Value-chain clusters and aquaculture innovation in Bangladesh

Farmers adopting and implementing innovations, such as new technologies and new products, often require "collaborative inter-segment innovation" by other actors in other segments of the value chain, such as wholesalers implementing new product innovations such as supply of commercial fish feed and chemicals and buying and marketing non-traditional fish species. We tested whether the clustering, and thus economies of agglomeration with implied lower transaction costs, encourage and facilitate farmers to innovate. That potential determinant of farmer choices has not been studied in agriculture or aquaculture or indeed the food sector. We use a unique data set from our own primary survey of the aquaculture value chain in Bangladesh, including micro data for 1500 fish farm households and 20 districts (77 villages) for meso level data. We calculate an index to include both horizontal agglomeration and vertical interconnections among actors in the value chain. We find being in an area with a high clustering index is associated with a higher probability of farmers using more modern inputs and growing non-traditional commodity fish species, controlling for farmers' other characteristics as well as proximity to cities.