Understating emerging value chains and business performance: evidence from dairy industry in India

Abstract

PurposeThe purpose of the study is to identify the factors affecting the entrepreneur's choice of the dairy value chain and evaluate the impact of the value chain on farm performance (profit).Design/methodology/approachPrimary data were collected from dairy entrepreneurs in India, covering nine states. A multinomial treatment effect model (controlling for selection bias and endogeneity) was used to evaluate the impact of the choice of the value chain on entrepreneurs' profit.FindingsDairy entrepreneurs operating in any recognized value chain other than the value chain driven by the consumer household realize a comparatively lesser profit. Dairy farmers have established direct linkages with customers in urban areas – who could pay premium prices for safe and quality milk. Food safety compliance is positively associated with profit and entrepreneurs (who have undergone formal training in dairying) preferred partnerships with a formal value chain. The prospects of starting a dairy enterprise are slightly higher in villages compared to urban areas.Research limitations/implicationsDairy entrepreneurs can make a shift in accordance with the study's findings and boost their profitability. It aids in comprehending how trainees (who obtained advice and training for raising dairy animals from R&D organizations) and non-trainee dairy farmers make value chain selections, which ultimately affect profitability. However, purposive sampling and a small sample size limit the universal implications of the study.Social implicationsDeveloping entrepreneurial behavior and startup culture is at the center of policymaking in India. The findings imply that the emerging value chain not only enhances the profit of dairy farmers by resolving consumer concerns about food safety and the quality of milk and milk products but also builds consumer trust.Originality/valueThis paper offers insight into how the benefits of dairy entrepreneurs vary with their participation in the different value chains. The impact of skill development/training programs on value chain selection and farm profitability has not yet been fully understood. Here is an attempt to fill this gap. This paper through light on how trained and educated dairy entrepreneurs are able to establish a territorial market by approaching premium customers – this is an addition to the existing literature.