Farmer-trader vertical coordination: drivers and impact on the lotus-grain value chains in central Vietnam

Figures & data

Figure 1. Transition from open market negotiations to collaboration. Source: Spekman et al. (1998).

Table 1. Summary statistics of the variables in the study.

Variables	Non-adoption		Verbal contract		Input contract		Written contract		Full sample
	Mean	SD	Mean	SD	Mean	SD	Mean	SD	Mean	SD
Outcome variables
Lotus-grain yield (ton/ha)	1.46	1.03	1.50	1.22	2.05	1.98	1.68	1.69	1.68	1.54
Lotus-grain revenue (Mill.VND/ha)	57.00	44.06	56.15	45.99	82.77	101.8	61.05	56.63	64.5	67.6
Explanatory variables
Farmers-traders trust (weak to strong, 1–5)	1.15	0.529	1.35	0.875	1.25	0.811	1.17	0.681	1.23	0.732
Price determination (1 = farmers, 2 = both, 3 = traders)	1.92	1.25	1.73	1.12	1.76	1.19	1.89	1.20	1.83	1.19
Join trading-support group (yes = 1)	0.625	0.486	0.529	0.502	0.462	0.501	0.486	0.502	0.527	0.5
Control variables
Famers and farming characteristics
Gender of household head (Male = 1)	0.875	0.332	0.765	0.426	0.769	0.423	0.838	0.37	0.813	0.39
Age (years)	58.1	8.94	58.55	9.06	58.53	8.80	57.21	9.94	58.1	9.17
Household size
Experience of household head (years)	4.67	3.02	4.94	4.1	4.71	3.87	5.02	3.80	4.83	3.69
Farm size (ha)	0.696	1.15	0.699	0.849	0.325	0.24	0.541	0.594	0.562	0.801
Number of ponds (plots)	1.92	1.10	2.05	1.44	1.97	0.923	1.78	0.846	1.93	1.09
Planting density (tree per m^2)	21.17	3.66	24.70	6.99	22.89	5.30	22.83	3.79	22.83	5.18
Postharvest loss (%)	29.12	41.91	11.32	27.39	11.02	28.11	15.13	33.99	16.93	34.33
Apply processing (yes = 1)	0.275	0.448	0.324	0.47	0.333	0.473	0.324	0.47	0.313	0.464
Apply food traceability (yes = 1)	0.075	0.264	0.029	0.17	0.026	0.159	0	0	0.033	0.18
Input and output information
Gate-price of lotus-grain (VND/kg)	36.82	10.03	37.5	8.28	36.12	9.34	38.0	7.77	37.08	8.94
Access to extension services (yes = 1)	0.65	0.479	0.471	0.502	0.487	0.502	0.432	0.498	0.513	0.5
Number of training courses attended (Course)	0.675	0.688	0.441	0.606	0.846	1.317	0.541	0.723	0.633	0.899
Access to credit (yes = 1)	0.15	0.359	0.088	0.285	0.051	0.222	0.081	0.274	0.093	0.291
Credit amount (Mill.VND)	8.5	23.71	5.29	19.22	3.33	16.45	3.91	16.96	5.3	19.41
Instrumental variables
Distance to main market (km)	3.60	2.019	3.19	2.051	3.42	1.86	3.39	1.96	3.41	1.97

VND: Vietnamese Dong (approximately 23,015 VND/$U.S. as of 2023); SD: standard deviation. Source: Authors’ calculations.

Figure 2. Conceptual framework.

Table 2. Factors associated with the adoption of vertical coordination strategies: First-stage MESR estimation.

Vertical coordination strategies	Verbal contract		Input contract		Written contract
	Coef	St.Err	Coef	St.Err	Coef	St.Err
Farmers-traders trust (weak to strong, 1–5)	0.43***	0.156	0.429	0.044	0.369	0.099
Price determination (1 = farmers, 2 = both, 3 = traders)	−0.556	0.757	−0.403	0.298	−0.163	0.204
Join trading-support group (yes = 1)	−0.935	0.618	1.185***	0.179	1.176***	0.247
Gender of household head (Male = 1)	−1.091**	0.486	−1.05**	0.481	−0.283	0.942
Age (years)	0.006	0.017	−0.021***	0.008	−0.016	0.014
Household size	0.171*	0.102	0.128**	0.059	0.077	0.104
Experience of household head (years)	0.09*	0.054	0.107	.087	0.087	0.064
Farm size (ha)	0.051	0.141	−2.748***	0.89	−0.215	0.335
Number of ponds (plots)	0.361**	0.151	0.619***	0.188	0.186	0.134
Planting density (tree per m^2)	0.168***	0.022	0.079***	0.03	0.098***	0.03
Postharvest loss (%)	−0.007***	0.003	−0.011***	0.002	−0.007	0.009
Apply processing (yes = 1)	0.239	0.771	0.379	0.415	0.775*	0.462
Apply food traceability (yes = 1)	−2.528	1.937	−1.831	1.252	−15.812***	0.83
Gate-price of lotus-grain (VND/kg)	0.011	0.043	0.012	0.051	0.039	0.034
Access to credit (yes = 1)	−1.257***	0.131	−1.342**	0.525	−0.819	0.93
Access to extension services (yes = 1)	−0.453	0.647	0.348	0.665	−0.732	0.705
Distance to main market (km)	−0.126**	0.057	−0.077*	0.043	−0.084**	0.033
Constant	−5.545***	1.721	−0.582	1.23	−2.485*	1.359

*, **, and *** indicate significance at the 10%, 5%, and 1% levels, respectively.

Source: Authors’ calculations.

Figure 3. The adoption of different vertical coordination strategies by farming households. Source: Authors’ calculations.

Figure 4. Unconditional lotus-grain yield density distribution.

Figure 5. Unconditional lotus-grain revenue density distribution. Source: Authors’ calculations.

Table 3. Estimated results of the average treatment effects of vertical coordination strategies on lotus-grain household welfare in the MESR.

Outcome variables	Combinations	Adoption (j = 2/3/4) (a)	Non–adoption (j = 1) (b)	ATT (c) = (a) − (b)	Change in outcome (%)
Lotus-grain yield (ton/ha)	Verbal contract vs Non-adoption	1.30	1.91	−0.61 *	−31.9
	Input contract vs Non-adoption	3.05	2.02	1. 03 ***	50.3
	Written contract vs Non-adoption	1.49	2.06	−0.57	−27.6
Lotus-grain revenue (Million VND/ha)	Verbal contract vs Non-adoption	58.3	79.0	−30.7*	−26.2
	Input contract vs Non-adoption	108.6	80.7	27.8***	34.5
	Written contract vs Non-adoption	64.7	91.5	−26.7	−29.2

1) VND = Vietnamese Dong (approximately 23,015 VND/$U.S. as of 2023); Outcome variables in log form.

2) Calculated using the STATA user-written command selmlog (Bourguignon et al., 2007); t-test employed for mean group comparisons; *, **, and *** denote significance at the 10%, 5%, and 1% levels, respectively.

Source: Authors’ calculations.

Figure A1. Lotus cultivation in Thua Thien Hue Province (2017–2020).

Figure A2. Lotus value chain in Central Vietnam (source: Authors’ calculations).

Table A1. The variances between the two polar extremes of the buyer–seller relationship continuum.

Traditional arm’s-lengths relationships	Supply chain partnerships
Short-term focus on individual transactions	Commitment to long-term relationships
Buying decision made on price	Buying decision made on value
Many suppliers	Fewer selected suppliers
Low interdependence	High interdependence
Haphazard production and supply scheduling	Order driven production and supply
Limited communication restricted between sales and purchasing	Open communication facilitated by multilevel relationship
Little co-ordination of work processes	Integration of work processes
Relationship specific investments avoided	Increases in relationship specific investments
Information is proprietary	Information is shared
Clear delineation of business boundaries	Creation of intercompany teams
Use of threats to resolve disputes	Joint problem solving approach to conflicts
Unilateral improvement initiatives	Continuous joint improvement sought
Separate activities	Engage in joint activities
Dictation of terms by more powerful firm	Joint decision making
Adversarial attitudes	Co-operative attitudes
Conflicting goals	Compatible goals
Behave opportunistically	Mutual trust exists
Act only in own interest	Act for mutual benefit
Win‒lose orientation	Win‒win orientation

Source: Duffy and Fearne (2004).

Table A2. Key characteristics distinguishing verbal, input, and written contracts in vertical coordination strategies in the lotus-grain value chain in the study areas from focus group discussions.

Characteristics	Verbal Contract	Input Contract	Written Contract
Nature of Agreement	Oral agreement, often informal	Formal agreement specifying input provisions	Formal written agreement outlining terms
Documentation	Typically, not documented	Documented, specifying input quantities/timing	Formally documented with detailed terms
Trust Requirement	Moderate to high trust between parties	Moderate trust, more formalized relationship	Trust needed, but terms explicitly stated
Flexibility	High flexibility in terms of arrangements	Some flexibility, but terms usually specified	Less flexibility, terms are predetermined
Risk Allocation	Often shared between parties	Shared, but clearer delineation of responsibilities	Defined risk allocation, usually favoring one party
Transparency	Limited transparency due to informal nature	Moderate transparency, terms specified in contract	Transparent, terms explicitly outlined
Complexity	Low complexity, simpler agreements	Moderate complexity, detailing inputs and terms	Higher complexity, detailed legal provisions
Duration	Often short-term, subject to change	Medium to long-term agreements	Medium to long-term, with fixed terms
Cost	Lower transaction costs due to informality	Moderate transaction costs for documentation	Higher transaction costs for legal drafting
Common Challenges	Ambiguity in terms, lack of formal recourse	Ensuring input quality/timeliness, contract enforcement	Legal disputes, adherence to contract terms

Table A3. Determinants of the adoption of vertical coordination strategies for lotus grain yield: Second-stage MESR estimation.

Lotus-grain yield	Non-adoption		Verbal contract		Input contract		Written contract
	Coef	S.E	Coef	S.E	Coef	S.E	Coef	S.E
Farmers-traders trust (weak to strong, 1–5)	−0.433	1.173	−0.677***	0.162	0. 308*	0. 2 61	−0.562	0.336
Price determination (1 = farmers, 2 = both, 3 = traders)	−0.668	−0.617	0.527*	0.399	−0.678*	0.520	−1.204***	0.204
Join trading-support group (yes = 1)	−0.598	0.797	0.804***	0.269	0.141	0.885	0.227	0.267
Gender of household head (Male = 1)	−2.325***	0.778	−0.692	1.162	0.224	0.878	−0.608***	0.242
Age (years)	0.013	0.043	0.021	0.026	−0.025	0.038	0.019	0.021
Household size	−0.066	0.153	0.182	0.154	−0.073	0.210	0.336***	0.141
Experience of household head (years)	−0.046	0.064	0.007	0.098	−0.076***	0.028	0.035**	0.017
Farm size (ha)	0.584	0.400	0.511	0.497	−1.485	1.694	0.666***	0.154
Number of ponds (plots)	0.752*	0.381	0.100	0.147	0.124	0.191	−0.175	0.213
Planting density (tree per m^2)	−0.021	0.095	0.110	0.101	0.129	0.137	0.170***	0.023
Postharvest loss (%)	−0.001	0.006	0.021**	0.009	0.004	0.007	−0.006	0.003
Apply processing (yes = 1)	1.127	0.933	0.312	0.345	0.217	1.496	−1.139***	0.404
Gate-price of lotus-grain (VND/kg)	0.028	0.036	−0.032*	0.021	0.034***	0.006	−0.058***	0.019
Credit amount (Mill.VND)	−0.038***	0.005	−0.019*	0.012	0.017	0.051	−0.040***	0.007
_m1	3.903*	2.145	2.468	0.300	−1.128	0.924	−1.218	1.178
_m2	−0.916	0.753	−1.858	1.171	1.663	4.904	2.095	1.818
_m3	−2.971	2.298	−1.565	1.810	−0.471	3.510	−0.428	0.418
_cons	0.487	2.246	−5.527	6.694	−1.645	3.553	−1.745***	0.683
Sigma2	18.615	19.252	9.590*	5.152	3.588***	61.759	5.129	3.071
rho1	1.160***	0.209	1.022***	0.212	−0.764	0.368	−0.690***	0.665
rho2	−0.272	0.320	−0.769*	0.487	1.126	0.777	1.186	1.075
rho3	−0.883***	0.295	−0.648	0.635	−0.319	0.711	−0.242	0.286

Table A4. Determinants of the adoption of vertical coordination strategies for lotus-grain revenue: Second-stage MESR estimation.

Lotus-grain revenue	Non-adoption		Verbal contract		Input contract		Written contract
	Coef	S.E	Coef	S.E	Coef	S.E	Coef	S.E
Farmers-traders trust (weak to strong, 1–5)	−0.430	1.429	−0.692*	0.333	0.403**	0.273	−0.588	0.424
Price determination (1 = farmers, 2 = both, 3 = traders)	−0.660*	0.314	0.587	0.813	−0.651**	0.342	−1.188**	0.532
Join trading-support group (yes = 1)	−0.593	0.798	0.777**	0.333	0.203	0.196	0.247	0.291
Gender of household head (Male = 1)	−2.326***	0.825	−0.668	0.607	0.230	0.430	−0.605	0.994
Age (years)	0.013***	0.004	0.020	0.065	−0.024	0.019	0.021	0.035
Household size	−0.068*	0.040	0.175	0.245	−0.074*	0.059	0.339***	0.112
Experience of household head (years)	−0.045	0.085	0.009	0.050	−0.079*	0.056	0.036	0.073
Farm size (ha)	0.583***	0.112	0.520	1.096	−1.383	0.972	0.691**	0.331
Number of ponds (plots)	0.743*	0.445	0.079	0.234	0.100	0.237	−0.194	0.187
Planting density (tree per m^2)	−0.020	0.067	0.105***	0.038	0.133*	0.091	0.167*	0.125
Postharvest loss (%)	−0.001	0.010	0.021***	0.004	0.004**	0.002	−0.007	0.009
Apply processing (yes = 1)	1.109	0.867	0.332	0.591	0.156	0.239	−1.150	1.082
Gate-price of lotus-grain (VND/kg)	0.051***	0.034	−0.009	0.030	0.055***	0.022	−0.035	0.053
Credit amount (Mill.VND)	−0.038*	0.006	−0.020	0.028	0.017	0.020	−0.040***	0.017
_m1	3.853*	2.235	2.439	0.761	−1.096	0.891	−1.178	2.364
_m2	−0.928	0.945	−1.956*	1.323	1.694	1.991	2.083	3.641
_m3	−2.909*	1.532	−1.377	1.654	−0.486	1.388	−0.436	0.750
_cons	3.264	3.322	−2.431	8.211	1.131	2.156	1.059	1.901
Sigma2	8.065	16.703	9.307	9.111	3.636	10.926	5.014	5.170
rho1	1.163*	0.574	1.025	0.149	−0.737	0.394	−0.675	0.602
rho2	−0.280	0.594	−0.822*	0.445	1.139	0.913	1.193	1.198
rho3	−0.878***	0.051	−0.579*	0.422	−0.327	0.721	−0.250	0.389

Table B1. Montiel-Pflueger robust weak instrument test.

Effective F statistic:	51.292
Confidence level alpha:	5%
Critical Values	TSLS	LIML
% of Worst Case Bias
tau = 5%	37.418	37.418
tau = 10%	23.109	23.109
tau = 20%	15.062	15.062
tau = 30%	12.039	12.039

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Data availability statement

Code to obtain results for the study is available upon reasonable request.