Impact of government support on the level of traceability implementation and business performance in the Italian fishery supply chain

Governments view agri-food traceability as a tool to protect public, animal and plant health and to protect buyers against fraud (Food Standards Agency 2002). At the firm level, however, the level of traceability is determined by expected and actual costs and benefits. Costs can be divided into implementation (or set up) and operation (or maintenance) costs. Benefits can arise from compliance with regulatory requirements, enhanced food safety and recall performance, improved marketing performance and increased supply chain efficiency (Sparling and Sterling, 2004). While food operators tend to have a good understanding of the likely cost of traceability, performance or competitiveness benefits are more difficult to grasp (Verdenius 2006). While governments around the world support food operators in the implementation of traceability practices and systems, there is a clear need for research to understand how food operators’ perceptions of costs and benefits affect the level of traceability implementation (Meuwissen et.al 2003). In particular, there has been no research to date that documents and analyses how government support affects business performance. This paper aims to contribute to closing this research gap. It proposes a conceptual decision model that incorporates both expected and actual costs and benefits of traceability in the analysis. Received government support, amongst other firm characteristics, is hypothesized to affect actual costs and benefits via expected costs and benefits and the chosen traceability level/sophistication. The analysis uses a sample of 60 Italian fish processing businesses that were surveyed in spring 2008. The results show that food operators who received government support adopted a higher level of traceability, and reported a higher level of expected and actual costs and benefits, in comparison to food operators who did not receive any kind of support. However, these operators also reported actual benefits to be smaller than expected, mainly because of overly optimistic expectations about the impact of traceability implementation on prices and market share.