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Dynamics of Evolution in the Global Fuel-Ethanol Industry

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  • Chan, J.H.
  • Reiner, D.

Abstract

We employ a value chain analysis approach to examine the forces shaping the industry structure, entry and inter-firm governance modes. Forty largest global and regional companies in the ethanol manufacturing stage have been classified according to their pre-entry industry of origin. Firms with pre-entry history in feedstock supply have shown higher resilient to market shock especially compared to de novo firms. In addition, we observe a trend of dual-directional vertical integration. Firms backward integrate to secure feedstock supply; firms forward integrate to gain access to the retail market. Security of feedstock has been identified as a critical success factor of the manufacturer in this resource intensive industry. Another critical success factor is gaining control over the end user market via forward integration. We propose that critical success factor is the important determinants of inter-firm governance mode.

Suggested Citation

  • Chan, J.H. & Reiner, D., 2011. "Dynamics of Evolution in the Global Fuel-Ethanol Industry," Cambridge Working Papers in Economics 1129, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1129
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    References listed on IDEAS

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    1. van de Vrande, Vareska & Vanhaverbeke, Wim & Duysters, Geert, 2009. "External technology sourcing: The effect of uncertainty on governance mode choice," Journal of Business Venturing, Elsevier, vol. 24(1), pages 62-80, January.
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    Cited by:

    1. Baines, Joseph, 2014. "Food Price Inflation as Redistribution: Towards a New Analysis of Corporate Power in the World Food System (Preprint)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(1), pages 79-112.
    2. Griffith, Andrew P. & Haque, Mohua & Epplin, Francis M., 2014. "Cost to produce and deliver cellulosic feedstock to a biorefinery: Switchgrass and forage sorghum," Applied Energy, Elsevier, vol. 127(C), pages 44-54.
    3. Baines, Joseph, 2015. "Price and Income Dynamics in the Agri-Food System: A Disaggregate Perspective," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 157992, July.
    4. Jason Wood & James Nolan, 2021. "Plant location decisions in the ethanol industry: a dynamic and spatial analysis," Computational Economics, Springer;Society for Computational Economics, vol. 58(1), pages 103-132, June.

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    More about this item

    Keywords

    Inter-firm governance; Biofuels; Entry; Vertical integration;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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