The past decade has witnessed a trend toward unbundling of enterprises that were once highly integrated in vertical forms or horizontally as conglomerates. The economic forces behind these changes simultaneously enabled collaborative relationships that replaced command‐control coordination. While such change has been widespread, the food industry serves as an example of an industry where such strategies have been incompletely pursued. This paper aims to provide a microeconomic explanation of three bases for the emergence of collaboration and network formation: transaction costs, interdependence in value creation processes, and shared resources.
Within a setting of the food industry, a microeconomic theory of firm level choice of transactions is presented and extended to consider market level equilibrium in where persistent relationships are defined to compose an integrated economic network.
The paper presents a framework for identification of the optimal pattern of relationships across firms to compose networks that could enhance the competitive advantage and the economic performance of the food sector.
While performance of the food system has been the target of extensive public policy, that policy has typically viewed food enterprises as autonomous units operating through competitive markets. This paper provides a framework that highlights an economic rationale for collaboration across food enterprises that offers enhanced performance while maintaining essential aspects of competition.
