Designing Contracts and Sourcing Channels to Create Shared Value

When a new farming technology helps the buyer but costs the farmer, adoption depends on how the two sides trade. We study when changing the contract, switching from commodity sourcing to direct sourcing, or combining both can turn a one-sided innovation into a mutual gain. The answer hinges on how the technology’s costs scale. Using farm data from Patagonia, Argentina, we estimate that the proposed mechanism could increase average supply-chain profit by 6.9% while also producing environmental benefits.

Manufacturing & Service Operations Management, vol. 21, no. 2, pp. 271–289