AAWE, Economics Dept, New York University, 19 W 4th St, 6Fl., New York NY 10012aawe@wine-economics.org

AAWE Working Paper No. 145 – Business

 

Innovation and Learning Dynamics in the Chilean and Argentine Wine Industries

Fulvia Farinelli 

Introduction

This paper focuses on the magnitude, variety, and sources of innovation introduced by the Chilean and Argentine wine industries during the past two decades. It analyzes whether the prolonged export growth of Chilean and Argentine wines has been achieved by building the innovation capacity of local actors and creating domestic linkages with local grape producers, winemakers and input providers, or by relying exclusively upon FDI and knowledge flows generated abroad. In line with the evolutionary tradition, this study explores the hypothesis that, much as in the case of high-tech sectors, the ability of developing countries to enter knowledge-intensive natural resource-based sectors, such as wine, depends on their ability to access capital, technology and knowledge from abroad, that is, on what can be defined as “external” sources of innovation. It also depends, however, on the ability to absorb and adapt imported technology and know-how to the local environment, that is, on the creation of local tacit knowledge and endogenous R&D capabilities.

This paper measures, first of all, the innovativeness of the leading 25 Chilean and of the leading 25 Argentine exporters of bottled wines, and looks at the variety of innovations introduced, focusing not only on new methods of production, but also on the development of new products and new ways of organizing business. Subsequently, it identifies the role played by external sources of innovation ␣ such as FDI, as well as capital-embodied and codified knowledge flows ␣ in triggering the phenomenal technological upgrading process of the Chilean and Argentine wine industries. Finally, it looks at the role played by internal sources of innovation, namely at the creation of local tacit knowledge and incremental innovation, at the emergence of a wide pool of highly qualified human resources, and at the role of sectoral R&D programmes, local universities and research centres in the creation of endogenous technological capabilities.

This paper is structured as follows: Section 2 measures the innovativeness of the leading 25 Chilean and of the leading 25 Argentine exporters of bottled wines. Section 3 looks at the variety of innovations introduced, focusing – in line with the Schumpeterian tradition – not only on new methods of production, but also on the development of new products and new ways of organizing business. Section 4 looks at the triggering role of FDI in stimulating the phenomenal technological upgrading process of the Chilean and Argentine wine industries over the past two decades. Section 5 focuses on the importance of external sources of innovation in sustaining such a process, namely, on the importance of capital-embodied and codified knowledge flows channelled through imports of foreign machinery and quality certification mechanisms. Section 6 looks at the creation of local tacit knowledge and incremental innovation in the Chilean and Argentine wine industries, and at the emergence of a wide pool of highly qualified local oenologists, agronomists and viticulturalists. Section 7 analyses the role of sectoral R&D programmes and of local universities and research centers in the creation of endogenous technological capabilities. Section 8 concludes with some considerations on the longer-term sustainability of the export boom of Chilean and Argentine wines.

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