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200 Social Capital and the Food System: Some Evidences from Empirical Research

3. The emergence in the system of collaborative inter-firm relationships, such as strategic
alliances, consortiums and joint ventures (Sporleder, 1994, 2000). These kinds of
relationships occur when firms engage in formal or informal agreements to strategically
exploit a common advantage associated with the “external synergies” stemming from the
relations themselves. For instance, collaborative relationships between retailers and
suppliers in the supremacy of the marketing channel (may) create gain opportunity by
maximizing consumer satisfaction and minimizing costs

It is worth noticing that in all three cases mentioned social capital is 1- mainly retained in the
form suggested by the trust perspective, and 2- is generally deemed to cause welfare
enhancement, by fostering organizational efficiency and innovation. On the contrary, few
efforts have been made so far in investigating social capital from a network perspective,
considering also possible negative welfare effects of social capital exploitation practices. This
lack of attention for the “downside” of social capital could lead (as we try to explain below) to
somewhat misleading interpretations of the re-organizational processes currently occurring in
the food system.

While in the 1960s and 1970s the key players in the world economy were largely vertically
integrated, in the 1980s and 1990s “the rising integration of world markets through trade
brought with it a disintegration of the production process of multinational firms, since
companies found it profitable to outsource (domestically and abroad) an increasing share of
their noncore manufacturing and service activities” (Gereffi, 2005, p. 166). As a consequence,
the whole production structure in the global economy changed, with the emergence of
international trade and production networks. During the last two decades in the food sector
many TNCs have progressively reduced their involvement in first-tier processing and have
engaged in policies of outsourcing together with high investments in brand equity.

Literature on industrial organization indicates as causes of vertical disintegration, efficiency
seeking and market power enhancing behavior. Networks and vertical integration have been
compared as alternative supply structures for specialized inputs, with networks turning
dedicated into flexible assets (Kranton and Minnehart, 2000). The general wisdom is that
flexible assets and networks involve social benefits when there is high demand uncertainty. In
the case of the food sector, where inputs generally exhibit a low level of specialization, major
causes of disintegration seem to be the possibility of boosting profit through the exercise of
high buying power (stemming from the weakness of fragmented suppliers with few exchange
alternatives), and the cost saving due to poor labor and environmental regulations (these latter
generally occur in developing countries where suppliers are situated). According to this view,
firms engaged in outsourcing build their own networks structured in such a way as to
maximize the value of their social capital. Networks rich in structural holes and in relations
with suppliers characterized by imbalances in bargaining power (such imbalances are
associated with asymmetries in exchange opportunities between the counter parties, as
predicted by the power-dependence theory) provide these firms with competitive advantages
and profit opportunities. Negative welfare effects may derive from an exacerbation of market
imperfection at final as well as intermediate markets of the food supply chain, and from
inequalities in income distribution among actors in the chain. It is worth noticing that in the
framework sketched not only is trust inessential for the accessibility to (this network style)
social capital benefit, but it may even be destroyed as a consequence of it. Trust waste can



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