Incompleteness of Chinese Fruit and Vegetable Contracts
Abstract: The use of contracts as a way of vertically organizing transactions is spreading in many agricultural sectors. Contractual arrangements vary a lot across different chains or relations between downstream firms and primary growers. Our paper aims to explore why some contracts are more complete than others. We adopt multiple case studies as our research method. Based on 6 cases, we empirically examine three determinants of the completeness of a contract in the context of fruit and vegetable contracting in China. Four main conclusions follow. Firstly, it is shown that the extent of completeness of a contract varies substantially across different supply chains in China. Secondly, a contract is more complex when the firm designing the contract sells high quality products. Thirdly, our cases are indeterminate regarding market uncertainty determining the completeness of a contract. Fourthly, reputation has no effect on the completeness of a contract.
