Epsilon Archive for Student Projects

Abstract

Agriculture is on the brink of entering a data-driven economy that will impact growth and business relations. The information- and communication revolution in the agri-food chain aspires to collect data at a low cost. Applying information- and communication technologies to the agri-food chain is believed to help optimise resources and therefore contribute to a smaller environmental footprint. At present, however, there are barriers and many issues that need to be resolved; For example, it is not an easy task to aggregate and interpret large amounts of detailed data to be used in decision support tools for farmers and primary producers. There are also transparency issues due to numerous intermediaries and a need for strengthening the link between different chain actors and levels in the agri-food chain. The agricultural has never before undergone such a digital transformation.

In Great Britain and the Netherlands, Blockchain has been included in the agri-food chain. In Sweden, however, the agri-food chain does not yet apply this new digital structure. Even though digitalisation is used, Blockchain involves larger quantities of information and requires capacity of handling information in transparent and efficient ways. This study investigates the advantages and disadvantages with Blockchain and will hopefully lead to an answer whether Blockchain might influence the transaction costs and the collaboration in the agri-food chain in a positive way.

This study was conducted via secondary sources about Blockchain complemented with four interviews. Because no practical experiments about Blockchain have yet been carried out in the Swedish agri-food chain, the study was limited to the respondents’ knowledge of Blockchain acquired from theoretical case studies and working experience. The result from the respondents and from the secondary sources give both positive and negative answers regarding whether Blockchain has potential to decrease transaction costs in the agri-food chain. The transaction costs that have been studied regard information/search costs, bargaining costs and enforcement costs.

The study investigates Blockchain’s potential to reduce transaction costs in the Swedish agri-food chain. Transaction costs are additional costs not included in the value of the unit under transaction. The Swedish agri-food chain is characterised by several transaction costs caused by issues such as food frauds, insufficient trust among agri-food chain actors, transparency and traceability issues.

The study concludes that with a Blockchain applied in the agri-food chain, several transaction costs can be reduced. Information costs can be reduced, as more information becomes accessible and traceable. Blockchain also has potential to reduce monitoring costs through cryptographic Smart Contracts and performance-based payment. However, Blockchain is not likely to encourage information sharing unless information sharing is monitored by statutory requirements. Also, the Blockchain network runs on high operation costs of electricity and Internet to verify the Blockchain network’s constant update on information.