Allocation of Decision Rights in Fruit and Vegetable Contracts in China

Abstract

This paper empirically examines the determinants of the allocation of decision rights in the context of fruit and vegetable contracting. A multiple case study is used to investigate twelve fruit and vegetable contracts in order to test five hypotheses regarding the decision rights allocated to the farmer growers and to the downstream agricultural firms. The main conclusion is that under contract farming, many decision rights are shifted from farmers to firms. Quality, reputation, monopsony-oligopsony power and specific investments by firms positively influence the number of decision rights allocated to agribusiness firms under contract farming, whereas specific investments by farmers have no effect on the allocation of decision rights.

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