Public procurement for school breakfasts in the Bolivian Altiplan: governance structures enabling smallholder inclusion

Public food procurement offers the prospect for an alternative development path toward market inclusion, upgraded skills, and raised income for smallholder farmers. In Bolivia, the current public administration favors smallholder participation by regulating a preference of up to 40% for smallholders and local producers as opposed to other types of suppliers. However, smallholders' provision to local public institutions remains limited. To analyze the reasons for this, three municipalities with different approaches to smallholder procurement were investigated in a multiple-case study. Using transaction cost theory, our findings show that high transaction costs and pure market coordination act as strong barriers to smallholders' active participation. We found that hybrid governance structures, based on different types of relationship-oriented coordination and market exchange enable the inclusion of smallholders via: a) direct and active support from decision-makers, b) gate openers at the municipalities, and c) community embeddedness that supports trust-building and reduces uncertainty. Thus, our study contributes to opening up the ‘black box’ of hybrids in transaction cost theory by illustrating how social capital influences the mechanisms through which resources are distributed – a dimension inadequately considered in the traditional transaction cost theory approach.