All Working Papers

Recent studies about catching up are often focused on the emergence of high-tech sectors such as electronics, software, pharmaceutical and telecommunications. These industries are indeed globally known for having sparked economic growth in some selected countries, such as Japan and South Korea in the eighties and nineties, and India and China in more recent years. Nevertheless, there is little doubt that in a large number of emerging countries the agro-food industry still significantly contributes to GDP. Though often depicted as low value-added and with little innovation content, the agro-food industry is a sector with considerable opportunities for technological and rent upgrading. UNCTAD (2009) has identified a group of dynamic and competitive middle-income countries, including Argentina, Brazil, Chile Thailand and Malaysia, which have become exporters of high-quality processed primary products. Some authors have envisaged an undergoing process of de-commodification of primary commodities, which are increasingly transformed from standardized staples into high-quality, diversified, processed goods, with raising barriers of entry, high knowledge intensity and technological dynamism, increasing value added content and high export price per unit (Farinelli, 2012; Kaplinsky and Fitter, 2004; Kaplinsky, 2005; Perez et al, 2009).
Among the most dynamic primary industries there is wine, which is an extremely interesting case from a catch up point of view because the latecomers in the international market have changed how wine is produced, sold and consumed and in doing so they have challenged the position held by the incumbents (Giuliani et al, 2011). Until the end of the 1980s without a doubt, European countries, and particularly France and Italy, dominated the international market for wine. Subsequently, significant changes into the market, namely the decrease in consumption in traditional consuming countries, the entry of new inexperienced consumers and the increasing importance of large distribution have put under attack this supremacy. Initially the USA and Australia and later emerging countries such as Chile and South Africa have gained increasing market shares in terms of both exported volumes and values at the expense of the incumbents. More recently, due to the higher involvement of consumers and the increasing attention to variety and regional specificities in some market segments a new comer as Australia has slowed down its growth, opening up opportunities to newer entrants such as Argentina and New Zealand. At the same time, innovation has also interested the incumbents, in particularly Italy, which has challenged the leadership of France in some key markets such the USA (Mariani et al., 2012).
Finally, some further future changes can be envisaged in the new rapidly growing Asian markets, still representing a small share of the global demand but with a lot of potentialities of becoming a new key scene in the wine industry.
In this paper we aim at investigating the different catch up cycles occurring from the 1960s until 2010 in the global wine sector through a detailed analysis of exports in volume, value and unit price. This analysis allows addressing issues related with the increasing share in the global market of latecomer countries and the relative decline of the incumbents, as well as possible changes in the market leadership within these two groups.
In the next section after a brief account of the literature on catch up we focus on catch up in the wine industry since the 1960s. Then, in the Section 3 we present an analysis of the evolution of the industry investigated based on trade data. Section 4 provides a detailed analysis of the entry of the New World (NW) producers explaining how market changes opened up a window of opportunity and then followed transformations in the innovative and knowledge base and in the institutional settings. The following section focuses on the resurgence of Old Word (OW)1 countries in the international markets. In Section 6, we discuss about the rise of new actors among the latecomers. Section 7 puts forward the hypothesis of a new cycle following the emergence of Asia both as a rapidly growing market and as a new production source. Section 8 concludes.

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.