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Introduction
Collaboration throughout the supply chain is improved when information exchange is fast and easy. With higher collaboration between supply chain stakeholders information sharing is likely to increase which might reduce opportunistic behaviour (Van der Vorst et al., 2002; Hobbs & Young, 2000). Empirical research proving this are however limited (Steinle et al., 2014).
According to Williamson (1975), under conditions of asymmetric information and conflicting interests, transactions are likely to suffer from opportunistic behaviour; “self- interest seeking with guile.” Williamson (1985) elaborated on this view by describing opportunism as the “incomplete or distorted disclosure of information, especially calculated efforts [by the agent] to mislead, distort, disguise, obfuscate or otherwise confuse” the principal thereby exploiting the information vulnerability of the principal.
The danger for opportunistic behaviour seems to be particularly true for differentiated supply chains that moved from commodity supply chains (driven by autonomous stakeholders) to differentiated product supply chains with a wide array of interconnected complex relationships between stakeholders (Wever, 2012). These differentiated supply chains often focus on differentiated claims based on credence attributes such as “free range”, “antibiotic free”, “hormone free” or from a particular “region of origin”.These claims, however, bring about several possibilities for opportunistic behaviour as a result of increased information asymmetries surrounding these claims (Wever, 2012).
Although opportunistic behaviour is suspected, and can admittedly cause havoc in differentiated supply chains, it is not always easy to detect, which makes it quite difficult to prevent. A better understanding of the drivers of opportunistic behaviour may, therefore, lead to the development of customised monitoring and enforcement mechanisms to safeguard the product’s reputation, the supply chain stakeholders, and the uninformed consumer against exploitation.
The case of Karoo Lamb
One illustrative case study of a differentiated meat supply chain is Karoo Lamb in South Africa. The Karoo Lamb supply chain is differentiated in that it identifies and guarantees the Karoo region22 as the origin of the lamb product but also include claims such as free range, no routine antibiotics, hormone free, good animal practices, and full farm-to-fork traceability23 (KMOO, 2016a).
Lamb reared on natural indigenous Karoo veldt24 is believed to produce meat with a unique flavour (Erasmus et al., 2016). The unique identity of and the geographical value attached to Karoo Lamb makes it possible to sell Karoo Lamb at a premium price above ordinary lamb products. This unique identity makes the product exceptionally vulnerable to opportunistic behaviour by stakeholders who do not comply with the strict production protocols. The misuse of the name means that the geographic advantage of farmers raising lamb, according to the protocols, in the Karoo region is lost, not only to the farmers but also to the Karoo community. Moreover, this misuse of the name further confuses the consumers, who have no way of authenticating the Karoo Lamb’s credence attributes of origin and free range.
In an attempt to combat the exploitation of the Karoo name, a group of farmers established the Karoo Development Foundation (the foundation) in 2009, to act as the custodian of the intellectual property rights embedded in the name “Karoo”. With the purpose of mobilizing this responsibility, the KDF registered the Karoo Meat of Origin certification mark in 2011, which meant that it was now illegal to label a product as “Karoo Lamb” if it is not certified under the Karoo Meat of Origin certification scheme (the certification scheme) (Kirsten, 2011).
Following the establishment of the certification mark, Karoo farmers, abattoirs, processors, retailers and other outlets can apply to use the certification mark. The certification scheme, as a system of auditing and certification, has the responsibility to prevent supply chain stakeholders from exploiting the marketing potential that rests in the name “Karoo”, by selling lamb products, that do not comply with the scheme’s protocols, as “Karoo Lamb”. The certification of Karoo Lamb furthermore assumes that the consumer is willing to pay a price premium for these products, of between R1 and R2 per kg carcass weight (in previous years) (van Zyl et al., 2013). This potential price premium makes the concept of Karoo Lamb even more attractive for farmers, abattoirs, processors and retail outlets.
Although all the entities in the Karoo Lamb supply chain can act opportunistically (by not complying with the stipulated protocols), and probably do from time to time, the paper focuses mainly on the Karoo farmers’ since the essence of the Karoo Lamb product is rooted in the unique production practices. In the Karoo Lamb case, the farmers are found to behave opportunistically specifically by breaching the certification scheme’s free range on indigenous Karoo vegetation protocol.
During some initial conversations with the certified Karoo abattoirs, they revealed instances where they had to reprimand opportunistic farmers for violating the Karoo Lamb protocols. These farmers would feed their lambs, either in feedlots or on Lucerne fields, to realise a higher price for a better carcass, and then market the lambs as Karoo Lamb to capture the potential price premium paid for Karoo Lamb.
The opportunistic behaviour of farmers not only increase the risk of reputational damage to the Karoo Lamb name if non-compliance with protocols are revealed but also puts the reputation of the other stakeholders at risk. Continued opportunistic behaviour can potentially lead to the collapse of the Karoo Lamb name, especially if consumers decide to boycott Karoo Lamb because they feel cheated in that they pay premium prices for commodity lamb products.
Clearly, the opportunistic behaviour of farmers may damage the reputation of Karoo Lamb and could potentially lead to welfare losses to every stakeholder participating in the Karoo Lamb supply chain. Adequate measures to safeguard the Karoo Lamb supply chain will reduce opportunism which will result in absolute gains due to the supply chain stakeholders’ complete commitment to the transaction (Williamson, 1999). These safeguards usually include a monitoring system, to monitor supply chain stakeholders for opportunistic behaviour, and enforcement mechanisms, to enforce penalties for opportunistic behaviour and incentives to reward principled behaviour.
Upon its establishment, the certification scheme appointed the South African Meat Industry Company (independent third party) to conduct the audits for certification as well as the follow-up inspections for compliance on behalf of the certification scheme. Currently, it seems like the certification scheme has a handle on ensuring protocol compliance among the abattoirs, processors, and retail outlets; these entities are audited annually with the danger of losing their certification if non-compliance is suspected. However, to monitor and reprimand the opportunistic farmers that are scattered throughout the very remote Karoo region25 has proven to be more challenging. The measures stipulated to monitor farmers include scheduled audits every four years and the (often empty) promise of an annual unscheduled audit with the danger of losing their certification if opportunism is suspected. Moreover, all the stakeholders are allowed to reapply for permission to use the certification mark if their certification was revoked for whatsoever reason (KMOO, 2016a). Even though the certification scheme stipulated their measures to deal with opportunistic stakeholders on their official website, very few of the stakeholders (specifically the farmers) are aware of these monitoring and enforcement mechanisms. It is in this context that the paper aims to identify measures that can safeguard the farmer- abattoir transaction against the opportunistic behaviour of farmers to assure the credibility of Karoo Lamb, in an attempt to increase the overall success of the Karoo Lamb supply chain.
The theoretical framework and research hypotheses
Trust, in particular between stakeholders in differentiated supply chains, becomes significantly more important due to the higher degree of interdependencies (La Londe in Kwon & Suh, 2005). The more the supply chain stakeholders trust each other, the more likely they are to share information with each other (Eckerd & Hill, 2012) and the less likely they are to act opportunistically (Wang et al., 2014; Wang et al., 2013). For stakeholders participating in differentiated agricultural supply chains, with increased interdependencies as a result of pooled reputational capital, trust and the importance of information sharing become even more important. Exploring the relationship between information sharing and opportunistic behaviour is therefore postulated.
Hypothesis 1: Information sharing between the farmer and the abattoir has a negative effect on the opportunistic behaviour of the farmer
“It is trust – not power, wealth, or even love – that is the most important operational resource in our society. Why? Without trust, we would simply be unable to act.” (Eisenegger, 2009). Trust is having confidence in each other’s reliability and integrity, and on the expectation that the one has the other’s best interest at heart (Jones & George, 1998; Williamson, 1993). Although Fawcett et al. (2007) regard information sharing as the most important factor for successful supply chain relationships and performance, the sharing of information requires trust between supply chain stakeholders (Kwon & Suh, 2005). However, the level of trust between two supply chain stakeholders often dictates the type and detail of the information shared between them. A relationship is, therefore, expected between the trust that the farmer has in the abattoir, and the information that the farmer shares with the abattoir.
Hypothesis 2: The farmer’s trust in the abattoir has a positive effect on the information that the farmer shares with the abattoir
According to Hines (1995), organisations form networks based on the need to exchange resources. This is especially true in the vast Karoo region, where the townsfolk and surrounding farmers rely heavily on one another. To that end, although relatively isolated, close close-knit communities are formed in which resources and information are shared26. By being part of a network, farmers gain access to valuable information. Information obtained and shared within a network function as a mechanism for reducing information asymmetries and subsequent opportunistic behaviour (Lu, 2007). Recent studies that investigated the relationship between networks and information sharing implied that farmer networks might stimulate information sharing for improved technology adoption (Manson, 2016; Burbi et al., 2016; Ward & Pede, 2015), enhanced conservation (Rosman, 2015) and better-performing collectives (Ostrom, 2014) or cooperatives (Bijman et al., 2012). Most of the research did not explicitly focus on the impact of networks on information sharing. However, Jraisat et al., (2013) did find that networks triggered information exchange in supply chains. It is, therefore, expected that farmers who participate in a network are not only more likely to share information within the network but also more likely to share information with the supply chain to achieve their common goal.
Hypothesis 3: Positive psychographic variables of farmers participating in farmer networks have a positive effect on the information shared between farmers and abattoirs
Although the farmers’ loyalty to the Karoo region and their shared goals, led to the formation of the certification scheme, it is unclear whether or not the farmers are satisfied with the certification scheme’s efforts to protect the Karoo name from exploitation. Farmer satisfaction is an important consideration, since a person’s satisfaction with a service, is often used to predict future usages of that service (Newman & Werbel, 1973). Satisfied customers are more likely to continue using the service, share their positive experiences and are less receptive to a competitor’s offerings. This demonstrates the fact that a relationship between satisfaction and loyalty exist, namely that satisfaction may lead to increased loyalty (Gallarza et al., 2016; Awan & Rehman, 2014). Although studies that focus on the effect of customes satisfaction on loyalty are abundant in market research (see inter alia Gallarza et al., 2016; Pappu & Quester, 2016; and Mutonyi et al., 2016 for an agricultural study) the relationship between satisfaction and loyalty towards an agricultural collective organization, such as Karoo Lamb, are not researched explicitly. The farmer’s satisfaction with the certification scheme’s efforts to protect the geographical value of the Karoo Lamb product is, therefore, expected to influence the farmer’s loyalty to the certification scheme positively. Moreover, although specific research on the relationship between satisfaction and information sharing is scarce, it is postulated that farmers who are satisfied with the performance of the certification scheme would be (more) willing to share (more) information in an attempt to reach their common goal.
Declaration
Acknowledgements
Abstract
List of figures
List of tables
Introduction
1.1 Background and context
1.2 Problem statement
1.3 Conceptual framework
1.4 Research objectives
1.5 Study area and research design
1.6 Methodological approaches
1.7 Main contributions of the thesis
1.8 Thesis outline
The Karoo Meat of Origin certification scheme: A silver bullet?
2.1 Introduction
2.2 The Karoo region
2.3 Lamb production practices in the Karoo
2.4 The relationship between the farmer and the abattoir
2.5 The initial challenge
2.6 The beginning of “Karoo Meat of Origin”
2.7 Karoo Meat of Origin success stories
2.8 Vulnerabilities of the certification mark
2.9 Current challenges
2.10 What’s next?
Information sharing as a safeguard against the opportunistic behaviour of South African Karoo Lamb farmers
3.1 Introduction
3.2 The case of Karoo Lamb
3.3 The theoretical framework and research hypotheses
3.4 Methodology and research context
3.4.1 Research design
3.4.2 Empirical method
3.5 Results
3.5.1 Measurement model evaluation
3.5.2 Structural model evaluation
3.5.3 Evaluating the hypothesised relationships
3.6 Applicability of the findings
3.7 Summary and recommendations for future research
Investing in collective reputation: sheep farmers, geographic indicators and collective action in the Karoo, South Africa
4.1 Introduction
4.2 Theoretical considerations and research hypotheses
4.3 Methodology
4.4 Results
4.4.1 Measurement model results
4.4.2 Structural model results
4.4.3 Evaluating the research hypotheses
4.5 Discussion and conclusion
4.6 Recommendations for future research
Aligning enforcement and governance mechanisms towards a more streamlined South African Karoo Lamb supply chain
5.1 Introduction
5.2 Background to the Karoo Lamb case
5.3 Methodology
5.3.1 Methodological approach: Enforcement mechanisms
5.3.2 Methodological approach: Governance mechanisms
5.4 Understanding the mechanisms that enforce quality and origin
5.5 Understanding the Karoo Lamb’s unique governance situation
5.6 Aligning the enforcement and governance mechanisms
5.7 Concluding remarks and recommendations for future research
Summary, conclusion and directions for future research
6.1 Summary of the problem and subsequent research questions
6.2 Theoretical contributions
6.3 Concluding remarks
6.4 Managerial implications
6.5 Limitations and direction for future research
References.
Appendix A
Appendix A1: Farmer questionnaire
Appendix A2: Abattoir questionnaire
Appendix A3: Processor questionnaire
Appendix A4: Retail outlet questionnaire
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