Theory and practice of multi-product farms: Farm butcheries in Umbria

This paper addresses the phenomenon of the on-farm butcher shops that have become increasingly important in the Central Italian region of Umbria over the last decade. Theoretically, farm butcheries are analyzed as multi-produ ct farms that vertically integrate the primary production, processing and r etailing of(mainly) beef and that considerably reduce the cost of each unit produced by jointly producing two or more interrelated goods or services. The practical value of farm butcheries lies in the preservation and valoriz ation of the local Chianina cattle breed and of local resources in general, including social capital and landscape. Farm butcheries contribute to an e ndogenous type of rural development with major macroeconomic returns and th e case exemplifies the central position of the multifunctional farm in the renewal of the European countryside. The economic success of farm butcherie s is explained in terms of the reduction of economic transaction costs and the achievement of economies of scope. The main conclusion of the paper is that the specificity of assets results in substantial competitive advantage s for the organizational form of the multi-product farm in processes of rur al development.