IDEAS home Printed from https://ideas.repec.org/p/ags/aaea16/235363.html
   My bibliography  Save this paper

Transaction Costs, Capabilities, and Grape Procurement Strategies in U.S. Emerging Wine Regions

Author

Listed:
  • Miranda, Bruno
  • Chaddad, Fabio

Abstract

What are the drivers of grape procurement strategies in U.S. emerging wine regions? Are these choices constrained by the same factors as in established wine areas? This paper uses a mixed-methods approach to discuss the "make-or-buy" decisions of small American wineries from five states: Illinois, Michigan, Missouri, New York and Vermont. Departing from the existing empirical literature on grape procurement strategies in the wine industry, we argue that the study of organizational decisions in American nascent clusters has to consider both their structural characteristics and the features of their participants. Based on semi-structured interviews with Missouri winery owners, we argue that, given the heterogeneity in the bundles of capabilities and resources owned by firms from emerging areas, a rationale exclusively inspired by Oliver Williamson's transaction cost economics is insufficient to explain grape procurement strategies. The evidence presented here is consistent with the view that knowledge plays a decisive role in boundary decisions. Also, the results point out to the importance of informal ties in the governance of the transactions carried out by the wineries in the sample. In special, trust appears to be an essential supporting mechanism in the governance of less coordinated exchanges, reflecting the constraints faced by many firms to devise complex formal arrangements.

Suggested Citation

  • Miranda, Bruno & Chaddad, Fabio, 2016. "Transaction Costs, Capabilities, and Grape Procurement Strategies in U.S. Emerging Wine Regions," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235363, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235363
    DOI: 10.22004/ag.econ.235363
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/235363/files/MIRANDA_%20Bruno_%20CHADDAD_%20Fabio.%20TC_%20capabilities%20and%20grape%20procurement%20strategies%20in%20the%20U.S.%20wine%20industry.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.235363?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    2. Anne Parmigiani, 2007. "Why do firms both make and buy? An investigation of concurrent sourcing," Strategic Management Journal, Wiley Blackwell, vol. 28(3), pages 285-311, March.
    3. Elisa Giuliani, 2011. "Role of Technological Gatekeepers in the Growth of Industrial Clusters: Evidence from Chile," Regional Studies, Taylor & Francis Journals, vol. 45(10), pages 1329-1348, November.
    4. Rachael E. Goodhue & Dale M. Heien & Hyunok Lee & Daniel A. Sumner, 2003. "Contracts and Quality in the California Winegrape Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3_4), pages 267-282, December.
    5. Jean Marie Codron & Etienne Montaigne & Sylvain Rousset, 2013. "Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina," Post-Print hal-01506201, HAL.
    6. Kirk Monteverde & David J. Teece, 1982. "Supplier Switching Costs and Vertical Integration in the Automobile Industry," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 206-213, Spring.
    7. Oliver E. Williamson & Scott E Masten (ed.), . "The Economics of Transaction Costs," Books, Edward Elgar Publishing, number 1652.
    8. ZYLBERSZTAJN, Decio & MIELE, Marcelo, 2005. "Stability of contracts in the Brazilian wine industry," Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 43(2), pages 1-19, June.
    9. Ashenfelter, Orley, 2010. "Predicting the Quality and Prices of Bordeaux Wine," Journal of Wine Economics, Cambridge University Press, vol. 5(1), pages 40-52, April.
    10. Nicholas S. Argyres & Todd R. Zenger, 2012. "Capabilities, Transaction Costs, and Firm Boundaries," Organization Science, INFORMS, vol. 23(6), pages 1643-1657, December.
    11. Claude Ménard, 2013. "Plural Forms of Organization: Where Do We Stand?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(3-5), pages 124-139, April.
    12. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    13. Nicholas S. Argyres & Teppo Felin & Nicolai Foss & Todd Zenger, 2012. "Organizational Economics of Capability and Heterogeneity," Organization Science, INFORMS, vol. 23(5), pages 1213-1226, October.
    14. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(2), pages 335-361, October.
    15. Marta Fernández-Olmos & Jorge Rosell-Martínez & Manuel A. Espitia-Escuer, 2009. "Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa," Agribusiness, John Wiley & Sons, Ltd., vol. 25(2), pages 231-250.
    16. Fraser, Iain, 2005. "Microeconometric analysis of wine grape supply contracts in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-24.
    17. 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), pages 1-21, April.
    18. Coase, R H, 1988. "The Nature of the Firm: Influence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 33-47, Spring.
    19. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-486, April.
    20. Bruce Kogut & Udo Zander, 1996. "What Firms Do? Coordination, Identity, and Learning," Organization Science, INFORMS, vol. 7(5), pages 502-518, October.
    21. Anne Parmigiani & Will Mitchell, 2009. "Complementarity, capabilities, and the boundaries of the firm: the impact of within‐firm and interfirm expertise on concurrent sourcing of complementary components," Strategic Management Journal, Wiley Blackwell, vol. 30(10), pages 1065-1091, October.
    22. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    23. Stefano Castriota & Marco Delmastro, 2015. "The Economics of Collective Reputation: Evidence from the Wine Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 469-489.
    24. Coase, R H, 1988. "The Nature of the Firm: Meaning," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 19-32, Spring.
    25. Coase, R H, 1988. "The Nature of the Firm: Origin," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 3-17, Spring.
    26. Franken, Jason R. V. & Bacon, Kevin J., 2014. "Organizational Structure and Operation of the Illinois Wine Industry," Agricultural and Resource Economics Review, Cambridge University Press, vol. 43(1), pages 104-124, April.
    27. Storchmann, Karl, 2010. "The Economic Impact of the Wine Industry on Hotels and Restaurants: Evidence from Washington State," Journal of Wine Economics, Cambridge University Press, vol. 5(1), pages 164-183, April.
    28. Franken, Jason R.V., 2014. "Coordination of the California Winegrape Supply Chain," Journal of Wine Economics, Cambridge University Press, vol. 9(2), pages 183-201, August.
    29. Demsetz, Harold, 1988. "The Theory of the Firm Revisited," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 141-161, Spring.
    30. Brousseau,Éric & Glachant,Jean-Michel (ed.), 2008. "New Institutional Economics," Cambridge Books, Cambridge University Press, number 9780521876605, September.
    31. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
    32. Brousseau,Éric & Glachant,Jean-Michel (ed.), 2008. "New Institutional Economics," Cambridge Books, Cambridge University Press, number 9780521700160, September.
    33. Kathleen R. Conner & C. K. Prahalad, 1996. "A Resource-Based Theory of the Firm: Knowledge Versus Opportunism," Organization Science, INFORMS, vol. 7(5), pages 477-501, October.
    34. Fernández Olmos, Marta, 2010. "The performance implications of "grow or buy" decisions in the wine industry," Food Policy, Elsevier, vol. 35(3), pages 256-264, June.
    35. Sergio G. Lazzarini, 2004. "Order with Some Law: Complementarity versus Substitution of Formal and Informal Arrangements," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 261-298, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno V. Miranda & Brent Ross & Jason Franken & Miguel Gómez, 2022. "Plural forms and differentiation strategies in the agri‐food sector: Evidence from the U.S. wine industry," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 486-504, July.
    2. Kira R. Fabrizio, 2012. "Institutions, Capabilities, and Contracts: Make or Buy in the Electric Utility Industry," Organization Science, INFORMS, vol. 23(5), pages 1264-1281, October.
    3. Alex Eapen & Rekha Krishnan, 2019. "Transferring Tacit Know-How: Do Opportunism Safeguards Matter for Firm Boundary Decisions?," Organization Science, INFORMS, vol. 30(4), pages 715-734, July.
    4. Mie Augier & David J. Teece, 2009. "Dynamic Capabilities and the Role of Managers in Business Strategy and Economic Performance," Organization Science, INFORMS, vol. 20(2), pages 410-421, April.
    5. Der-Fang Hung, 2015. "Sustained Competitive Advantage and Organizational Inertia: The Cost Perspective of Knowledge Management," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 769-789, December.
    6. Per L. Bylund, 2015. "Signifying Williamson's Contribution to the Transaction Cost Approach: An Agent-Based Simulation of Coasean Transaction Costs and Specialization," Journal of Management Studies, Wiley Blackwell, vol. 52(1), pages 148-174, January.
    7. Kyle J. Mayer & Deepak Somaya & Ian O. Williamson, 2012. "Firm-Specific, Industry-Specific, and Occupational Human Capital and the Sourcing of Knowledge Work," Organization Science, INFORMS, vol. 23(5), pages 1311-1329, October.
    8. repec:dau:papers:123456789/2412 is not listed on IDEAS
    9. Argandoña, Antonio, 2010. "From action theory to the theory of the firm," IESE Research Papers D/855, IESE Business School.
    10. Richard N. Langlois & Nicolai J. Foss, 1999. "Capabilities and Governance: The Rebirth of Production in the Theory of Economic Organization," Kyklos, Wiley Blackwell, vol. 52(2), pages 201-218, May.
    11. George Chondrakis & Mari Sako, 2020. "When suppliers shift my boundaries: Supplier employee mobility and its impact on buyer firms' sourcing strategy," Strategic Management Journal, Wiley Blackwell, vol. 41(9), pages 1682-1711, September.
    12. Garrouste, Pierre & Saussier, Stephane, 2005. "Looking for a theory of the firm: Future challenges," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 178-199, October.
    13. Michael G. Jacobides, 2008. "How Capability Differences, Transaction Costs, and Learning Curves Interact to Shape Vertical Scope," Organization Science, INFORMS, vol. 19(2), pages 306-326, April.
    14. Nina Hampl, 2020. "Drivers of and barriers to partner switch in interfirm alliances: a conceptual model," Journal of Business Economics, Springer, vol. 90(4), pages 563-589, May.
    15. Bitsch, Linda & Hanf, Jon H., 2022. "The perfect match: interpersonal relationships and their impact on chain management," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(3), March.
    16. Paul Walker, 2010. "The (Non)Theory Of The Knowledge Firm," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(1), pages 1-32, February.
    17. Kannan Srikanth & Phanish Puranam, 2014. "The Firm as a Coordination System: Evidence from Software Services Offshoring," Organization Science, INFORMS, vol. 25(4), pages 1253-1271, August.
    18. Filipe M. Santos & Kathleen M. Eisenhardt, 2005. "Organizational Boundaries and Theories of Organization," Organization Science, INFORMS, vol. 16(5), pages 491-508, October.
    19. Ramji Balakrishnan & Leslie Eldenburg & Ranjani Krishnan & Naomi Soderstrom, 2010. "The Influence of Institutional Constraints on Outsourcing," Journal of Accounting Research, Wiley Blackwell, vol. 48(4), pages 767-794, September.
    20. repec:dau:papers:123456789/2608 is not listed on IDEAS
    21. Xhoxhi, Orjon & Imami, Drini & Hanf, Jon & Gjokaj, Ekrem, 2022. "Too much power or no power: when does intermediary's power result into better wine and happier farmers?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(5), December.
    22. Hervé Lanotte & Aurélie Ringeval-Deluze & Erick Pruchnicki, 2022. "The stabilising effects on GVCs of multi-annual supply contracts between leading and subordinate firms: The example of champagne [Les effets stabilisateurs sur la CGV des contrats pluriannuels d’ap," Post-Print hal-04021392, HAL.

    More about this item

    Keywords

    Agribusiness; Institutional and Behavioral Economics;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea16:235363. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.