All Working Papers

In 1989, the Canada – United States Free Trade Agreement (FTA) was implemented and dramatically changed the course of the wine industry’s development in British Columbia (BC). The FTA forced the industry to make the transition from being highly protected, and inefficient, to a competitive market contender. Although considered initially to be a victim of the FTA, by 2010, the BC wine industry contributed $295.8 million to the BC economy, or 0.15% of provincial GDP, and provided 5,100 direct and indirect jobs; and is now considered by many to be a remarkable BC success story. This investigation traces the evolution of the industry from 2000 to 2010 by examining the structural changes that occurred in the industry’s value chain during that period.
The study employs and industry cluster model to identify the relationships between the firms located in the Okanagan region. Results from the study show the growth in value added from all sectors of the value chain and identify several sources of the industry’s competitive advantage: extensive vertical integration, and a strong relationship to the tourism cluster. Conclusions are provided regarding the future challenges and opportunities facing the industry.

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.

The origins of the Argentinean wine industry can be traced to the Spanish colonial period and the establishment of the Virreinato del Rio de la Plata. However, the emergence of the modern wine industry is explained by the Italian and Spanish immigration of the late XIX century and by the contribution of European specialists hired by emergent Schools of Agriculture such as the Faculty of Agrarian Science from the National University of Cuyo, as it is known nowadays. The planting of French varieties (Cabernet Sauvignon, Merlot, Tannat and especially Malbec), Italian varieties (Barbera, Nebbiolo, Sangiovese, Bonarda) and Spanish ones (Tempranillo, Semillón, Pedro Giménez) took place simultaneously with the introduction of the railway in the provinces of Mendoza and San Juan thus favoring immigration and the diffusion of new growing and wine-making techniques. The irrigation system and water management organization also began at the time, giving a key contribution to the wine industry emergence. Big family wineries of Italian (Giol, Gargantini, Tittarelli, Cavagnaro, Filippini, Rutini, etc) and Spanish (Escorihuela, Arizu, Goyenechea, etc) origins were born, grew and consolidated in this period.
During the XX century the Argentinean wine industry experienced periods of expansion triggered by the credence on an unlimited domestic market and periods of intense crisis with disastrous consequences for wineries and grape growers. Public regulations were present in these fluctuations aiming at reducing the negative impacts of recession or aiming at profiting from the expansion period. Wineries, grape growers, governors and congress men gave shape with their actions to the wine industry with diverse impact in the economy of the main wine producing regions: Mendoza and San Juan. Implemented regulations include: temporary plantation prohibitions, tax-breaks programs for specific vine varieties, regulations for sales quantity, public acquisition of grapes and wine for ulterior elimination or distillation, among others. Most of these initiatives only had short term effects thus constantly required new measures. This extensive regulation constitutes a vast experience for all agri-food chains and for the whole Argentinean economy, as it illustrates the short-term and long-term advantages and disadvantages of different measures.

Although it is very difficult to find any research that has been devoted to establish the value of wine education courses on consumers, gatekeepers are pinning a lot of hope on wine education to create or restore value. The purpose of this research was to investigate if wine courses lead to any changes in perception, consumption pattern and modify the consumer’s degree of involvement for the category.
We compared results of the same survey filled in twice by new wine course students in Montreal, Québec, Canada: prior to their first class and at the end of the course five weeks later; followed up by two questionnaires after three and twenty-four months. All survey questions were assessed in a five-point Likert type scale and the outcomes were statistically treated using t-student test.
The results obtained imply that the perceptions, behavior and commitment towards the category changes after having followed a wine course. An economic value was created for the proponent of the courses (the retailer) as the majority of students declared spending more afterwards. In addition, value was also created for the students as they declare an increase in involvement, a sense of empowerment, an increase in frequency of usage of the product but not in the intensity.