Almost all research studies in social and behavioral sciences regardless of disciplines/programs require a rationale or base for conducting research. This rationale/base is often called theoretical framework. A host of researchers have provided varying definitions of theoretical framework (Sekaran, 2000; Camp, 2001; Elliott; 2005, Tuckman, 1999). A theoretical framework is a conceptual model of how one theorizes or makes logical sense of the relationships among several factors that have been identified as important to the problem (Sekaran, 2000). In essence, it attempts to integrate key pieces of information especially variables in a logical manner, and thereby conceptualizes a problem that can be tested. A typical theoretical framework provides a schematic description of relationships between and among independent, dependent, moderator, control, and extraneous variables so that a reader can easily comprehend the theorized relationships. Radhakrishna, Leite, and Baggett (2003) presented a typology for research designs. Using the quantitative research paradigm, they classified research designs into three categories: descriptive, descriptive-correlational, and experimental. The decision to select a research design depends on the goals of one’s research study. It also depends on the review of literature which provides a solid foundation for developing theoretical framework. Therefore, the linkage between research types and theoretical framework becomes vital.
Formulating the Conceptual Framework
The conceptual framework of the study is a structure that can hold or support a theory of a research work. It presents the theory which explains why the problem under study exists. Thus, the theoretical framework is nothing but a theory that serves as a basis for conducting research, in other words it is the linkages between concepts from the literature that justifies the need to answer the question to the research problem. journclasses.pbworks.com/f/theoretical+framework.ppt
The Purposes of formulating a conceptual framework includes:
Helping the researcher see clearly the variables of the study.
Providing the researcher with a general framework for data analysis.
To achieve these purposes the theoretical framework when formulated should consider to:
Specify the theory used as basis for the study
Mention the proponents of the theory
Cite the main points emphasized in the theory
Support the exposition of the theory by ideas from other studies
Illustrate itself by means of a diagram.
In this chapter the researcher details the conceptual framework of this study by articulating the research problem and, the theoretical model developed to be tested in relation to the research problem and to provide the reasoning behind the developed hypotheses, to be followed by the measurement of scales of the variables discussed in the theoretical model.
The research process steps is diagramed in Figure:xx
Choosing methodologies Planning Process
Understanding deeply the research problem
Identifying key factors
Developing the research modelExploratory Process
Developing Hypotheses to be tested
Defining factors and variables
Executing study and measure resultsQuantitative research
Figurexx: research process steps
Research problem statement:
This study aims to explore the added values of food traceability systems as electronic business applications in the agri-food industry to achieve quality control by revealing the role of food traceability systems in mitigating the information asymmetry taking place in the food supply chain between producers and consumers which refers to the fact that one market actor (producer/seller) is more or better informed than the other (consumer) -especially with the existence of credence attributes ; which are products attributes that cannot be observed by the consumer either at the point of sale neither after consumption, (e.g. the level of pesticide residues for vegetable food, genetically modified ingredients, or the level of animal welfare for animal food in productsâ€¦..). Some of these credence attributes, related to health and food safety, has received increasing attention by consumers, particularly in EU. As a consequence, for example the competitiveness of a meat exporter depends heavily on its capacity to provide the relevant information in a credible way, with, for instance, an adequate traceability system. (Mello, Azevedo, 2004).
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In this study the researcher presents a theoretical model that introduced four variables which are: Authenticity, information reliability provided by the system, information adequacy to satisfy consumers’ needs, and governmental third party credence embedded in the traceability system and their role in mitigating the previously mentioned information asymmetry situation which subsequently affects the perceived risks of consumers toward food products in terms of safety and quality. This reduction in perceived risks is considered to be a good cause that has its own effect on consumers’ willingness to pay price premiums for traceable products. In other words the model discusses the extent at which food traceability systems can provide consumers with reliable and adequate information, as well as supporting the authenticity of food products they are buying within the existence of governmental third party credence, will reduce consumer’s information asymmetry toward food products, especially for credence attributes of products and once this asymmetry is mitigated ,the consumers perceived risks related to food safety and quality inside active traceability systems will decrease, which will be a good cause for them to justify paying a price premium for traceable products.
This research study targets assessing the food traceability system added values from the consumer’s perspective through consumers’ perception toward and expectations from traceability systems in the food industry especially within the existence of information asymmetry situation mentioned above in the food supply chain. This information asymmetry affects on consumers’ bounded rationality and this rationality is limited by three factors:
The information consumers have.
The cognitive limitations of consumer’s minds.
The finite time consumers have to make decisions, which in turn increase uncertainty and perceived difficulty to evaluate quality and safety in products.
The primary question this research is addressing regarding the objective of assessing food traceability systems in agro products from the perspective of consumers is:
How does consumer’s knowledge of traceability systems affect their willingness to pay (WTP) a price premium for traceable products?
And through the assessment of traceability systems as a scenario of quality control within food supply chain, a secondary question falling into the attention of this s research is:
What are the added values of traceability systems as an electronic business application?
Conceptual ( theoretical) Framework:
Continued advances in information technology have created the infrastructure for a post-industrial economy, that is the knowledge economy in which modern software and networking enables producers and consumers’ unprecedented ease in creating and sharing digitized knowledge and this knowledge economy is abstracting away from products and services and is focusing on consumers’ experience itself, using products/services as props. The knowledge economy is transforming roles between all parties in the economy. It is witnessing extensive collaboration in which buyers are tapping into sellers’ resources to participate in the design and delivery of products and services. This process of interaction is mutual in nature , for that sellers are also accessing knowledge and feedback data from consumers’ experiences and future expectations as well.
As for the agri-food industry global demands for increased food safety and quality assurance programs, increased global competition, changing government rules and regulations, political and trade barriers, bioterrorism, and identity preservation requirements in global markets are all affecting the world’s food supply chain. To satisfy changing market demands, all suppliers in the food supply chain must adapt to these global issues. Total asset visibility must be maintained in production, in process, in storage, and in transit. Since 2001, new words have entered and dominated the global agricultural market place. Traceability, tracking, product integrity and quality assurance have become an important part of today’s global food supply chain.
Within these rapidly spreading practices, global consumers are also demanding verifications of food products and their sources for a disease-free food supply chain. This demand has called for intensified traceability that establishes the need for both operational shortage identi¬cation and tracing-back and forward capabilities in a food supply environment. Especially after recent global food-borne illness outbreaks which necessitated the importance and signi¬cance of traceability to the global food industry.
At the same time changing consumer attitudes have resulted in demands for greater food safety and quality control on the retail market. Quality control in food supply chain is a scientific discipline describing handling, preparation, and storage of food in ways that prevent food borne illness. This includes a number of routines that should be followed to avoid potentially severe health hazards and this is where food traceability systems function as record keeping of all the activities related to the food safety and quality assurance. This introduction to food traceability has its potentials to consumers as well and not only to the business, especially that consumer’s demand for greater food safety and quality is still faced by an information asymmetry situation taking place in the food supply chain which is strongly reported in different studies (McCluskey and Swinnen, 2004; Verbeke et al., 2007; Verbeke and Ward 2006; Grunert, 2002; Hobbs, 2003). In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to be unbalanced.
Economists explain moral hazard as a special case of information asymmetry, a situation in which one party in a transaction has more information than another. In particular, moral hazard may occur if a party that is insulated from risk has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information which in our case is translated to producers knowing more about all what is related to food products from the early stages in farms to the arrival of products to the sale or consumption point by consumers, whether this information is related to raw materials, manufacturing processes, health control programs, packaging and storage conditionsâ€¦..etc among huge amounts of details recorded in the supply chain. This state of information asymmetry induces consumers to be affected by a perception of risk toward food products in terms of quality and safety.
A classic paper on adverse selection as another example of information asymmetry is George Akerlof’s “The Market for Lemons” from 1970, discusses two primary solutions to information asymmetry problem, signaling and screening.
Michael Spence originally proposed the idea of signaling. He proposed that in a situation with information asymmetry, it is possible for people to signal their type, thus believably transferring information to the other party and resolving the asymmetry. Spence proposes, for example, that going to college can function as a credible signal of an ability to learn assuming that people who are skilled in learning can finish college more easily than people who are unskilled, and then by finishing college the skilled people signal their skill to prospective employers. No matter how much or how little they may have learned in college, finishing functions as a signal of their capacity for learning.
So the idea behind signaling depends on transferring the information to the less informed party to reduce the gap between the better informed and the less informed, referring to producers and consumers respectively.
According to Bailey et al., (2002); Liddell and Bailey, (2001) labels and certifications are among the most used signaling mechanisms by the food industry. They also ascertain that the following are particularly important in the signaling process of food safety and quality:
(a) The implementation of traceability programs along the production and marketing chain.
(b) The transparency in the productive processes.
(c) Mechanisms of product assurance, in terms of food safety and quality (traceability, transparency and assurance – TTA).
Then it would be logical to conclude that traceability systems can function as a signaling mechanism to transfer information as signals to consumers to increase their level of knowledge about food products. In the model discussed in this research there are four variables that the researcher is arguing to be characterizing a food traceability system in order to achieve the signaling activity as a solution to the information asymmetry taking place between producers and consumers. These variables are:
Credence of governmental third party:
Joseph E. Stiglitz pioneered the theory of screening for resolving information asymmetry. In this way the under informed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party.
Examples of famous classical situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, mortgage brokers and loan originators, stockbrokers, Realtors, real estate agents, and life insurance transactions.
Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament (estate sale or estate liquidation is a type of garage sale, yard sale or auction to dispose of a substantial portion of the materials owned by a person. The most common reason for an estate sale is the death of the property owner, and the consequent need to quickly liquidate the deceased’s belongings (Wikipedia, 2010). Another example lies in sales of old art pieces without prior professional assessment of their value. This situation was first described by Kenneth J. Arrow in an article on health care in 1963.
George Akerlof in “The Market for Lemons” notices that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. Because of information asymmetry, unscrupulous sellers can “spoof” items (like software or computer games) and defraud the buyer. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases, or will not spend as much for a given item because of this risk perception. He even extends the consequence of this risk perception to the possibility for the market to decay to the point of nonexistence.
In food traceability systems consumers can obtain reliable information about quality and use this to screen out low quality products (Perloff, 2001). However, this comes at a cost as stated by Shapiro (1983) ‘Information costs are as real as production costs’ these costs can stop a market emerging. In some cases consumers can buy information about some types of goods from experts who have no incentive to provide misleading information, for examples The Royal Automobile Club of Victoria (RACV) pre-purchase car inspections, and Archicentre building design and inspection experts’ pre-purchase house inspections but how that could happen when buying food products! This is why traceability systems is an efficient tool to help consumers be better informed partners in the supply chain.
The informativness of traceability systems in terms of reliability and adequacy is very much connected to the outcome of signaling and screening which is the emergence of some markets for credence attributes, even in the presence of information asymmetries. But signals are costly and imperfect, and consumers incur costs in identifying and interpreting many signals. Therefore, some attributes, which would be profitable with full information, are not produced or there are no private incentives to promote a particular credence attribute that consumers want. This can happen when:
The information has a public good aspect and all companies would benefit from one company’s claim; for example, oats improve heart health
There is no competitive disclosure of negative attributes; for example, there are no ‘cholesterol-free’ eggs, so consumers are not alerted to the cholesterol content of eggs.
Communicating ethical traceability should be anticipated as a three step process that includes the following three approaches (Coff et.al 2008):
1. Providing sound information to consumers (one-way information strategy on the basis of the informed choice argument).
2. Establishing a reciprocal dialogue with consumers (participatory strategy on the basis of the normative argument).
3. Establishing a deeper engagement between dedicated consumers and producers (co-production strategy on the basis of the normative argument).
On its own, the first strategy runs the risks that the information given will fail to interest some or most consumers, because it will not connect with their own ethical and cognitive information preferences. Consumers nowadays are subjected to an overload of information that simply does not tell them anything, because the information totally neglects their own ethical and information preferences, taking us to the intensive need to the types of information consumers’ are concerned about within each domain in the food industry presented as the information reliability variable in the model of this research.
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The second strategy looks more promising with respect to communicating issues of ethical traceability, because it takes the two-way information process seriously, and thereby recognizes the specific information needs of different consumers. However, this strategy runs the risk that the communication will take place at a late stage in corporate decision-making processes, on the basis of definitions of problems that have not been subjected to critical scrutiny by consumers. The third strategy looks more promising with respect to the joint development of (the premises for) ethical traceability schemes. However, this strategy is probably too demanding to count on the engagement of a large number of producers and consumers. The three approaches together do, offer a new strategy for involving consumers in the methods and decisions of the food supply chain.
This communication of information to consumers from traceability systems records carries substantial added values. It is essential when discussing values of food traceability to refer to the fact that the terms “value” and “values” are used in different ways when referring to food production and food business networks. Stevenson, (2008) addresses three points within this scope:
1. “Value-added” used to characterize food products that are converted from raw product through processes that give the resulting product an “incremental value” in the market place. An “incremental value” is realized from either higher price or expanded market. For example, jams, cheeses, and pre-cooked meats are considered “value-added” products.
2. “Value-added” is used to characterize food products that have incremental value in the marketplace by differentiating them from similar products based on product attributes such as: geographical location; environmental stewardship; food safety; or functionality. Examples of this type of “value-added” products include locally grown produce, organic or integrated pest management (IPM) grown fruits, antibiotic and/or hormone free meat, or functionally specified hops or baking flours.
3. “Value” and “values” used to characterize the nature of certain business relationships among interacting food business enterprises, rather than any attribute of the product itself. In general, this collection of relationships is referred to as the “supply chain”. When these relationships are expressly based in an articulated set of values, they are becoming known as “values-based supply chains” or, more succinctly, “value chains”.
As for the food industry in relation to the research problem and the described information asymmetry situation it is concluded that traceability systems added value to consumers fits perfectly as a tool to provide consumers with details of information about the recorded data related to food products and this can be motivated (screened) by consumer’s revelation of paying premiums to producers for traceable products to motivate them into investing in traceability systems within high levels of adoption that will allow the existence of diversified data details to be communicated and transferred( signaled) to consumers to mitigate their perception of risk toward food products and not only adopting traceability as a regulatory requirement to food laws which in this case is seen to be a daunting task by food organizations.
To finalize; the model presented in this research(Figure x) while delivering four variables to characterize the informativeness of traceability systems, which are: authenticity, information reliability, information adequacy, and governmental third party credence, to reduce the aforementioned situation of information asymmetry, it is also extending its stand point by using the four mentioned variables to function under the umbrella of signaling and screening solutions (Figure xx) , where signaling is the activity that producers can perform through traceability systems for transferring information to the less informed parties represented by consumers, and the activity of screening is performed by consumers to motivate producers to adopt traceability systems and to share the relevant information from the records of traceability systems by their revelation to paying price premiums to traceable products. In this way consumers’ will be using the producer’s signals to screen safety and quality. In other words the model realizes the objective of allowing consumers’ to be driven by signaling route which refers to the activities of the suppliers (as better informed side) offering indicators to consumers about food products in terms of safety and quality, and at the same time by transferring this information, consumers will be able to practice screening as less informed side by gathering information actively and thus assessing product attributes.
Time to make decisions
Cognitive limitations of minds
Willingness to pay
Governmental third party credence
`Figure x, the model of the research
Signaling through traceability systems by producers
Screening through motivating producers to share information with consumers
Willingness to pay price premiums for traceable products
Governmental third party credence
(Figure xx integrating the study model into the screening and signaling solutions to information asymmetry)
A hypothesis is a logical supposition, a reasonable guess, an educated conjecture. It provides a tentative explanation for a phenomenon under investigation. However, hypotheses are not unique to research. Hypotheses are constantly generated in the human mind as we work to understand day-to-day phenomena. By formulating a series of reasonable guesses of cause and effect we are able to understand and explore the events in our surrounding environment Leedy and Ormrod, 2001).
The importance of hypothesis is in its ability to guide the research. A researcher may refer to the hypothesis to direct his or her thought process toward the solution of the research problem or sub-problems. The hypothesis helps an investigator to collect the right kinds of data needed for the investigation. Hypotheses are also important because they help an investigator to locate information needed to resolve the research problem or sub-problems.
In research, a researcher is able to either support or reject a hypothesis. If a hypothesis is rejected, it will lead a researcher to new hypothesis to explain the phenomenon in question. If a hypothesis is continually supported, it may evolve into a theory (Leedy and Ormrod, 2001).
As a hypothesis is continually supported over time by a growing body of data, it becomes a theory. A theory is described as “an organized body of concepts and principles intended to explain a particular phenomenon”. A theory is similar to a hypothesis in that it offers a tentative explanation for a phenomenon that new data will either support or not support. Both are supported or rejected based on testing by various investigators under different conditions (Leedy and Ormrod, 2001).
A researcher will formulate a hypothesis based on the problem or sub-problems of the research. The hypothesis is driven by the research question (Leedy and Ormrod, 2001).
Depending on the review of traceability studies and the framework formulating the research under discussion and the theoretical model of this study in which the researcher proposes four factors characterizing a traceability system to reduce the aforementioned Information asymmetry the following hypotheses have been developed:
The authenticity of food products is considered an important attribute, when a product is authentic it means that this product is what it claims to be and the information about this product is honest. An authentic product also gives consumers more confidence in the product.
Within this sense the first hypothesis is:
H1: authenticity reduces Information asymmetry
It refers to how much one can depend on the information according to ones needs and requirements, in relation with information asymmetry the second hypothesis is:
H2: Information reliability reduces Information asymmetry
It refers to how sufficient to satisfy a requirement or meet a need the Information is, in relation to information asymmetry the third hypotheses will be
H3: Information adequacy reduces Information asymmetry
Credence of governmental third party:
A certification label has a strong positive meaning to the consumer in regard to food safety, and that itself is a signal to everyone involved in the food supply chain, be it growers or manufacturers or retailers, to intensify efforts to adopt clear and meaningful independent safety certification. Likewise, extra assurances are deemed necessary, such as that of a certification authority that will enhance credibility and reliability of the information provided, which leads to the 4th hypotheses:
H4: Governmental third party credence reduces Information asymmetry
Bounded rationality of consumers:
Early economists, led by Nicholas Bernoulli, John von Neumann, and Oskar Morgenstern, puzzled over the question of how consumers make decisions. Beginning about 300 years ago, Bernoulli developed the first formal explanation of consumer decision making. It was later extended by von Neumann and Morgenstern and called the Utility Theory. This theory proposed that consumers make decisions based on the expected outcomes of their decisions. In this model consumers were viewed as rational actors who were able to estimate the probabilistic outcomes of uncertain decisions and select the outcome which maximized their well-being.
However, as one might expect, consumers are typically not completely rational, or consistent, or even aware of the various elements that enter into their decision making.
In addition, though consumers are good at estimating relative frequencies of events, they typically have difficulty translating these frequencies into probabilities. This Utility model, even though had been viewed as the dominant decision-making paradigm, it had serious shortcomings that could not be explained.
Nobel Laureate Herbert Simon proposed an alternative, simpler model in the mid-1950s. This model was called Satisficing, in which consumers got approximately where they wanted to go and then stopped the decision-making process. An example of this would be in the search for a new apartment.
Under the Utility Theory, consumers would evaluate every apartment in a market, and form a linear equation based on all the pertinent variables, and then select the apartment that had the highest overall utility score. With Satisficing, however, consumers might just evaluate apartments within a certain distance to their desired location, stopping when they found one that was “good enough.” This theory, though robust enough to encompass many of the shortcomings of Utility Theory, still left significant room for improvement in the area of prediction. Simon and others have extended this area in the investigation of the field of bounded rationality.
The bounded rationality of consumers has three constraints:
availability of information
mind cognitive limitations
time (to make decisions)
When relating the information asymmetry to bounded rationality and consumers perceived risks, two hypotheses are developed:
H5: mitigating Information asymmetry positively affects the constraints of consumers’ bounded rationality.
H6: mitigating Information asymmetry positively affects consumers’ perceived risks
And to explore how consumer’s knowledge of traceability systems affects their willingness to pay (WTP) a price premium for traceable products, by linking their perceived risks to their willingness to pay, the following hypotheses is developed:
H7: mitigating consumers perceived risks positively affects their willingness to pay (WTP) a price premium for traceable products.
Measurement scales and operationalization of variables :
The theoretical model of the research under discussion is a model with different variables; in general vvariables are concepts in numerical form that can vary in value. They are things that we measure, control, or manipulate in research. They differ in many respects, most notably in the role they are given in our research and in the type of measures
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