Standardization and segmented governance in the Peruvian alpaca fiber

value chain

First and corresponding author

Dr. Miklos Lukacs de Pereny

Lecturer-Researcher

ESAN Graduate School of Business, Universidad ESAN

Alonso de Molina 1652, Monterrico chico, Surco, Lima, Perú

+51 (1) 317 7200

mlukacs@esan.edu.pe

Second author

Dr. Ronnie Ramlogan

Senior Lecturer

Alliance Manchester Business School, University of Manchester

Booth Street East, Manchester, M13 9SS, United Kingdom

+44 (0) 161 820 8344

ronnie.ramlogan@manchester.ac.uk

Third author

Prof. Marcela Miozzo

Professor of Innovation Management and Entrepreneurship

King´s Business School, King´s College London

Bush House

30 Aldwych

London WC2B 4BG

+44 (0) 207 848 8747

marcela.miozzo@kcl.ac.uk

Paper submitted for the Special Issue “Innovation for Inclusive Rural Transformation in Developmental States” guest edited by Peter Jacobs, Glenda Krauss, Alexis Habiyaremye and Irma Booyens.

Standardization and segmented governance in the Peruvian alpaca fiber

value chain

This article builds on and extends Global Value Chain theory through an examination of

governance dynamics in the Peruvian alpaca fiber chain in the context of developmental state-

sponsored standardization during the period 1997-2013. We propose a Segmented Governance

Model (SGM) showing a fragmented-concentrated supply-demand structure to describe and

explain how micro and meso-scale interactions configure chain governance. The SGM allows a

move beyond the traditional upstream-downstream analysis to accommodate the horizontal

mobility of suppliers and buyers at pre-export segments of the chain. Findings show how mixed

governance modes co-exist within and between segments and explain why convergence towards

a coherent overall market governance does not occur as standardization unfolds. We suggest

further studies applying the SGM to better explain national governance dynamics in

commodity chains towards inclusive and sustainable market engagement at the global scale.

Keywords: Global Value Chains, governance, standardization, development, alpaca fiber,

Peru

Word count: 10,137

Paper submitted for the Special Issue “Innovation for Inclusive Rural Transformation in Developmental States” guest edited by Peter Jacobs, Glenda Krauss, Alexis Habiyaremye and Irma Booyens.

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1. Introduction

This article builds on and extends Global Value Chain (GVC) theory through an examination of

governance dynamics brought by state-sponsored standardization in the Peruvian alpaca fiber

value chain between 1997 and 2013. Alpaca fiber is one of the world’s finest animal products

and Peru is the largest producer with over 80% of global output (FAO, 2005). According to the

IV National Agricultural Census, the alpaca population stands at 3,685,500 animals and is

concentrated in the southern Andean regions of Puno, Cuzco and Arequipa (INEI, 2012) (see

Figure 1). In 2015 total fiber output was 4,400 metric tons and exports were valued at US$159

million (Rojas, 2016). From this output the main single markets for tops and yarns –

intermediate goods accounting for 70% of exports - were Italy (28%), China (20%) and Norway

(12%) while garments – the remaining 30% - were destined to the US (49%), Germany (10%)

and Japan (5%). According to Manrique and Grupp (2005) the fiber industry provides direct

employment for 150,000 people and indirectly an additional 500,000. Moya and Torres (2008)

suggest that as many as 2.9 million people – nearly 10% of Peru’s population - participate

given the industry’s multiplying effect over chemical industries and transportation services.

Figure 1. Geographical concentration of alpaca fiber production in Peru (insert here)

International competition from fine animal fibers such as cashmere, angora and mohair in the

early 2000s forced the Peruvian alpaca fiber industry to upgrade the quality of raw produce

through standardization. An initial program implemented by the state between 1997 and 1999 in

the context of market liberalization and privatization was followed by an ongoing initiative

between large private textile industries and regional and local state agencies since 2002. Our case

study illustrates how both processes have influenced governance dynamics in the fiber chain by

conceptualizing standardization as a cyclic, dynamic and context-specific process aimed at

organizational and institutional change (Botzem and Dobusch, 2012). Particular attention is paid

to micro and meso-scale interactions among suppliers, buyers and middlemen as well as the

institutions mediating these interactions given that at this level, governance dynamics can be

empirically traced and theoretically refined.

The fiber chain makes for an interesting and useful case study for GVC governance for a

number of reasons. First, underneath its generic buyer-driven typology it hosts a variety of

domestic actors configuring a rich pattern of micro and meso interactions. Second, it has

undergone two fiber standardization processes which highlight the developmental role of the 2

state1 in fostering rural transformation while offering opportunities to trace organizational and

institutional change. Lastly, non-market forms of exchange are prevalent in the fiber chain and

provide fertile ground for the application of alternative governance determinants.

By governance we mean coordination among actors based in geographically fragmented but

functionally integrated production and trade systems (Gereffi et al, 2001) . Governance matters

because participation or exclusion from markets, opportunities for upgrading and distribution

of rents are mainly determined how a chain is governed and by whom (Humphrey and Schmitz,

2001). In an attempt to broaden and refine GVC governance theory, Ponte and Sturgeon (2014)

proposed a Modular Theory-Building (MTB) approach where governance is assessed at macro,

meso and micro scales using theories - or ‘modules’ - from different academic disciplines to

promote conceptual cross-fertilization. The main purpose of this approach is to develop a richer

and more adaptable theory of governance for which this article aims to provide a modest

contribution.

From a scalar perspective, macro or overall governance is underpinned by a dual typology.

Capital and technology-intensive firms dominate producer-driven chains whereas labor-intensive

ones with strong purchasing power, dominate buyer-driven chains by exercising tight control

over their supply base (Gereffi, 1994). A number of relevant case studies on commodity-based

industries (Dolan and Humphrey, 2000; Knutsen, 2004; Neilson, 2008; Tran et al, 2013) have

applied this typology to explicitly highlight power asymmetries between lead firms and suppliers

and the resulting uneven outcomes based on position in the chain. However, as intuitively noted

by Ponte and Gibbon (2005) GVCs may exhibit different forms of coordination behind

apparently homogeneous governance modes.

At a micro scale, governance is concerned with coordination determinants and dynamics at

individual chain nodes while at meso-scale governance explores how different coordination

modes ‘travel’ up- or downwards between nodes (Ponte and Sturgeon, 2014.) Two influential

governance theories at both levels are coordination theory (Gereffi et al, 2005) and Ponte and

Gibbon’s (2005) GVC theory of conventions. The former elaborates five governance modes

conditioned by three information-based functionalist determinants while the latter provides a

more normative assessment by delving into collective processes of quality assessment and 1 This paper adopts Johnson´s (1999) definition of ‘capitalist developmental state’ as a state strongly involved in macro-economic policy, regulation and planning for national economic development via market-rationalism. The adoption of this concept is pertinent given that its emergence and discussion in international academic and development policy circles coincides with the period of free market reforms undertaken by the Peruvian government between the early 1990s and 2011. It also covers most of the period where fiber standardization initiatives took place.

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valuation. For Sturgeon (2008), micro and meso governance theories better express its dynamic

nature in contrast to the more static views on power and entry barriers addressed by overall

governance.

Functional and geographical linkages between nodes configure a characteristic input-output

structure which invites vertical analysis of governance. Verticality is ingrained in the concept of

upgrading where actors may slip-off from the chain if value-addition, improved or transferable

skills and innovation are not achieved. In this regard, many commodity chains such as cotton in

West Africa (Bingen, 2006), cut-flowers in Ethiopia (Gebreyeesus and Sonobe, 2012) and

coffee in Nicaragua (Bacon, 2005) are characterized by highly fragmented supply and

concentrated demand segments articulated by middlemen. This structural configuration is

important in two ways. First, although many suppliers may operate at the same node and

perform the same functions, those with larger production volumes will be in a stronger

position to mitigate buyer-power. This opens the possibility for bottom-end actors to capture

higher rents without climbing the chain, thus suggesting that macro and vertical GVC analysis

cannot trace properly horizontal mobility. Second, by missing horizontal linkages and

mobility, scholars and policy makers miss important theoretical and practical insights which

may inform why development goals such as those included in the UN Sustainable

Development Goals Report (2017) are so difficult to achieve.

In response to these limitations and to better explain governance dynamics, we develop a

Segmented Governance Model (SGM) to empirically illustrate vertical and horizontal

coordination and mobility at micro and meso scales. The traditional input-output structure is

replaced by a bi-dimensional chain which combines fragmented and concentrated forms of

supply and demand, leading to four configurations: (i) Fragmented Supply-Fragmented

Demand (FF); (ii) Fragmented Supply-Concentrated Demand (FC); (iii) Concentrated Supply-

Fragmented Demand (CF), and; (iv) Concentrated Supply-Concentrated Demand (CC), with

each segment containing its own nodes and set of actors, institutions and interactions. Theory

of coordination and theory of conventions are used to label, describe and explain governance

modes within and between segments. Diffusion and adoption of innovations theory (Rogers,

1983) is leveraged into the SGM to complement the role of coordination theory’s functionalist

determinants in light of state-sponsored standardization.

The next section provides a brief literature review on GVC governance and standards followed

by an elaboration of the SGM. Section three presents the research design and methods while 4

Section four introduces the main actors, institutions and market and non-market interactions

influenced by dominant textile industries and pro-market state intervention through

standardization in the fiber chain. Empirical findings on static and shifting governance modes

are discussed in the fifth section including the developmental role played by state agencies for

rural transformation through standards diffusion and adoption. Section Six concludes.

2. Theoretical framework

2.1. Governance theory in Global Value Chains

Global Value Chains assess the passage and value-addition processes of goods (and services)

from extraction and/or production to end consumption (Kaplinsky and Morris, 2001). They are

founded conceptually on four dimensions: (i) input–output structure; (ii) territoriality; (iii)

governance; and (iv) institutions. The first two allow descriptive mapping and tracking of

structural change. From a geographic perspective, structural change can occur through

emergence or disappearance and articulation or disarticulation2 of chain nodes. From a functional

one, division and specialization of labor within and between nodes can also alter a chain’s

structural configuration. Yet, both perspectives tend to fragment in light of increased

globalization with profound implications for coordination, the main analytical concern of

governance.

An initial typology of governance was elaborated by Gereffi (1994) who distinguished between

producer and buyer-driven chains. In the former, capital and technology-intensive firms (e.g.

automotive industry) dominate forward and backward linkages. In the latter, low-technology,

labor-intensive firms such as global retailers drive decentralized supply networks through strong

purchasing power and managerial capabilities. This dual typology emphasizes power

asymmetries and its impact on labor specialization and distribution of gains. However,

Humphrey and Schmitz (2002) pointed out that macro governance is unable to cope empirically

with more functionally specialized chains and stressed the power of dominant firms to set and

enforce parameters (e.g. norms and standards) over suppliers leading to a quasi-hierarchical

governance mode. Furthermore, Sturgeon (2002) introduced the concept of ‘modular’

2 Initially proposed by Bair (2009) and further developed by Bair and Werner (2011) the ‘disarticulations’ approach provides a historically-based narrative of socio-economic processes underpinning (de)construction of commodity chains. Particular attention is paid to exclusion determinants and dynamics of production and trade.

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networks where highly specialized suppliers in electronics deliver components following

specific technical requirements from lead firms without financially depending on them.

In response to these findings, Gereffi et al (2005) focused their attention on inter-firm linkages

and dynamics of exchange at sub-macro scale to propose five governance modes: (i) Markets,

where chains are coordinated through spot price and arms-length interactions; (ii) Modular,

where suppliers follow buyers’ requirements; (iii) Relational, where culturally complex chains

are governed by reputation, mutual dependence and close ties; (iv) Captive, where bottom-end

actors accept transactional conditions imposed by dominant buyers due to prohibitive switching

costs, and; (v) Hierarchical, where vertically integrated firms are subject to strong managerial

control. These modes are conditioned by three functionalist governance determinants, namely:

(i) complexity of information handled among partners; (ii) codifiability of this information,

and; (iii) suppliers’ capabilities to apply it. Ranging from high to low, the combination of these

determinants configure how chains are governed as power asymmetries and explicit

coordination decreases when governance transits from market to hierarchical modes.

Both the dual and five-fold governance typologies stress the role and impact of firms on market

exchange activities and outcomes. In this regard, Gibbon et al (2008) argue that the producer-

buyer typology approaches governance as lead firms “driving” the chain whereas the five-fold

typology does it from a coordination perspective. They propose a third perspective of

governance as normalization in the sense of collective compliance to norms, regulations and

standards. This perspective builds on convention theory applied by Ponte and Gibbon (2005)

through a constructivist-normative assessment of chain interactions shaped by quality standards.

The relation between standards and governance is clear as standardization demands explicit

coordination among stakeholders to achieve upgrading and market governance. This is why we

turn to standards in the next sub-section.

2.2. Standards and governance

Standards are information-based instruments used to assess and communicate attributes ranging

from quality to performance of products and processes. Economic research on standards in the

mid-1980s focused on technical compatibility and economic efficiency issues to explore their

impact on network externalities (Katz and Shapiro, 1985), increasing returns (Arthur, 1989),

competition for market dominance (Shapiro and Varian, 1999) and firm strategies for adoption

(Besen and Farrel, 1994). However, a constructivist response led by economic sociologists in 6

the late 1990s posed normative questions on the moral implications of compliance (Busch,

2000) legitimacy (Werle and Iversen, 2006) and distributive justice (Busch and Bingen, 2006)

while others examined standardization through ‘social contagion’ (Burt, 1987; Strang and

Meyer, 1993), ‘filiation’ or adoption (Bowker and Leigh-Star, 2000) and structural shifts in

commodity chains (Tanaka and Busch, 2003).

Constructivist research on standardization borrowed largely from Rogers’ (1983) theory of

diffusion and adoption of innovations which proposed that although no positive correlation

exists between diffusion and adoption, more diffusion can increase adoption. Lack of causality

is partly explained by Rogers’ (1983: 4) definition of adoption as ‘compatibility with the

values, beliefs, and past experiences of the social system’ leading him to propose five adoption

mechanisms: (i) Relative advantage, when the potential adopter perceives positive effects of

adoption not only from an economic but also from a socio-cultural point of view (e.g. social

reputation); (ii) Compatibility, between the innovation (standard, our inclusion) and the values

and norms embedded in a specific social system; (iii) Complexity, attached to learning and using

the innovation which increases with literacy; (iv) Trialability, through learning by doing or

using, and; (v) Observability, associated to positive or negative results observed from others’

experience. The main difference between Rogers’ adoption mechanisms and the three

functionalist determinants of coordination theory is that the former are better suited for

characterising culturally mediated market interactions prevalent in rural and informal settings.

We consider adoption of standards as an innovation to study their influence on GVC governance

dynamics. The first steps in this direction were taken by Ponte and Gibbon (2005) who used

convention theory3 towards quality assessment and validation. Based on Eymard-Duvernay´s

(1989) argument that price is the main yardstick of quality, both authors proposed six

conventions for chain governance of which the following three are relevant to our case study4: (i)

Market conventions, when agreement is reached on price as a precise reflection of quality and

where different prices communicate different qualities; (ii) Industrial conventions, when

consensus on quality cannot solely be reached by price so uncertainty is resolved by introducing

specific assessment and validation tools such as standards, and; (iii) Domestic conventions,

where quality is determined through trust built upon repeated successful transactions. Quality

3 Convention theory was developed by Boltanski and Thévenot (1991) who identified and elaborated six ‘orders of worth’ to explore market and organizational arrangements from a philosophical perspective.4 According to Ponte and Sturgeon (2014), the three remaining conventions are Civic, Inspirational and Opinion have no clear association with any of the five governance modes outlined by Gereffi et al (2005). We agree with this observation based on our empirical evidence.

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conventions may overlap and change to reflect different coordination forms over time just as

different governance modes may co-exist in the same chain as Ponte (2009) empirically shows in

a case study of South African wine.

Market, industrial and domestic conventions find in market, modular and relational/captive

modes respectively their inter-firm governance counterparts (Ponte and Sturgeon, 2014). Most

importantly, how easy or hard these conventions ‘travel’ up or down the chain is one of the

model’s most important contributions to governance theory. Market conventions transit with

ease throughout chain nodes given that most information about the quality of a particular product

(or service) is contained in its price. Industrial conventions can also travel with ease if a

particular tool (e.g. standard) is collectively validated and applied by buyers and sellers whereas

domestic conventions travel slowly given that social capital accumulation is a collective and

time-consuming endeavour. Overall, while convention theory provides a normative framework

for GVC governance research, Gereffi and colleagues’ functionalist theory of coordination

focuses on power relations conditioned by information-based determinants (ibid). Yet, both

theories emphasize vertical mobility and lack a structural framework capable of tracing

horizontal linkages and mobility. This operational vacuum in governance dynamics can be

partially filled with the proposed SGM.

2.3. Segmented Governance Model

The SGM is inspired by the idea of degrees of concentration of supply and demand developed

by Lee et al (2012) which links agro-food GVCs with quality standards. In comparison to a

linear input-output structure, the SGM disaggregates a GVC into segments to illustrate vertical

and horizontal coordination and mobility at micro and meso scales (see Figure 2). A bi-

dimensional representation of the chain combining fragmented and concentrated forms of

supply and demand configures the following four chain segments: (i) Fragmented Supply-

Fragmented Demand (FF); (ii) Fragmented Supply-Concentrated Demand (FC); (iii)

Concentrated Supply-Fragmented Demand (CF), and; (iv) Concentrated Supply-Concentrated

Demand (CC). By segment we do not refer to a chain node but to a portion of the chain

containing some nodes, each with a unique set of actors and institutions interacting within

and between them.

Figure 2. Linear versus segmented Global Value Chain. (insert here)

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Degrees of concentration or fragmentation of supply and demand depend on geographical and

functional criteria. Geographical fragmentation or concentration is determined by the

location, number and density of suppliers and buyers at specific chain nodes, while functional

fragmentation or concentration is conditioned by division and specialization of labor at pre-

export stages ranging from Small-Scale Producers (SPs) to Large Textile Industries (LTIs). Fiber

output and collected volumes during each trade season act as proxies for functional division

where larger volumes produced and collected are associated to stronger economic, logistic and

technological capabilities. Theory of coordination and theory of conventions are used to label,

describe and explain governance modes and/or conventions resulting from interactions among

suppliers, buyers and middlemen within and between segments. Particular attention is paid to

empirical validation of diffusion and adoption of standards under Rogers’ constructivist

mechanisms.

Standardization may influence micro and meso interactions at each segment with varying

intensity and direction. Intensity means relational depth (e.g. arms-length versus close ties) and

number of relational ties of each actor while direction refers to how specific actors at each

segment engage in market governance and/or conventions as pursued by standardization. The

SGM pays equal attention to vertical and horizontal interactions which traditional input-output

structures are unable to scrutinize. In addition, the SGM also allows tracing inter-segment

chain dynamics hidden under the fiber chain’s buyer-driven typology. Overall, by identifying

and describing key actors and institutions and by explaining the nature of interactions shaped by

standardization, a rich panorama of governance dynamics can be portrayed applying the SGM.

3. Research design and methods

When selecting a method, we considered our research question – How does governance

dynamics change at different chain segments in a context of standardization? - and the intended

theoretical and empirical contribution. In doing so, we established that an inductive qualitative

approach had a good methodological fit. We designed an exploratory case study and used a

variety of data collection techniques: interviews, observation of meetings, and observation of

participants. The same questionnaire was applied and all interviewees were conducted in

Spanish. Eleven questions were asked to understand the diffusion and adoption mechanisms of

standards, role and impact of actors in the standardization process, collaboration and

competition for standard implementation, market and non-market exchange mechanisms, role of

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informal and private standards and overall assessment of standardization in terms of fiber

quality and output.

First, we conducted semi-structured interviews with 22 key stakeholders during 2012. Nineteen

participants were selected following purposeful sampling and the rest through snow-ball

technique. Interviewees in Lima included representatives from the Ministry of Agriculture

(MINAG), National Council of Science and Technology (CONCYTEC), National Institute of

Intellectual Property Protection (INDECOPI) and the National Agrarian University. Six

interviews were conducted in Arequipa, Peru’s fiber industry hub, with representatives from

Peru´s largest fiber industries Michell and Incatops, the Peruvian Institute of Alpacas and

Camelids (IPAC), Ministry of Production (PRODUCE), Regional Agrarian Direction (RAD)

and a national NGO. The remaining 12 interviews were conducted in Puno, where over 50% of

the world´s alpaca fiber is produced. Respondents included small, mid and large-scale

producers, representatives from Puno’s RAD, the National Agrarian Bank (Agrobanco), a

national and international NGO and one middleman. In spite of mediation by one business

agent, no more middlemen were willing to be interviewed given their reticence to interact with

industry outsiders.

Second, data was collected through attendance at a Peruvian Technical Norms (PTNs) meeting

– the current standard under implementation - hosted by IPAC and held in Arequipa in

September 2012 with representatives from producers’ organizations, Michell and Incatops,

MINAG, PRODUCE, Arequipa’s RAD and one national NGO. The Puno Alpaca Roundtable

was held in October with 13 participants including representatives of Puno’s RAD, Local

Collection Centers (LCCs) from the districts of Capaso, Cojata and Santa Lucia, Peruvian

Society of Alpaca and Llama Breeders (SPAR) and the Central Alpaca Cooperatives of Puno

(CECOALP). No recording was allowed in Arequipa but written notes were permitted at both

meetings. Discussions provided a clearer understanding of competing interests surfaced by

standardization, especially between LTIs and fiber producers.

Third, additional visits were made to Michell and Incatops plants in Arequipa to observe fiber

collection and industrial processing. Informal visits in Puno included two LCCs and seven SPs

in the provinces of Lampa and Ayaviri in Puno to observe traditional animal production

techniques and PTN-based transactions. These visits provided a holistic view of

standardization and the relational nature of the AFC. Given scarcity and poor quality of

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secondary sources5 and reticence of textile firms to share private information, empirically

based estimates were provided by RAD and NGO interviewees on standardization indicators.

Data analysis proceeded in two stages. In the first we identified key events in the process of

standardization ranging from commercial transactions under PTN terms to PTN diffusion and

enforcement initiatives by regional state agencies and Agrobanco. In the second stage we

compared and contrasted the analysis of field data that elucidated interrelated features of the

process of standardization and governance dynamics. The inductive perspective in data coding

was compared and contrasted with explanations about patterns of GVC governance in the

literature. For data coding proper we used codes and logic derived from the research streams

selected as our cognitive frames of reference. As we iterated between data and emerging logic,

we gradually built a more objective characterization of the process of standardization and its

impact on coordination activities among different chain actors which allowed us to crystalize

our understanding of these interrelated processes. These insights underpin the model that we

present after analyzing our data. We assess below the empirical evidence around the main issues

arising from state-sponsored standardization in the Peruvian fiber chain.

4. Standardization in the Peruvian alpaca fiber chain

During the second half of the 1990s, a series of international financial crises6 led to contraction

of exports forcing state intervention as LTIs reduced domestic purchases. A segmented

representation of the chain during this period is shown in Figure 3. At the time, geographically

fragmented and isolated SPs and Mid-sized Collective Producers (MCPs)7 were responsible for

90% of national supply while the remaining 10% was supplied by the more financially and

technologically endowed Mid-sized Private Producers (MPPs), Large Collective Producers

(LCPs) and Large Private Producers (LPPs). Thicker arrows in Figure 3 illustrate the main

trajectory of largest fiber volumes where 80% of national supply was purchased by three

dominant LTIs. Discontinuous line-patterned arrows represent temporal interactions during the

1997-1999 state standardization effort.

Figure 3. Segmented structure of the alpaca fiber chain during MITINCI standardization. (insert

here)5 This limitation is openly acknowledged by Bonavia (2009: 514) who warns us about ‘the poor quality of the data of South American Camelids in general.’6 The 1994-1995 Mexican crisis was followed by the 1997 Asian financial crisis, 1998 Russian financial crisis and 1998-1999 Brazilian currency crisis. Exports of fiber garments decreased from US$16.5 million in 1994 to US$14.4 million in 1995 bouncing back to US$16 million in 1999 (MINCETUR, 2012).7 Size of herds in these peasant managed production units ranges between 200 and 799 alpacas. Small-scale producers own less than 200 animals while large producers manage herds over 800 alpacas.

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For decades middlemen networks have operated across all segments guided by the visible hand

of LTIs through a funding system known as habilitacion. Business agents funded by LTIs fund

large middlemen or grandes acopiadores who in turn fund mid-sized middlemen or rescatistas

who in turn fund small-sized middlemen or alcanzadores who in turn purchase fiber from

approximately 160,000 SPs (De los Ríos, 2010). Middlemen capture rents through

commissions tied to collected volumes and by transferring transaction costs downwards.

Alcanzadores are the single link between SPs and the rest of the chain. Although barter for basic

goods is still practiced, bulk-based purchases locally known as “sweep purchases” under an

informal tui-adulto (T-A) or traditional standard are most common. The traditional standard –

diffused and enforced by middlemen on SPs since the mid-19th century – pays a premium for

fiber from animals less than two years old known as tuis. Volumes lower than five quintales8

are sold per SP per trading season which runs from October to March. Although SPs are subject

to transactional conditions imposed by alcanzadores as no alternative means for subsistence are

available, close-ties known as compadrazgo must first be developed. However, trade happens

only between compadres irrespective of higher prices offered by competing alcanzadores as

proven loyalties secure future purchases, thus configuring a captive-relational governance or

domestic convention at FF segment.

After collection, alcanzadores transport fiber to rescatistas who purchase directly from MCPs

at provincial weekly fairs under the same transactional conditions imposed on SPs. However

traded volumes range from 10 to 35 quintales per season. Small-end buyers represented by

thousands of artisans and textile SMEs9 purchase only 10% of national supply directly from

alcanzadores or rescatistas while grandes acopiadores collect and distribute over 80% of

national supply through rescatistas. They also establish semi-formal arrangements with business

agents who sweep purchase their collected fiber under traditional standards. Although most fiber

is purchased by LTIs around 5% is smuggled to textile industries in Bolivia (Brenes et al, 2001).

8 Quintal is a unit of measure introduced by Spanish colonizers in the 1530s but still used in the southern Peruvian Andes. One quintal is equivalent to 22-23 full alpaca fleeces weighing between 45 and 50kg.9 The Ministry of Foreign Trade and Tourism estimates that 100,000 artisans are involved in the Peruvian textile industry but less than 25,000 are formally registered as SMEs. Although no figures are specifically available for the alpaca fiber industry, the same source estimates that 77% of artisans are engaged in subsistence economies (MINCETUR, 2001).

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In contrast to SPs and MCPs, MPPs apply modern production and management techniques10

alongside LCPs and LPPs. Large Collective Producers correspond to peasant enterprises

founded during the 1970s Agrarian Reform and supply less than 5% of total national output

(Brenes et al, 2001). The three most important, Rural Alianza, SAIS Pachacutec and SAIS

Tupac Amaru sell between 250 and 2,000 quintales per season. Given larger volumes they

can bypass middlemen and deal directly with business agents. A flat price per pound of raw

produce is agreed between them before each shearing season under traditional standards. A

higher price differential of 20-30% roughly equates to transactional costs transferred to SPs. In

the case of MPPs higher quality of yields allows them to engage with business agents under

similar conditions of LCPs. Nonetheless, LCPs and MPPs remain price-accepting actors, thus

configuring relational-captive governance or domestic convention at CF quarter. Relations

precede captivity because during periods of high demand LCPs can sell their produce to

business agents from a competing LTI although they will still remain dependent on them.

Large Private Producers are represented by Pacomarca and Mallkini farms based in Puno.

Founded in the early 1990s and owned by the two currently dominant LTIs Incatops and

Michell respectively, these farms apply modern reproduction techniques such as embryo

transfers and in vitro fertilization to improve their genetic pool. Their herds range between

2,000 and 2,500 animals but average fiber output stands at 5.4kg per animal per season

compared to 1.6-2.5kg from smaller production units (Brenes et al, 2001). In contrast to fixed

prices under traditional standards, fiber from LPPs is assessed under private LTI standards.

Moreover, both LTIs have enough market power to unilaterally fix trade prices per season given

that neither the state nor Small Textile Industries (STIs) are able to absorb national supply.

Under such conditions, through hands-on governance over business agents and hands-off

governance over the rest of the chain, LTIs at CC quarter configure a quasi-hierarchical

governance mode.

4.1. The 1997-1999 MITINCI standardization program

Incapacity of LTIs to absorb national supply and of SPs to exit the chain during the mid-90s

financial crises triggered an emergency program of state purchases between 1997 and 1999

and the introduction of new quality standards developed by the Ministry of Industry

(MITINCI). As shown in Figure 3. fiber was directly purchased by state agents and cheaply

10 These include mechanical rather than manual shearing, feedstuffs, veterinary care, use of registries for animal production, controlled mating and adequate infrastructure.

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sourced to geographically fragmented artisans and SMEs in the country and STIs clustered in

Arequipa. Additionally, marginal exchange between the latter and grandes acopiadores

configured relational governance at FC quarter. Nevertheless, low manufacturing quality of

intermediate goods and null access of STIs to international markets posed no commercial

threats to LTIs.

The aims of this state-led standardization program were to: (i) break captivity of SPs from

middlemen by replacing sweep purchases with spot-price transactions based on the new

standard; (ii) foster quality of raw produce through price incentives based on five fiber

categories; (iii) organize and concentrate supply through State Collection Centers (SCCs) of

fiber to empower peasant organizations by increasing their bargaining power; and (iv) promote

regional industrial development through STI organization and replication. Until 1999, a total of

42 SCCs operated nationwide. State agents were also responsible for MITINCI standard

diffusion through in situ workshops and technical assistance. After few months of program

implementation, the state offered prices 110% higher than those of middlemen11. Although

LTIs raised prices by 40% they were unable to compete with the state (Torres et al, 2011).

Price became the sole incentive for MITINCI standard adoption by fragmented suppliers

through relative advantage, trialability and observability as lower volumes continued to be

traded between LCPs and LTIs under traditional standards. Total national output saw an

artificial increase from 2,775 to 3,448 metric tons between 1995 and 1998 (MINAG, 2012) due

to heavily distorted domestic prices in spite of highly contracted international demand. However,

subsidies ended due to severe economic depression12 forcing closure of all SCCs in November

1999. Although state subsidies through MITINCI standard adoption offered temporal relief to a

reduced number of SPs - less than 5% of national supply was purchased by state agents

between 1997 and 1999 - these immediately regressed to transactional captivity by middlemen

after state exit and captive-relational governance at FF segment remained unchanged.

Nevertheless, higher concentration of demand was now visible at FC quarter which saw STPs

increase from 10 to 30 and responsible for 5% of national manufacturing output13.

11 Prices paid per pound of white Suri fiber – the most valued in the Peruvian market – reached s/.16-20 (US$6-7.5) at SCCs during the 1997-1998 season from s/.8-12 offered by middlemen.12 In 1998 the country was affected by “El Niño” phenomenon which negatively impacted national GDP by 3%.13 Until 2011, Michell, PROSUR and Incatops were responsible for 90% of exports with individual shares of 55%, 23% and 11% respectively (Fairfield, 2006). However, on June 2011, Incatops purchased PROSUR configuring a duopolic/duopsonic market with Michell.

14

4.2. Standardization under the Alpaca Fiber Peruvian Technical Norm (PTN), 2002-2013

After failed state intervention the fiber chain returned to hands-off governance by LTIs but

low fiber quality continued undermining international competitiveness. In response to this

situation, in 2001 Incatops proposed the creation of the public-private Peruvian Institute of

Alpacas and Camelids (IPAC)14 to steer market coordination, technical assistance and quality

promotion. A year later, with strong logistic support from regional governments 15, IPAC

launched the National System for Collection and Commercialization of Alpaca Fiber (SNARF)

to organize supply through Local Collection Centers (LCCs) modelled after SCCs.

Simultaneously, a new standard was developed by national experts from LTIs, the State

Council for South American Camelids (CONACS) and the National Agrarian University.

After two years of open bids at LCCs, SNARF ended and the Alpaca Fiber Peruvian Technical

Norms (PTNs )16 were officially launched and endorsed by INDECOPI in 2004.

The joint LTI-state PTN standardization shared MITINCI’s aims but lessons learned led to

operational adjustments: (i) Diffusion and adoption would be promoted throughout the entire

chain, not only among fragmented producers; (ii) LCCs would be managed by peasants, not

state agents, and; (iii) prices would be negotiated among IPAC members before each

trading season, not unilaterally fixed by LTIs. However, SPs complained about immediate

withdrawal of LTIs after SNARF’s deactivation given their unwillingness to pay higher prices for

PTN fiber17. Nevertheless, PTN diffusion and adoption efforts were continued by IPAC, RADs

and NGOs configuring new governance dynamics in the fiber chain (see Figure 4).

Figure 4. Segmented structure of the alpaca fiber chain during PTN standardization. (insert here)

14 Among IPAC´s founding members were Incatops, Michell and PROSUR, MINAG and the newly formed Ministry of Production (PRODUCE, former MITINCI), National Agrarian University of La Molina, Commission for Promotion of Exports (PROMPEX), the national NGO DESCO and producers´ organizations. In 2003 IPAC was formally accredited as a national technological innovation center by PRODUCE.15 In November 2002, the Peruvian government promulgated Decentralization Law No. 27867 leading to the creation of 25 regional governments responsible for managing and implementing their own budgets and sectoral policies. To present, state agencies have decentralized units operating in each region, among them Regional Agrarian Directions (RADs) of the Ministry of Agriculture which actively support PTN diffusion/adoption.16 PTNs are public-private standards composed of six norms regulating fiber length, diameter, color and fleece quality. Norms PTN 231.300 – 2004 for fleece categorization and PTN 231.301 - 2004 for fiber classification are applied on field while the remaining four, not relevant for this study, are restricted to laboratory testing methods (INDECOPI, 2004). 17 The PTN 231.300 – 2004 for fiber categorization defines four fiber categories as well as guidelines, requirements and labelling procedures for categorization process. The norm establishes that sheared fleeces must be assessed manually and through observation by qualified staff. The four categories are: (i) Extra Fine, with qualities below 23µ known as Baby Alpaca; (ii) Fine, from 23.1 to 26.5µ, (iii) Semi Fine, from 26.6 to 29µ, and; (iv) Thick, over 29µ.

15

Average estimates by regional state officers place PTN diffusion rates at 40-50% among SPs

and 30-40% for MCPs through in situ information (e.g. local news, radio and word of mouth)

and training. Adoption rates are estimated at 95% among SPs and 100% for MCPs organized in

LCCs with premium prices for categorized fiber as main incentive. Until April 2013, between

10 and 20% of SPs nationwide traded fiber at LCCs with relative advantage and trialability as

main adoption mechanisms. However, diffusion and adoption are actively discouraged by

middlemen who see their profits sliced by PTN-based transactions. Yet, through cash payments

under traditional standards, alcanzadores provide a powerful sense of security to SPs who have

not adopted the PTN. Their role is facilitated by geographical isolation which limits LCC

replication.

Larger volumes have enabled LCCs to bypass middlemen and trade directly with STIs through

commercial alliances promoted by RADs configuring the foundations of an industrial

convention. Small textile industries are now capable of fully absorbing LCC supply - estimated

at 10% of national total - through access to international markets facilitated by NGOs. Product

upgrading has been achieved by STIs via exports to Italian and Swiss markets but shipments

are still infrequent and rarely exceed US$100,000 each. Both processes have triggered horizontal

mobility of STIs from FC to CC quarter as more fiber is gradually sourced by LCCs.

Diffusion rates among LCPs reach 100% through in situ information programs and technical

workshops. Since PTN implementation, some LCPs have sub-contracted manufacturing services

of STIs for intermediate goods to Bolivian and Chilean markets although these interactions

remain marginal. Yet, PTN adoption at CF segment is almost non-existent as LTIs continue to

enforce T-A standards through business agents18. Large Private Producers also continue to

operate exclusively under private LTI standards. Therefore, relational-captive governance at CF

and quasi-hierarchical governance at CC segments remain static given that, apart from the

occasional interaction between LCPs and STIs, micro and meso interactions have hardly

changed since PTN standardization.

Registration and formalization of SPs into LCCs are conditions set by RADs to access training.

Through product and process upgrading SPs increase fiber quality and output in spite of

remaining at the bottom-end of the chain but horizontal mobility is allowed by larger trading

18 Through an LCP representative, the first author learned that business agents paid a flat price of s/.8 soles (US$2.8) per pound of fiber during the 2012-2013 season compared to US$2.4-2.8 for tui and US$2.0-2.4 for adult fiber under traditional standards. During the same season, prices for PTN fiber at LCCs ranged from US$2.8-3.2 for Extra Fine and US$1.6-2 for Thick categories.

16

volumes which mitigate buyer-power. Moreover, LCCs share export rents with STIs. On the

other hand, transactions between LCCs and business agents have been less promising as the

latter tend to apply ‘reclassification fees’ on purchased fiber arguing that fiber classification at

LCCs is ‘unreliable’. In any case, for the first time in the industry´s history, vertical integration

between LCCs and STIs has allowed SPs to engage directly with manufacturers and avoid

middlemen transaction costs.

Until 2008, PTN-driven standardization had been successful in modifying chain governance

dynamics by formalizing and concentrating supply. Former vertical relations of SPs with

alcanzadores were partially replaced by the less asymmetric LCC-STI ones allowing horizontal

mobility for both. However, the 2009 Global Financial Crisis tested PTN standardization success

when domestic prices plunged 50-70%. The central government responded with a new program

of direct purchases from fragmented and organized SPs through a US$9.5 million emergency

fund managed by the agricultural state bank Agrobanco. Yet, unlike MITINCI standardization,

state subsidies were replaced by public credit, thus transferring liabilities to producers.

Registration, membership and formalization of LCCs and fiber sales exclusively through

Agrobanco became non-negotiable conditions for SPs and MCPs. In addition, purchases were

strictly conducted under PTN terms and credit caps were established based on valuation of LCCs

total potential supply. Slow recovery began in 2011 with renewed international demand but

dependency of LCCs on public credit increased as PTN-driven LCC replication was partially

replaced by access to credit.

Standardization success post-Global Financial Crisis has been threatened by mismanagement of

loaned funds where late or incomplete payments from LCC managers to LCC members has

become a common problem. Middlemen have seized the opportunity by approaching

disappointed LCC members and providing them immediate full payment in cash for individual

produce. Securing income – even under unfavorable traditional standard terms – is a priority for

vulnerable SPs. However, it is still early to predict whether LCCs will continue their healthy

market-oriented engagement with STIs or configure captivity by the state, thus threatening

successful PTN standardization experienced between 2004 and 2008.

5. Discussion

5.1. Stakeholders´ interests in response to standardization

17

Common agreement exists among chain stakeholders on the need for standardization. Specific

interests range from higher incomes for producers, to competitive exports for STIs and

LTIs, and opportunities for political advancement for regional governments. However,

underlying conflicts were observed during group meetings in Arequipa and Puno. The most

important relates to unilateral price-setting by LTIs on the grounds of dependency on

international demand. This was loudly denounced by SPs who alongside RADs and NGOs

perceive LTIs as ‘exploitative’ organizations exclusively concerned with rent capture. On the

other hand, LTIs perceive SPs as ‘unreliable’ and easily manipulated by ‘incompetent’,

‘obstructionist’ and ‘corrupt’ regional governments. Michell and Incatops representatives also

accuse regional governments of actively discouraging private enterprise and using LTIs as

political scapegoats.

Given its informal and competitive environment, middlemen hardly share information and are

not sympathetic towards LTIs, on which they depend financially. Middlemen are active

disablers of PTN diffusion and adoption as PTN-based transactions impede them transferring

transaction costs to SPs. If rents were to be appropriated by alcanzadores and rescatistas under

PTN conditions, LTIs would simply reduce funding for habilitacion, thus transferring costs to

them. Through traditional standard enforcement middlemen capture rents by paying lower

prices to SPs and commissions tied to collected volumes act as incentives.

Like middlemen, SPs tend to be distant to outsiders. Very few know the path followed by their

produce after sales and close ties are restricted with alcanzadores. Given their precarious

livelihoods, securing income is their single concern. Middlemen reinforce dependency through

barter for basic goods and payments in cash. For SPs aware of PTN standards, individual

adoption without LCC membership is impossible given that breaking compadrazgo relationships

means risking secure income. Moreover, small outputs of low quality do not satisfy economies

of scale. For thousands of peasants settled 4000 meters above sea level, poor soil conditions

eliminate the option of chain exit and without access to upgrading opportunities, product and

process downgrading are the norm. Although recommendations have been provided to leverage

indigenous knowledge and experience for upgrading through innovation (Beduschi et al, 2017)

the vast majority of fiber producers are poorly educated elders as most youngsters migrate to

urban areas in search of job opportunities. Training programs and technology transfer initiatives

such as mechanical shearing have proven less effective given their fixed animal production

routines and habits. These historically rooted conditions explain total dependency on

alcanzadores and rigid captive-relational governance at FF quarter. 18

Large Collective Producers and MPPs remain under relational captivity of LTIs given that STIs

are still unable to absorb their supply. However, the latter have shifted from market transactions

with grandes acopiadores and temporally with SCCs to a dual market-relational governance

with LCCs. It must be noted that the term ‘market’ only applies to spot-price transactions as

fixed prices by LTIs and distorted prices during MITINCI standardization configure an

imperfect market. Nevertheless, in spite of their triple-fold growth in numbers between 1997

and 2013, STIs still cannot compete with the much better resourced and internationally

connected LTIs which withdrew from SNARF confident of keeping hands-off control over their

supply-base. This confidence was backed-up by the duopolic-duopsonic position and unmatched

logistic capabilities of Michell and Incatops. However, pressing international demand for quality

forced purchases from LCCs, especially since 2011 when market recovery began.

With regular support from NGOs, RADs have actively promoted PTN standardization although

LTI representatives argue that regional governments’ involvement is motivated by political

ambitions as peasants´ votes help them secure power networks. Support from RADs is widely

appreciated by SPs and MCPs, especially after re-introduction of public credit through

Agrobanco but inter-regional collaboration among RADs, is almost inexistent.

5.2. Segmented governance linkages and dynamics before and after PTN standardization

State-sponsored standardization has been implemented with two common purposes in mind: (i)

increase fiber quality in response to competition from substitute fine fibers, and; (ii) achieve

overall market governance based on spot-price transactions. According to LTI and RAD

interviewees PTN standardization has partially achieved the first objective by increasing Extra

Fine fiber´s share from 10% in 2004 to 20-25% of total national supply in 2013. However, the

second aim remains distant. Although foreign demand determines domestic prices LTIs continue

to exercise buyer-power by setting and fixing punitive prices. We find this is the main reason

why standardization has not triggered co-evolution towards market governance in all segments as

comparison between Figures 5a and 5b show. Additionally, rural transformation triggered by

fiber standardization has remained decoupled from structural transformation. Collective assets

such as transportation and communications infrastructure are key drivers for engagement in

local-to-global markets (IFAD, 2016) but remain largely unattended by the state in the southern

Peruvian highlands.

19

Figure 5(a). Segmented governance modes stemming from MITINCI standardization, 1997-

1999. (insert here)

Figure 5(b). Segmented governance modes stemming from PTN standardization, 2002-2013.

(insert here)

Figure 5a illustrates that targeted MITINCI standardization at FF was unable to break captive-

relational governance given that state subsidies could not be maintained and middlemen only

traded under traditional standards after state exit. State agents also lacked the operational

capabilities of middlemen who quickly filled their vacuum. Moreover, LTIs exercised hands-on

and hands-off governance through business agents and middlemen, thus consolidating a vertical

chain structure. Governance modes in three chain segments proved their institutional hardness

except at FC quarter which experienced market-driven replication through trade with SCCs.

MITINCI standardization was exclusively subsidy-driven; no other incentives were perceived

or obtained by its beneficiaries.

In contrast, as shown in Figure 5b, PTN standardization has already generated significant

change in governance dynamics through market transactions between LCCs and STIs and

parallel horizontal mobility of both towards CF and CC segments respectively. Until 2008-2009

LCC replication and trade linkages with STIs created a virtuous cycle leading to supply

concentration alongside product and process upgrading. These micro interactions promoted

spot-price transactions under PTN conditions leading to the emergence of a fragile market mode

or convention. In spite of the gravitational pull exercised by LTIs on all chain segments STIs

have been able to resist it by absorbing LCC demand without surpassing output limitations. This

coalition between regional STIs and the organized peasantry constitutes the core of the rural

transformation process which has benefited its members by offering direct access to

international buyers while partially shielding them from extractive economic institutions19, in

particular sweep purchases underpinned by hands-off governance from LTIs. However, LCC

credit-driven replication since 2009 threatens to break the 2004-2008 virtuous cycle of

19 According to Acemoglu and Robinson (2012), economic and political institutions can be defined as extractive or inclusive. The former shape market incentives to save, invest, innovate and/or adopt new technologies while the latter regulate the power and capacity of the state to govern society. Extractive political institutions configure narrow and unconstrained distribution of power whereas inclusive ones lead to centralized but plural power distribution patterns. In the hands of dominant coalitions, extractive political institutions allow the implementation and enforcement of extractive economic institutions to transfer wealth from disadvantaged social groups to dominant ones. Thus, a synergistic relationship is created between extractive political and economic institutions where both tend to reinforce each other and persist over time.

20

standardization risking return to pre-2002 conditions. Limited but emerging interactions

between LCPs and STIs could increase competitive pressure on LTIs if their smaller peers

consolidate access to international markets.

Middlemen networks stand as a formidable barrier for PTN adoption at FF segment, the most

important in terms of unattended socio-economic needs and production volumes. Yet, without

middlemen no chain articulation would be possible. Under this consideration, horizontal

mobility of SPs, MCPs and STIs stands as a remarkable achievement considering the short

standardization period. However, although multiple governance modes co-exist within the fiber

chain they do not evenly co-evolve towards market governance. Even if governance dynamics

change in a subtle and uneven manner without altering buyer-driven governance, incremental

changes within segments may lead to major governance shifts. Lastly, by moving horizontally

towards CF segment SPs at LCCs can earn US$1-1.5 more per pound making a significant

difference in their living conditions.

5.3. Operational attributes of the Segmented Governance Model

In contrast to linear GVC frameworks, the SGM stands as an incremental improvement for the

study of governance dynamics. Through its application we can represent structurally

supply/demand concentration and fragmentation of commodity chains. Segmented governance

modes tend to remain hidden under generic governance, especially in highly informal and

uncoordinated primary production chains found in the developing world. In the fiber chain

case study, Michell and Incatops project hands-on and hands-off governance to control

middlemen and suppliers, thus configuring vertical (or diagonal) linkages as shown in Figures

5a and 5b.

Standards are exogenous instruments unleashing structural change and governance shifts which

affect a multitude of interactions at micro and meso scales. When these interactions remain

unchanged after PTN introduction, standardization fails to endogenize meaning failure of

standard adoption. This explains static governance at FF segment where adoption ceased

abruptly after subsidies were discontinued. However, when standards are adopted they become

endogenous and changes in interactions are reflected by shifting governance modes as observed

at FF to CF and FC to CC segments. Even though SPs and STIs continue to perform the same

functions, standardization exposes both to novel interactions even against the threat these face

by credit-driven LCC replication.21

In summary, although PTN prices are still dependent on prices set by LTIs under traditional

standards, the following changes in governance have been achieved: (i) emergence and

consolidation of peasant managed LCCs; (ii) concentration of national fiber supply from 10% to

25%, and; (iii) vertical integration of LCCs with STIs supported by RADs, and; (iv) vertical

integration of LCPs with STIs. Partial success of PTN standardization can be assessed through

LCC replicability: from 48 operating in Arequipa and Puno in 2009 to over 80 nationwide three

years later. By facilitating opportunities for collaboration between LCCs and STIs, the state via

RADs has also contributed to structural change in the fiber chain in line with rural development

policies and goals provided by IFAD’s Rural Development Report (2016) and CELAC’s

Innovation for Rural Sustainable Development Report (2017).” Lastly, Rogers’ diffusion and

adoption theory offers more versatility when characterizing micro-interactions. A case in point

is compadrazgo relations at FF segment which functionalist determinants would have trouble to

operationalize.

6. Conclusions

By focusing on fragmented and concentrated forms of supply and demand, this paper has

developed and applied a SGM to trace, describe and explain governance dynamics and modes

stemming from state-sponsored standardization in the fiber chain. In contrast to a macro

governance typology, attention has been paid to domestic micro and meso interactions among

buyers, suppliers and middlemen using theory of coordination, theory of conventions and theory

of diffusion and adoption. Standardization processes have been assessed as drivers of change in

GVC governance modes and dynamics as well as the pro-market bend of the developmental

state in steering these processes at the regional and national level.

Failure of MITINCI standardization between 1997-1999 showed that state subsidies are

insufficient for achieving standards endogenization. This process also tested the resilience of

non-market interactions such as compadrazgo resulting in static governance mode at the

cornerstone FF segment. However, structural and governance shifts have been generated by

PTN standardization between 2002 and 2013. Organization and formalization of SPs into LCCs

has led to horizontal mobility towards CF segment through supply concentration while vertical

linkages of STIs have configured market governance and horizontal mobility of the latter

towards CC segment as fiber is increasingly sourced by concentrated suppliers. Moreover,

product and process upgrading fostered by PTN adoption has resulted in value added goods 22

exported to international markets and still marginal but significant interactions with LCPs.

Access of bottom-end actors to international markets via commercial alliances with STIs is one

of the major achievements of standardization in the pursuit of national and global development

goals. However, in contrast to partial success in social and market inclusion, caution is

required when assessing long-term sustainability of PTN standardization due to more recent

credit-driven LCC replication and mismanagement of loaned funds which may damage PTN

standardization.

Finally, we show empirically that far from homogenous GVC governance, segmented modes

co-exist but do not co-evolve towards a single and relatively coherent mode of overall market

governance as PTN standardization unfolds. Furthermore, governance modes can overlap

within chain segments. Overall, following the path traced by the MTB approach, the SGM

constitutes an incremental yet valuable improvement over linear GVC analytical perspectives

because chain dynamics can be assessed holistically. The SGM accommodates segmented

governance modes while expanding analytical coverage from vertical to horizontal interactions

and mobility within and between segments. Although our conclusions are limited by the

specificity of our case we believe that the SGM offers promising opportunities for international

development scholars and policy makers as a more comprehensive understanding of structural

change in commodity chains may illuminate theoretical and policy perspectives aimed at

tackling market exclusion and broader sustainable development challenges”. Therefore, we

recommend comparative studies applying the model on commodity chains across countries and

sectors to test its validity and advance our understanding on governance dynamics.

23

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Figure 1: Geographical concentration of the alpaca fiber production in Peru

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Figure 2: Linear versus segmented Global Value Chain

Figure 3 Segmented structure of the alpaca fibre chain during MITINCI standardization

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Figure 4 Segmented structure of the alpaca fibre chain during PTN standardization

Figure 5a Segmented governance modes stemming from MITINCI standardization,1997–1999

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Figure 5b Segmented governance modes stemming from PTN standardization,2002–2013

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