Influence of guanxi, trust and farmer-specific factors on participation in emerging vegetable markets in China

Abstract

The fast development of market outlets (e.g., supermarkets, processing industries, international markets) in China provides rich opportunities for small-scale farmers to upgrade quality and increase income. However, the high level of transaction costs incurred in small-volume-based vegetable transactions hinders farmers from participating in these emerging markets. This article explores how personal relationships (called guanxi in China) and trust between farmers and their buyers influence transaction costs in vegetable transactions, and thereby also farmers’ participation in

emerging markets. We interviewed 167 vegetable farmers in Jiangsu Province, which provided data for empirical testing using two-stage probit analysis with endogenous variables. The findings suggest that guanxi and trust effectively reduce transaction costs in vegetable marketing in China, which may help and encourage farmers to better participate in emerging markets. The results also reveal that farmers’ age, education, marketing experience, distance to the market, production scale and land quality influence transaction costs. The article ends with policy implications with respect to efficiently reducing transaction costs in vegetable supply chains in order to create a better environment for small-scale farmers in emerging markets in China.