Shermain Hardesty, Robert P. King, Gail Feenstra, Laurie Houston, Jan Joannides, and Larry Lev
March 2018
We use results from a survey of specialty food manufacturers to examine how supplier–manufacturer relationships vary in the specialty food sector. While diverse mechanisms govern relationships between manufacturers and suppliers, relational contracts (longstanding, informal commitments) are the most common governance structure in our sample overall, particularly for medium-sized manufacturers. Vertical integration with the principal supplier is most common for smaller manufacturers, who also are most likely to use open market purchases. The largest manufacturers are significantly more likely to use formal contracts. Nearly half of manufacturers in our sample, regardless of their size, purchase directly from farms.
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