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

AAWE Working Paper No. 185 – Business

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AAWE Working Paper No. 185 – Business

Strengths and Governance: The Argentine Grape-Wine Industry at the Crossroads

Aldo Biondolillo & Juan Pedro Brandi


Over the last years there has been a debate about the “structural change” in emerging economies and their impact on the understanding of development. New types of structuralisms are discussed using the concept of value chain in certain production sectors that have undergone significant changes.

The objective of this paper is to contribute to the debate about the structural change of the Argentine grape-wine growing sector using the dual analysis of “Strengths and Governance”.

First of all, we wish to point out that viticultural production is carried out in imperfect markets where prices are the result of an asymmetric negotiation between the purchasing power of a demand that is concentrated in a few firms and an atomized supply that is in the hands of thousands of producers. We analyze the strengths resulting from the interaction between the internal factors characteristic of the production unit and the external forces that operate within a given business organization. We describe the manner in which the supplier is related to the resources and the markets. We combine the above analysis with the governance approach, which refers to the manner in which the relationship among the several actors engaged in grape-wine growing is governed. We also analyze the relationships between firms and institutional mechanisms through which coordination actions are implemented outside the market. Emphasis is laid on the importance of explicitly incorporating institutionality into the analysis of the grape-wine growing sector chain so as to make sure that enforcement agencies comply with decisions reached by “consensus”.

One first conclusion of the study refers to the complementariness of both approaches and, in both cases, there is a continuous segment that spans from “decentralized coordination to a more centralized one”. By learning how value chains are governed, it is possible to know how they affect suppliers’ “upgrade” (increasing the added value of the chain through innovation). The upgrade is illustrated with a case study in which the knowledge acquired by the innovative firm is spread within the grape-wine growing sector, giving rise to a positive externality that may be internalized by means of suitable public policy instruments.

This article was written by Karl Storchmann