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

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  • 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.

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  • 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
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