An analysis of the farmers contractual preferences in process innovation implementation: A case study in the Italian poultry context

In long-term contractual relationships, farmers have frequently to change and re-organize the production stage they manage to address buyers’ requests and to cope with uncertainty. This paper conceptualizes the process innovation implementation in terms of governance structure adaptation. Considering the broiler sector as a case study, we submit that the allocation of the decision rights is the key factor allowing the farmer and the processor to cope with the uncertainty inherent to the innovation. We empirically analize the relationship between the contractual preferences for the allocation of the decision rights (to use the resources involved in the expected innovation), the observable dimensions of the organization and the production inputs. The results show that, while the allocation of the decision rights between the farmer and the processor has an explanatory role in the design of the production process and of the process innovation implementation, the farmer contractual preferences are caused by the expected costs of the adaptation.