Productive process innovation as sequential adjustment of the hybrid governance structure: the case of the poultry sector

The paper concerns production process innovation in an existing hybrid governance form. Adopting a Transaction Cost Economics perspective, we consider process innovation here in the conceptual context of the organization of production and technological change. It is assumed that the determinants of innovation act as emerging disturbances, and it is argued that innovation is achieved via adaptive, sequential adaptation based on specific, costly contractual rules. To support this thesis, the analytical framework introduces hypotheses to be tested by evidence. First, it is conjectured that the parties to a hybrid adopt flexibility techniques (MacNeil, 1978) to cope with the necessity of future process innovation. This hypothesis is compared with a competitive one, focusing the interests of the parties explicitly with regard to collaboration. Second, further hypotheses are tested that concern the influence of asset specificity, behavioral uncertainty and the allocation of resources to the costs of the contractual rules supporting innovation. A two-step method is proposed to test the hypothesis and to estimate the transaction costs associated with the contractual rules. The empirical results corroborate the analytical framework. Although this paper addresses a very specific issue, its main contribution relates to how hybrid governance forms organize production activities.