Literature review on innovative, sustainable and competitive agrifood value chains

This Literature review Data-set has been produced in the frame of CO-FRESH -  D1.1. State of the art summarized in an overview of the key success factors (and their theoretical explanations) of innovative, sustainable and competitive agrifood value chains.

Grand societal challenges, such as climate change, environmental degradation, food security, immigration, and digital transformation, urge agrifood value chains to embrace sustainability objectives and measures. This objective requires value chains actors from farm to fork to interact for environmental, social and economic improvement of the system. In this context, innovation, that has long been considered as a factor of growth and competitiveness, becomes an increasingly important factor to create value while addressing sustainability challenges. Therefore, the emergence of concepts such as sustainability-oriented innovation and sustainable innovation are undeniable results of this trend. However, our scholarly understanding of these emerging concepts can be improved. In addition, it has been acknowledged that sustainability outcomes cannot be gained individually and that collaboration among value chain partners is needed. Thus, collaboration is seen as an effective way to turn ambition and commitment into action in the journey toward sustainability.

The CO-FRESH project aims to enhance collaboration for sustainability-oriented innovation, by proposing tools for re-designing fruit and vegetables (F&V) agrifood value chains across Europe. To reach these objectives, Work Package 1 takes the lead in Identification, Analysis and Design of Innovative and Sustainable Agrifood Value Chains. The current report is the outcome of Task 1.1, a review of the state of the art.

Deliverable 1.1. presents the state of the art of the academic and grey literature on sustainability-oriented innovation (SOI) in agrifood chains, more specifically presenting key success factors and their theoretical explanations for innovative, sustainable and competitive agrifood value chains. The review, first, gives a clear definition of ”sustainable and innovative agrifood chains’’ in the CO-FRESH project, drawing on the literature about SOI. Second, the review explores different modes of collaboration that contribute to sustainability and innovation in agrifood chains. Finally, the review elaborates on the role of public policies in promoting SOIs in agrifood chains.

The outcome of this review will be used in offering a list of search criteria to create an inventory of innovative and sustainable F&V value chains in Europe. In addition, the insights of this deliverable will be used for characterizing and assessing the F&V value chains and their success factors (Task 1.2). On the basis of this review and the assessment in Task 1.2, recommendations will be given for data collection on and redesigning of the CO-FRESH pilot cases.

Chapter 2 presents the main methodology applied in the literature review. A framework for guiding the review was designed around the key concepts of sustainability, innovation, value-chain and collaboration. The main questions were: How is SOI defined in the literature and how does it apply to the agrifood sector? What are the specificities of SOI in fruit and vegetable value-chains? How does inter-organizational collaboration relate to SOI in agrifood chains? How do public policies relate to SOI in agrifood chains? The agrifood sector was the primary focus, but perspectives from other sectors were brought in to complement our understanding. No limitations were put on the type of agricultural products considered. The disciplines of Business, Management and Economics were studied, but also Agriculture, Regional and Urban Planning, Environmental Studies. This process result in more than 350 references reviewed.

Chapter 3 addresses how sustainability-oriented innovation (SOI) is defined in the economics, business and strategic management literature. The chapter starts by reminding that sustainability in itself is subject to debate. In the agrifood sector, sustainability has long been addressed through the environmental lens, first at the farm level and then at the level of the value chain with the development of LCA methods. The concept has then evolved to encompass a more holistic view of sustainability taking into account social dimensions of food systems (like healthiness and relational proximity) and economic dimensions in value chains (like a fair distribution of value, and competition within and across value chains). Even when consensus exists on the sustainable development goals, the indicators developed by international organizations often differ from the ones that are of interest for corporates or developed by academics. From our review of the literature, we conclude that SOI can be defined according to the direction, distribution, diversity, and degree of openness.

The direction of SOI refers to the three pillars of sustainability.

While eco-innovation or social innovation put the emphasis on one dimension, SOI takes into account more than one dimension. As a result, SOI involves a higher level of complexity and more uncertainty on the outcomes of the innovation compared to conventional innovation.

The distribution of SOI refers to the repartition of the benefits.

Many authors argue that SOI should enable a fair benefit-sharing among the value chain actors. In addition to that, the outcomes of SOI do benefit not only the value chain actors but also external actors. For instance, a reduction of the use of chemical inputs on the farm results in cost reduction, thus an economic benefit for the farmer, while it also results in a reduction of greenhouse gas emission, thus an environmental benefit for society as a whole.

The diversity of SOI refers to the type of innovation. Based on economics of innovation and innovation management literature, we rely on the following types of innovation in the CO-FRESH project:

Technical innovation: The implementation of new or significantly improved goods and services, or new or improved methods of producing goods and services.

Organizational innovation: The implementation of a new routines, management structures and methods of coordination within or between organizations.

Managerial innovation: A form of organizational innovation focused on the specific roles and functions of the manager, including the interpersonal roles, the informational roles and the decision-making roles.

Institutional innovation: A legitimate change in the cognitive, normative, or regulative rules of a social system

The degree of openness of SOI refers to the participation of different actors in the innovation process.

SOI is a process that can rely on various degree of value-chain collaboration. In other words, a process that brings together value chain actors (and sometimes also external actors) toward a common goal and a common understanding of developing and implementing an innovation. These value chain actors share decision rights on a part of their individual activities. While SOI begins at the firm level in response to external stimuli such as legislation, it evolves in a pro-active change at the wider system level.

In sum, we provide the following general definition of sustainability-oriented innovation: “A collaborative process of change directed at improving one or more of the three pillars of sustainability (i.e., environmental, economical and social), relying on a diversity of bundled innovations (notably technological, organizational and institutional), and whose benefits are fairly distributed along the value chain actors”.

Acknowledging that collaboration is of paramount importance for SOI, Chapter 4 analyses how inter-organizational collaboration relates to SOI. In this report, the focus is on inter-organizational relationship and not on intra-organizational collaboration. The modes of inter-organizational collaboration in the agrifood sector include collaborations among value chain actors (such as joint ventures, cooperatives, licensing, contracting) and collaborations between value chain actors and actors in the business ecosystem, the technological innovation system or the socio-ecological system (including public-private partnerships and multistakeholder partnerships). In the agrifood sector, collaboration traditionally concerns knowledge exchange; production and distribution activities; new product development; and commercialization of products. As collaboration entails risk and loss of autonomy, organizations engage in collaborations only if there are clear benefits. Current motives for horizontal and vertical collaboration include strengthening of bargaining power; gaining economies of scale; accessing tangible and intangible resources; reducing transaction costs; sharing of risks; improving lobbying power and legitimization; and joint learning and innovation. Success factors of collaboration include trust, reciprocity, communication, partner compatibility, and the complementarity of resources.

The remainder of chapter 4 explores how particular collaboration modes relate to SOI in agrifood chains and derives with six main themes.

One, cooperatives could enable collective investments necessary for SOI. Moreover, cooperatives could facilitate a reduction of the individual risk of farmers in SOI and provide the technical assistance and financial room for experimenting with sustainable agricultural practices.

Two, the dual role of contracts appears to be crucial for SOI in value chains. On the one hand, contracts facilitate adoption of new technologies and farming practices, that could lead to improved environmental sustainability. On the other hand, contractual arrangements are an organizational innovation that enable value creation and value sharing, that could lead to better socio-economical sustainability. Contracts in general facilitate incentive alignment, risk mitigation and benefit sharing; co-investment, joint-funding and protection of specific investment; socio-technical interactions and inter-organizational learning; and provision of credit, inputs and technical services.

Three, involving consumers and citizens is a strong driver of innovation and a move toward more responsible patterns of consumption. However, the match between citizen preference and consumer purchase behaviour is yet to be better understood. Consumer-driven initiatives such as community-supported agriculture, buying groups, and participatory guarantee systems are growing and have been described in the literature on short food supply chains.

Four, the advantages of multistakeholder partnerships appear to be evident for promoting SOI along the value chain.  Actors and stakeholders in the periphery of a firm's stakeholder network (e.g., universities, civil society and public authorities) may be even more relevant for SOI than primary stakeholders.

Five, the relevance of open innovation and the collaboration among value chain actors for innovation is undeniable. Although open SOI capabilities comply with the traditional open innovation capability framework, the capabilities should be accustomed to the sustainability context and adapted to the diversity of sustainability as perceived by actors.

Six, digitalization has substantial influence on inter-organizational collaboration for SOI in agrifood. Digitalization influences collaboration modes in several ways: facilitation of information and knowledge sharing by overcoming material constraints; improvement of transparency and reliability; and intensification of the volume and rapidity of data collection and data analysis. However, digitalization has downsides such as increasing the power of dominant actors and the risk of exclusion of small-scale and computer-illiterate producers.

Chapter 5 analyses how public policies relate to SOI in agrifood chains. Among the most debated public policies addressed in the literature, the EU Common Agricultural Policy (CAP) is the most explored, especially with reference to the instruments provided within the framework of the two pillars of the CAP. With regard to policy instruments aimed at supporting SOI, most of the literature focused on financial instruments. However, some authors explored normative instruments, mainly with reference to environmental and phytosanitary regulations. There is little debate on informative policy instruments, studied mostly with reference to advisory services and educational campaigns. Another theme that found relatively modest debate was the impact of innovation on the social dimension of sustainability. Most authors focused on the environmental and economic impact of sustainability. The role of public policies to promote social sustainability along the value chain remains a key area of improvement, especially with regard to rural employment and livelihood. The review highlights that, in general, the investigation approach to explore the role of public policies in promoting SOI along agrifood value chains is often rather narrow and case study-oriented.

Finally, the report derives at two main conclusions. First, we draw lessons learnt on how collaboration and public policies relate to SOI in agrifood chains, and on the factors that strengthen SOI. Independently of the types of collaboration (within the value chain or between the value chain and the broader innovation system), this review reveals common factors that lead to successful collaboration for SOI. A prerequisite is for actors to share a common vision on the sustainability goals. In addition, the importance of relational factors such social capital, trust and communication was highlighted in all literature. The complementarity of resources between the actors is also a major factor for successful collaboration. Finally, the importance of combining different collaborations modes was revealed in our review, as well as the importance of enabling institutions and public policies. We also found that inclusive and evolutionary governance structures at different levels of the value chain promote collaboration for SOI. For instance, bilateral collaboration in a value chain for access to specific resources may be complemented with open innovation strategies that enable generating knowledge. Finally, this review principally focused on meso-level factors that can influences collaboration modes for SOI. Further explorations should focus on micro-determinants of innovation and the evolution of success factors of collaboration along the process of SOI.

Second, our literature review has allowed us to present 16 recommendations for interventions for improvements in the pilot cases of the CO-FRESH project. These recommendations are clustered in three categories: relational, structural and operational, and strategic. Relational factors are about the (social) interactions between actors involved in the value chain and in the innovation process. Structural and operational factors are about structuring the agrifood chain, structuring the innovation process, and the operations in the value chain. Strategic factors include the goals that the actors in the value chain pursue, individually and jointly, and the translation of these goals into management decisions.