Identifying Global Value Chain Governance Determinants in Kenya’s Horticultural Oriented Export Sector by Nonlinear Principal Component Analysis

Abstract

The objective of this work is to empirically assess the determinants used in global value chain governance trade through interfirm relationship and their effect on competitive advantage of horticultural value chains in developing economies. The paper is based on a Kenyan survey of 83 horticultural exporters of fresh fruits and vegetables accessed out of 120 exporters registered with Fresh Produce Association of Kenya (FPEAK) and Horticultural Crops Directorate (HCD). It employs a nonlinear principal component analysis procedure of categorical principal component analysis (CATPCA). From the CATPCA output, five components considered to be key food value chain governance determinants affecting the export oriented horticultural value chain in Kenya were extracted and named as standards & certification, nature of transactions, level of chain integration, nature of contract and relational characteristics. The current research shows that with prioritisation of requisite food safety standards & certification schemes and discernment of transactional demands of heterogeneous export markets, horticultural exporters may expect to be competitive by means of improved product differentiation, process flows, logistical advantage and promotion of marketing & organisation management innovativeness. The implication therefore to the chain managers that standards & certification schemes are taking a critical position in determining food value chain governance especially through remote governance or governance from a distance other than the governance structure continuum of markets and hierarchies previously defined by transactional cost economics.