Building theory: Legal embeddedness as a new notion in GPN theory

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farming enterprises. This is only possible when there are official papers for the land and the small-scale relief of the land is not too steep and allows for highly mechanized agriculture and, thus, seldom the case in the Romanian Carpathians. (3), the last possibility is renting or buying of farmers’ land when they are trying to grow their own business. For that process, social contacts, as well as the network embeddedness through good connections to financiers and local authorities, must be supplied. Further, the parcels of land should be neighbouring or at least close by. These farmers tend to be part of a young, well-educated farmer generation, who themselves are trying to grow their businesses into industrial farming while keeping the “intravilan” part of the holdings into peasant agriculture. These three possibilities end up in a reduction of traditional farming methods, smallholder agriculture and biodiverse, no- to low input integrated farming systems.

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benefits (Hess & Coe, 2006; Rainnie et al., 2011). This is especially fostered as law enforcement improves in Romania.

Through the high degrees of societal and territorial embeddedness, and consequently developed lock-in effects, many farmers become stuck within their traditionally functioning structure of distribution channels. However, farmer markets are no longer a legally embedded outlet and police are showing up at street vendors and roadside sales to check certificates, and production of processed dairy products must traceably happen according to EU regulations. While nothing changed at the smallholders’ production – neither the animal husbandry, nor the hygiene at the processing level, nor the quality of products or targeted distribution channels – smallholders can no longer sell their products legally. Even though the networks around them are still in place, with roadside sales and farmer markets still being visited by many customers, legal disembedding pushes them into product-downgrading within their production. Instead of more complex, elaborated dairy products, they now sell raw milk to globally acting intermediaries and are joining global value chains. These buyer-driven chains, with globally acting dairies squeezing the prize for the primary producers, are the new legal option available to smallholders. If they resist this option, they are seen as “the non-registered and undeclared economy”.

That means having to accept working in informal, undeclared conditions, which are not legal while not being able to access subsidies and suffering a reputational loss. This decision also goes along with societal and network disembedding as described in section 4 and might also end up in a downgrade of social status. Even though only empirically tested in the Romanian smallholder agri-food network, the push of businesses toward informality through new regulations can be expected to have an enormous impact on business structures. Thus, the notion of legal embeddedness should be a new category of embeddedness, added to the categories of “societal”, “network”, and “territorial” as proposed earlier by Henderson et al., (2002) and Hess & Coe (2006).

Through the lens of the concept of SFSC (Renting et al., 2003; van der Ploeg, 2010), the legal disembedding of short food supply chains, via roadside sales and farmer markets as described in section 5, leads to similar theoretical conclusions as the dairy example of

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section 4. The whole structure of existing SFSCs from integrated peasant farming systems is legally disembedded through the Romanian state as a result of the clash of traditionally grown, informal and legally accepted grey market structures around the smallholder economy and the willingness to live up to EU regulations, which concern hygiene in agri-food chains and taxation and black market combatting. The results are changes in the land use patterns, with smallholders clearing their pastures to access better-paying subsidies and joining global supply chains through specialized production. However, their bargaining power toward their buyers is very limited and ecological consequences are contradicting the idea of sustainable rural development. Other forms of embeddedness, which are well established for smallholders in the rural areas of the Romanian Carpathians, are not countering the impact of the legal disembedding because collective bargaining power is very low, due to missing cooperatives and farmers’ associations.

Using the empirically grounded information from these two case studies, the need for a new notion of “legal embeddedness” becomes clear. In a consequence, the best situation of legal embedding is when businesses or structures are fostered by legal institutions, be it through direct or indirect subsidies or fostering legislation. The mediocre situation might be described as legally acceptable, which might have been the case for smallholders’ distribution channels before accessing the European Union and adapting legal frameworks in the direction of its regulations. Legal disembeddedness, however, must be understood as the situation of a businesses, operating in informal and illegal zones, but it must not be confused with illegal businesses. It is crucial to understand that disembedding is a process which must happen before being legally disembedded.

Thus, legal disembedding is a process of illegalization of business practices that have been legal before. This legal disembedding in the complex production networks of today’s globalized economy does not only concern a single business practice but the whole connected production network. This is especially the case, when, as in Romania, millions of stakeholders are hit directly by the change of legal institutions. A similar impact can be expected for legal embedding, which can be understood as the legalization of practices that were illegal before and changed the whole production network. The pace and communication of the process of (dis-)embedding, as well as the preparation of affected

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stakeholders, might, however, influence their resilience. As section 4 and 6 showed, the inclusion of legal disembedding also requires a stronger consideration of informal practices, distribution channels, and agreements, when analysing smallholder production networks through the GPN lens.