Vertical Coordination, Market Power, and Performance in Contract Farming: A Multi-Dimensional Assessment of the Processing Tomato Supply Chain in Thailand

Abstract This study contributes to the industrial organization literature on vertical coordination and contract governance in agri-food systems by providing a multi-dimensional empirical assessment of a processing tomato supply chain in Upper Northeastern Thailand, where smallholder farmers engage processors through contract farming arrangements. Building on transaction cost economics and principal-agent theory, a comprehensive measurement framework comprising 56 performance indicators organized across nine dimensions was developed and applied to 346 contracted farmers across four provinces during the 2024–2025 production season. Stochastic frontier analysis (SFA) was employed to estimate farm-level technical efficiency, while Spearman rank correlation analysis examined linkages between relational governance dimensions and farm-level outcomes. Results reveal substantial vertical coordination failures, particularly in joint decision-making (mean = 2.08 ± 1.09) and problem-solving (mean = 1.77 ± 1.11), alongside pronounced market power asymmetries where farmers report high processor leverage (RBA9 = 3.49) but limited bargaining capacity (RBA8 = 2.46). Traceability infrastructure is underdeveloped (only 31.13 % of farmers). Mean technical efficiency is 69.10 %, indicating a 30.9 % output gap attributable to managerial and agronomic constraints, with substantial provincial variation ranging from 55.47 % in Nakhon Phanom to 89.86 % in Buengkan. The Cobb-Douglas production frontier reveals increasing returns to scale (Σβ = 2.015), while farming experience, furrow irrigation, and harvest frequency significantly reduce technical inefficiency. Critically, information sharing (r s = 0.124, p = 0.021) and resource allocation fairness (r s = 0.114, p = 0.034) are significantly associated with farm profit but not with technical efficiency, establishing a dual-pathway finding: relational governance improves economic outcomes through market-side mechanisms such as improved pricing, reduced transaction costs, and more equitable rent distribution whereas technical efficiency is driven by agronomic factors orthogonal to governance quality. Policy recommendations address contract design reform, producer organization development, targeted extension services, traceability infrastructure investment, and competitive market structure oversight.