Managing Opportunism in Value-Added Supply Chains:

In recent years there has been an increasing demand for specific characteristics in food products pertaining to origin, quality, health and environmental factors. This demand creates value-added opportunities, but requires differentiation and vertical integration of the supply chain. Due to the credence nature of many products, it is difficult to determine if products reflect the traits under which they are marketed. Cheating through misrepresentation and unauthorized practices presents a threat to the development of identity preserved production and marketing (IPPM). In Canada, value-added IPPM systems have not been highly formalized except for the organics sector, but new traits from biotechnology may lead to greater market segmentation. Fraud is always a potential problem when there exists an incentive for opportunism, but there is a general lack of direct research applied to identity preserved production. Through interviews with organic supply chain stakeholders in the organics sector, we will achieve a better understanding of the efficacy of formalized quality-control regulation. By understanding which characteristics of these supply chains are susceptible to opportunism, future research will determine how to incorporate more effective regulatory mechanisms within the constraints of the high enforcement costs of complete information required for new value-added production.