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Reducing Hold-up Risks in Ethanol Supply Chains: A Transaction Cost Perspective

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  • Weseen, Simon
  • Hobbs, Jill
  • Kerr, William A.

Abstract

Ethanol plants sit at the intersection of three main supply chains, involving the procurement of feedstocks and the marketing of ethanol and distillers grains. A transaction cost framework assesses the extent to which uncertainty, asset specificity, and transaction frequency create incentives for opportunistic behavior by exchange partners leading to problems of hold-up. Using case study evidence from the western Canadian ethanol sector, solutions to the hold-up risks facing ethanol plants are explored. Contracting and integration feature strongly in downstream output markets. The positioning of the ethanol enterprise within a firm’s overall business model, whether as a stand-alone investment or as a forward or backward integration strategy, is an important consideration for future supply chain research in this sector.

Suggested Citation

  • Weseen, Simon & Hobbs, Jill & Kerr, William A., 2014. "Reducing Hold-up Risks in Ethanol Supply Chains: A Transaction Cost Perspective," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(2), pages 1-24, May.
    • Handle: RePEc:ags:ifaamr:167906
    DOI: 10.22004/ag.econ.167906
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    References listed on IDEAS

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    Cited by:

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    3. Xue, Jinjie & Yuan, Hongping & Shi, Benshan, 2016. "Investigating partners' opportunistic behavior in joint ventures in China: The role of transaction costs and relational exchanges," Journal of Business Research, Elsevier, vol. 69(12), pages 6067-6078.
    4. Setene, Letlama & Jordaan, Daniel du P.S., 2021. "The trade-off between chain performance and fragility considering coordination strategies of agri-food chains: a South African egg chain's case study," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(3), March.
    5. Signorini, Guilherme & Ross, R. Brent & Peterson, H. Christopher, 2015. "Governance strategies and transaction costs in a renovated electricity market," Energy Economics, Elsevier, vol. 52(PA), pages 151-159.
    6. Joanita Kataike & Xavier Gellynck, 2018. "22 Years of Governance Structures and Performance: What Has Been Achieved in Agrifood Chains and Beyond? A Review," Agriculture, MDPI, vol. 8(4), pages 1-32, March.

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