Transformative business models for organizing primary producers and their integration into value chains

Abstract

There has been widespread recognition for the past number of years of the increasingly globalized nature of economies around the world. This phenomenon has generated considerable debate encompassing whether globalization is a positive evolution of economic activities or is detrimental to the interests of certain countries or specific groups (Kaplinsky, 2004, Nadvi 2004). Among the groups whose economic security is thought to be of greater risk from globalization are the small-scale producers in the developing world. Small-scale producers are defined as primary producers that are participating in economic activities but generate insufficient returns to escape from poverty on a sustainable basis. Hence, they are not destitute, which would call into play a different set of policies and solutions, but can be thought of as disadvantaged yet economically active producers. This paper addresses strategic issues of small-scale producers/collectors (entrepreneurs) and presents an argument for devoting greater attention and resources to organizing groups (social networks) of primary producers/collectors in order to facilitate their effective participation in value chains. It is based on the premise that primary producers can be integrated into selected national and globalized value chains in such a way that increases their economic security and allows them to escape from a life of poverty on a sustainable basis while strengthening the competitiveness of the entire value chain as well. The questions that need to be addressed relate to the characteristics of the producers themselves and the characteristics of the economic sectors in which they operate. We employ a value chain typology for assessing primary producer value chain integration based on types of chain governance and upgrading options that are commonly found in value chains. Two testable hypotheses have been formulated to focus the study on the characteristics of successful producer groups and viable value chains.