Contractual arrangements and food quality certifications in the Mexican avocado industry

The adoption of private quality certifications in agrifood supply chains often requires specific investments by producers which can be safeguarded by choosing specific contractual arrangements. Based on a survey data from avocado producers in Mexico, this paper aims to analyze the impact of transaction costs and relationship characteristics of the joint choice of contractual arrangements and quality certifications. Using a bivariate probit model, it shows that a producer’s decision to adopt private quality certifications is directly linked to high levels of asset specificity and price. In order to ensure the high level of specificity under the presence of low levels of price uncertainty, producers have relied on relational governance supported by the expectation of continuity in their bilateral relationships with buyers. The adoption of private quality certifications in agrifood supply chains often requires specific investments by producers which can be safeguarded by choosing specific contractual arrangements. Based on a survey data from avocado producers in Mexico, this paper aims to analyze the impact of transaction costs and relationship characteristics of the joint choice of contractual arrangements and quality certifications. Using a bivariate probit model, it shows that a producer’s decision to adopt private quality certifications is directly linked to high levels of asset specificity and price. In order to ensure the high level of specificity under the presence of low levels of price uncertainty, producers have relied on relational governance supported by the expectation of continuity in their bilateral relationships with buyers.