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Reassessing supplier reputation in international trade coordination – a German and Australian perspective of global organic food networks
Amelie Bernzen
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Abstract
Uncertainties are especially high among importing firms and for products with sensitive and ‘critical’ quality characteristics in a societal context, such as food. While much recent literature on this issue has focused on the implementation of standards and certification systems, I argue that reputation also plays an important role for trading firms in mitigating uncertainties across large distances. Reputation may or may not reflect reality and is based on public (e.g. media) and networked (from individuals) information. This article draws on Convention Theory in a case study based on qualitative interviews among organic food importers to Germany and Australia. I first show that the degree of their public exposure implies specific risks and strongly influences importers’ coordination strategy. I then go on to examine how, in these firms’ supplier relations and risk management, not only the reputation of (potential) suppliers counts, but also the reputation of supplier countries and institutional systems such as standards and certification bodies. Intensive involvement and first-hand experience with certifiers and suppliers in exporting countries can, in some cases, cause firms to challenge their existing beliefs. I conclude that a good reputation is still essential for (improving) market access, even when basic prerequisites such as legally mandatory certification are fulfilled.
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Vol. 145, No. 3 · Research article

Reassessing supplier reputation in
international trade coordination –
DIE ERDE
Journal of the a German and Australian perspective
of global organic food networks
Geographical Society
of Berlin

Amelie Bernzen1

1Institute of Geography, University of Cologne, Albertus-Magnus-Platz, 50923 Köln, Germany,
[email protected]
Manuscript submitted: 19 August 2013 / Accepted for publication: 17 April 2014 / Published online: 26 September 2014

Abstract
Uncertainties are especially high among importing firms and for products with sensitive and ‘critical’ quality cha-
racteristics in a societal context, such as food. While much recent literature on this issue has focused on the imple-
mentation of standards and certification systems, I argue that reputation also plays an important role for trading
firms in mitigating uncertainties across large distances. Reputation may or may not reflect reality and is based on
public (e.g. media) and networked (from individuals) information. This article draws on Convention Theory in a case
study based on qualitative interviews among organic food importers to Germany and Australia. I first show that the
degree of their public exposure implies specific risks and strongly influences importers’ coordination strategy. I then
go on to examine how, in these firms’ supplier relations and risk management, not only the reputation of (potential)
suppliers counts, but also the reputation of supplier countries and institutional systems such as standards and certi-
fication bodies. Intensive involvement and first-hand experience with certifiers and suppliers in exporting countries
can, in some cases, cause firms to challenge their existing beliefs. I conclude that a good reputation is still essential
for (improving) market access, even when basic prerequisites such as legally mandatory certification are fulfilled.

Zusammenfassung
Unsicherheiten sind unter importierenden Unternehmen für qualitätssensitive Produkte, wie zum Beispiel
­Lebensmittel, besonders hoch. Während sich die jüngere Literatur zu diesem Thema auf die Umsetzung von
Standards und auf Zertifizierungssysteme fokussiert hat, wird in diesem Beitrag argumentiert, dass auch die
Reputation von Handelspartnern für Unternehmen wichtig ist, um Unsicherheiten über große Distanzen zu re­
duzieren. Reputation wird dabei durch öffentliche und vernetzte Information begründet. Die hier dargestell­
ten Ergebnisse basieren auf einer empirischen Fallstudie von Importeuren für biologische Nahrungsmittel nach
Deutschland und Australien und werden mithilfe der Convention Theory ausgewertet. Zunächst wird gezeigt,
dass das Ausmaß der öffentlichen Wahrnehmung bzw. die Abhängigkeit des Importeurs von öffentlicher oder
vernetzter Reputation spezifische Risiken beinhaltet und seine Koordinationsstrategien stark beeinflusst.
Anschließend wird untersucht, inwiefern für diese Importeure in Handelsbeziehungen und beim Qualitäts­
management nicht nur die Reputation der potentiellen Lieferanten eine Rolle spielt, sondern auch das Ansehen
der Lieferantenländer und entsprechender institutioneller Systeme wie zum Beispiel Standards und Zertifizie­
rungsstellen. Intensive Beteiligung und Erfahrungen aus erster Hand mit Zertifizierern und Lieferanten in Ex­
portländern können in manchen Fällen Firmen dazu veranlassen, ihre bestehenden Ansichten infrage zu stellen.
Abschließend kann gesagt werden, dass eine gute Reputation noch immer essentiell für den Marktzugang ist,
auch wenn Grundvoraussetzungen, wie beispielsweise die gesetzlich verpflichtete Zertifizierung, erfüllt sind.

Bernzen, Amelie 2014: Reassessing supplier reputation in international trade coordination – a German and Australian perspective of global
organic food networks. – DIE ERDE 145 (3): 162-174

DOI: 10.12854/erde-145-15

162 DIE ERDE · Vol. 145 · 3/2014

Supplier reputation in international trade coordination – a perspective of global organic food networks

Keywords Reputation, trade, convention theory, organic agri-food networks, imports, Germany, Australia

1. Introduction product specifications that become the focus of gen­
eral public debates (Trebbin and Hassler 2012). The
The food industry has been particularly affected by food industry is a good example of this in terms of
bad press in the media over the past years ( J­ affee increased concerns regarding food safety; a notable
and Masakure 2005), well-illustrated by events in sector within this industry is that of organic food.
early 2013 when three scandals broke across Eu­
rope within the space of a few weeks (horse meat Organics reflect the broader processes of globalisa­
mislabelled and sold as beef in deep freeze lasagne, tion in the way that food is produced, traded, mar­
conventional eggs mislabelled and sold as organic, keted and consumed, including an increasing profes­
toxic corn entering the EU as cattle and pig feed). sionalisation, industrialisation and fragmentation
This damages not only the reputation of the firms with a division of labour on a global scale (Pimbert
involved, but creates a general mistrust among end et al. 2001). It has been the fastest growing food sec­
consumers in terms of which products they feel can tor over the past decade with areas under organic
be bought and consumed safely. management having tripled since 1999 (Willer and
Lernoud 2013), a 170 % market expansion since 2002
However, the question of who is to blame is not easy and continuous double digit growth rates in sales
to answer as division of labour and complexity along turnover (Sahota 2013). In addition to the above, the
value chains increase. From the sourcing of raw growing number of firms and producers indicate that
materials to the end consumer, products and their organics has moved away from being a niche phenom­
components are increasingly produced, processed, enon. A large array of new players have joined the
traded and marketed through various channels in market vying for their share of the pie. For instance,
different geographical and institutional environ­ today, the largest share of organic products is sold
ments (Fig. 1). In general, the past decades have through conventional supermarkets, discounters and
seen a significant increase in the number of possible large retailers in the large consumer markets such as
suppliers of a certain product due to sinking trans­ the EU or the US (Bernzen 2012, Fitch Haumann 2011).
portation costs, improved logistics and communica­
tions systems in addition to highly competitive la­ Regarding the position of a firm along the value chain
bour wages (Grant 2000). A large share of these new (Fig. 1), high uncertainties are prevalent among im­
suppliers are located in developing countries and porting companies, as I argue, due to the increased
are looking for business opportunities by producing geographical, but sometimes also due to institutional
for western markets (e.g. Dannenberg 2012, Dolan and cultural, distances and differences from their di­
and Humphrey 2000). One could argue that this pro­ rect suppliers. Lacking this proximity, which is pre­
cess leads to advantageous increased competition sumed to support and enhance economic exchanges
on both the price and the quality dimension. On the that are based on trust and reciprocity (Dannenberg
other hand, this rapidly growing pool of new and 2012, Glückler 2005), importers may be especially
mostly unknown suppliers confronts buyers with vulnerable to opportunistic behaviour.
more (complex) information to be handled and less
transparent supplier systems across borders and In this paper, I argue that reputation is a key point of
continents (e.g. Dietsche and Braun 2008, Gereffi et reference to reduce these uncertainties across larger
al. 2005). In short, a firm’s transaction costs rise geographical distances and examine the relevance
to tackle the increased uncertainties regarding the and impact of reputation from the perspective of
right choice of suppliers and the quality and trace­ firms importing organic food products into Germany
ability of products and production processes. and Australia. The rest of this paper is structured as
follows: After an introduction of the theoretical con­
The level of complexity and uncertainty in trade co­ cepts of value chain analyses and reputation, I will ad­
ordination depends on the product and the firm’s dress the following questions on the basis of insights
position within the value chain (Fig. 1, Gereffi et al. drawn from Convention Theory (CT). First, what is the
2005). Regarding product types, uncertainties are perceived reputation of one’s own firm, which type of
especially high among firms that trade high value reputation is it based on (public, network) and what
and ‘high risk’ products with critical and sensitive are the major risks which threaten an established

DIE ERDE · Vol. 145 · 3/2014 163

Supplier reputation in international trade coordination – a perspective of global organic food networks

COUNTRY OF CONSUMPTION COUNTRY OF PRODUCTION

Inner network of importing firms
FOCUS OF Importer with Financial/personal involvement
MEDIA / high public exposure
HIGH PUBLIC (own brands)
SUPPLY/VALUE CHAIN ACTORS

EXPOSURE

Retailer / Importer with Involvement
Suppliers / Upstream suppliers
supermarket chain low/moderate
exporters
(no direct import) public exposure

Consumer

Supplier
Logos/labels on product

Involvement
Retailer / Manufacturer/
supermarket chain processor

Importer with
low public
exposure
INSTITUTIONAL

Local certification bodies Internationally Local CB
FRAMEWORK

operating CB

Private
Public (minimum) organic standard / Local organic
national
government regulation Accredits/approves of standard/regulation
standards

CB High/very high public exposure Product flow Audits, certification, Source: own concept
Design: A. Bernzen
CB Low/moderate public exposure Information flow tests, accreditation
Cartography: R. Spohner

Fig. 1 Public exposure and broader net work of importing firms along international value chains of organic food
(schematic, simplified)

high reputation? Second, I will look at the perceived 2. Theoretical approaches of reputation and ­value
reputation of existing and potentially new suppliers. chain coordination
This also includes the reputation of its immediate
cultural setting and institutional framework, i.e. the How do buyers overcome uncertainties and minimise
country, the standard it is certified against, and the the risk of opportunistic action by their suppliers?
certification body conducting the audits (Fig. 1). I ar­ How can the latter gain trust and secure their posi­
gue that reputation is influenced by (a) the source of tion on the market? Within the field of Economic Geo­
reputation (public, network) and (b) the importing graphy, different concepts have been adopted and
country. The hypothesis here is that own (personal) developed that provide analytical frameworks for
experience can fundamentally change existing repu­ the analysis of global economic exchange and coor­
tations that have previously been formed primar­ dination mechanisms in international value chains.
ily through the media and third parties. I will also Many studies – in particular those applying Global
explain how reputation leads to certain measures Commodity Chain, Global Value Chain or Global Pro­
of trade coordination, including new supplier selec­ duction Network approaches – have highlighted the
tion and degree of vertical integration. I conclude role of public and private product and process stand­
that a good reputation is still essential for (improv­ ards in governing international trade and increasing
ing) market access, even when core criteria such as transparency and traceability along the value chain
legally mandatory certification are fulfilled. (e.g. Dolan and Humphrey 2000, Franz and Hassler

164 DIE ERDE · Vol. 145 · 3/2014

Supplier reputation in international trade coordination – a perspective of global organic food networks

2010, Ouma 2010). Some scholars of Economic Geo­ phy (e.g. Farole et al. 2011, Glückler 2005, Patchell 2008).
graphy and business management have also drawn In the context of supply chain coordination, extant stud­
on Principal Agent Theory (e.g. Dannenberg 2012) or ies on reputation have shown that a good reputation has
network approaches (e.g. Braun and Dietsche 2009, a variety of advantageous outcomes or consequences.
Kühlmann 2009) to address issues of opportunistic These include, e.g., increased customer commitment,
behaviour and conflicting interests in global value loyalty and word-of-mouth, improved satisfaction and
chains. However, studies focusing on intangible fac­ customer acquisition (for a literature overview, see e.g.
tors that influence a buyer’s decisions regarding pre­ Sarstedt et al. 2013). Furthermore, reputation may re­
ferred suppliers have been scarce. duce the risk of opportunistic behaviour among suppli­
ers as it would put the latters’ good reputation at stake
One such intangible factor is reputation, or Corpo­ (Shapiro 1983, Kühlmann 2009). As a perceived anteced­
rate Reputation (CR), which has also been termed ent to trust (Suh and Houston 2010), reputation would
an intangible asset (Falkenreck 2010). It has been also lower transaction costs required for negotiations
defined as “the expectation of future performance and monitoring among suppliers (Bergh et al. 2010).
based on the perception of past behaviour” (Glück- However, some scholars have noted a research gap re­
ler 2005: 1732), or to ‘‘represent publics’ cumulative garding the impact of reputation on buyers’ decision-
judgements of firms over time’’ (Fombrun and Shan- making processes (Eberl 2006, Falkenreck 2010) and
ley 1990: 235). To measure reputation, I here adopt claimed that more studies were needed that investigate
the conceptualisation by Schwaiger (2004), which has the manner in which judgements are formed among dif­
been found to deliver the most valuable results in re­ ferent kinds of stakeholders (Gabbionetta et al. 2007).
cent research (Sarstedt et al. 2013). It sees reputation
as a two-­dimensional attitudinal construct of both Thus, the influences of reputation and trust are of high
cognitive and affective elements, i.e. an (individual) importance. In this context, I argue that one should
­stakeholder’s objective knowledge and subjective consider the reputation not only of trading partners
perceptions about the firm, and his emotional mindset along the supply chain (i.e. firms; buyers/suppliers)
(Schwaiger 2004, Eberl 2006). But how are these per­ but also of objects or entities which are a constitutive
ceptions and judgements created? Glückler and Arm- part of the business and the institutional framework,
brüster (2003) argue that the communication channel such as standards, certification bodies, logos and
is crucial for the credibility of the reported (reputa­ brands (e.g. Veloutsou and Moutinho 2009, see Fig. 1).
tional) information. They distinguish between public Overarching and relevant to all is the reputation a
and networked reputation which differ in terms of given country has among actors of a certain industry.
their diffusion, scope and reliability (Table 1).
A conceptual approach beyond marketing literature
Much of the existing literature exploring reputation has that specifically addresses reputation as one basis
taken place in the context of stakeholder interests and of decision-making and coordination is Convention
comes from the disciplines of Economics and Business Theory (CT). This framework, which has its roots in
Management (e.g. Falkenreck 2010, Suh and Houston French Sociology of the late 1980s, has proven useful
2010, Sarstedt et al. 2013, Fombrun and Rindova 2000), in recent studies due to its conceptually differentiat­
though it has also found its way into Economic Geogra­ ed treatment of uncertainty rather than codifiability

Table 1 Public versus networked reputation (Glückler 2005)

Public reputation Networked reputation

Public, i.e. broadcasting over media, Network, i.e. communication within trust
Diffusion
business press relations (word of mouth)

Scope Theoretically unlimited, i.e. public Limited, by membership in a personal network

Thin information, i.e. low reliability due to Thick information, i.e. high reliability due to
Reliability
unknown origin of judgment trusted contact towards the origin of judgment

DIE ERDE · Vol. 145 · 3/2014 165

Supplier reputation in international trade coordination – a perspective of global organic food networks

or complexity (as in GVC) and its ability to grasp the man traders must abide by EU law which stipulates
role of intangible factors such as reputation or trust that all products sold under the organic label must
(Ponte and Gibbon 2005, Raynolds 2004). CT posits be – at least – certified for the EU market (mandatory
that actors have different value systems which define certification against EC eco-regulation). In Australia,
how they assign value (or worth) to a person or an on the other hand, certification is voluntary, but one
object (Rosin 2007). Of the six conventions originally must be able to prove that the product is equivalent
categorised by Boltanski and Thévenot (2006 [1991]), to the new domestic organic standard (AS 6000). This
five have proven useful for studies in the agri-food results in quasi-mandatory certification against one of
sector (Raynolds 2004, Rosin and Campbell 2009), in­ the seven national private standards, or for imports,
cluding industrial convention, where worth is meas­ one of the larger international ones. These two regula­
ured through statistics and measurable, standard­ tory systems reflect the two countries’ varieties of cap­
ised information; civic convention (social and/or italism, with Germany as a coordinated, and Australia a
environmental welfare, mutual norms) and market liberal market economy (Hall and Soskice 2001).
(price, competitiveness). The two types of conven­
tion that are of interest to the questions in this paper I focused on qualitative research methods for the
are domestic convention and opinion convention. The purpose of our study. Data was collected during semi-
former captures the idea of a networked reputation structured, guided interviews with selected relevant
(Table 1), as “people’s worth depends on a hierarchy supply chain actors, namely decision-makers (buy­
of trust based on a chain of personal dependencies” ers, quality managers) of firms based in Germany and
(Boltanski and Thévenot 1999: 370). Typical relevant Australia. The companies interviewed ranged from
actions associated with this convention are trust, pur­ large retailers, manufacturers (with and without own
suing long-term relationships, personal invitations or brands), supermarkets and wholesalers, to small trad­
recommendations. Opinion convention, also referred to ers and agents. Thus, I included firms with varying de­
as the World of Renown, explicitly refers to the way in grees of public exposure, or, in other words, firms that
which actors justify their actions by referring to some­ differ with regard to their primary reliance on public
one’s value (worth) that has been determined on the and/or networked reputation respectively. Overall, I
basis of fame or his public reputation (Table 1). To point defined four levels of public exposure that a firm can
out the difference to the domestic convention, Boltanski have (low to very high). Their criteria and the respec­
and Thévenot (1999: 371) stress that within the opin­ tive number of firms I interviewed per country are de­
ion convention worth is “based on nothing other than picted in Table 2. In terms of the firms’ product range,
the number of individuals who grant their recognition. they included seasonal and non-seasonal, fresh and
It is hence entirely unrelated to the realm of personal dry, plant- and animal-based products; some offered a
interdependencies […]”. Brand names, for instance, are wide product assortment while others were very spe­
often used when evaluating objects. Public opinion and cialised, e.g. trading tea or coffee only. Furthermore,
renown are thus essential in this context. I also considered the share of a firm’s turnover that
is generated by sales of organics, interviewing a bal­
anced number of importers that commit their busi­
3. Methodology ness 100 per cent to organics, and those that do not.

In this paper, the role of reputation is analysed from In total, 26 firms were interviewed in Germany and 19
the perspective of firms in Germany and Australia in Australia between February and October 2010. The
that import organic products into their respective results in this paper, however, are based on those 15 in­
countries. Doing so helps to achieve more compre­ terviews with companies from each country which best
hensive results by considering a broader spectrum of addressed the issue of reputation. A follow-up standard­
western consumer markets. Both countries are highly ised questionnaire was sent to the same companies to
developed pluralistic market economies that feature reconfirm trends drawn from the qualitative material.
high degrees of urbanisation and corresponding ur­ Clearly, these results are not of a re­presentative nature.
ban lifestyles among consumers. However, Germany Nevertheless, it is a viable method to explore the complex
and Australia do feature some striking structural, interconnections between a firm’s trade coordination on
physio-geographical and market-related differences global markets and its reputation within its network in
(Bernzen 2012). With regard to the regulation of the more depth. Complementary interviews with industry
organic sector, it is important to understand that Ger­ experts and stakeholders, e.g. from certification bod­

166 DIE ERDE · Vol. 145 · 3/2014

Supplier reputation in international trade coordination – a perspective of global organic food networks

ies, independent research institutes, consumer boards, those that could potentially damage it, my interviewees
legal advisors and government representatives were elaborated on quality, responsibility and, to some degree,
conducted to better understand the broader context of performance indices. (However, responses varied some­
the importers’ activities (8 in Germany, 11 in Australia). what between high- and low-exposure firms; Table 3.)

Similarities among all types of firms regarding qual­
4. The “invisible importer”? Public exposure and ity indices are a certification against a reputable (or­
reputation risks among importing firms ganic) standard and a reliable and consistent supply
(volume- and quality-wise). Second, with regard to
“As importers, we just don’t have a name on the pub­ demonstrating responsibility, transparency regard­
lic market. We don’t appear anywhere. Our [product] ing the business and sold products are very important.
may be packaged and labelled under fifty different The latter aspect, though, is much more significant to
brands, but at the end of the day, it is always the brand upstream (“invisible”) suppliers who rely much more
owner’s [reputation that is damaged], not ours” (Ger­ on networked reputation. These firms are usually re­
man importer, moderate public exposure, translated quired to provide their customers (e.g. supermarkets)
from the original German quote, DE-IMP7). with highly detailed information regarding not only
their own firm’s business conduct, but also information
With the exception of a few supermarket chains and on the name, location, certification status etc. of their
retailers who import directly and (larger) importers upstream suppliers (“traceability back to the source”).
whose branded products also carry the firm’s name,
most importing firms have a rather low exposure on Firms with high and very high public exposure empha­
public markets, as illustrated by the quote above and sise and publicly communicate the fact that the qual­
shown in Figure 1. This fact is mirrored in the number ity of their products offered meets higher standards
of firms interviewed as shown in Table 2. than the minimum required by law, thus differenti­
ating their brands from other players on the mar­
When commenting on the factors that they feel have the ket. This is also true for supermarket chains which
most influence on the reputation of their firm, including sell only very little organics in terms of their total

Table 2 Firms’ levels of public exposure; number of interviewed firms in dataset per level (source: own data)

Sell
branded Firm's Reputation No. of No. of
Criterion/ Own
product name relies on interviewed interviewed
public stores Typical firm type
(own or = brand public or firms in firms in
exposure (retail)
private name network Germany Australia
label)

Supermarket chain,
Very high Yes Yes Partly Public 2 3
retailer

(Large)
Public /
High No Yes Yes manufacturer 2 3
networked
with own brand

Manufacturer for
Networked
private label,
Moderate No Yes No (some 6 6
wholesaler for
public)
branded products

Trading agents,
importer/
Low No No No Networked wholesaler for fresh 5 3
produce, processor
of raw ingredients

DIE ERDE · Vol. 145 · 3/2014 167

Supplier reputation in international trade coordination – a perspective of global organic food networks

Table 3 Reputation indices and bases for firms trading in organic products (source: own data)

Significance for Significance for
firms with firms with
Indices Bases of reputation Risks
high/very high low/moderate
public exposure public exposure

Contamination, loss of
Certified against (minimum or
High High organic certificate, fraud,
higher) organic standard(s)
listing on "black list"

Supply shortages,
Reliable and consistent supply
Very high Very high variations in delivered
(quality and quantity of product)
quality

Confusion among
Quality Offer product with higher quality consumers regarding
than the minimum required (by organic quality due to
law), i.e. "image product"; Very high Average multiple standards and
also regarding level of residues in logos, contamination,
tested product negative media
report/scandal

Employers without
Tradition in trading organics,
High Very high adequate expertise on the
high expertise
specifics of organics

Long-term business operations
High Very high
(economic stability)
Performance
(Part of) large (international) Size relevant on
Average
firm domestic market

Ethical and social, Behaviour that risks
environmentally friendly High High integrity, credibility,
business conduct honesty
Responsibility
Transparency regarding business Sourcing from unknown
and suppliers, traceability to the High Very high suppliers in case of supply
source shortages

revenue share. As our interviewees argued, they of­ (Australian supermarket manager, very high
fer organics as an important “image product” for public exposure, AUS-IMP18).
strategic rather than for profit-making reasons.
Second, there are (albeit minor) issues with organic
At the same time, featuring organics is connected to product labeling. In Germany, due to the strict EU im­
some specific potential risks for these firms. First, port regulations, obligatory certification and highly
sourcing sufficient volumes of consistent quality or­ complex labeling laws, some firms fear that if they do
ganic product is much more difficult than in the con­ not comply with these they will risk being sanctioned.
ventional sector. This means that in cases of supply Furthermore, but particularly in Australia, retailers
shortages, the shelves may have to stay empty. Large fear that the high number of different organic stand­
supermarkets in particular believe that this could have ards/logos may cause confusion among consumers in
a negative impact on their reputation among consumers: terms of their opinion of the product’s quality, ultimate­
ly leading to a mistrust of the organic brand altogether.
“Availability is not easy. [...] you’ve got to have Yet, the greatest risk and fear of firms with high public
core lines that [...] are there for the customers exposure is that their firm will get negative media cov­
and on a regular basis. So disappointment is not erage. This is because for them, ultimately, reputation
something that customers deal with very well” relies on the goodwill of the public. While supermarket

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Supplier reputation in international trade coordination – a perspective of global organic food networks

chains, discounters and other retailers have the oppor­ firm that they have gathered over time. To gain a good
tunity of influencing their reputation though direct, reputation, a supplier must continually demonstrate
consumer-oriented marketing measures at their stores, similar quality, performance and responsibility indi­
they also argue that “you cannot let such a small prod­ ces as outlined above for importing firms (Table 3).
uct segment of your business ruin your reputation” (for­ However, when importers are looking for new suppli­
mer German supermarket manager, DE-IMP27) – and, ers, certain attributes cannot be experienced ex ante,
like large brand manufacturers, take strict measures and in most cases importers will ask other players
in their supply chain coordination as a consequence, within their network which impressions they have
which is also felt by upstream suppliers: of potential new trading partners prior to deciding
whether or not to engage their services:
“...what retailers are scared of most is negative
press. Much of what we do today and many of “With suppliers, particularly, if you hunt the globe
those partly exaggerated quality management for stuff, you are generally looking for some kind of
requirements that now exist and are making life referral. I will always ring someone else that’s buy­
extremely hard for producers also, are really ing from them and say: Hey, can they supply, are they
based mainly on this fear of negative headlines genuine, have you had any problems, what are your
in the media. And so this has to be top priority” thoughts?“ (Australian manufacturer and brand
(German importer, low public exposure, translat­ owner, moderate public exposure, AUS-IMP1).
ed from German original quote, DE-IMP4).
This is where the “invisible” supplier’s networked rep­
In contrast, the largest number of importers remain utation is crucial, as he will only in few cases dispose
“invisible” to the public and end consumers, in other of an internationally disseminated public reputation,
words these firms rely on building a strong reputation and will only be recommended to new buyers if he has
as a supplier of organic products within their network proven his positive qualities to others. Some importers
to establish and maintain their position in the indus­ in our study even argued that they would not trade with
try. Thus, apart from demonstrating high quality and a firm that they had no other (external) reference on.
responsibility indices as noted above, it is extremely
important for them to perform well, gain expertise in The data also suggest, however, that it is not only the
the specifics of organics and use this to build strong networked reputation of the firm itself that influences
networks. It may also help them to commit to strong importers in their selection of new suppliers. Especial­
ethical and environmentally-friendly business stand­ ly where few networked references are available, the
ards. It is not so much the media that pose a threat reputations of (i) the country a new supplier is from,
to these firms, but rather the risk of losing their good (ii) the standard it is certified against, and (iii) the cer­
name by repeatedly delivering bad quality products tification body (CB) which tests and controls the firm’s
to their customers – perhaps even by neglecting due compliance with the standard have a major impact on
diligence – or through negative reports spread by the supplier’s assumed business conduct or product
word of mouth. The latter is a critical threat as the or­ quality. These reputations and assumptions, combined
ganic sector, in comparison to the conventional sector, with personal experience (from past transactions), re­
is still much smaller in terms of the number of players veal some key uncertainties among importers and have
involved, thus news spreads much faster. a decisive impact on the way they coordinate trade re­
lations with suppliers abroad. By reading the empirical
material (interviews) through a CT lens, one can iden­
5. Supplier reputation and value chain coordination tify typical ways in which importers justify their value
chain coordination by referring to reputational issues.
5.1 Networked reputation of supplier firms

Which factors generate a supplier’s reputation among 5.2 Reputation of supplier countries
“visible” and “invisible” importers, and how does this
influence the value chain coordination of the latter? Two geographic regions were most elaborately dis­
First of all, suppliers’ reputations are based on net­ cussed in terms of their reputation by the importing
worked information but also, as relationships become firms I interviewed. First, Asia – and China in particu­
more established, on their own experience with the lar – as an overall challenging or difficult region to

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Supplier reputation in international trade coordination – a perspective of global organic food networks

source from; and second, the so-called ‘western’ na­ ries. Sourcing from more than one supplier per product
tions such as the US, Canada, New Zealand, Australia, has also become a popular strategy.
and Western Europe. The latter group of countries
was generally perceived to have a good reputation Among suppliers in developing and emerging nations,
as countries of origin among Australian and German China’s reputation stands out as the overall most criti­
firms. Yet, a differentiated look at these regions’ repu­ cally regarded one both among German and Austral­
tations from the German and Australian perspective, ian importers. Some firms were also concerned re­
respectively, shows some striking variations and de­ garding South American and African countries as well
cisions made in trade coordination. as India and Bangladesh, but to a lesser extent, which
is why I will focus on China in the following text. Ma­
“Western” countries have a very good reputation jor issues associated with these countries relate to
among Australian importers. This is based on public quality (e.g. contamination, lax audits) and responsi­
and networked reports as well as own (mainly long- bility indices (e.g. differences in business mentality,
distance) experience with suppliers in these coun­ high risk of fraud). Before commencing trade with
tries. The latter are believed to have an understand­ China, much of this negative reputation is generated
ing for high quality products, good business ethics, through public channels who report on food scandals
and, moreover, understand the specifically strict re­ (e.g. melamine in baby milk), and through a firm’s net­
quirements posed by the Australian Quarantine and work to some extent. The firms I interviewed propose
Inspection Service (AQIS) at the Australian customs. three main strategies to mitigate the (assumed) repu­
Thus, these countries are preferred supplier coun­ tation-related risks: (i) a ‘no-China’ policy, i.e. refrain­
tries to Australian firms, and their standards are ing from sourcing from China. In the case where China
all accepted by national Australian regulations for seems the only alternative (e.g. availability or tradi­
organic imports. German firms, on the other hand, tion of certain products, e.g. certain types of tea; sup­
do not mention much the US or Canada as supplying ply shortages elsewhere, financial constraints), firms
countries, which may be related to the fact that the either (ii) import certified product, often combined
EU and US organic standards have only recently been with additional tests, or (iii) engage in high-intensity
mutually recognised as equivalent; and the fact that cooperations with producers in China. This is particu­
most products grown in North America can also be larly so in the third case where my data suggest that
sourced in Europe. Looking at Europe, though, Ger­ shifts and changes in the mutual reputation between
man importers differentiate much more between firms occur through experience.
the reputations of individual European countries/
regions. With a reputation based much more on own The degree of vertical integration or the ways and
(proximity-related, hands-on) experience than in depth of involvement importing firms show in “high-
Australia, there is a lively debate within the import­ risk” countries depend on various factors. Given that
ers’ community on whether or not Southern Euro­ importers from all levels of own public exposure
pean countries have reliable and integer suppliers. demonstrated personal and financial investment in
While some rely on products from these regions (also production countries, the public exposure and type
counter-seasonally) and fulfill their local customers’ of their customers, their firm’s dedication to organic
product quality demands, a considerable number value systems, and as Ponte and Gibbon (2005) have
of the interviewees reported that the reputation of also pointed out, size and available capital are the
countries such as Italy, Spain, or Greece was dam­ most important explanatory variables. Thus, it is
aged as imported goods have repeatedly been found mainly importing firms with “high” exposure (Table 2)
to contain high residue values, there were apparent selling directly to supermarkets and retailers who had
cases of fraud, and, finally, many of these countries a very high level of financial investment and ‘hands-
were on major German discounter Aldi’s list of ‘high on’ commitment in production countries. Committed
risk’ suppliers. Suppliers from Northern Europe are low- or moderate-exposure importers generally had a
perceived to represent more often the core values of critical minimum business volume, frequently included
organic ­(agricultural) production. Measures taken by organic values within their business culture and sold
German importers to overcome these uncertainties directly to retailers. All this should not obscure the
are (apart from asking for recommendations on suppli­ fact that, despite little direct involvement in countries
ers) increased testing of products imported from these of production in organics, large supermarket chains,
areas, either on-site or samples in (in-house) laborato­ such as the German companies Rewe, Edeka or Aldi, or

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Supplier reputation in international trade coordination – a perspective of global organic food networks

the Australian companies Coles and Woolworths, have the reputation of a standard, but also whether a CB
some of the most stringent monitoring systems – they is reputable. Here, proof that they meet the minimum
cannot afford any scandals that ruin their reputation. standards for EU certification is mandatory, and ac­
cordingly the German government logo for certified
Overall, German firms invested more financial and organic products has earned a solid reputation among
personal resources than Australian firms. High- consumers since its introduction in 2001. Yet, espe­
involvement measures aimed at building long-term cially firms with high and very high public exposure
partnerships among German firms included part- and experience in production countries criticise the
ownership of production sites, own subsidiaries in standards for being too lax, too flexible in terms of
supplier countries, sending own staff or trainers fa­ the possible interpretations and point out various
miliar with the local culture and language, and/or fre­ loopholes which pose a risk in their point of view. It is
quent visits. While some Australian firms cover their frequently these same firms who also pay much atten­
suppliers’ costs for certification or offer training re­ tion to the choice of CBs, as networked reputation and
garding organic farming methods or intelligent mar­ some own experience seem to paint a heterogeneous
keting strategies, most of the firms I interviewed opt­ picture of how integer and thorough CBs – especially
ed for the coordination type (ii) as mentioned above. those operating in other countries – conduct their au­
Two firms stated that they import Chinese products dits. All in all, even though most firms are certified to
through German trading firms, as these have a high meet the minimum standards for sale on the EU mar­
reputation for quality management systems. One ket, and only some suppliers demand higher stand­
explanation for this finding may lie in their take on ards (e.g. private standards by organic farmers asso­
standards and certification systems. ciations, Soil Association or Biosuisse standards for
some imported commodities, or company-own stand­
ards), almost all firms conduct tests of the purchased
5.3 Reputation of organic s­ tandards product in-house or commissioned to third parties –
and ­certification bodies they do not rely fully on the certification system over­
seen by their government.
The reputation of international standards and certifi­
cation bodies mirrors to some extent the reputation of
certain countries or economic regions. It is thus no sur­ 6. Conclusions
prise that the reputation of public organic standards
from highly developed countries is very good among Using the domestic and opinion conventions from CT
Australian importers. For example, the EU, US, Japa­ to unpack the concepts of networked and public repu­
nese and IFOAM organic standards are among those tation in economic action, the above discussions have
with the largest geographical dissemination (also in given an insight into the multiple ways that reputa­
terms of the number of certified operators) and are ac­ tion affects a buyer’s decision-making processes (as
cepted as ‘equally reliable’ as the Australian domestic called for by Eberl 2006, Falkenreck 2010) and value
standard (see Bernzen 2012 for an in-depth discus­ chain coordination processes across larger distances.
sion). Accordingly, the reputation of CBs certifying During the interviews that I conducted with Austral­
against these standards, e.g. in Europe or in the US, is ian and German importing firms it became clear that
that they are reliable, strict and large enough to meet reputation plays an important role for the large ma­
AQIS requirements. A pragmatic approach to supplier jority of firms when it comes to selecting new suppli­
and/or product selection is thus to look for one of these ers. While further research on this issue should also
standards for imported products. In combination with consider the opinions of a broader variety of actors in
three large and four smaller local Australian certifiers the value chain in addition to importers, my findings
(each with an own standard and logo) and the non- do support those of other reputable scholars who have
existence of a singular ‘government’ logo, the number pointed out that reputation leads to positive word-of-
of variations in terms of organic logos on products of­ mouth and benefits customer acquisition (Sarstedt
fered to Australian consumers is very high. et al. 2013). Yet, not only the ‘solid’ and reliable net­
worked reputation is a decisive reference point, but
While Australian importers focus above all on im­ also the reputation of the country of origin of the firm
porting certified product, and preferably with a repu­ in question in addition to the standard and certifica­
table standard, many German firms not only debate tion body the supplier is using. A given reputation also

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Supplier reputation in international trade coordination – a perspective of global organic food networks

seems to influence a firm in the choice of how exter­ Glückler and Armbrüster (2003) argue that networked
nalised or internalised product quality management reputation bridges uncertainty that is related to the
is carried out (degree of vertical integration). lack of formal institutions such as legislation, stand­
ards and certificates. Yet, the preceding analysis
However, my findings somewhat oppose those of Suh shows that uncertainty exists also where formal in­
and Houston (2010), who see reputation as a given stitutionalisation is given. A good reputation is still
antecedent to trust, and that of scholars arguing that essential for (improving) market access, even when
it lowers transaction costs required for negotiations core criteria such as legally mandatory certification
and monitoring among suppliers (e.g. Bergh et al. are fulfilled. Thus, not only formal and legal require­
2010). The data presented show that even when the ments set by states, firms and organisations, e.g. in
reputation of a supplier has been deemed ‘reliable’ by the shape of codified product standards or market-
their network, this does not lead to a complete rela­ based, i.e. price-related, arguments, are decisive for a
tionship of trust between buyer (importer) and sup­ buyer’s decision regarding supply chain coordination.
plier. In line with findings by e.g. Dannenberg (2012),
the interviewed downstream firms with high public In the context of international trade coordination
exposure rely above all on public reputation among analyses in Economic Geography, I argue that CT is
the media and end consumers and take extensive one suitable complementary framework to GVC litera­
measures to avoid media scandals. The indices that ture with which not only market logics and institu­
originally substantiate a supplier’s reputation (such tions based on industrial values, but also less tangible
as quality, performance and responsibility indices) aspects of trust, reputation, altruistic values and busi­
are continuously tested and/or supported, particu­ ness mentality can be captured. Also, CT stresses the
larly – but not only – in business with “risky supplier fact that coordination need not be reduced to one type
countries”. This is particularly crucial as the vulner­ of coordination, as suggested by Gereffi et al. (2005).
ability of product brands has been shown to be much Rather, firms can employ different conventions at the
more noticeable in the food and drinks industry; and same time. Power relations within the value chain, on
what Wilkinson (2002: 335) has argued for sports the other hand, are better captured within GVC frame­
brands may now also seem applicable to supermarket works. Overall, I conclude here by calling for a greater
and high-end organic brands, namely that “the brand inclusion of ‘informal’ or ‘intangible’ factors into ex­
is transferred from the product to the firm itself and isting concepts. Using CT can assist in this endeavour
identified with life-style aspirations”. by showing how something intangible (reputation) is
then expressed in very tangible actions.
The variations between German and Australian import­
ers regarding the foci and generation of the suppliers’
reputation and that of supplier countries and standards Acknowledgements
or CBs suggest that ‘geographical and institutional dis­
tance does matter’ and touch on the debate of whether The empirical research would not have been possible with­
reputation as an intangible asset is only confined to a out financial support by the German Research Founda­
local area or can be transferred to global markets. It tion (Deutsche Forschungsgemeinschaft, DFG) within the
has been indicated for the wine industry that a “territo­ project ImPOrt. The author wishes to thank Martin Franz,
rial collective reputation” is important (Patchell 2008: ­Benita Rowe and two anonymous reviewers for their help­
2366). But would an Australian importer be more criti­ ful comments on a previous version of this paper.
cal of European organic standards and CBs if they were
closer, both geographically and institutionally? Also,
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Supplier reputation in international trade coordination – a perspective of global organic food networks

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Amelie Bernzen
University of Vechta, Faculty Member
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Global Food Trade Beyond the 'Standards' Debate. Conventions, Institutions and Uncertainties in Organic Food Imports to Germany and Australia
Amelie Bernzen
2014
More and more products in western consumer markets today are imported, increasingly from developing countries. Yet, as distances to suppliers increase, monitoring and tracing product and process qualities along global supply chains back to the source have become increasingly challenging tasks for companies at the downstream end of the chain. Particularly importers risk legal sanctions or negative media coverage in case products are non-compliant with local requirements. The problem of uncertainty becomes even more urgent as highly specific quality designations come into play. The aim of this dissertation is to contribute to this discussion by providing an improved understanding of how formal and informal institutions – analysed in particular through a Convention Theory (CT) lens - are employed by importers of highly sensitive products in mitigating uncertainties in cross-border relations with their suppliers. This is achieved through a comparative empirical case study of firms impor...
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BERNZEN, A. & B. BRAUN (2014): Conventions in cross-border trade coordination. The case of organic food imports to Germany and Australia. Environment and Planning A 46, 1244 – 1262, doi:10.1068/a46275.
Amelie Bernzen
Monitoring and tracing product and process qualities along global supply chains have become increasingly challenging tasks for companies at the downstream end of the chain. High levels of uncertainty in trade coordination arise among importing companies in the face of these developments. The conceptual aim of this paper is to show, by the example of organic food imports to Germany and Australia, how convention theory can contribute to the analysis of trade coordination in global value chains. Our empirical results affirm that industrial conventions such as standards and third-party certification have gained increasing significance over the past two decades. Simultaneously, however, we argue that industrial conventions are not enough to overcome uncertainties in trade. They do not necessarily lead to reduced differences in perceptions of product quality between suppliers and importers. Less tangible factors such as trust established through relationship management and reputation are likewise significant. Furthermore, not only companies with a certain ideological tradition, but also individual people with altruistic motives within other types of firms, can determine how 'dedicated' a firm is in pushing trade coordination according to civic and domestic conventions. Market conventions (ie, the importance of price and competitiveness) are stressed more by Australian firms reflecting the country's liberal market economy and low state subsidies especially in the area of agriculture. Finally, compromises between conventions are sometimes necessary to end a situation of conflict between buyer and supplier.
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Trust within the organic food supply chain: the role of the certification bodies
Roberta Spadoni
99th Seminar, February 8-10, …, 2006
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Determinants of trust in imported food products: perceptions of European gatekeepers
Damien Mather
British Food Journal, 2007
PurposeThe purpose of this paper is to understand the elements of country image that influence gatekeepers of the European food distribution sector when making industrial purchasing decisions regarding imported food products.Design/methodology/approachIn‐depth interviews were conducted with key informants of seventeen food distribution companies and industry organisations in five European countries to determine the factors that they consider important when deciding from which countries to source food products.FindingsConfidence and trust in production systems, the integrity of regulatory systems, and the reliability of suppliers appear to be the major determinants of product‐country image as viewed by gatekeepers of the food distribution channel.Practical implicationsThese specific factors relating to confidence, trust, integrity and reputation appear to over‐ride more general perceptions of country image based on scenic or environmental considerations.Originality/valueProvides usef...
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Competing for standards in global food supply chains
Olivier De Schutter
2012
The past twenty years have been characterized by the rapid expansion of the global supply chains in the agrifood sector. Concentration in the food production and distribution chains has been significantly increasing as a result, and so has the bargaining power of large retailers and commodity buyers over agricultural producers, particularly small-scale food producers. Adopting a measure of power that is correlated to the dependency of small-scale producers on the buyers and the retailers, this paper focuses on the power of agribusiness corporations to impose their standards, that are complementary to -and sometimes more stringent than -the standards imposed by the States. This article examines various strategies through which such private power to set standards in supply chains can be checked, in order to ensure that standards are not a source of exclusion, particularly for small-scale producers who face the most serious difficulties to comply. Based on an analysis of distributional...
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Sanitary and Phytosanitary measures in agri-food imports from the European Union: Reputation effects over time
Ibtissem Taghouti
The EU's Rapid Alert System for Food and Feed provides information on sanitary and phytosanitary (SPS) notifications. With a set of data from the 1998-2013 period, we test the hypothesis that past notifications can determine current notifications. This is the "reputation effect", meaning that inspectors may tend to target products or countries with previous SPS problems. We analyze the scope of the reputation effect over time. We used two count data models to estimate the distribution of current notifications. In line with previous literature, our findings indicate that reputation does affect current EU notifications. Furthermore, we identify some relevant exporter countries for which reputation is long-lasting.
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The Strategic Use of Private Quality Standards in Food Supply Chains
Isabel Teichmann
2011
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Economic Geography
Reputation (Reputation)
Reputation Management
Global Value Chains
Convention Theory
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