Abstract:

Studies of smallholder market participation typically measure institutional arrangements using binary channel-participation indicators or equal-weight additive indices. Both discard information: binary indicators lose discriminating power once a channel is used almost universally, and additive indices impose an arbitrary equal-weight structure that is empirically unjustified. This paper develops a principal component approach to measuring institutional intensity: the latent, multi-dimensional way farmers engage with, assess, and transact through alternative marketing channels. Using survey data from 577 smallholder potato farmers in Elgeyo Marakwet County, Kenya, we subjected sixteen channel-specific indicators (benefits, challenges, opportunities, governance, and transaction volume, across spot-market, broker, cooperative, and contract channels) to principal component analysis. The data were suitable for dimension reduction (KMO = 0.74; Bartlett's test p < 0.001). Five orthogonal components emerged. Two broker-dominated components were separated from this structure and were excluded, reflecting the pervasive, distinctive role of broker intermediation in this value chain. We discuss construct validity and transferability to other value chains. The contribution is methodological: a replicable framework for measuring market governance in smallholder settings.