Transaction costs and cattle farmers’ choice of marketing channels in China: A Tobit analysis

The purpose of this study is to examine key factors that affect cattle farmers’ selection of marketing channels and draw implications for China's beef supply chain development.Design/methodology/approach – A questionnaire was designed and face‐to‐face interviews were conducted with a random sample of 153 farmers located in three major cattle producing regions across China.Findings – Several variables related to transaction costs (chiefly, in the form of negotiation costs and monitoring costs), as well as socio‐economic factors, were identified as of significant influence on farmers’ choices of cattle marketing channels.Research limitations/implications – Further research should be conducted to measure the effects of risk preference in marketing decisions. Caution needs to be exercised when generalising the findings of this study to cattle farmers in other regions that are significantly different from the surveyed ones.Practical implications – This study will contribute to a better understanding of cattle producers’ marketing channel selection. Further, it will contribute to identifying which factors encourage or discourage farmers from using forward contracts; information needed urgently by private and public policy makers.Originality/value – This paper presents a model and case study that show how transaction cost minimisation affects the adoption of vertical coordination. Studies examining this area for China are scarce and this paper makes an important contribution to the literature.