The impact of collective quality reputation on markup of food exporting firms: evidence from China

Purpose Food export firms in developing countries face low export price traps and lack sufficient funds/incentives to obtain third-party certification or self-build brands. This study addresses the novel issue of exploring ways to increase the markup of food export firms. Design/methodology/approach This study utilizes ASIF data, China’s firm-level customs matching data, and a constructed GIs (Geographical Indications) database. A panel data fixed effects model is employed, complemented by instrumental variables (IV) and introducing exogenous shocks to address endogeneity concerns. This approach allows the examination of the causal relationship between improvements in collective quality reputation and the markup of Chinese food export firms. Findings The results show that collective quality reputation has significantly increased the markup of Chinese food export firms. Food exporters have higher markups if they export food with higher and stronger heterogeneity in quality, and export to higher-income destination countries. The improvement of collective quality reputation significantly reduces marginal costs and increases the export price markup of food exporters through economies of scale. In addition, collective quality reputation can alleviate information asymmetry in the food industry and weaken the “free-rider” problem. Research limitations/implications To sustain an excellent collective quality reputation and further improve the quality of export food, the government needs to strengthen the governance of the collective quality reputation of the food industry to avoid free-riding behavior. Originality/value This paper manually collects and collates the data on regional public brand certifications at China’s prefectural-level city. It broadens the literature on the impact of collective quality reputation on export firm pricing and provides new evidence from Chinese food exporters from the perspective of food collective quality reputation.