The strategy of voluntary certification in Italian olive oil industry: Who and why?

Abstract: Background: The phenomenon of asymmetric information is central in the agri-food sector, in which often there is not full information transparency about product quality. This condition is particularly complex considering the high-end products. In particular, there are specific attributes (credence attributes) that are not assessable by consumers. For these reasons, a clear information about certification can give to consumers the possibility to make a rational choice. A company can choose voluntarily to participate in certification programs that can be viewed also as a simplification of some organization issues. Often the incentives to participate in voluntary programs arise from the need to have a positive economic performance of the firm. On the one hand, the firm may have benefits from the technical assistance of the certification, which allows it to reduce costs of controlling particular sensible steps of the process. On the other hand, the firm may provide a new certification label, in order to ensure a greater transparency of its processes. Methods: The research aims to understand the characteristics of firms oriented to use voluntary certifications as a tool to reduce information asymmetries between producers and final consumers. In particular, we want to consider two contexts of analysis: a structural one, considering some specific internal aspects and investment choices of the firms (typology, size, extraction system, storage system, material investments, immaterial investments); a second one that takes into account some decisions related to market relationships (sale to consumers, sale to HoReCa, sale to wholesalers, sale to purchasing groups, sale to GDO, export activity). The study concerns small and medium olive oil company of Southern Italy. We apply two logit models in order to show the determinants in the choice to introduce a voluntary certification. Results: The results show significant values in both the two dimensions considered. Among the first one, there are significances in immaterial company investments but also in physical assets related to the olive oil process. There are several scientific developments relevant to the olive oil process and some of these patents have been reviewed in this paper. Regarding the physical assets, the storage system is a clear representation of the asset importance in the decision to participate in the certification program. Furthermore, the presence of considerable immaterial investments is important in the certification decision, which confirms the idea that voluntary certification can be viewed as a strategic tool. In the second part of analysis there are significances in some distribution channels (direct sale to final consumer, to wholesalers and to purchasing groups) as well as in the export activity. Conclusion: This work aims to contribute to the debate about the addressing of quality policy for a reduction of asymmetric information in the high-end products. Because of small dimensions of firms in Southern Italy, not always we can find conditions about the presence of specific assets. Indeed, the small dimensions of the companies make quality investments complicated. The incentive to invest, both in terms of control of product and in terms of immaterial investment, can help in a participation in voluntary certification programs. Further, it is important to investigate the three distribution channels resulting from the research because of their importance in terms of information asymmetry.