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Quality and governance mode choice: a transaction cost approach to the wine industry

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  • Fernandez-Olmos, Marta
  • Rosell-Martinez, Jorge
  • Espitia-Escuer, Manuel Antonio
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    Abstract

    We analyze the relationship between product quality and governance mode choice using the results of a survey of DOC Rioja wineries. Wineries that produce high-quality wines are more likely to vertically integrate than are wineries that produce low-quality wines. Consistent with Transaction Cost Economics, we find evidence that asset specificity and uncertainty are important determinants of vertical integration. Finally, the size of the winery is also an important factor that affects governance mode choice in viticulture.

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    File URL: http://purl.umn.edu/44266
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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44266.

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    Date of creation: 2008
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    Handle: RePEc:ags:eaae08:44266

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    Keywords: quality; governance mode choice; transaction cost; Industrial Organization;

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    1. Coles, Jerilyn W. & Hesterly, William S., 1998. "Transaction costs, quality, and economies of scale: examining contracting choices in the hospital industry," Journal of Corporate Finance, Elsevier, vol. 4(4), pages 321-345, December.
    2. Hueth, Brent & Ligon, Ethan, 1999. "Agricultural Supply Response Under Contract," Staff General Research Papers 5039, Iowa State University, Department of Economics.
    3. Rachael Goodhue & Dale Heien & Hyunok Lee & Daniel Sumner, 2003. "Contracts and Quality in the California Winegrape Industry," Review of Industrial Organization, Springer, vol. 23(3), pages 267-282, December.
    4. Richard Williams, 2006. "Generalized ordered logit/partial proportional odds models for ordinal dependent variables," Stata Journal, StataCorp LP, vol. 6(1), pages 58-82, March.
    5. Erin Anderson, 1985. "The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis," Marketing Science, INFORMS, vol. 4(3), pages 234-254.
    6. W. Coles, Jerilyn & Hesterly, William S., 1998. "The impact of firm-specific assets and the interaction of uncertainty: an examination of make or buy decisions in public and private hospitals," Journal of Economic Behavior & Organization, Elsevier, vol. 36(3), pages 383-409, August.
    7. Allen, Douglas W & Lueck, Dean, 1995. "Risk Preferences and the Economics of Contracts," American Economic Review, American Economic Association, vol. 85(2), pages 447-51, May.
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    Cited by:
    1. Franken, Jason R. V. & Bacon, Kevin J., 2014. "Organizational Structure and Operation of the Illinois Wine Industry," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), April.

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