Horizontal and Vertical Networks for Innovation in the Traditional Food Sector

Abstract

The locus of innovation is not the individual firm anymore but increasingly the network in which the firm is embedded. Hence, in this paper innovation is investigated in the broader context of networks and applied to the traditional food sector. Networking refers to a process of identifying and acting on complementary interests with or without formal means of cooperation and plays an important role for the diffusion and adoption of innovations, because they increase the flow of information. Two main types of networks exist. Vertical networks relate to cooperation of partners belonging to the same chain. Meanwhile, horizontal networks refer to cooperation among firms which are primarily competitors. Data were collected during focus groups and in-depth interviews in three European countries: Belgium, Hungary, and Italy. In each country, data are collected from retailers/wholesalers, food manufacturers and suppliers in the beer, hard and half hard cheese, ham, sausage, or white paprika chain. In the investigated countries both vertical and horizontal networks exist. However, the intensity of using the network differs. On the one hand vertical networks are well developed based on quality assurance schemes and traceability, though these networks often face difficulties due to high lack of trust. On the other hand, horizontal networks are well developed when a producer consortium is involved. However, these networks can be inhibited through strong competition. The partners in traditional food networks focus mainly on innovation related to product characteristics such as new size, form and packaging without changing the traditional character of the product. The main barriers for innovation in the traditional food networks are the lack of understanding the benefits of networking activities for innovation, the lack of trust, the lack of knowledge of appropriate methods and skills, and the lack of financial and physical resources. Our study points out that successful SMEs use their networks to overcome lacks of knowledge and information and to create possibilities of joint use of resources.