization is another business model that has appeared in the agro-food sector in recent years. Such organizations lie somewhere between the for-profit sector and the non-profit environmental goals that are characteristic of non-profit entities while still focussing on revenue generation that is characteristic of for-profit entities.

Although limited research attention has been paid to business models and to business model innovation in the agro-food sector, a significant amount of work has been conducted. It is important regardless of whether there is a significant body of knowledge or an emerging body of knowledge to document this process (Gellynck and Molnár, 2009). The paper by Joakim Tell et al. entitled “Business model innovation in the agri-food sector: a literature review” both documents and provides a systematic literature review of business models and business model innovation in the agro-food industry as a factor of innovation.

Factors that can affect agro-food supply chains include natural disasters, technological accidents, infectious diseases, terrorism, food safety incidents, food fraud and wider food crime, and market and pricing strategies (Gellynck et al., 2012). To face these factors SMEs have to develop resilience. Implicit in the definition of resilience is the requirement for flexibility and adaptability as well as the capacity to absorb market and environmental shocks and still maintain a fully functioning food supply chain. Factors that influence supply chain resilience can be internal, i.e. within the supply chain network or external factors often outside the control of the organizations involved. These factors can be categorized as processes such as transport, communication and infrastructure; controls including protocols, policies, procedures, systems and assumptions; and demand and supply related issues such as the fear of, or actual disturbances to, the multi-directional flow of materials, product, finance and information.

“Building strategic resilience in the food supply chain” by Louise Manning and Jan Mei Soon considers the concept of strategic business resilience in order to postulate innovative mechanisms to drive business performance in the food supply chain. It includes a literature review and the development of a resilience model that can be adopted in the food supply chain at both a strategic and an operational level. The model derived in this research can be used in the food supply chain to drive supply chain agility, organizational stability and longevity, and as a result continuous improvement.

Some authors have investigated the complementarity between absorptive capacity and the effective management of external knowledge flows in open innovation systems (Leat and Revoredo-Giha, 2008). The resource-based view of the firm supports this thesis and suggests that the benefits from combining new and existing knowledge are more likely to occur when based on complementarity rather than similarity. “Borderless ideas – open innovation in the Hungarian food chain” by Adrienn Molnar et al. analyzes innovation performance taking into account not only the direct impacts of external knowledge inflows and absorptive capacity. It also examines the indirect effect of external knowledge inflows mediated by the existence of potentially complementary internal resources (absorptive capacity). As such the paper investigates the innovation process in the Hungarian agro-food sector using the concept of open innovation. Empirical analysis is based on the data from a 2014 survey of more than 300 small- and medium-sized agricultural producers, food processors and food retailers. It determines the impact of open innovation and a company's absorptive capacity on innovation performance employing two stage approaches. First, it applies a semi-non parametric probit model. Second, it runs cluster analysis to categorize companies based on their open innovation, absorptive capacity, firm and managerial characteristics. Results imply the openness along the food chain may decrease the introduction time of innovation in all areas of innovation, as well the innovation propensity. The openness toward competitors may decrease the introduction time of innovation with regard to technological innovation, but it may increase with regard to product innovation, as well the innovation propensity (Manning, 2015). The absorptive capacity decreases the introduction time of technological product, organizational and market innovation. “Borderless ideas – open innovation in the Hungarian food chain” demonstrates a positive relationship between the use of external knowledge and a company's own innovation capacity with regard to innovation propensity, but not when it is defined as openness along the food chain.

Open innovation can be a competitive innovation strategy beyond the Hungarian example shown above (Trienekens et al., 2008). The next paper addresses the issue of open innovation and the lesser developed Vietnamese firms. De Koning, Crul, Van Engelen, Wever and Brezet in their paper “Mental innovation space of Vietnamese agro-food firms” aims at understanding whether the agro-food firms have the “mental space” or an according mind-set to innovate with their customers. A three dimensional model of “mental innovation space” was developed, comprising the focus of innovation, level of innovation and degree of collaboration. A total of 14 Vietnamese agro-food companies agreed to embark on a process of problem definition for innovation according to these three dimensions. The results show that the Vietnamese agro-food firms have a rather small mental innovation space. However, the firms recognize the need for innovation and are enthusiastic about the use of co-creation. The applications of co-creation firms foresee are close to the market, motivated by meeting customer demand and keeping up with competitors.

While the value of innovations in DNA-related output oriented traits is well known, less is known about input traits (Lefebvre et al., 2015). With specific reference to feed efficiency, previous studies have not adequately addressed the economic incentives or outcomes of the producer's decision to adopt. Using the case of genomic selection for feed efficiency, Ellen Goddard et al. address this issue in their paper, “Improving sustainability of beef Industry supply chains.” The study uses results from a multi-year farm simulation model that links the decision maker (cow-calf producer) to the other supply chain members further down the value chain (backgrounders and feedlots). Backgrounder and feedlot managers' valuation of calves influences cow-calf producer adoption decisions as revenue from the sale of weaned calves is the primary determinant of profitability for these producers. The effect of different calf retention practices, i.e. whether to sell feed efficient calves at weaning or at heavier weights is also addressed. The study is situated in the context of cattle production in Alberta which is the leading beef producing province in Canada.

Rosa Caiazza

Universita degli Studi di Napoli Parthenope, Napoli, Italy

Tiziana Volpe

National Research Council, Naples, Italy, and

John L. Stanton

Saint Joseph's University, Philadelphia, Pennsylvania, USA

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About the Guest Editors

Rosa Caiazza is a Professor of Strategy at the Parthenope University of Naples. She is a Board Advisory Member of Academy of Management Perspective, Corporate Governance and several other A journals. She was Visiting Researcher at the Wharton University of Philadelphia (USA) and Univeristè Libre de Bruxelles (Belgium). She is the author of many articles published in top-tier academic journals on interlocking directorates and M&A. She was chairman of many Eiasm Conferences on M&A. She had “Emerald Literati Network Awards for Excellence.” Her main research topics are: corporate and business strategies, internationalization, cross-cultural management, M&A and corporate governance. Rosa Caiazza is the corresponding author and can be contacted at: mailto:rosa.caiazza@uniparthenope.it

Tiziana Volpe is a Researcher at the National Research Council (CNR), Institute of Research on Innovation and Services for Development (IRISS). She has a PhD in “Agro-food and Environment Resource Economy” at the University of Naples “Parthenope. rdquo; She has been involved in many research activities such as: “Cross National Spin-offs, Policy and Institutes” for the Institute of Development Strategies, School of Public and Environmental Research of Indiana University (USA) and “Innovation in Agro-food” for the Saint Joseph's University (USA). Her research interests concern agro-food, innovation, logistic and other activities of value chain. She wrote many articles on these topics for national and international journals.

John L. Stanton is a Professor of Food Marketing at the Saint Joseph's University. He has been teaching at the Saint Joseph's University since 1984, but he has also held many executive positions in the food industry. He was Vice President of Marketing for Melitta Coffee Company, was Director of Research for Weightman Advertising Agency and worked in Germany for Erivan Haub of Tengelmann. He has published over 60 academic articles including the Journal of Marketing Research and Science. Dr Stanton is on the Board of both Herr's Food Company and Frankford Candy Company. Dr Stanton has appeared national TV such as CNN and has been quoted in many business magazines including Fortune.