Spillovers from modern supply chains to traditional markets: product innovation and adoption by smallholders

There is an emerging body of literature analyzing how smallholder farmers in developing countries can benefit from modern supply chains. However, most of the available studies concentrate on export markets and fail to capture spillover effects that modern supply chains may have onlocal markets. Here, we analyze the case of sweet pepper in Thailand, which was initially introduced as a product innovation in modern supplychains, but which is now widely traded also in more traditional markets. Using survey data from smallholder farmers and econometric techniques,we show that sweet pepper cultivation contributes significantly to higher household incomes. Strikingly, at this stage, participation in modernsupply chains does not lead to higher incomes than supplying sweet pepper to traditional markets. However, the results also indicate that missingland titles, weak infrastructure conditions, and limited access to information constituted serious constraints during the early phases of sweet pepperadoption. Such constraints need to be overcome, so that smallholder farmers are better prepared for the prompt reactions needed under rapidly changing market conditions.