Aquaculture farmer organizations and cluster management: concepts and experiences

2.6.3 Commodity techno-economic characteristics
The incentives for establishing coordination mechanisms vary between different 
innovations and commodities. Jaffee and Morton (1995) suggest that the organization 
and performance of private-sector marketing and processing will be influenced by the 
“distinctive techno-economic characteristics of the individual commodities”, as these 
characteristics affect transaction costs (and hence the demand for institutions) through 
influencing the level of asset specificity, uncertainty and frequency of transaction in 
production and marketing. Institutional development requirements and the need for 
coordination mechanisms will increase with demanding techno-economic characteristics 
such as perishability, multiple purchased input production requirements, technical 
sophistication of post-harvest and processing activities, and small quantities produced 
by many farmers. Thus, low levels of institutional development in developing countries 
are likely to be an important constraining factor in the development of institutionally 
demanding commodity systems and are likely to be more important than technological 
development (Dorward 
et al
, 2000). Aquaculture products have institutionally 
demanding techno-economic characteristics (e.g. perishability, strict quality and food 
safety requirements, use of multiple inputs, need for cold chain, and sale and transport 
of live fish), especially if products are bound for export markets. This argument implies 
that in order to support the small-scale aquaculture sector, institutional development is 
needed. FOs are an obvious candidate for solving the sorts of coordination problems 
faced by developing countries and can be well placed to develop the trust needed to 

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Aquaculture farmer organizations and cluster management – Concepts and experiences
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secure credible commitments from different market actors to make mutually beneficial 
and complementary investments through building strong relations with other market 
actors.