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Determinants and Effects of Institutional Change: A Case Study of Dry Bean Grades and Standards

In an era marked by the twin forces of globalization and agro-industrialization, global food markets are undergoing a shift from homogeneous markets to differentiated markets, a reorientation from national markets to global markets, a move from spot market toward vertical coordination and integration (Schertz and Daft, 1997), and a restructuring of economies and polities from planned to market driven. In this new global context, expanded international trade of agricultural commodities and food products exists in a new trade and business environment characterized by increasingly liberalized trade, sophisticated logistics, precise product specifications and attribute management, and a concentration of actors. As the global agrifood system adapts to these forces, firms are implementing strategies to enhance quality and control coordination. Standards are part of the instruments firms use to implement those strategies and, thus, the role of standards is shifting from one of commodity definition to lower transaction costs to that of a strategic tool for product differentiation (Leat et al. 1998) and market formation and protection for both private industries and governments (Reardon et al. 1999). However, this "shift" is not a clear movement from one function to another but rather highlights the dual nature of standards. While a standard can and might produce standardization (conformity) of goods, it can also provide the necessary structure for product differentiation (diversity).