We examine theoretically and empirically the factors associated with commodity organizations’ voluntary adoption of stricter food safety guidelines. Our theoretical analysis finds that larger organizations are less likely to require members to invest in food safety procedures due to higher implementation costs.
Recalls induce organizations to adopt stricter food safety standards only when expected future gains from improved product reputation outweigh the short run costs of implementing those standards. The same logic holds for organizations representing growers of a product with higher demand, e.g., a larger share of fruit and vegetable sales. Organizations whose members have a larger share of the market for their product are more likely to adopt stricter food safety guidelines when that investment induces members to increase output, a necessary condition for which is that members’ current food safety procedures are more protective than the industry average.
Our econometric analysis finds that organizations with more members are less likely to adopt food safety guidelines for their members, as our theoretical analysis predicts. Organizations whose members account for a larger share of the market for their product and organizations for commodities representing larger shares of fruit and vegetable sales are more likely to implement food safety guidelines, consistent with considerations of long term profitability increases due to improved reputation for safety outweighing concerns about increases in cost of production. Organizations that have experienced negative shocks to reputation as measured by the number of Class I FDA recalls are also more likely to adopt food safety guidelines, again consistent with considerations of long term profitability due to improved reputation for safety outweighing concerns about increases in cost of production.
Foodborne illness outbreaks, collective reputation, and voluntary adoption of industrywide food safety protocols by fruit and vegetable growers
Aaron Adalja and Erik Lichtenberg