Examining Food Value Chain Governance Determinants on Competitive Advantage of Kenya Horticultural Exporters

(Pages: 12-29)

Martin Kang’ethe W. Gachukia1,* , Willy M. Muturi2 and Noor I. Hassan2

1Riara University, School of Business, P.O. Box 49940-00100 Nairobi, Kenya
2Department of Economics, Accounting & Finance, Jomo Kenyatta University of Science & Technology, P.O. Box 62000-00200 Nairobi, Kenya

Abstract:

The objective of this paper is to empirically examine Global Value Chain [GVC] determinants largely used in global value chain governance trade through interfirm relationship. These relationships rely upon ex-ternal institutional frameworks on whose partner or cluster of firms have little influence other than their inter-nally devised administrative mechanisms such as formal contracts and relational governance systems devel-oped by the exchange partners. This paper is based on a survey of 83 horticultural exporter firms of fresh fruits and vegetables out of 120 exporters registered with Fresh Produce Association of Kenya and exporters who outsource their pack house activities at Horticultural Crops Directorate pack house. It employs categorical principal component analysis [CATPCA] to deal with the multicollinearity problem among categorical explana- tory variables. From the CATPCA output, five components were extracted and renamed as standards & certi-fication, nature of transactions, level of supply chain integration, nature of contract and external contingencies.

These components were considered to be the key food value chain governance determinants affecting the export oriented horticultural value chain in Kenya among other horticultural exporters in developing countries.

Through multiple regressions these components were regressed on the dependent variable of competitive ad-vantage. It is emergent and novel to this research that standards & certification schemes take a critical posi-tion in governance of food value chain as remote governance or governance instruments; this research also corroborates that nature of transactions, level of supply chain integration and contracts are significant determinants in value chain governance. The research also examined the moderation effect of traceability systems which was found to have positive and significant interactions to nature of transactions, standards & certifications and level of integration; it however had no effect on nature of contracts and external contingencies.

Overall, standards & certification have been impactful in competitiveness of the horticultural exports by creating competitive positioning to exporters especially with multiple certifications related to diversified niche and heterogenous markets.

Keywords:

Categorical Principal Component Analysis [CATPCA], Global Value Chain Governance, Competitive Advantage, Fresh fruits & Vegetables, Kenya.