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EU Agro-Food Chain and Vertical Integration Potentiality: a Strategy for Diversification?

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  • Ting Chang

    ()

  • Luca Iseppi

    ()

Abstract

This work utilizes Leontief input–output tables to establish, through new appropriate indicators (the new entry barriers and invasion indices), the strategy pursued by some branches of EU countries for diversifying production, so enriching thus the range of their secondary products. Our attention is focused on EU countries strategic perspectives of diversification by vertical integration, regarding in particular the potentiality of the main Agro-food Chain branches: “Agriculture, hunting and related services” and “Food and beverages”. In this context, we deal with the backward and forward linkages that are the expression of Agriculture and Food vertical integration potentialities through their secondary production in the main field of competence (core business) of the other that reaches a total of €55 billion. In this research, we observe some basic elements: (a) EU Agriculture takes advantage from the opportunity to diversify itself by vertical integration in the field of competence of Food and beverage. So Agriculture will ensure higher incomes and vital outlets for its survival. Food industry entry barriers are feeble and can be circumvented. (b) Food and beverages does not want or perhaps is not able to exploit the upstream integration potentiality with Agriculture due to the high entry barriers that the very Agriculture has built to isolate its core business (endogenous barriers) or that it suffers (exogenous barriers). On the contrary, it is not uncommon that Food industry invests in foreign agriculture and becomes involved in intra and extra-EU relocation diversifying itself in a context of multinational vertical integration. Copyright Springer-Verlag 2012

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Bibliographic Info

Article provided by Springer in its journal Transition Studies Review.

Volume (Year): 19 (2012)
Issue (Month): 1 (September)
Pages: 107-130

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Handle: RePEc:spr:trstrv:v:19:y:2012:i:1:p:107-130

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Related research

Keywords: Diversification strategies; Vertical integration; Entry barriers; Agriculture; Food and beverage; E01; L16; E1; Q13;

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References

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  1. Sortino, Antonio & Chang Ting Fa, Margherita & Piccinini, Livio Clemente, 2008. "Future scenarios of the modernized agriculture and a Sraffian framework for the “return of techniques” scenario," MPRA Paper 9403, University Library of Munich, Germany.
  2. Ani L. Katchova, 2005. "The Farm Diversification Discount," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 984-994.
  3. Fan, Joseph P H & Lang, Larry H P, 2000. "The Measurement of Relatedness: An Application to Corporate Diversification," The Journal of Business, University of Chicago Press, vol. 73(4), pages 629-60, October.
  4. Orr, Dale, 1974. "An Index of Entry Barriers and Its Application to the Market Structure Performance Relationship," Journal of Industrial Economics, Wiley Blackwell, vol. 23(1), pages 39-49, September.
  5. Davide Vannoni, 1996. "The Directions Of Diversification In Italian Manufacturing," CERIS Working Paper 199612, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  6. Laura Rondi & Davide Vannoni, 2005. "Are EU Leading Firms Returning to Core Business? Evidence on Refocusing and Relatedness in a Period of Market Integration," Review of Industrial Organization, Springer, vol. 27(2), pages 125-145, 09.
  7. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
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