Vertical integration in the wine industry: a transaction costs analysis on the Rioja DOCa

Abstract

The authors study the determinants of make or buy decisions for grapes made by wineries belonging to the Rioja Qualified Designation of Origin (DOCa). In particular, they analyze the relationship between product quality and vertical integration. Although there is a long tradition in transaction cost theory of analyzing the determinants of make or buy decisions in manufacturing, surprisingly few empirical studies have been conducted in the agriculture and food and beverage industry. Likewise, although quality is a key competitive variable in many food sectors, only a few studies have analyzed quality in their models. The authors find that transaction costs and product quality provide a useful explanation of vertical integration in the wine industry in the Rioja DOCa. Wineries that produce high-quality wines are more likely to integrate vertically than those producing low-quality wines. They also find that the size of the winery significantly affects make or buy choices. Implications are explored for managers facing a governance mode choice. [EconLit Classifications: L220, Q130]. © 2009 Wiley Periodicals, Inc.

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

“…Six types of asset specificity have been identified in the literature on grape supply (Ayouz et al 2002;Fraser, 2005;Fernández-Olmos et al, 2009;Traversac et al, 2011). …”

“…Our contribution aims to provide an additional perspective on wine grape chain organisation. As was the case with a recent study on the Spanish Rioja wine industry (Fernández-Olmos et al, 2009), we are interested in the coherence (or alignment) between the characteristics of transactions and the governance of grape procurement.…”

“…Based on a survey of 187 wineries, Fernández-Olmos et al (2009) showed that Rioja wineries producing high-quality wines are more likely to integrate vertically than those producing lower priced products. Consistent with TCE, growers' physical and dedicated assets increase the use of hierarchical governance, whereas the effect of physical asset specificity at a winery level is not statistically significant in the model.…”

Regulation and Contract Choice in the Distribution of Wine

“…Most economic research has focused on supply relations between wineries and wine grape growers (Fernández-Olmos, Rosell-Martínez, and Espitia-Escuer, 2009;Franken, 2014;Franken and Bacon, 2014;Goodhue et al, 2003;Zylbersztajn and Miele, 2005) or on consumerlevel supply and demand characteristics (for a broad survey, see Storchmann, 2012). There is little research on the structure of the value chain between the winery and the retailers from whom the wine is ultimately purchased.…”

The entry of logistics service provider (LSP) into the wine industry supply chain

“…Beside these geographical or economic approaches, more territorial [2] and managerial approaches [3] focus on the performance of the wine industry supply chain (WSC). It became an important issue for many parts of both the old and new world.…”