Positioning and bargaining power in agri-food global value chains

Value creation forms the basis for the construction of global value chains (GVCs) and has received significant scholarly attention, yet the issue of value capture or power distribution along supply chains, “within” industries, is still unresolved. A recent property rights framework (Antr`as and Chor, 2013; Alfaro et al., 2019) highlights how final firms exert power over their suppliers to optimally organize their sequential production process. In such an environment, how can suppliers (exporters) act strategically to reduce the power of the buyers (importers)? We contribute, theoretically and empirically, to a better understanding of the extent to which the division of surplus in the agri-food sector is affected by manufacturing exporters’ position in GVCs. We argue that: (1) further upstream specialization along agri-food GVCs increases bargaining power (the “specialization effect”); (2) expansion along GVCs by importing more upstream inputs and exporting more processed goods also increase bargaining (the “expansion effect”); and (3) the “specialization effect” outweighs the “expansion effect” so that the overall effect is similar to the former. These theoretical hypotheses are tested using firm-level data on French agri-food industries (from French customs and the AMADEUS database) over 2002-2017 period. We build on the bilateral stochastic frontier model to measure the bilateral bargaining power of manufacturers. Following recent approaches in the literature, we identify manufacturers that participate in GVCs with those that jointly import and export, and measure their position in value chains through the level of transformation (upstreamness) of goods they use and produce. Hypotheses (1) and (3) are strongly supported and are mainly driven by product mix upgrade and the reduction of the hol-up problem, while hypothesis (2) is weakly supported and is only due to the high-quality production.