Tourism Value Chain Governance

Abstract

Over the past two decades, researchers and practitioners have given considerable attention to issues of tourism value chain governance. To establish a systematic understanding of the current research contributions and gaps, this study provides a review of published studies on the topic. Various dimensions of tourism value chain governance, namely, policy, destination management and marketing, integration of distribution channels, and sustainability of the tourism value chain, are examined. Content analysis is used to provide quantitative evidence and hence a more objective evaluation. The results show that research on tourism value chain governance remains limited, and the development of each dimension unbalanced. An agenda for future research is proposed, given the indications that both qualitative and quantitative investigations are needed to establish the most appropriate governance models for tourism value chains.

Keywords

value chain tourism governance power relations

Introduction

World tourism has experienced significant growth over the past two or three decades, bringing considerable benefits to all actors involved in the tourism value chain such as governments, suppliers, intermediaries, and tourists themselves. At the same time, however, conflicts between the different actors have become increasingly intense, which in turn has negatively affected the sustainability of tourism development (see, e.g., Lee, Riley, and Hampton 2010; Zhang, Song, and Huang 2009). For example, there is evidence that tour operators tend to jeopardize the image, profit margins, and long-term profitability of small- and medium-sized hotels in Mediterranean summer seaside resorts so as to maximize their own profits (Bastakis, Buhalis, and Butler 2004). In practice, therefore, it is especially important to emphasize issues of tourism value chain governance. Governance in this context refers to the sum of the ways in which individuals and institutions deal with their common affairs (T.G. Weiss 2000). It is a continuing process through which conflicting or diverse interests may be accommodated and cooperative action taken (UN Habitat 2006). Purnomo, Guizol, and Muhtaman (2009) suggest that good governance ensures that interactions between different actors involved in the value chain are efficient and effective.

Given the importance of governance issues in the tourism industry, researchers have shown considerable interest in the theme. Over the past few years, an increasing number of studies have addressed the specific dimensions of tourism value chain governance from the perspectives of government, local communities, festivals, protected areas, hotels, tour operators, travel agencies, and the value chain as a whole (see, e.g., Berne, Garcia-Gonzalez, and Mugica 2012; Romero and Tejada 2011; Jamal and Stronza 2009; Wilson, Nielsen, and Buultjens 2009). Although a lot of work has been done, few attempts have been made to analyze the existing literature systematically. There is no comprehensive and in-depth review of the published research, which makes it difficult to accurately evaluate the current status of the field, identify the research contributions and gaps, and establish future research agendas worthy of further exploration.

This study seeks to tackle this challenge by inventorizing the research on tourism value chain governance recently published in peer-reviewed journals. Its main objective is to provide a comprehensive and in-depth review of this literature. Its specific goals are (1) to offer a descriptive analysis of the tourism value chain governance research based on year of publication, journal title, research methods, and research themes; (2) to identify the contributions and limitations of the current research; and (3) to propose an agenda for future research in this area based on the structure, conduct, and performance framework (SCP). Content analysis techniques are used to provide quantitative evidence for the objective evaluations of the literature.

The rest of this paper is organized as follows. The second section defines tourism value chain governance; the third section introduces the research methodology; the fourth section offers a descriptive analysis of the published studies based on publication year, journal title, research method, and theme; the fifth section evaluates the published studies on tourism value chain governance based on the SCP framework; and the final section presents conclusions and an agenda for future research.

Tourism Value Chain Governance

Tourism Value Chain

The concept of a value chain was first introduced by Porter (1985), according to whom “every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product” (p. 36). The integration of these activities generates profit for the firm and creates value for customers in the form of a value chain. This can be used at the micro level to trace the key source of a firm’s competitive advantage.

With the division of labor and specialization of firms, value is created not only by the firm itself but also by different companies located across different areas or even countries. Consequently, in addition to Porter’s micro value chain, the concept of the macro value chain has also emerged (see, e.g., Romero and Tejada 2011; Freeman and Liedtka 1997). The macro value chain involves the full range of value-added activities required to bring a product or service from the conception or design stage, through the different phases of production, delivery to the ultimate consumers, and then to final disposal or recycling after use (Romero and Tejada 2011; Purnomo, Guizol, and Muhtaman 2009; Kaplinksy and Morris 2001). Players in the macro value chain are bundled together to cocreate and codeliver use value to customers. At the same time, with sales of use value, players seek to capture the exchange value and generate profit for themselves if this exceeds the collective costs of performing all the required activities (Cawley and Gillmor 2008). Instead of firm-specific activities, the concept of a macro value chain has been applied mainly to industry activities, with much interest in the relationships between different actors participating in the value chain (Romero and Tejada 2011). In this article, the term value chain is used to refer to the macro level.

In terms of definition, individuals, organizations, and firms involved in the tourism industry can be seen as nodes in a tourism value chain, collaborating to cocreate and codeliver sustained value for tourists and at the same time generating profits for themselves (Romero and Tejada 2011). Although it is difficult to profile all the actors along a value chain, a typology may be beneficial in understanding its different components. Generally speaking, actors along a tourism value chain can be categorized into four tiers: planners or designers of the basic tourism product, suppliers of products and services, tourism intermediaries, and tourists themselves (Romero and Tejada 2011; Kaplinksy and Morris 2001). Figure 1 presents a simplified typology of these actors.

Figure 1.

A simplified typology of actors along the tourism value chain

The planners or designers of the basic tourism product are the actors responsible for policy making and planning, and are displayed at the very beginning of the value chain. Tourism products and services include attractions, accommodation, restaurants, bars, souvenir shops, airlines, transportation and so forth, which may be operated by governments, contractors, or local residents. These suppliers provide the primary product or service to tourists directly or indirectly via intermediaries. There are two possibilities in the third tier of the value chain: tourism intermediaries who purchase products or services from suppliers and sell them to tourists, or the tourists themselves, if they purchase directly from suppliers. The chain between suppliers of tourism products and tourists is described by the dotted lines in Figure 1 in order to distinguish it from the former possibility. Tourism intermediaries can be further divided into tour operators (wholesalers) and travel agencies (retailers). If tourists purchase products or services via intermediaries, they will be located at the fourth tier of the value chain. As described in Figure 1, on one hand tourism products and services can be offered to tourists directly or indirectly via intermediaries, constituting a downward products-and-services flow. On the other hand, with the exchange of tourism products and services, cash flow is moving upward, which will generate profit for actors involved in the value chain if the cash flow exceeds the collective costs of performing all the required transactions (Cawley and Gillmor 2008).

Value Chain Governance

To study the relationships between the various actors involved in the tourism value chain, the concept of value chain governance is critical. The term governance refers here to interorganizational governance along the tourism value chain, which is not a new concept and has attracted considerable attention from researchers over recent decades (see, e.g., Wathne and Heide 2004; Poppo and Zenger 2002; Heide and John 1992). Various theoretical perspectives from a wide range of disciplines have been adopted by researchers to explain this form of governance. Among them, transaction cost economics and the social network theory have provided the main building blocks for the theoretical framework of value chains (Williamson 1979; Granovetter 1985).

Transaction cost economics was the starting point for academic debate on interorganizational governance. It proposed that arm’s-length markets and a vertically integrated hierarchy dichotomize governance structures based on their transaction cost differences. Arm’s-length markets imply that discrete transactions occur between organizations. The transactions in markets have “a distinct beginning, short duration and sharp ending by performance,” as well as “complete transferability” and “no joint efforts,” their primary focus being “on the substance of exchange and no future is anticipated” (Dwyer, Schurr, and Oh 1987, p. 13). While price is the dominant governance mechanism of markets, transactions within a vertically integrated hierarchy are mainly regulated by authority relationships (Williamson 1979). Moreover, transaction cost economics emphasizes the use of formal contracts to govern interorganizational relationships against possible hazards, with mutual agreement on their rights and obligations (Williamson 1973).

However, this approach has been criticized by a number of researchers, especially those interested in social network theory. These academics argue that transaction cost economics treat transactions as independent of the larger societal context, which is far from being the reality (Powell 1990). In fact, the boundaries of organizations are blurred when they engage in certain forms of collaboration that resemble neither arm’s-length markets nor vertical integration, but networks (Powell 1990). Based on this perspective, Jones, Hesterly, and Borgatti (1997) integrated transaction cost economics and social network theory to provide a framework for exploring the conditions of network governance and the mechanisms adopted in it. In a network governance structure, relational governance mechanisms such as trust and relational norms are used to safeguard interorganizational relations informally, promoting flexibility, solidarity, and information exchange among organizations (Gulati 1995; Granovetter 1985).

Tourism Value Chain Governance

The concept of the value chain is derived from the manufacturing industry, and most of the current research on governance is based on data collected in this context. Issues of value chain governance are obviously critical for the sustainable development of the tourism industry as well. As noted earlier, tourism products and services are jointly offered by a number of individual actors along the value chain. That is, every node of the chain can affect the value attained by tourists, which in turn affects the profit of individual actors. Thus, the success of individual tourism actors, as well as of the entire tourism value chain, is dependent on good interorganizational governance to ensure efficient coordination, cooperation, and integration.

Furthermore, because of the peculiar characteristics of the tourism industry, its governance differs from that found in the manufacturing industries in many respects, highlighting the need for research on the topic to be conducted within the specific context of tourism. First, tourism policy making and planning is highly controlled by governments and destination management organizations (DMOs), especially in developing countries (Krutwaysho and Bramwell 2010; Yüksel, Bramwell, and Yüksel 2005), so their position of power is worthy of attention. Second, unlike manufacturing products, tourism products and services cannot be moved from one place to another. On the contrary, tourists need to travel to specific destinations to consume products and services either by themselves or through intermediaries (Zhang, Song, and Huang 2009). As a bridge between tourism products or services and tourists, the role of intermediaries such as tour operators and travel agencies are very important in tourism value chain governance. Third, tourism products cannot be evaluated prior to their consumption, which means that the opportunistic behaviors of upstream suppliers and downstream customers (such as cheating and lying) are more difficult to monitor than in the manufacturing industry. Last but not least, because of the public nature of tourism resources, there is no incentive for organizations to voluntarily avoid the overexploitation of resources, including natural resources and cultural assets (Beritelli 2011). It is therefore crucial to investigate tourism value chain governance in order to attain a balance between economic development and resource protection.

On the basis of these specific characteristics of tourism value chain governance, a number of researchers have tried to explore the issues over the past decade (see, e.g., Beaumont and Dredge 2010; Romero and Tejada 2011; Jamal and Stronza 2009; Wilson, Nielsen, and Buultjens 2009). The chief objective of this study is to provide a comprehensive and in-depth review of this research and propose an agenda for future work.

Method

In this study, content analysis was used to provide quantitative evidence for an objective evaluation of the literature. Content analysis is a popular technique for “the objective, systematic, and quantitative description of the manifest content of communication” (Berelson 1952, p. 55). It has been used by researchers to synthesize and evaluate published studies, as it helps quantify the qualitative information with a view to evaluating the structure and content of the articles (Krippendorff 2004; Brewerton and Millward 2001). The procedures involved in content analysis include sampling from the available population of data, determining the unit of analysis, identifying the coding scheme, and analyzing the data (Kassarjian 1977).

Sampling

In this study, several academic databases were used to search for published articles relevant to tourism value chain governance, including Elsevier Science (www-sciencedirect-com.web.bisu.edu.cn), ProQuest (http://proquest.umi.com), EBSCOhost (https://www-ebscohost-com.web.bisu.edu.cn), Ingenta (http://chinesesites.library.ingentaconnect.com), and Google Scholar (http://scholar.google.com.hk). These are the most frequently used academic databases. The keyword tourism together with governance, collaboration, coordination, cooperation, and integration were used to search for relevant publications in these databases. The time period was not restricted, since the aim was to generate a comprehensive list of publications on the topic.

Only full-length articles published in the top six peer-reviewed journals were collected, since these journals are the primary means through which scholars seek to disseminate their research. The top six journals are Annals of Tourism Research, Tourism Management, Journal of Travel Research, Journal of Sustainable Tourism, Journal of Travel & Tourism Marketing, and Tourism Analysis. Limiting the search in this manner was a way to ensure the quality of the data analysis (Henttonen 2010). After the initial collection phase, the authors checked the content of the articles individually to see whether each complied with the sampling criteria. Those papers that did not, or were irrelevant to the topic of tourism value chain governance, were excluded from the study. A total of 45 articles were included in the database for analysis.

Categorization

Based on the objectives of this study, the unit of content analysis was identified as the single paper. A coding scheme was developed to categorize the articles in the database. This is a necessary step in order to minimize the use of subjective judgment in the analytical process (Krippendorff 2004) and help ensure the analysis is based on a comprehensive list of relevant studies (Line and Runyan 2012). For consistency and comprehensiveness, the articles were sorted based on year of publication, journal title, research methods, and themes. These parameters were then identified as the components of the basic coding scheme.

With regard to research methods, each article was further subcoded as a conceptual, qualitative, or quantitative study. Using an inductive approach, the research themes were then also subcoded along five dimensions: tourism policy, destination management, destination marketing, integration of distribution channels, and sustainability of tourism value chains. These coding schemes were used to allocate each article to one subcoding category under the basic scheme.

Validity and Reliability

In content analysis, because the researcher’s subjective judgment should be minimized to obtain an objective assessment, issues of validity and reliability are especially important. This was addressed by strictly following the procedure for content analysis suggested by Kassarjian (1977) with all steps being performed by one of the coauthors, who had been trained in content analysis techniques and was familiar with the concept of tourism value chain governance. The results of the content analysis were then cross-checked by all the coauthors.

Descriptive Analysis

To understand the development of research on tourism value chain governance, the first step was to conduct a descriptive analysis of the publications across different years and journals. As shown in Figure 2, the first paper on the topic was published in 1988, and focused mainly on tourism value chain governance and community-based tourism planning. However, the quantity of papers remained small during 1988-2006, with a significant increase from 2007 onwards. Before 2007, the articles were mainly published in journals such as Annals of Tourism Research (n = 11) and Tourism Management (n = 3). After 2007, the publications became more diverse, with a total of 31 articles published since then in a variety of different journals: Annals of Tourism Research (n = 5), Tourism Management (n = 8), Journal of Travel Research (n = 5), Journal of Sustainable Tourism (n = 9), Journal of Travel & Tourism Marketing (n = 1), and Tourism Analysis (n = 3). The surge in the number of published papers in this area in recent years suggests the topic has attracted increasing attention from researchers.

Figure 2.

Distribution of publications across years

Research Methods

To provide an assessment of the research methods used, three types were identified: conceptual, qualitative, and quantitative studies. Figure 3 shows the distribution of the papers across these categories. Most were qualitative in nature, with the number of conceptual and qualitative studies being 12 (27%) and 28 (62%), respectively. Moreover, case studies are particularly prominent in this field.

Figure 3.

Distribution of publications across methods

Although their use has declined sharply in many fields over the past few decades as statistical methods have developed (George and Bennett 2004), case studies of interorganizational governance in the tourism value chain still dominate research on this topic. Among the 45 papers studied, 31, or 70%, had used a case study approach. This is not surprising for a research field in its early stages of development, as the case study approach serves the “heuristic purpose of inductively identifying additional variables and generating hypotheses” and enables the development of theories on “how different combinations of independent variables interact to produce different levels or types of dependent variables” (George and Bennett 2004, pp. 45-46).

Research Themes

An inductive approach was used to generalize the main themes of the 45 papers. Five themes were identified through a careful examination of the content: tourism policy issues, destination management, destination marketing, integration of the distribution channel, and sustainability of the tourism value chain. Although some articles covered more than one theme because of the interdisciplinary nature of tourism research, each article was categorized only by the theme which was most clearly manifested. Figure 4 shows the distribution of the publications across the five themes. Of the 45 articles, most (n = 22) dealt with destination management, 10 focused on destination marketing, 6 looked at tourism policy issues, 4 examined the integration of the distribution channel, and 3 articles studied the sustainability of the tourism value chain. This composition indicates that destination management and marketing attracted most attention from researchers. The distribution of the research themes over time is presented in Table 1.

Figure 4.

Distribution of publications across themes

Table 1.

Number of Publications by Theme over Time

Themes /Year	Tourism Policy Issues	Destination Management	Destination Marketing	Integration of Distribution Channels	Sustainability of the Tourism Value Chain
1988	–	1	–	–	–
1991	–	1	–	–	–
1995	–	2	1	–	–
1997	–	1	–	–	–
1998	–	–	1	–	1
1999	–	1	–	–	–
2000	1	–	–	–	–
2001	–	–	–	1	–
2005	2	–	–	–	–
2006	–	–	–	1	–
2007	–	1	3	–	–
2008	–	2	2	–	1
2009	–	4	3	1	–
2010	2	3	–	–	–
2011	2	4	1	1	1
Total	7	20	11	4	3

Source: Compiled by the authors.

Tourism policy issues

Table 1 shows that research on tourism value chain governance and policy issues has attracted reasonable academic attention, especially in recent years. With the globalization of the economy and society as well as the popularity of neoliberalism, the role of government has shifted from “top–down” policy formulation and implementation to the “bottom–up” approach of engaging different stakeholders in decision making (Vernon et al. 2005). In the tourism industry, however, the involvement of different stakeholders in the process of policy making and implementation has been relatively weak because of the diverse and fragmented nature of the industry and the conflicts between different actors. Appropriate tourism value chain governance is therefore essential to the success of policy formulation and implementation.

Of the seven articles related to tourism policy issues, one was published in Tourism Management in 2011; four in Annals of Tourism Research in 2000, 2005, and 2010; and two in the Journal of Sustainable Tourism in 2010 and 2011. With regard to the methods used, two of these articles were conceptual studies, while the others were case studies based on in-person, in-depth interviews.

In view of the importance of the tourism value chain governance in facilitating the effective formulation and implementation of policy, several researchers have focused on the problems and challenges encountered during the collaborative tourism policy-making process such as power asymmetry, governance structures, right of representation, and evaluation of outcomes (Wang and Bramwell 2012; Krutwaysho and Bramwell 2010; Vernon et al. 2005; Yüksel, Bramwell, and Yüksel 2005; Göymen 2000). Furthermore, a handful of researchers have explored ways in which actors in the tourism value chain can resolve these problems and overcome the challenges of the collaborative policy-making and implementation process (Hall 2011; Beaumont and Dredge 2010). For example, Hall (2011) identifies a typology of governance structures that might be suitable for collaborative tourism policy making, and Beaumont and Dredge (2010) investigate the operation of different governance structures and their effects on such a process.

Destination management

Partly because of the public nature of tourism destinations and the tragedy of the commons, their management remains one of the most debated topics in this field of research. Researchers agree that both public and private organizations along the tourism value chain in a destination should be effectively governed, with best practice being applied in the development of governance principles and collaborative theories. Coordination, collaboration, and cooperation among different actors along the tourism value chain can facilitate consensus and learning during the destination planning and management process, which in turn could ensure the protection of the public interest.

Significant efforts have been made to understand the need for tourism value chain governance in destination management (see, e.g., Arnaboldi and Spiller 2011; Haugland et al. 2011; Zach and Racherla 2011; Jamal and Stronza 2009; Beritelli, Bieger, and Laesser 2007; Selin and Chavez 1995; Selin and Beason 1991; Murphy 1988). However, the empirical findings are inconclusive. For example, researchers have found that there are conflicts and challenges during collaborative destination management, caused by power asymmetry and divergent interests as well as contextual factors such as history, markets, culture, legislation, and politics (see, e.g., Wesley and Pforr 2010; Okazaki 2008; Trousdale 1999; Reed 1997; Jamal and Getz 1995). Others have explored the effectiveness of the various governance models in tourism destination planning and management (see, e.g., Beritelli 2011; Erkuş-Öztürk and Eraydın 2010; Lade 2010; McCool 2009; Plummer and Fennell 2009) and developed measurement scales with a view to evaluating these governance models in the context of destination management (see, e.g., Eagles 2009; Cawley and Gillmor 2008).

Destination marketing

As well as destination management, tourism destination marketing is another issue that is closely related to tourism value chain governance. Because of the fragmented nature of the tourism industry, different actors along the destination value chain need to work together to create and deliver sustained value for tourists. However, tourists see the destination as a single product that offers them an integrated experience. Thus, destination marketing activities should be coordinated to integrate individual actors’ efforts along the value chain.

Research on tourism value chain governance and destination marketing has mainly focused on the nature and dynamics of the governance process in collaborative marketing (see, e.g., Hultman and Hall 2012; Wang 2008; Wang and Fesenmaier 2007; Wang and Xiang 2007; Palmer and Bejou 1995). Several researchers have also showed considerable interest in the factors that facilitate effective interorganizational governance for destination marketing such as number and diversity of actors, communication and interaction channels between organizations, social relations, as well as organizational capabilities (d’Angella and Go 2009; Lemmetyinen and Go 2009; Bhat and Milne 2008). Others have tried to evaluate the effects of different governance styles on such marketing (McKinney, Hazeldine, and Chawla 2009; Paskaleva-Shapira 2007; Palmer 1998). However, a widely accepted governance model has yet to be developed.

Integration of distribution channels

Tourism distribution channels are “inter-organizational networks in which members cooperate to achieve supra-organizational goals in competition with other channels and to achieve their particular performance goals in competition with other companies off and in the network” (Berne, Garcia-Gonzalez, and Mugica 2012, p. 206). Here the term integration means “the extent to which separate parties work together in a cooperative manner to arrive at mutually acceptable outcomes” (O’Leary-Kelly and Flores 2002, p. 226). The integration of tourism distribution channels could ensure that all actors achieve the best possible outcomes (Ford, Wang, and Vestal 2012). The issue has, however, received relatively little attention over the past few years.

In view of the key roles played by small- and medium-sized tourism enterprises in distribution channels, researchers have focused considerable attention on their development within the competitive tourism environment, as well as their relationships with larger enterprises (Novelli, Schmitz, and Spencer 2006). Scholars have also been interested in the strategies adopted, and problems encountered, during the process of integration of distribution channels (Zhang et al. 2010; Wilson, Nielsen, and Buultjens 2009; Lafferty and Van Fossen 2001). Although much progress has been achieved, there is still a long way to go to develop effective models of tourism value chain governance that can facilitate the horizontal and vertical integration of distribution channels.

Sustainability of the tourism value chain

As well as focusing on issues of policy, destination management and marketing, and the integration of the tourism value chain, a few articles have also looked at the sustainability of the tourism value chain as a whole (see, e.g., Romero and Tejada 2011; Tribe 2008; Tremblay 1998). By contrast, articles related to this issue have mainly taken a macro perspective.

In more recent years, a few researchers have proposed that a value chain model should be adopted for the tourism industry and emphasized the importance of governance issues (Romero and Tejada 2011). Others have illustrated the significance of combing the transaction cost, competences-based, network, and critical theories with interorganizational governance in the value chain (Tribe 2008; Tremblay 1998). However, such governance does not develop naturally but requires considerable effort from different actors along the whole value chain. How this can be achieved is an important topic worthy of future research.

SCP Framework and Tourism Value Chain Governance

It is valuable to place the review in a relevant framework with a view to synthesizing the studies on tourism value chain governance and to offering guidance for future research. The basis for the conceptual framework proposed here is the structure-conduct-performance paradigm developed by the industrial economists such as Bain (1956) and Mason (1957). The paradigm describes the relationships between the governance structure, process, and performance (Berne, Garcia-Gonzalez, and Mugica 2012). According to this paradigm, governance environment and structure may affect governance outcomes indirectly through its effect on governance mechanisms among the chain actors (Molm 1990). Figure 5 illustrates this conceptual framework.

Figure 5.

A framework for researching value chain governance in tourism

Governance Environment

Although interorganizational governance is essential for tourism policy making, destination planning and management, destination marketing, integration of distribution channels, and sustainability, attention should first be paid to the governance environment before the identification of specific models. The environment is defined here as the physical and social factors that should be taken into consideration directly during the decision-making process (Duncan 1972). The effects of the environment on the governance model in the tourism value chain have been addressed by a number of researchers (see, e.g., Beaumont and Dredge 2010; Yüksel, Bramwell, and Yüksel 2005; Trousdale 1999).

A country’s legal system, the changing requirements of tourists, the increasingly varied market segmentation, the globalization of tourism, and advances in information and communications technologies (ICT) all affect the environment and hence the structure and outcome of the governance model applied to the tourism value chain (Göymen 2000). In addition, power distribution is another factor frequently addressed by researchers (Yüksel, Bramwell, and Yüksel 2005). As noted by Yasarata et al. (2010, p. 345), “the politics of tourism is a struggle for power.” Power governs the interactions between actors, all of whom are influencing or trying to influence the formulation of tourism policies and the ways in which they are implemented (Hall 1994). A power imbalance between actors is a common phenomenon in the tourism industry. Consequently, the more powerful members of the value chain often take advantage of the less powerful (small and medium enterprises) when the business environment is unfavorable, forcing them under their control and increasing the possibility of a quasi-hierarchical value chain governance structure being formed (see, e.g., Romero and Tejada 2011; Göymen 2000).

In contrast with the developed countries, which most often have a democratic culture, authority in some developing countries tends to be highly centralized, with governments or their agencies making most policy decisions and providing much of the infrastructure and services (Yüksel, Bramwell, and Yüksel 2005). Central governments and agencies often control the tourism industry through constitutions, laws, ministries, departments, or councils tasked with overseeing tourism development plans, which in turn greatly affect the development of the value chain (Elliott 1983). Such highly centralized authority and reservation of decision-making power to central governments and its agents for activities such as tourism policy making and destination planning, management, and marketing has been considered a major obstacle to the development of appropriate governance (see, e.g., Yüksel, Bramwell, and Yüksel 2005; Göymen 2000). As noted, while tourism value chain governance is being advocated by more and more countries, there is still a long way to go before an effective governance model can be developed.

Governance Structure

According to Gulati (1998, p. 302), governance structure denotes the “formal contractual structures used to organize the partnerships.” Appropriate governance structures could contribute to the development of order, and hence reduce conflict and improve the realization of mutual gains (Williamson 2002). In the tourism industry, no universal governance structure exists along all value chains. Actors along each value chain usually pursue different interests. Therefore, types of governance structure are determined by the power struggles among these actors.

According to Yasarata et al. (2010), while tourism policy making and destination management are normally decentralized activities in developed countries, they tend to be centralized in the developing countries, where decisions are made mostly by government intervention rather than by a pluralistic approach. This proposition has been supported by Krutwaysho and Bramwell (2010), Yüksel, Bramwell, and Yüksel (2005) and Göymen (2000). Krutwaysho and Bramwell (2010) have suggested that tourism policy formulation and implementation in Thailand are strongly centralized and hierarchical, with central government deciding the policies and providing the infrastructure and services. Although the leading actors in tourism policy making and destination planning are often the government and its agencies, they can also be the tourism authorities and industry associations (Greenwood 1993), tourism investors’ associations, and nongovernmental organizations (Yüksel, Bramwell, and Yüksel 2005).

While a quasi-hierarchical structure in tourism policy making and destination planning is common, some researchers have highlighted the need to broaden the notion of decentralization to facilitate the participation of other actors along the value chain (see, e.g., Wesley and Pforr 2010; Plummer and Fennell 2009; Vernon et al. 2005). It has been suggested that governments, tourism suppliers, intermediaries, and communities should all be given equal power in tourism policy making and destination management to enable sustainable development. Wesley and Pforr (2010) have also suggested that attention needs to be paid to the ways in which a society is managed. Complex societal problems tend not to be solved by the traditional “one-way traffic” model but by a “two-way” synergistic model within which various stakeholders interact. Beaumont and Dredge (2010) have further investigated three different governance structures in tourism, namely, council-, community-, and local tourism organization–led networks, and discussed the effects of these structures on local tourism policies.

In the tourism industry, arm’s-length relations exist within some tourism value chains or as part of them. For example, the governance of hotels by large and vertically integrated tour operators has been described as “co-ordination via market relations” (Romero and Tejada 2011, p. 302). This is the usual approach because the hotel product is perfectly defined and the demand categories have very specific product specifications, so suppliers do not need to cooperate with tour operators in defining the product. Furthermore, with the development of the Internet and other forms of ICT, hotel establishments can use diverse channels or intermediaries, including travel agencies or their own firms, to sell and distribute their products to tourists (Romero and Tejada 2011). But although arm’s-length market relations may benefit tourism development at the destination, the fragmentation and diversity of the industry has highlighted the need for network structures among various actors to promote sustainable development (Lee, Riley, and Hampton 2010; Costa and Baggio 2009). As suggested by Uzzi (2005), embedded exchanges have quite distinct characteristics from arm’s-length exchanges, with more emphasis being placed on trust and personal ties rather than explicit contracts, and a greater focus on long-term relationships than immediate gains (Bhat and Milne 2008).

Although some suppliers, especially the larger ones, have developed a good appreciation of different market needs and implemented a sound marketing mix, this is not always the case, particularly for the small- and medium-size enterprises that constitute the majority of tourism businesses (Pearce 2008; Pearce and Tan 2006; Stuart, Pearce, and Weaver 2005). Such enterprises, either because of an unfavorable business environment or the high volatility of the tourism market, usually depend on larger intermediaries for much of their business (see, e.g., Romero and Tejada 2011; Karamustafa 2000; Göymen 2000). The relationship between small and medium enterprises and large, integrated groups largely fits the quasi-hierarchical model. Although the enterprises are legally independent, they are strongly subordinated to tour operators (Romero and Tejada 2011). For example, in Turkey, the suppliers of accommodation services, particularly along the Aegean and the Mediterranean coastlines, depend very much on international tour intermediaries for their business (Karamustafa 2000; Göymen 2000). Similarly, the landscape of European tourism is concentrated around a few large tour operators that dominate the major markets and control extensive networks of suppliers (Adriana 2009). More often than not, the relations between large operators and accommodation suppliers in destinations is described as exploitive and manipulative; this kind of relationship has been established mainly to consolidate large tour operators’ control over the tourism trade and tourist movements (Karamustafa 2000; Bastakis, Buhalis, and Butler 2004).

The hierarchical structure is similar to the concept of vertical integration, comprising vertical mergers across different tourism components such as hotels and airlines (Lafferty and Van Fossen 2001). A hierarchical structure is common when the risks of poor performance by independent suppliers increase if buyers use quality as a brand attribute (Humphrey and Schmitz 2002). In Europe, large tour operators have achieved remarkable vertical growth by integrating their core businesses with transportation services and travel shops via the acquisition of major outgoing agencies. They have also acquired accommodation establishments and incoming tour and coach operators (Bastakis, Buhalis, and Butler 2004). Integrated corporations with a wide range of services tend to increase profit and efficiency (Lafferty and Van Fossen 2001; Weiss 1974). Salinger (1990) has found that large firms are more profitable because they exploit their market power and are more efficient because of economies of scale. The hierarchical structure enables firms to gain a competitive advantage over equally efficient rivals by generating barriers to entry and greater certainty of contracts (Porter 1980; Hamilton and Mgasgas 1997). The accumulated forces deployed by tour operators, however, show signs of oligopoly and have created unfair trade practices in origin markets. In addition, this acutely oligopsonistic phenomenon has also been perceived as harmful to tourism product suppliers in some European destinations (Bastakis, Buhalis, and Butler 2004).

Governance Mechanisms

Governance mechanisms refer to the safeguards that organizations put in place to regulate interorganizational exchange, minimize exposure to opportunism, protect transaction-specific investments, and promote a continued relationship (Burkert, Ivens, and Shan 2012; Jap and Ganesan 2000; Wathne and Heide 2000). The deployment of appropriate governance mechanisms is critical for effective interorganizational governance in the tourism value chain, as it could decrease transaction and coordination costs while increasing organizations’ willingness to cocreate value during the governance process (Jap and Ganesan 2000).

Tourism value chain governance could be realized through price, authority, transactional, or relational mechanisms, or a combination of them (Jap and Ganesan 2000). The price mechanism is used when actors along the tourism value chain exchange through the market, whereas the authority mechanism is used when actors are integrated into a hierarchy of firms (Powell 1990). Furthermore, when actors are governed through an intermediate structure between market and firm, transactional or relational mechanisms, or a combination of them, are used to safeguard interparty business. Transactional mechanisms are the safeguards that “govern inter-party exchange, avoiding uncertainties through legal stipulations and economic incentive systems,” such as legal contracts, or an actor’s investment in assets idiosyncratic to another (Liu, Luo, and Liu 2009, p. 294; Brown, Dev, and Lee 2000). Finally, relational mechanisms tend to focus on “inherent and moral control, governing exchange through consistent goals and cooperative atmosphere,” such as the development of trust and relational norms between actors (Liu, Luo, and Liu 2009, p. 294; Brown, Dev, and Lee 2000).

An evaluation of these various mechanisms has recently been conducted by Beritelli (2011). By investigating a European Alpine tourism destination, Beritelli (2010) found that in contrast with formal contracts, only relational-based mechanisms, in combination with a few communication variables, had a strong positive influence on cooperation between actors along the tourism value chain. However, it is obvious that more research is required in order to provide more evidence on how best to facilitate collaboration, coordination, and cooperation between actors.

Governance Performance

Effective interorganizational governance in the tourism value chain could benefit the development of the industry and facilitate the achievement of more sustainable outcomes (Wesley and Pforr 2010). It has been argued that governance has the potential to foster partnerships, cooperation, and collaborative arrangements, which in turn could promote more equitable and efficient economic performance between different actors (Wesley and Pforr 2010). While the relational and economic performance of interorganizational governance in the value chain have been frequently recognized by researchers, there is still a lack of research on how to measure the performance of different governance models.

Value chain governance versus relational performance

Relational performance can be defined as “the extent to which the partners consider their relationship worthwhile, equitable, productive, and satisfying” (Selnes and Sallis 2003, p. 88). Usually, relationship satisfaction and commitment are regarded as partial indicators of this (see, e.g., Nyaga, Whipple, and Lynch 2010). In fact, various interorganizational governance modes in the tourism value chain will have different effects on the relational performance for actors. In a tourism context, Yodsuwan and Butcher (2011) have developed six scales to measure the satisfaction of collaborators and explored the relationship between such satisfaction and specific interorganizational governance mechanisms. The results showed that relational mechanisms such as trust had the most significant effect on satisfaction. Similarly, in a European Alpine tourism destination, only relational mechanisms combined with communication variables have been shown to positively influence cooperative behavior among actors (Beritelli 2011).

Value chain governance versus economic performance

In contrast with relational performance, economic performance mainly focuses on the reduction of cost and inventory, and the improvement of financial performance. The economic success of individual actors and the whole value chain is dependent on its efficient governance (Haugland et al. 2011; Beritelli, Bieger, and Laesser 2007). As noted by several scholars, governance supports economic performance in a value chain since it facilitates the transfer of information and knowledge between actors (Dyer and Singh 1998; Fischer 1999) and the coordinated development of products and services (Holmen, Pedersen, and Torvatn 2004). According to Hjalager (2010), Beritelli, Bieger, and Laesser (2007), and Rowley, Behrens and D. Krackhardt (2000), effective interorganizational governance in the tourism value chain enhances its stability and helps facilitate deeper knowledge transfer and incremental innovations, thereby ensuring significant market success. Relationships without governance, on the other hand, will always be characterized by conflict, which impedes optimal economic development.

Discussion

As conflicts between different actors in the tourism value chain have become more and more intense, issues of interorganizational governance have attracted increasing attention from researchers and practitioners alike (see, e.g., Arnaboldi and Spiller 2011; Beaumont and Dredge 2010; Yüksel, Bramwell, and Yüksel 2005). This study has provided a comprehensive and in-depth review of the existing literature using a content analysis approach. A descriptive analysis was first conducted based on publication year, journal title, research method, and research themes to understand the development of, and limitations on, existing research on the topic. A systematic conceptual framework was then derived to demonstrate the relationships between governance environment, structure, mechanism, and outcomes.

An Agenda for Future Research

Based on a comprehensive and in-depth review of the existing literature on tourism value chain governance, this study proposes a six-pronged agenda for future research. First, with respect to the governance environment, existing research has mainly focused on power asymmetry and its effect on the interorganizational governance of policy making and destination management and marketing. Little work has been done to examine the effects of legal, economic, cultural, and other contextual factors on governance issues. Even less attention has been paid to the effect of the governance environment on the integration of tourism distribution channels and the sustainability of the value chain as a whole. In fact, power asymmetry in tourism development is the most critical factor affecting such integration and sustainable development. It may also lead to unequal benefit sharing among actors, which in turn may widen the gap between rich and poor. Second, most of the articles on interorganizational governance have focused on issues of destination management and marketing. Little work has been done to compare different tourism distribution channels, particular suppliers and intermediaries, tour operators and travel agencies, and to explore the roles of tourists. More attention could be paid to governance issues arising from the integration of tourism distribution channels. Third, research on the preconditions for, and effects of, different governance mechanisms, as well as the evaluation of outcomes, is still limited. Exploration of these topics is another potential avenue for future research. Fourth, research on the governance environment, structure, mechanisms, and outcomes in the tourism value chain has been carried out mostly in isolation, with their interrelationships largely ignored. These relationships should be extensively investigated. Fifth, this review demonstrates that not enough effort has yet been made to use quantitative methods to test the propositions and hypotheses that have been developed. Although a number of case studies have been carried out, generalization of their findings has been constrained because of their methodological nature. More quantitative work should be conducted to increase the external validity of the conclusions drawn from these qualitative studies. Last, but not least, future work might usefully broaden the conceptual framework proposed in this study by taking a different view of existing research on interorganizational governance of the tourism value chain. This might allow specific governance issues to be identified in a much wider scope.

Limitations of the Current Study

A few limitations of this study should be addressed. First, it reviewed the published research based only on publication year, journal title, research method, and research themes. Other information such as authorship or institutional contribution was not addressed. Second, the review was restricted to peer-refereed papers in the top six journals. Some research on tourism value chain governance may also have been published elsewhere.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The authors would like to acknowledge the financial support of The Hong Kong Polytechnic University (Grant No.: GU-743) and the National Natural Science Foundation of China (Grant No.: 40971292).

Bios

Haiyan Song is chair professor of tourism in the School of Hotel and Tourism Management at The Hong Kong Polytechnic University. His research interests include tourism forecasting and tourism supply chain management.

Jingyan Liu is professor and head of the Department of Hospitality and Service Management in the Sun Yat-sen University Business School, Sun Yat-sen University, China. Her research interests are in the areas of ecotourism, destination management and tourism strategy research.

Gezhi Chen is a PhD student in the Department of Hospitality and Service Management in the Sun Yat-sen University Business School, Sun Yat-sen University, China.

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