Contract or trust: An investigation on exchange relationships between farmers and Medicinal and Aromatic Plants processors

Blendi Gërdoçi1Engjell Skreli2Arzen Rexha3
1Faculty of Economics, University of Tirana
2Faculty of Economy and Agribusiness, AUT
3Centre of Agricultural Technology Transfer, Shkodër

 

Abstract

This study constitutes an examination of the behavior and relations of Albanian gatherers and farmers with other downstream actors in the Medicinal and Aromatic Plants value chain. Particular attention was paid to the nature of relations between agricultural producers and marketing channels chosen by them, distinguishing between exporters, local collectors and exporters, longer-term relations, commitment and trust, and contracting along the value chain. Given the absence of, or weak, contract enforcement and the clear evidence of embeddedness in dyadic relationships in this chain, we focused our analysis on sustained relationships, contracting and personal bonds as a determinant factor to improve business relationship quality and sustainability. The survey and in-depth interviews show a week prevalence of oral contracts in embedded relationships and weak evidence of contracts influence in shaping stable relationships as well. We also find that mature and embedded relationships based on trust generate higher sustainability.

Keywords: contracting, trust, channel choice, relational governance

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