Compliance with international food safety standards in Kenya's green bean industry: Comparison of a small-and a large-scale farm producing for export

Abstract

European food safety standards have increased the fixed and transactions costs of Kenyan green bean farmers while requiring more stringent quality monitoring by exporting firms. This paired case study finds that large farms use owner equity to invest in improved facilities. Small farms attain scale economies by joining a marketing group that spreads facility investment costs and reduces the transaction cost to buyers of monitoring small farm performance. Green bean buyers meet the asymmetric information problem by close monitoring, the threat of contract termination, and variable product pricing to induce compliance with the standards.