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Information asymmetry, third party certification and the integration of organic food value chain in China

Jiang Zhao (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing, China)
Ksenia Gerasimova (Centre of Development Studies, University of Cambridge, Cambridge, UK) (Higher School of Economics, Moscow, Russian Federation)
Yala Peng (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing, China)
Jiping Sheng (School of Agricultural Economics and Rural Development, Renmin University of China, Beijing, China)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 25 September 2019

Issue publication date: 10 January 2020

699

Abstract

Purpose

The purpose of this paper is to discuss characteristics of organic food value chain governance and policy tools that can increase the supply of good quality of agri-products.

Design/methodology/approach

This paper discusses a national organic food supply system in China, identifying the link between an organization form with a social confidence crisis and information asymmetry as the main challenges. It develops an analytical model of the market structure of organic certification based on the contract theory, which considers the certification incentive driven by both farmers and processors. Two cases of raw milk producers and processors provide empirical data.

Findings

The argument which is brought forward is that product information asymmetry together with strict requirement for ensuring organic food integrity brings the organic milk value chain into a highly integrated organization pattern. A tight value chain is effective in the governance of organic food supply chain under third party certification (TPC), while a loose value chain discourages producing organic products because of transaction costs. TPC is found to be a positively correlation with a tight value chain, but it brings high organizational cost and it raises cost for consumers.

Originality/value

This is the first paper discussing the governance of organic food value chain in Chinese milk industry.

Keywords

Acknowledgements

The authors declare no conflict of interest. Jiang Zhao and Ksenia Gerasimova contribute equally as the first author in this work. This work was supported by National Key R&D Program of China (No. 2018YFC1603300), the National Natural Science Foundation of China (Grant No. 71633005) and National Science and Technology Support Project of China (Grant No. 2014BAK19B05).

Citation

Zhao, J., Gerasimova, K., Peng, Y. and Sheng, J. (2020), "Information asymmetry, third party certification and the integration of organic food value chain in China", China Agricultural Economic Review, Vol. 12 No. 1, pp. 20-38. https://doi.org/10.1108/CAER-05-2018-0111

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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