Relational Contracts and Smallholder Farmers’ Entry, Stay and Exit, in Kenyan Fresh Fruits and Vegetables Export Value Chain

Buyer-driven governance systems and the related value chain entry and stay barriers are known to have led to smallholder farmers exiting the Kenyan fresh fruits and vegetables export value chain. This paper addresses two gaps in this literature. First, the paper addresses the question of how the fresh fruits and vegetable export smallholder farmers have managed to secure their stay in this value chain known for its high entry barriers. Second, the paper addresses the question of what happens to the smallholders known to have exited the value chain. To explore the two gaps, transaction costs theory was applied. The results show that smallholders entry and stay in the value chain was underpinned by relational contract enforcement mechanism of supply reliability. Second, smallholders were found to occasionally exit and re-enter the value chain, depending on the prevailing risks. In conclusion, the paper argues that contemporary African value chain scholarship should consider the analysis of relational contracts and their enforcement mechanism as well as the totality of smallholders’ farming, in order to understand the motives behind smallholder value chain entry and stay decisions.