What are Horizontal Linkages?
In a value chain, horizontal linkages are longer-term cooperative arrangements among firms that involve interdependence, trust and resource pooling in order to jointly accomplish common goals. Both formal and informal horizontal linkages can help reduce transaction costs, create economies of scale, and contribute to the increased efficiency and competitiveness of an industry. In addition to lowering the cost of inputs and services (including financial services), inter-firm horizontal linkages can contribute to shared skills and resources and enhance product quality through common production standards. Such linkages also facilitate collective learning and risk sharing while increasing the potential for upgrading and innovation. Small-scale producer groups have strong potential to increase their bargaining power in the marketplace, while processors, suppliers and traders may also form their own groups to strengthen their position within industries.
