Organisational Innovation and Living Conditions of Farmers in the Cocoa Value Chain in Ghana

Abstract

Organisational innovation defined as the introduction of new governance arrangements, coordination mechanisms, and rules shaping interactions among value chain actors such as certification schemes play a crucial role in transforming agricultural value chains by enhancing marketing strategies and optimizing transaction processes. Conceptually, such innovations are expected to reduce transaction costs, although empirical evidence suggests that their impacts are context-dependent. Organisational innovation has been well-acclaimed to offer a variety of environmental and socio-economic benefits, enhancing smallholders’ livelihoods by encouraging the adoption of innovative practices and promoting information transparency along the value chain. Recognising these potential benefits, certification schemes have been actively promoted by sustainability standard setting organisations, certification bodies, external buyers, development partners, and public institutions to enhance the sustainability of export value chains. This thesis analysed the roles of certification schemes as key organisational innovation and their effects on the living conditions of farmers in the cocoa value chain in Ghana. Specifically, the study (i) identified and analysed the drivers, dynamics and governance of Organizational Innovation (i.e., Certification Schemes) in the Ghana’s cocoa value chain using Gereffian typology, descriptive analysis and Network Mapping Analysis (ii) analysed the role of proximity in information flows in certified farmer network using Social Network Analysis (SNA), a complementary approach to Network Mapping under the same family of methods (iii) examined the role of farmers’ capacities and effectual behaviours in driving impact within certification scheme by adopting the qualitative process approach also known as Impact Pathways Analysis and (iv) assessed the effects of certification on farmers’ living conditions (i.e. Cocoa income, yield and food security) by employing Propensity Score Matching (PSM) and instrumental variables (IV) techniques. Relevant data was obtained using: 1) participatory approaches, 2) focus group discussions, 3) key informant interviews and 4) case studies on the cocoa value chain. Additionally, cross-sectional data was collected on 1,011 randomly sampled cocoa farmers consisting of 607 Fairtrade-certified and 404 non-certified farmers in the Eastern Region of Ghana from January, 2021 to May, 2024. Organisational Innovations is explained from the perspective of New Institutional Economics (NIE). The study was guided by the following theoretical frameworks: (i) Global Value Chain governance in relation to Transaction Cost Economics (TCE), a subset of NIE. TCE is linked with the Gereffi/Social network theories by explaining how governance structures and relational networks in global value chains are organized to minimize transaction costs and manage power asymmetries. The first finding shows that certified cooperative farmers are trapped in a captive governance system with some relational and hierarchical aspects, hence governance steers towards hierarchy with certification. Cooperative bargaining power remains weak in certification agreements due to limited power and authority over the price, premium, technical, and buyer information, which calls for other initiatives such as cooperative exports. The second finding highlights two certified cooperative-specificities: a private extension officer and cooperative manager as information gatekeepers compared to public extension officer as a broker in the non certified network. Such centralised network configuration poses a risk to the overall effectiveness of information flows due to potential bias and delays. Based on the perception of farmers, certified farmers use technical, buyer, and premium information to improve their cocoa quality. This finding suggests that access to these information enables them to make production decisions that can support cocoa quality improvement. The third finding is that effectual behaviours and capacities are key drivers of the success of certification processes that enable cooperatives to stay in schemes, overcome uncertainties, and enhance livelihoods. Fairtrade certification, with its established governance and institutionalised dominance in Ghana’s cocoa sector, provides a robust context for analysing organisational innovation compared to other certification schemes. Therefore, the fourth finding is that the main drivers of participation in Fairtrade certifications are years of cocoa farming experience, access to labour, access to credit, and cocoa farm size. Evidence of the effects of Fairtrade certifications shows that certification improves cocoa income, yield, and food security through the household dietary diversity score (HDDS) dimension of smallholder households in Ghana. Thus, Fairtrade participation contributes significantly to household food diversity but has no significant effect on household food accessibility and availability. This observation is robust to the use of both quantitative econometric approaches (PSM and IV) and qualitative impact pathway approaches. Furthermore, effects differ considerably when Fairtrade certification is combined with other schemes and programmes. Thus, compared to non-certified households, Fairtrade only has more cocoa income, yield, and food security-enhancing effects. Thus, it contributes to significant improvement in household living conditions. Fairtrade & Organic compared to non-certified improves cocoa income and yield but this is lower compared to Fairtrade only and Fairtrade and CocoaLife schemes. Accordingly, building capacities of cooperatives in leadership, administration, governance and sustained investment in specialized support structures such as market access support, unionisation, and networks should be promoted as a means of increasing bargaining power. Also, to improve information flows in the certification mechanism, the risk of the two information gatekeepers who share a variety of information that supports cocoa quality improvement could be reduced by promoting collaboration among the cooperative manager, private extension officer, and the certified Purchasing Clerk. Certification should be encouraged as a means to enhance cocoa quality to address sustainability issues that confront the certified cocoa value in Ghana. Furthermore, policymakers and value chain actors should put the development and strengthening of capacities and effectual behaviours of smallholder farmers at the centre of certification interventions. Besides the addition of complementary packages such as access to credit to Fairtrade schemes, interventions and policies by standard creators and certification actors should go beyond increasing productivity and cocoa income and also focus on household food security (accessibility and availability).