Governance decisions in the supply chain and quality performance: The synergistic effect of geographical indications and ownership structure

Although the supply chain (SC) management literature has extensively analyzed how features of SC relationships affect quality performance, it barely considers the role played by SC governance in managing and promoting quality performance. This study examines how quality performance is affected by two SC governance decisions in agri-food chains: (i) the adoption of a geographical indication (GI), and (ii) the creation of co-operative (co-op) ownership structures. Focusing on the wine industry, the study first examines how GIs encourage quality by improving vertical adaptation and leveraging resources (e.g., knowledge) of all SC members. Second, it analyzes how co-ops' collective action and horizon investment problems may hinder the delivery of high-quality products. The paper also examines how the effectiveness of GIs in promoting quality is contingent on the ownership structure of agri-food chains. Data from 327 wine producers and quality scores for 1951 bottled wines are used to test the hypotheses. The results reveal that on average, the quality of wineries is positively associated with the adoption of the most stringent GIs. Second, although co-ops are negatively correlated with final quality compared to investor-owned firms (IOFs), this disadvantage is moderated when co-ops are certified under the most stringent GIs. However, these GIs are not related to wine quality within IOFs, suggesting that quality certifications are more effective when used within suitable governance structures.