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The agri-food sector is witnessing increased moves towards closer vertical coordination in a drive to tackle market transaction costs. The key factors affecting the type and degree of vertical coordination in the food supply chain include asset specificity and the hold-up problem, uncertainty and asymmetric information. In addition, increasing consumer demand for food quality and diversity (eg animal welfare, food safety, traceability, quality standards and environmental concerns) has been pivotal in increasing vertical coordination among different actors in the food supply chain (see, for example, Reardon et al., 2003; Reardon and Swinnen, 2004; Weatherspoon and Reardon, 2003; Reardon and Barrett, 2000).

However, the actual impact of vertical coordination on the farming sector is still not fully understood and is subject to ongoing debate. Indeed, it is often argued that vertical coordination in the supply chain can enable farmers to reduce the risks associated with demand uncertainty and price fluctuations, and to have better access to credit and technology, as well as reducing transaction costs associated with accessing markets and leading to more efficient exchange of information and adoption of innovative organizational structures. On the other hand, the growth of vertically integrated markets in the food supply chain provides an opportunity for dominant firms to impose their influence on weaker players such as farmers (see, for example, Key and Runsten, 1999; Razafindrakoto and Roubaud, 2002; Gow, Streeter and Swinnen 2000; Swinnen, Beerlandt and Dries, 2003; Dries and Swinnen, 2004). Indeed, in the past few decades it has been …