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From co-operation to competition: market transformation among elite Napa Valley wine producers
Ian M. Taplin
Department of Sociology, Wake Forest University, Winston-Salem, North Carolina, USA
Purpose – The purpose of this paper is to argue that cooperative behavior by key actors is often crucial for collective organizational learning to occur and new markets to become established. Such cooperation is gradually replaced by competition as network interactions become formalized following the codification of knowledge and the growth of a collective identity. Design/methodology/approach – Using detailed ethnographic studies from a broad sample, this paper uses key informants who played a role in creating and sustaining a viable market for a high status good. Findings – The sharing of tacit knowledge complements technical skills for key industry actors and facilitates collective organizational learning in ways that expedite the emergence of a high status sector. Once knowledge is codified as the sector gains legitimacy, there is less need for informal structured interactions as vital conduits of knowledge sharing. Originality/value – This paper shows how knowledge sharing via cooperative relationship underlies competitive market formation and provides firms with requisite quality enhancements necessary for status attainment. Keywords United States of America, Viticulture, Wines, Marketing strategy, Organizational change Paper type Research paper
International Journal of Wine Business Research Vol. 22 No. 1, 2010 pp. 6-26 # Emerald Group Publishing Limited 1751-1062 DOI 10.1108/17511061011035170
In this paper I use the example of ultra-luxury wines to examine how knowledge sharing between incumbents and newcomers was crucial in the formation of a market place for high status goods in a specific region. I argue that firms, through their winemakers, collaborated to forge a collective identity that led to operational upgrading and subsequent improved consistency and quality in their products. As such improvements were affirmed by official ratings groups, the region acquired high status attributes that in turn attracted new entrants. The cooperative relationships that were crucial to organizational learning in the early phase, and embedded in networks, became gradually recast in more competitive terms as firms now search to differentiate themselves from others. Given the codification of knowledge that has occurred with industry maturity, it is now less likely that reciprocal exchange relationships are necessary for new firms to attain performance capability; instead details are disseminated through educational programs and institutional bodies that are public goods. I argue that the growth of a collective identity among specialist organizations has become more structured so that organizational sub-populations co-exist in what is now a more formally circumscribed marketplace. Differentiation of sub-populations occur not because actors are on the periphery of a market dominated by generalists as ecological models of resource participation argue (Carroll, 1985; Swaminathan, 2001). Instead, they compete in separate niches where varying levels of resource availability shape market positioning and performance. Opportunities for resource rich specialists have encouraged new entrants but it has not necessarily led to high mortality rates for incumbents as organizational ecology scholars might predict (see, for example,
Delacroix et al., 1989). But it does explain the growth of niche resources that enable newcomers to be less dependent upon informal knowledge networks. My focus is on Napa Valley which in the last three decades has attained an indisputable recognition for quality (Kramer, 2004; Taber, 2005; Wall Street Journal, November 3, 2006). By concentrating upon a fairly small geographic region where brand recognition and generalized high status permit premium prices, I analyze how this luxury market has emerged. By identifying the circumstances under which economic transactions are embedded in networks, internal labor markets, trust, and/or institutions, one can assess the salience of such features in incipient market growth when product quality is difficult to measure or to predict in advance. Specifically, I look at the cooperative knowledge sharing role played by key actors who were often owner/ winemakers and whose network activities occurred within a quasi-competitive framework and an emerging institutional structure that sustained production norms. I also show how the status signaling mechanisms that provided gradual legitimacy for the industry in its infancy (when quality was either unknown or questionable) are now used by newcomers as a benchmark for their own aspirations. If we are to understand how markets develop and operate, including the evolution of specialist organizations therein, we need to determine how they are structured and what role is played by key individuals whose knowledge and expertise can aid firms that are attempting to establish a market presence in such a sector. It is precisely the network or relations between key actors that provide resources for firms in the aggregate (Burt, 1983) and permit some form of structuring that results in overall governance becoming institutionalized (Podolny, 1993; Campbell et al., 1991). Meanwhile information exchange by key actors can act as conduits for organizational learning and efficient market transactions (Granovetter, 1985; Uzzi, 1997). Ties among such actors are crucial for this exchange to occur (Powell, 1990), as is an element of trust and a willingness to exchange information that might seem to undermine the competitive advantage of a particular firm. As markets mature, key actors within firms establish performance parameters by relying upon information derived from similar placed actors in competitor firms. I hypothesize that such knowledge (rather than merely information) sharing is crucial to the performance of individual firms but also promotes enhanced quality in outputs of the market as a whole. In other words, embedded relationships structure knowledge transfer in ways that enhance overall efficiency and sustain market growth. Opportunistic behavior is less prescient here than informal and formal channels of communication that are distinctly cooperative in nature. In a luxury goods market where quality and status (or brand) are at a premium, gaining access to core operational competencies is essential for firms, but so is their success contingent upon the market as a whole continuously upgrading its performance indicators. In such a symbiotic relationship, firms establish reputations by market association but markets depend upon individual firms to continuously demonstrate their individual capabilities according to external evaluations. As brand identity increases, however, the industry inevitably attracts newcomers who often possess resources that enable them to purchase requisite inputs (best land, best viticulturalist, and best winemaker) and focus upon attaining high quality as measured by industry rating groups. This presumes that incumbants are willing to sell (and realize a profit on their initial investment) and/or that additional land for viticulture becomes available in the area (transformations within the existing agricultural sector). An increasingly fluid labor market for winemakers (greater firm
From co-operation to competition 7
density, more formal training programs that increase the supply of winemakers) result in firms bringing in outside specialists or poaching winemakers from incumbent firms. Therefore, I further hypothesis that the accessibility of community experience and codified knowledge as the market has matured renders high-quality goals attainable without necessary recourse to established networks, hence diluting the cooperative endeavors that sustained the industry in its ascendancy. Research methodology Semi-structured interviews with winery owners, general managers, and wine makers at 40 Napa Valley wineries were conducted between 2005 and 2007. Each winery in this sample produces at least one wine classified in the luxury category; some produced several wines in this category, others one high priced and several lower priced wines (although all fall under the general rubric of ultra-premium). I focused almost exclusively on wineries that produced a Cabernet Sauvignon or a Bordeaux blend since these are the signature grapes for this region and ones which are largely responsible for its reputation. It is typically the varietal wine that a person entering the market in Napa Valley will make (possibly alongside Chardonnay). Wineries were selected from a list derived from specialist publications, principally Wine Spectator and The Wine Advocate, as these are the principal ratings sources that score individual wines on quality and are accepted as industry benchmarks. Frequent rankings and listings of Napa Valley Cabernet Sauvignons and Bordeaux blends are published and I focused upon wineries which produced wines that obtained scores of at least 90 points from one of the two publications in the past ten years. I used a ten-year period to include established wineries as well as new entrants to the market. From an initial list of 51 wineries, 28 of the interviews resulted from ‘‘blind’’ calling; the remaining 12 followed the use of two informed insiders who contacted a resource person at a designated winery and then provided me with an introduction. This proved an expeditious way of securing interviews with wineries who otherwise (as several subsequently commented) would not have agreed to a meeting. I further classified wineries according to size based upon the number of cases of wine produced annually. Small wineries are those producing less than 15,000 cases; small to medium (15-75,000 cases), and medium (over 100,000 cases annually). All of the wineries in the sample were privately owned. Also, I endeavored to get a balance of established wineries (founded at least 20 years ago) as well as newcomers (entered the market in the last five to ten years) in order to discern how differences between industry founders and newcomers might be apparent. My assumption was that smaller wineries were more likely to be recent start ups, were better capitalized, and more intent upon exploiting the reputational effects by establishing a high price, limited production wine. They were also more likely to hire an established winemaker to gain instant credibility. Interviews lasted between 1 and 3 h and typically involved a tour of the winery and in some cases the vineyards. In four instances repeat visits were made. When interviewing the owner, I was able to gain specific information about the winery’s financial operations as well motivations behind the firm’s start-up, initial capitalization costs, revenue streams (including when profitability was attained, if at all), vision, and strategic goals. With general managers much of the same information was provided but less personal background was available. In my interviews with wine makers I asked specific questions about information sharing, relationship building, and interfirm mobility since these were crucial to understanding market stability. From prior
research in this area I realized that cooperation had become normative in the early phase of the industry’s growth; in my interviews I wanted to pursue this line of enquiry further and systematically determine the mechanism for such cooperation and asked specifically about this when questioning winemakers. In nine cases the owner was also the winemaker, hence I was able to gain a further nuanced perspective from this joint position. Table I provides a summary of the sample. The questions were grouped into the following basic categories: history of winery and personnel; production decisions and operational questions; interactions, both formal and informal with others in the industry; marketing and brand building;
Firm size: cases produced Medium 100,000 Medium 180,000 Medium 100,000 Medium 20,000 Medium 30,000 Medium 40,000 Medium 60,000 Medium 30,000 Medium 30,000 Medium 25,000 Medium 75,000 Medium 35,000 Medium 45,000 Medium 63,000 Small 2,500 Small 10,000 Small 20,000 Small 1,300 Small 2,000 Small 2,400 Small 2,500 Small 2,500 Small 10,000 Small 12,500 Small 8,500 Small 9,000 Small 1,200 Small 4,200-6,200 Small 10,000 Small 3,000 Small 2,000 Small 2,500 Small 7,500 Small 7,000 Small 10,000 Small 3,700 Small 5,500 Small 4,400 Small 4,000 Small 4,500 Number of interview hours 5 (on 2 visits) 2 2 2 3 3 1 2 2 2 9 (on 4 visits) 7 (on 4 visits) 2 1 1 1 2 2 2 1 3 3 1 2 1 6 (2 visits) 2 1 2 1 1 2 2 1 3 2 1 2 2 1
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Date of founding 1974 1972 1972 1994 1992 1973 1981 1982 1998 1978 1981 1978 1979 1969 1997 1995 1991 1998 1992 1987 1989 1996 1986 1995 1994 1996 1996 1982 1992 1994 1992 2003 1986 1985 2000 1984 2002 1999 1988 1999
Person interviewed President and CEO President and COO General manager President Wine maker Estate manager Controller President President/owner CEO General manager President/owner General manager President/ CEO Manager Winemaker General manager/winemaker Owner Owner/winemaker Owner/winemaker Owner/winemaker Owner/winemaker General manager General manager Owner/winemaker Vice-President/winemaker Owner/winemaker President Winemaker Manager Owner/winemaker Owner/winemaker Sales director Sales and operations manager Owner Director Co-owner Owner/winemaker General manager Manager
Summary of interviews and organizational characteristics of firms in the sample
regulatory problems; competitive pressures; and supply chain issues. I was also able to ask about reputation building and the problems associated with that, plus solicit general comments about industry evolution, cooperation and competition within the Valley, and perceived problems about stability within the industry. I encouraged individuals to share their thoughts on what made the industry successful, what sorts of threats were emerging and how they thought the industry would be changing. A full list of the open ended questions is provided in the Appendix. This detailed ethnographic approach permits one not only to determine answers to specific question sets but also to provide an opportunity for respondents to add their own stories. For example, wine makers were encouraged to talk about the pressures they experienced in producing certain types of wines; general managers how they determined the intent of owners who in many cases were absent from the property and balance that with operational exigencies; and finally what owners saw as the limitations of their endeavors. It also provided rich and detailed information on how information is exchanged through personal contacts, both formally among owners and informally among winemakers, and general managers. In the latter cases, personal relationships with fellow winemakers clearly shaped business activities in ways resonant of Granovetter’s (1985) notion of embeddedness, yet they complemented the more arms-length relationships that existed between owners. I did ask winemakers who had earlier worked for wineries that had been sold about their experiences in such firms in order to gain a sense of how prior circumstances might have led to success or in their case firm failure. As with any organizational population it is difficult to gain detailed information on firm failures other than second hand. Mortality rates among Napa wineries in the period under discussion, however, did not appear to be extensive and it is only in recent times that a pattern of sales to corporate entities who subsequently consolidate operations has emerged. While understanding firm failures can be an important dimension, I nonetheless felt that information derived from winemakers (their narratives and experiences) would provide sufficient details to support the analysis of network activities in the early phase of market formation. Napa Valley: background Both the context and the structure which governs knowledge transmission are important components of the effectiveness of organizational learning within individual firms. In the case of Napa valley one has a local market within a broader regional market of California as a whole which continues to be the primary producer of wine in the USA. With 391 brick and mortar wineries (and 704 grape growers), Napa valley produces 4 percent of California’s wine by volume but accounts for 27 percent of the sales value of the state’s wine (MKF Research, 2005). A combination of favorable terroir and climate, sophisticated viticulture techniques, adequate supplies of skilled managerial, and technical labor, a supportive institutional structure, plus individuals with sufficient capital resources to fund new initiatives (see Siler, 2007) all combine to ensure that premium prices for wines and grapes continue and the region’s status reinforced. Although American Viticulture Areas (AVA classifications are not a guarantee of product quality they are nonetheless an important source of identity for wineries since they both formalize and differentiate relationships between firms (Benjamin and Podolny, 1999; Zhao, 2005). In the case of Napa valley, the first AVA in California, there has been a further subdivision into 14 smaller appellations although the official delimitation of ‘‘Napa Valley’’ appears on the bottle’s label. Wineries draw general
reputational status from the broader collective identity (Napa Valley) but highlight unique aspects of site specificity by referring to their sub-viticultural area (Spring Mountain, Oakville, Rutherford, etc.). Since some of the top quality wines come from very specific vineyard designations, price premiums and reputational effects have inevitably followed. The subsequent status ordering between different appellations emphasizes the consumer’s perception of respective quality and permits price premiums to be assigned to wines affiliated with the prestigious regions. As Benjamin and Podolny (1999) and Podolny (2005) argue, maintenance of high status affiliations signifies product quality and therefore higher prices for their wine. This allows such wineries to move away from being an undifferentiated commodity where price competition is paramount. Unlike luxury French wines where a long track record of high quality denotes high status, Napa valley producers have had to manufacture such status. They have done this, especially in the last decade, by producing a high-quality product in very limited quantities and at a high retail price. The resulting product, often sold on allocation to a select group of customers, creates the perception of scarcity while the high price suggests quality. The success of this strategy has acted as a stimulus for new market entrants with the requisite resource capabilities who seek external validation of their desired quality by district affiliation. Because high status affiliation wineries are likely to produce high-quality wines (Benjamin and Podolny, 1999), such expectations on the part of the winery and the resources they bring to the venture further legitimizes the status hierarchy. Structure and governance The spatial proximity of firms within a strongly demarcated area, and the ensuing formal and informal interactions that structure inter-firm relationships, point to the existence of a cluster. The neo-Marshallian notion of clusters or industrial districts is important here because it refers to ways in which relationships between firms are shaped by institutional activities, de facto governance by dominant firms and an operational logic that emerges from consensual behavior by individual firms. Norms of reciprocity consolidate individual relationships and legitimize specific organizational forms, thus further sustaining the carrying capacity of the niche. This evolving population of organizations produces valuable knowledge resources which when eventually systematized and codified, create a modified organizational structure less overtly dependent upon informal cooperation. Similar clusters have evolved in other wine regions (Chile and New Zealand for example) but the distinctiveness of Napa is its quickly attained high status identity that was a product of effective network governance in the early development phase. It has been argued that informal contacts within clusters provide an easy conduit for information and tacit knowledge transfer (Lazerson and Lorenzoni, 1999; Breschi and Lissoni, 2001). Tacit knowledge refers to specific skill sets possessed by key individuals within cluster firms which when aggregated becomes community knowledge. Information on the other hand can be more widely available and accessible to a broader audience, is less complex and more generalized. Knowledge transfer is structured informally, based upon trust and social capital (Inkpen and Tsang, 2005). Informal relations between individuals provide an impetus for reciprocity-based collective learning since shared knowledge is indispensable for the maintenance of reputation and status.
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I hypothesize that close relationships existed (embedded ties) among winemakers whose sense of cohesion as a professional group was predicated upon interaction in which often proprietary information was knowingly divulged, and mutual obligations and expectations existed in what amounts to communities of practice. The resulting network was dense (many links between individuals) and decentralized (no one member exerts a centrifugal pull). Winemakers shared their wines with other winemakers as a form of benchmarking and non-codifiable knowledge-seeking behavior. This enabled them to learn about site-specific issues and gain access to nontechnical details. By promoting long term, shared interests over short-term gains, such action further stimulated organizational learning in the network setting (see Visser and deLangen, 2006). This form of collective learning depends upon synergies among individuals rather than firms as others have argued (Staber, 2001). I further hypothesize that firms that failed – or have not been able to consistently produce high scoring wines which amounts to de facto failure – had winemakers who were less active participants in such informal networks. As populations of organizations evolve and the market legitimized, operational knowledge becomes available without recourse to informal networks. Instead it is accessible to actors with more or other resources. By eroding the rationale for informal networks of knowledge sharing, does this necessarily replace co-operation with competition? However, collective organizational learning can minimize tendencies toward information hoarding and high status winemakers might be as likely to share operational details with newcomers as they were with their counterparts even if they are not dependent upon networks for their own information sources. Typically firms in a cluster operate within a set of rules that constrain them to cooperate to address competitive problems. Cluster governance involves a mix of coordination mechanisms, the efficacy of which is determined by the degree of trust, the role of leader firms, intermediaries, and how successful efforts are at minimizing free rider problems (deLangen, 2004). Because regional identity is crucial for reputational status, firms must adhere to common practices and conform to guidelines that are in many instances self-imposed although in some cases shaped by leader firms that are able to take the initiative on a particular issue. Trust refers to a sense of common identity and shared norms among key firms and individuals and the recognition that collective action can diminish opportunistic behavior. While institutional bodies provide regulatory parameters that govern basic operating procedures, industry-specific organizations (intermediaries) emerge to promote products and protect identity. Identity protection and constraints Cluster governance in wineries has been institutionalized in two ways: directly through trade organizations and indirectly through ratings agencies. Nationally, the Wine Institute’s (2007) role is to be an advocate for the industry, inform public policy and be a general resource for members. At a local level the Napa Valley Vintners (NVV) represents the shared interests of 310 member wineries and protects the integrity of the Napa Valley appellation. In 1975 the Napa Valley Grapegrowers was organized to represent over 500 grapegrowers in the valley and help promote best practices in agriculture, preserve the heritage, and strengthen the industry’s economic viability, as well as be a link with NVV members. Finally, a quasi-formal Napa Valley Wine Tech group was formed in the 1970s so that winemakers and winery owners could share information. They met regularly, sampled each other’s wines, and discussed ways of addressing problems that were part of an industry struggling in its infancy. The
respondents in my sample who were part of this group at its inception argued that it was one of the most important ways of learning non-technical aspects of winemaking and viticulture and crucial for the valley’s subsequent rise in status. To varying degrees, membership of these organizations endowed a certain affiliational legitimacy and sustained and formalized a network of individuals in firms. While winemakers shared knowledge with each other within the cluster and benchmarked their wines against each other through shared tastings, it is important to note the role played by agencies that evaluate wine quality using a scoring system. The two widely accepted leaders in this category are Wine Spectator and Robert Parker’s The Wine Advocate. It is generally acknowledged that a high score (90þ points on a scale of a 100) awarded to a wine by one of these signifies to the consumer that the wine is of the highest quality (and therefore status) and is a guarantee of increased sales and enhanced reputation for the winery (and winemaker). Within the industry, it is recognized that such ratings reflect a certain style of wine (big, high alcohol, fruit forward, and immediately accessible rather than ageworthy). Such tangible features, which are certainly compatible with growing conditions in Napa Valley, therefore provide a useful template for winemakers there. Given such stylistic parameters, not surprisingly winemakers (and winery owners) attempted, and continue, to make their wines accordingly. This can both lead to a convergence of style but also a product that more consistently reflects the preferences of such taste arbiters. Such agencies reinforced product stylistic constraints that confer status but also provided firms within this cluster with the requisite guidelines for production. This effectively established norms, structures tacit knowledge, and helped consolidate regional identity around a particular style of wine. Status, identity formation, and the structure of knowledge sharing Winemakers are key actors in shaping the identity of a winery and through their skills contribute to the status and reputation of the winery. As they move beyond formal learning (institutionally provided and focusing upon techniques and the chemistry of winemaking) and the informal apprenticeships at wineries, there are two mechanisms whereby systematic knowledge transmission actually occurs within the cluster: informal exchanges and shared opinions on product characteristics and occupational mobility by winemakers between wineries within the district. As in any occupational specialty where incumbents have site-specific knowledge, wine makers rely upon localized tacit operational details that are gleaned from others in the geographical area where they work in addition to their professional training. Since grape growing and the resulting attributes of wine vary from region to region (the concept of terroir perhaps best expresses these idiosyncratic aspects) learning what others are doing is crucial for newcomers, as is the sharing of routine techniques that are discussed between established winemakers. Every winemaker in my sample indicated how crucial such knowledge sharing was for them. One (10,000 case winery) said that quality is increasingly vineyard driven with an emphasis upon how vines are farmed, the land, viticulture techniques, etc. Gaining access to this knowledge by talking with fellow winemakers is vital and was expected. It was presumed that you share problem-solving details; that you solicit advice on certain technical aspects, and actively discuss site-specific attributes. As another (30,000 case winery) commented:
There’s a lot of cooperation among winemakers. That’s what’s expected and you’d be foolish not to do it. You help your neighbor in times of trouble, you share information, you visit other
From co-operation to competition 13
wineries, you go tasting. All of this helps you discern quality so that you can benefit and make your own wine better. So in this sense, this constantly tasting other peoples’ wines means you can strive to make your wine better, and if everybody is doing that everybody is making wines better.
He added that such cooperation was both structured (through quasi-formal meetings and organized tastings) and informal (show up at another winery and bring a bottle and solicit comments from the wine makers and his/her staff there) but the essence was to learn – both what to do and what not to do. Could it be that people merely brought their best wines to communal tasting, I asked in my interviews? Respondents said probably no since there was ‘‘a lot of bad wine we tasted in the early days.’’ An owner/winemaker (2,400 case winery) said that she believes her own success in building the reputation of her brand over the years was predicated upon the input of others who were frank and sometimes brutally honest about the quality of her early wines. Her goal was to make a high-quality wine and she knew the techniques (learned at UC Davis) but not necessarily the site-specific problems, information on which could best come from others. As she said, ‘‘you can learn by doing but it takes a long time to properly evaluate the product (from vineyard management techniques in the growing stages, to harvesting, and then aging in barrels before bottling can be up seven or eight years) so if you’re not doing it properly along the way you don’t find out until it’s too late. It wasn’t so much basic mistakes but the more subtle things that can be easily overlooked. I probed, questioned, solicited from other winemakers.’’ Another owner/winemaker of a very small (2,000 case) winery said that she found it crucial to establish links with the winemaking community and to routinize such activities.
It has to be fairly systematic and I find that my knowledge grows, not always in simple increments but in lots of subtle ways that cannot be really taught. I really believe that the success of wines in the valley [Napa] is based upon ways in which we keep trying to make better wines, a sort of one-upmanship. We talk about what we do, then strive to make a great wine so that’s it better than so and so’s, but once we’ve done that, we’re happy to talk about how we did it, why we did it, etc. It’s very competitive but in a friendly sort of way because we figure that our own reputations can be built but not in isolation. We need to cooperate but by doing this we’re constantly pushing the quality up and hence seeking a small competitive edge.
Almost 80 percent of the winemakers in my sample of wineries had worked for at least four other Napa Valley wineries, and another 15 percent for at least two during the past 15 years. Winemakers make a reputation slowly, by working their way apprenticelike as cellar assistants, assistant winemakers, and then finally as winemakers. Such inter-firm labor force mobility is unique because knowledge transcends individual firms but remains within the district. Also hiring is often done by word of mouth rather than in a formal labor market which further emphasizes the importance of the network. The enduring nature of relationships between actors fosters ties that enhance efficiency as well as permit some diversity. Such ties are of strategic significance for firms that implicitly encourage them (Gulati, 2000), but the knowledge sharing (resource dynamism) becomes more dense, tacit, and informal the more restrictive de facto group membership is. It is not just the quantity of interactions that sustains the network (Podolny and Page, 1998), but the quality that incumbents bring to the network. This is more than the social capital that Inkpen and Tsang (2005) correctly identify as crucial components in contextualizing network resiliency. It is also the status gradations that occur on the basis of past individual successes that shape the dynamics of information
exchange. Individual wine makers possess different but complementary resources. The problem of asymmetrical information is overcome and the knowledge base deepened precisely because individuals bring specialized knowledge that qualitatively and incrementally add to the resource pool (Maskell, 2001). The actors within such a network have strong and mutual ties because their collective identity was predicated upon the success of the district’s wine while their individual reputation was aided by the production and diffusion of detailed knowledge. As one (owner/winemaker, 4,400 case winery) said, ‘‘most of the time we know what we’re good at and are willing to talk about it in the hope that someone else will tell us something that’s puzzled us.’’ Another (owner/winemaker, 2,500 case winery) commented that it was a like a barter situation, ‘‘with everyone bringing something to the table to exchange; not formal but we recognized that this was what going on. I basically understand what they’re doing with vineyard management, etc.; it’s what goes on after harvest that intrigues me. This comes out at tastings and if it’s good they want to talk about it.’’ With more and more wineries able to produce a high-quality wine on a regular basis, it suggests performance outcomes indicative of effective knowledge transfer within the district. But it also belies the heuristic of measurable performance outcomes following the widespread use of ratings. While critics argue that more and more of the high scoring wines have the same taste profile – a criticism that is also leveled at the mass produced wines that are easily manipulated to ensure consistency that suits consumer taste (Colman, 2008) – site-specific characteristics are encouraged by winemakers to differentiate their wine. The nuances are often subtle and derive from location attributes as well as stylistic features. However they nonetheless fall under the general rubric of critic friendly styles. Better understanding of wine chemistry and the science of yeasts and fermentation, plus the growth of specialist consulting firms and individuals in these areas, allows winemakers to tailor-make their product (Goode, 2005). Now winemakers have both the skills sets and the operational parameters to make certain styles of wines and an institutional framework that facilitates production efficiency. Utilizing such resources they can reinforce their own reputation and if they so desire, move to another winery where their mandate is probably to replicate their earlier success. Since every winery in my sample indicated that ratings are very important (‘‘they can make or break you, especially if you’re a new entrant’’), winemakers who can rise to the challenge gain instant credibility and legitimize the reputation of the winery at which they work. Such parameters (both externally derived and internally encouraged) imposed production guidelines, the understanding of which on a day-to-day basis came from learned techniques and tacit knowledge shared within the winemaking cluster. The ties of reciprocity that bind individuals within this cluster foster collaboration by encouraging the collective benefits of competition. Subsequent operational norms maintained market stability since even newcomers strive to adhere to them because of the reputational implications. This helps eliminate much of the instability that often occurs within markets between incumbents and new entrants, even as status hierarchies within the market are changing as newcomers attain legitimacy. From the winemaker comments, I was unable to detect any significant differences until recent years in relational network activities between winemakers at cult wineries, those with consistently high scoring wines, and those whose scores were in the 80-90 range other than those one might normally attribute to personality issues. I was told on repeated occasions that while a few cult winemakers could be ‘‘prickly,’’ ‘‘arrogant,’’
From co-operation to competition 15
‘‘conceited,’’ or ‘‘condescending,’’ most were approachable and eager to discuss their wines. As one owner/winemaker (2,500 case winery) said, ‘‘we’re passionate about our wines and what we do. I won’t say that egos aren’t out there – they are. But for the most part we’re a community and we learn from each other.’’ And another (president/owner, 35,000 case winery) commented:
I think that folks realize that even if they’re top of the heap this year, another harvest could see them fall. It’s a fickle agricultural product; there are no guarantees. I don’t have to like the person to deal with him [her] or nonetheless respect them for what they’ve done. You’ve got to have a certain amount of humility to survive around here even though there are a lot of egos clashing at formal settings.
The existence of a less systematic hierarchy and differentiated pattern of knowledge might be a function of labor market mobility. Movement between wineries by winemakers might dilute some of the expected restrictions on knowledge sharing since it diminishes some of the exclusivity that status differentials might impose. Whether interpersonal relationships have developed from informal settings, solidifying network configurations despite hierarchies of knowledge and ability is certainly plausible. Aggregating these relationships provides a social capital dimension to understanding how network ties are structured and network stability maintained (Adler and Kwon, 2002; Inkpen and Tsang, 2005), but it also suggests how trust-based knowledge sharing can occur within the wider context of skepticism. As one winemaker/owner (2,500 case winery, with a long history in the industry that includes vineyard manager and winemaker to several major wineries in the area) said:
The innovators in this industry have been the small folks such as myself, with flair and creativity that keeps the industry and quality improving. It might sound conceited but having worked with Mondavi and other big ones I realize that we’re the ones that take the big risks, not them. But to do this I’ve got to know what’s going on, who’s growing the best grapes, who does the best custom crush. I know exactly what it costs to grow grapes and who’s good at vineyard management. How do I know this? Because I maintain ties and work with folks, talking through concerns. I do consulting for several wineries and that helps me keep abreast of what others are doing.
From comments such as the above and other remarks that highlighted the annual uncertainty around the final product (wine), it appears that optimal levels of cooperation emerged because to do otherwise was fraught with risk. Gaining access to the resources and capabilities that inhere in networks of specialists (local winemakers) was important if one was to minimize learning curves and was crucial should operational problems emerge and one needs a ‘‘favor.’’ It is such ties of reciprocity that bound together otherwise disparate individuals and sustained norms of cooperation that were crucial for market stability. Rather than growth of the wine cluster leading to fragmentation, the sharing of industry-specific knowledge led to innovation and improvements that actually consolidated the cluster’s initial advantages. I was unable to discern any reliable association between network membership/ interaction (specifically lack thereof) and organizational mortality. All of the winemakers whom I interviewed had been part of such networks and therefore adducing failure through non-membership is spurious at best. Aside from possible selection bias (I was unable to locate winemakers who had not been network members), it appears more likely that some form of associational endeavor was commonplace. Three winemakers specifically stated that not belonging to such informal groups would be impractical and inconceivable since such interactions were a rite of passage for newcomers coming to
the area. Not all would necessarily gain the same benefits; hence individual capabilities might be the telling factor in explaining different organizational outcomes. Respondents talked freely about cult wineries and ‘‘top gun’’ winemakers, noting particularly the visibility that such individuals and organizations brought and continue to bring to the industry and the struggle for those without such resources to compete. Succinctly put, one owner (30,000 case winery) said of boutique wineries (100-1,000 cases):
that they are people with deep pockets looking for the cache of owning a Napa winery. They don’t look to make money but acquire it for status, selling their wines to friends and visitors. They charge a premium and are willing to pay a premium for land etc. They’re buying into the industry but with their resources are able to maneuver themselves into a high visibility situation.
From co-operation to competition 17
Another (President/COO, 180,000 case winery) said:
The top winemakers have really established not just their own reputations but that of the valley in general. They’ve put their mark on the product, producing big, bold cabs [Cabernet Sauvignon] that Parker and Laube [Wine Spectator] like. Some are unpretentious and just do their job, others clamor for recognition. Whatever the case, what they’re doing is spreading around the valley. They’re the yardstick now and as long as you got some good blocks [areas within vineyards of specific plantings] you try and do what they’re doing. Why not [. . .] it generates buzz.
A general manager (75,000 case winery) commented:
Wine tastes better now because of improvements in production techniques. Winemakers can also take much credit for this. There’s about half a dozen who are really good and they set the standard for the opulent wines of limited quantity and very high price. But the reason they are good is often great attention to detail across the whole spectrum of the operation [as well as having the best grapes etc.] and this is something that others can learn to do and have done. The real difference between the cult wines and other chateau style wineries [20-30,000 case production] is perception. Limited production, high price, sold on allocation – all of this creates hype and seduces those who want the feel good effect of buying into luxury and a scarce product. I believe there are many good wines being made because winemakers have learned that with good grapes you can make good wines, and Napa has many good grapes. The pricing is where the real differences emerge.
This status deference has complicated the market structure in recent years, creating hierarchies that in some respects are artificial but are nonetheless resonant because of the perceptions of quality that inform consumer behavior. Diversification within the regional marketplace is increasing alongside complexity as individuals with deep pockets and utility maximizing aims have entered the sector. While intraorganizational struggles are inevitable (Fligstein, 2001) as a market matures, what is occurring here is the gradual decline of cooperative behavior and a more nuanced competitive edge to structured relationships. While this does not necessarily destabilize the network (nor the market), if anything it strengthens it by affirming an individual commitment to high quality. But it also limits the potential for core firms seeking to coordinate and control networks because there is less collective recognition of group norms of reciprocity. What ‘‘controls’’ come now in the form of reinvigorated institutional supports and formal designed to protect the Napa brand. Network competition If informal networks were crucial in building market prestige given limited formal sitespecific operational knowledge, as such knowledge becomes codified and operational
parameters more clearly defined and externally constrained, such networks conceivably become less relevant. Given decreased incentives for cooperative knowledge transfer and brokering, logically the population of organizations should evolve into a more competitive structure as actors have the possibility (needs?) to differentiate themselves as density increases. Relatedly, as firm density increases, incumbents are more likely to differentiate themselves from each other and doing introduce an element of competition that in the past was noticeably absent. In evaluating such propositions, there are several dimensions to consider. First, it is well accepted that the high status identity associated with the Napa brand came from a collective improvement in production methods since the 1970s. While such improvements are individual winery-based, the majority in the AVA recognize that their reputation adheres from their regional association and it is therefore incumbent on them to ensure that their production methods are consistent with best practices that maximize their efficiency. Second, striving to differentiate themselves from their competitors by accentuating terroir, they nonetheless protect the integrity of their Napa AVA since this is seen as the basis for their prestige (and high price). With increased density, firms with more valuable resources (prime vineyard location, top winemakers) leverage those resources in their pricing and are able to command high status when receiving consistent high ratings. This results in a more differentiated structure within the region, as ‘‘luxury’’ producers meet different market segments from those less able to exploit scarcity/high-quality/high prices niches. But all retain an affiliational identity with Napa Valley as this is the overarching imprimatur of quality. Because of secular increases in the overall demand for higher end wines (consumers trading up in their habits), producers do not see the market as a zero sum game. Owners capitalize on any high scores that they have received and use that in their marketing efforts; they work with distributors who play a crucial role in placing their wines in appropriate markets. But unlike many competitive marketplaces where producers emphasize their strengths and their competitors’ weaknesses, Napa producers are more likely to highlight the somewhat unique characteristics of their wine as a differentiating tool and/or rely upon high scores by experts to validate their product. As one owner commented ‘‘my wines are good but so are many others here. I work hard to market my wines but in doing so I’m also pushing the brand so in a way every one benefits.’’ I asked him if he saw the several wineries that abut his property as competitors. He responded that ‘‘in a way they are but they’re not trying to drive me out of business. I help them sometimes with vineyard stuff and they help me. There are some who I’m not particularly friendly with, some who are really secretive, some who I’m amazed at what they are trying to do. Do I get on with them? Superficially yes, with some; close friends with others, neighborly with the rest. At the end of the day we all have to work hard to keep the product out there. We go to the same pourings, work with the same distributors and restaurants, do the same charity events. The bottom line is we’re selling a similar product that’s expensive.’’ What does appear to have changed, and this might merely be a function of increased density, is that interaction is more likely to occur in formal settings where information flow is more structured and less reciprocity-based. Trust remains because winemakers and winery owners have encouraged institutional agencies to foster collective norms and they have agreed to abide by them. But weak ties now are more likely to characterize many of these interactions even thought the sense of belonging by individuals is strong. While not necessarily arms length of the type found in
contractual market relationships, there is more differentiation among participants, with interactions more likely to be between winemakers of similar status and reputation. A winemaker who now owns his own 2,500 case winery best summed up the opinion of so many of my respondents on how relationships have changed in the Valley. He said in a 2007 interview:
What we’ve got now is a much more complex and competitive landscape. In the past you’d help others because that was the way to learn and most of us were novices when it came to the different aspects of winemaking. Sure I had technical skills but it’s so different with the practical skills that you needed. Our various winemaker groups really helped me learn and I believe they were crucial and getting the industry on the firm footing. It’s a lot different now because the newcomers bring so much money and there are so many [winemakers] with the necessary skills out there. That means you don’t really need all those informal groups. We still taste but it’s more to show off your wine than to say ‘‘hey [. . .] help me make this better.’’ We’re still friendly and we talk a lot about the industry but there’s an edge now to conversations. I think a lot of it is because the stakes are so much higher now and everyone’s expected to make great wines. We’re Napa and that brand drives expectations so you’d better deliver. In the past I’d say we cooperated to help everyone make a better wine that would be competitive; now we’re competing to see who can make the best wine and get ahead of the pack.
From co-operation to competition 19
Informal friendships inevitably exist and many owners claimed mentoring relationships with more ‘‘old timers’’ in the Valley. But there’s also as one said ‘‘a healthy suspicion that publicly some individuals could not be relied upon to be entirely accurate.’’ One GM said that the annual pre Christmas parties and meetings are times when wineries can claim that they have had the ‘‘best harvest ever,’’ the ‘‘best quality grapes ever’’ and lie about all sorts of things! Nobody really believes this rhetoric but it is the annual ritual of make believe. This is consistent with Johnson et al.’s (2002) argument about the role of declarative knowledge or ‘‘know-what’’ which is predicated upon low levels of information complexity. In this case it emanates from the desire to trumpet the virtues of an individual winery and hence imply a competitive advantage for that producer. According to my sample, new winery owners were more likely to ‘‘accentuate’’ or ‘‘distort’’ facts pertaining to production and established vintners more guarded about their successes. As one owner of a medium sized (35,000 cases) winery with a long track record of success said:
There’s a couple of people whom I trust and respect in the valley, who’ve been at this for decades and who’ve taught me a lot. Others have come in and thrown money around and bought success but not necessarily respect. The latter want instant credibility but it takes time. They’re impatient but often don’t listen. They rely upon a few staff and possibly a high paid consultant and think that they can ignore what goes on among the rest of us. Often they succeed but it diminishes the trust that used to exist in the valley.
Another owner of a similar sized winery (30,000 cases) echoed these comments but went on to add that:
the new money and corporate wineries have moved aside the old agriculturalists who were pioneers back in the 1970s. A lot’s changed and while we still meet and talk, it seems more formal now than in the past. I don’t necessarily think of them as my competitors but I do recognize that they have resources that I cannot match so I have to be careful.
The owner of a small (1,300 cases) winery, whose family has owned land in the valley for generations, was quite prescient in identifying the issues. She commented:
We make 1300 cases and we don’t have lots of dot com money to throw around so there’s no way we can realistically compete with the cult or even corporate owned wineries. We can make good wine and look for smaller distributors to sell it, rely upon a few restaurants to
promote it, and the rest goes through our wine club. Really we don’t compete in the same marketplace as the others yet we share a similar product. We go to the same meetings, sit on the same boards, offer wines for charity events etc. Our winemaker gets around and he’s great at trying new things he learned from others. I suppose my conversations with fellow owners is at a different, more formal level. But we’re all part of the same industry and I suppose we get along because we have to. There’s argument and dissent and even hostility to some of the newcomers. They might not be bothered about being accepted into the community but they desperately want to make a good wine [they hired a top winemaker to do this] and so in a way they become part of the whole valley scene.
While this might sound like nostalgia for the old times and a reverence for the old timers, it nonetheless captures the perception by established producers that a certain formality now structures interactions and there is less transparency. There is certainly resentment by old owners that they lack the resources to match the impact that new owners have been able to bring for their product. But the sub-population of small producers operate in a niche as specialists, competing on the periphery because of their limited resources. Such a view of resource partitioning allows parallel markets of specialists to co-exist, some with extensive resources (new entrants) and others without, but without this necessarily affecting mortality rates in which that earlier studies predicted (Delacroix et al., 1989; Swaminathan, 2001). All of the respondents commented that relationships now are more formalized and prescriptive and there is much more obsession with ratings and scores. New owners have less need for informal community membership since it does not come with any greater access to information nor is it often even possible given their absentee nature. Their principal emphasis is to ensure that the collective identity of the Napa brand is maintained since it is an indispensable part of their own aspirational/reputational identity. Conclusion Research on clusters continues to emphasize the link between localized learning and innovation (Maskell, 2001), building upon earlier work that identified the dynamism of geographically proximate firms as drivers of growth (Porter, 1990). These complement studies in organizational evolution that focus upon resource partitioning (Carroll, 1985; Swaminathan, 2001). However, what is often lacking in such studies is the precise way in which knowledge is transferred other than to suggest that firms are embedded in networks, and how such actions can promote the successful growth of a cluster. This study attempts to specify exactly what the mechanisms are which structure learning and establish specialist organizations in what becomes a high status marketplace. It then shows how eventual industry stability around high status production norms means new entrants are less likely to need access to informal networks to attain such effectiveness levels. Instead of claiming that increased density mitigates network efficiency, I argue that the consolidation of operating principles renders network membership less important for new entrants than in the past when the industry was still climbing the quality ladder. Resource partitioning is both an enabling and a differentiating concept whereby sub-populations of specialists co-exist in a market niche despite having different resource bases. Since the focus has been on luxury wineries, understanding how status is attained and maintained is crucial. I have argued that the pursuit of a high status product, with attendant price premiums, has encouraged and required key actors to negotiate dense and tacit forms of knowledge sharing in a geographically specific network. While this
network is inevitably restrictive in terms of membership, the success of individual members is tied to the collective reputation of the region. Individual winemakers/ owners are a constituent part of this network, the parameters of which are sustained by internally accepted group norms of knowledge sharing plus externally by formal organizational affiliations of the wineries themselves. New entrant firms typically seek out winemakers with established reputations and bring resources that permit them to gain immediate entry into the high status marketplace. But the winemakers themselves become part of the multifaceted sets of formal and informal relationships within Napa Valley that structure interactions and shape behavioral conventions. While no clear evidence of leader firms shaping overall regional governance was found, it does appear likely that the most successful winemakers (those who garner the highest scores) become effective benchmarks for others. Greater resource availability therefore improves organizational survival and encourages new specialist foundings. The growth of a collective identity has been crucial for such organizational survival as well as facilitating differentiation within the market for specialist firms. This means that high status producers are more likely to be able to reproduce that status, and sufficiently well resourced new entrants gain such status, without disruption to the marketplace. More resource scarce firms (generally small producers) nonetheless survive in a separate niche, but continue to draw their legitimacy from membership of the regional cluster (collective identity). To conclude, there are three important findings that have been presented. First, I show how the interaction between key individuals within a marketplace of firms was the primary conduit for crucial knowledge sharing that was indispensable for the attainment of requisite quality for the growth of this luxury product. This was predicated upon principles of reciprocity and a cooperative framework that sustained trust and respect among key actors. The practical learning that occurred within such embedded networks (learning by doing) supplemented more formal training that individuals acquired either through educational programs or ‘‘working one’s way up the winery’’ (de facto apprenticeships). No matter what their background, the essence of the hands-on experience that enabled winemakers to comprehend the complexity of site-specific idiosyncrasies becomes part of the collective knowledge pool through such interactions. The ties between winemakers were dense and structured largely, but not solely, through informal contacts. These interactions promoted common approaches or conventions and contributed to the upgrading of the sector over the past two decades. Such networks of embedded interactions are responsible for the success of emerging specialist organizations, the growing collective identity of which furthers resource partitioning but in ways that do not necessarily lead to increased firm mortality. Second, once the industry became unambiguously associated with the production of high status products, the means whereby such excellence could be easily replicated with sufficient resources increased. This allowed new resource rich entrants to ‘‘buy their way into the market’’ and enabled them to function effectively without necessarily embracing the cooperative network of relationships that had sustained the sector’s growth. This did not destroy reciprocal exchange relationships within the sector. It did, however, render their utility more superfluous. Given easier access to tacit knowledge that hitherto had been more privileged, new entrants were less likely to invest time and energy into relationship building which in turn eroded the collective benefits of networks. Third, competition has supplanted cooperation as winery owners compete to attract the top winemakers and differentiate their product according to site-specific characteristics. This is not the cut throat competition one finds in less concentrated
From co-operation to competition 21
product markets but it is demonstrably different from the situation of several decades ago when the market was in its infancy. The risks are lower now than before which might explain current disincentives to embrace cooperation; similarly extant knowledge is widely available and publicly disseminated. Nonetheless, new and old owners strive to maintain market parameters, enforce district conventions, and abide by institutional stipulated rules to create stability. While this might sound like an elegy for old timers and the old ways of doing things, it is nonetheless an accurate depiction of what happens when an industry emerges from a small collection of specialists, builds a collective identity that becomes a resource in itself, but then becomes a victim of its own success by attracting new entrants whose own resource base permits a different form of network interaction. There are not necessarily ‘‘good guys and bad guys,’’ merely different actors with varying resource bases who forge an evolving collective identity which encourages further sub-specializtion of organizational populations albeit in a more structured competitive framer than before. As with cluster evolution in other wine regions such as Chile, and in the USA, Oregon and Washington State, such growth was often predicated on creating informal structures that supported the knowledge through cooperative endeavors. This was even more crucial given the complexity of knowledge required to consistently make a high status product. Such sharing might seem inimical to normal competitive marketplaces, but such sharing enabled new firms and established ones to attain and reproduce requisite quality levels to support their desired high status goals. Market maturity resulted in changes in such relationships precisely because the benefits of such arrangements had diminished and boundaries are created that reinforce status distinctions. Competition replaces cooperation but only when the market has matured significantly to render the latter’s utility less crucial to stability. Research on other industries with similar growth trajectories, tacit knowledge parameters, and high status aspirations would be useful to see if such a pattern has been replicated elsewhere. Similarly, it would be useful to see whether other wine districts experienced a similar growth stage only to be thwarted by the lack of institutional supports, the complete breakdown of consensual norms or high mortality rates by firms lacking in resources to respond strategically to the challenge of increased specialist density.
Notes 1. Wine classifications according to price typically assign the top segment as ultra premium which includes wines priced over $14 a bottle (retail). However, in this study I classify ultra-luxury wines as a sub-sector of this category and involve those whose retail price is over $40 a bottle. 2. Actual mortality rates are difficult to determine. Here I use failure to secure high scores as a proxy measure since this can seriously affect reputation and status and most importantly sales of wine. 3. Such ratings enable people who feel insecure about wine to use a seemingly objective measure of quality and therefore look to scores to inform their buying. Retailers and restaurants typically emphasize high scores as a sales tactic, and wineries invoke them in their own marketing. These agencies therefore legitimate tastes and also the high price that is subsequently paid for the wine. 4. See Taplin (2006) and Colman (2008) for more detailed discussion on the role of ratings and particularly the criticism leveled at Parker for his numerical scoring system and his
preference for powerful wines that inevitably stand out in blind tastings but are perhaps less food friendly than other wines. 5. Steve Heimoff’s (2008) recent book on his conversations with classic winemakers in California provides interesting insights into how these individuals build reputations at wineries then often move on. 6. See Enright (1998) for further discussion of how new forces energize clusters sometimes replacing those that gave it its initial advantage. 7. In 1976 at a blind tasting of French and California wines held in Paris, French judges chose several virtually unknown California wines over the more established and famous French ones. This brought significant attention and fame to the re-emerging California wine industry and demonstrated that Napa Valley in particular could produce wines of extremely high quality that would match the best from Europe. For further details of the event and how this permitted the industry to gain credibility and status, see Taber (2005). 8. Bulk wine producer Fred Franzia, CEO of Bronco Wine Co., who came to fame recently with his ‘‘two buck chuck’’ Charles Shaw wines that sell 5.5 million cases annually through Trader Joe’s, has suffered legal setbacks after attempting to use the name Napa on three of his Napa-named brands (Napa Ridge, Napa Creek, and Ruherford Vintners). The law requires 75 percent of the grapes to come from the location listed on the label and since his wines do not have that percentage (most coming from the Central Valley of California), the NVV took legal action. Franzia lost in court because he was unwilling to pay the higher prices for Napa grapes that would be necessary if he were to continue the use of Napa on his labels. On their part, the NVV were arguing that they were merely protecting the integrity of their brand. See Sogg (2006) for a fuller discussion of Franzia and this case. 9. Conaway (2003) and Siler (2007) provide interesting commentaries on the transformations that have occurred in Napa Valley during the past few decades, replete with personality clashes, the flood of new money, and the ambitions of newcomers, hirings and firings, and struggles over regulatory issues. Such nuanced narratives are a useful complement to the staid academic studies of power and privilege. References Adler, P.S. and Kwon, S.-W. (2002), ‘‘Social capital: prospect for a new concept’’, Academy of Management Review, Vol. 27, pp. 17-40. Benjamin, B.A. and Podolny, J.M. (1999), ‘‘Status, quality, and social order in the California wine industry’’, Administrative Science Quarterly, Vol. 44 No. 3, pp. 563-89. Breschi, S. and Lissoni, F. (2001), ‘‘Knowledge spillovers and local innovation systems: a critical survey’’, Industrial and Corporate Change, Vol. 10 No. 4, pp. 975-1005. Burt, R. (1983), Corporate Profits and Cooptation: Networks of Market Constraints and Directorate Ties in the American Economy, Academic Press, New York, NY. Campbell, J., Hollinsgworth, J.R. and Lindberg, L. (1991), Governance of the American Economy, Cambridge University Press, Cambridge. Carroll, G. (1985), ‘‘Concentration and specialization: dynamics of niche width in populations of organizations’’, American Journal of Sociology, Vol. 90, pp. 530-47. Colman, T. (2008), Wine Politics, University of California Press, Berkeley, CA. Conaway, J. (2003), The Far Side of Eden, Mariner Books, Boston, MA. Delacroix, J., Swaminathan, A. and Solt, M.E. (1989), ‘‘Density dependence versus population dynamics: an ecological study of failings in the California wine industry’’, American Sociological Review, Vol. 54, pp. 245-62.
From co-operation to competition 23
DeLangen, P.W. (2004), The Performance of Port Clusters: A Framework to Analyse Cluster Performance and an Application to the Seaport Clusters of Durban, Rotterdam and the Lower Mississippi, Erasmus Research Institute of Management, Rotterdam. Enright, M.J. (1998), ‘‘Regional clusters and firm strategy’’, in Chandler, A., Hagstrom, P. and Solvell, O. (Eds), The Dynamic Firm, Oxford University Press, Oxford and New York, NY. Fligstein, N. (2001), The Architecture of Markets, Princeton University Press, Princeton, NJ. Goode, J. (2005), The Science of Wine, University of California Press, Berkeley, CA. Granovetter, M. (1985), ‘‘Economic action and social structure: the problem of embeddedness’’, American Journal of Sociology, Vol. 91, pp. 481-510. Gulati, R. (2000), Managing Network Resources, Oxford University Press, Oxford. Heimoff, S. (2008), New Classic Winemakers of California, University of California Press, Berkeley, CA. Inkpen, A. and Tsang, E. (2005), ‘‘Social capital, networks and knowledge transfer’’, Academy of Management Review, Vol. 30 No. 1, pp. 146-65. Johnson, B., Lorenz, E. and Lundvall, A.-B. (2002), ‘‘Why all the fuss about codified and tacit knowledge?’’, Industrial and Corporate Change, Vol. 11 No. 2, pp. 245-62. Kramer, M. (2004), New California Wine, Running Press, Philadelphia, PA. Lazerson, M.H. and Lorenzoni, G. (1999), ‘‘The firms feed industrial districts: a return to the Italian source?’’, Industrial and Corporate Change, Vol. 8, pp. 235-66. Maskell, P. (2001), ‘‘Towards a knowledge-based theory of the geographical cluster’’, Industrial and Corporate Change, Vol. 10 No. 4, pp. 921-43. MKF Research (2005), ‘‘Economic impact of wine and vineyards in Napa County’’, pp. 1-7. Podolny, J.M. (1993), ‘‘A status-based model of market competition’’, American Journal of Sociology, Vol. 98, pp. 829-72. Podolny, J.M. (2005), Status Signals, Princeton University Press, Princeton, NJ. Podolny, J.M. and Page, K.L. (1998), ‘‘Network forms of organization’’, Annual Review of Sociology, Vol. 24, pp. 57-76. Porter, M.E. (1990), The Competitive Advantage of Nations, Macmillan, London. Powell, W. (1990), ‘‘Neither market nor hierarchy: network forms of organization’’, in Staw, B. and Cummins, L.L. (Eds), Research in Organizational Behavior, Vol. 12, JAI Press, Greenwich, CT, pp. 295-336. Siler, J.F. (2007), The House of Mondavi, Gotham Books, New York, NY. Sogg, D. (2006), ‘‘Bad boy of California wine’’, Wine Spectator, 16 November, pp. 168-75. Staber, U. (2001), ‘‘The structure of networks in industrial districts’’, International Journal of Urban and Regional Research, Vol. 25 No. 3, pp. 537-52. Swaminathan, A. (2001), ‘‘Resource partitioning and the evolution of specialist organizations: the role of location and identity in the US wine industry’’, Academy of Management Journal, Vol. 44 No. 6, pp. 1169-85. Taber, G. (2005), Judgment of Paris: California vs. France and the Historic 1976 Paris Tasting that Revolutionized Wine, Scribner, New York, NY. Taplin, I.M. (2006), ‘‘Competitive pressures and strategic repositioning in the California premium wine industry’’, International Journal of Wine Marketing, Vol. 18 No. 1, pp. 61-70. Uzzi, B. (1997), ‘‘Social structure and competition in interfirm networks: the paradox of embeddedness’’, Administrative Science Quarterly, Vol. 42, pp. 35-67. Visser, E.-J. and deLangen, P. (2006), ‘‘The importance and quality of governance in the Chilean wine industry’’, GeoJournal, Vol. 65, pp. 177-97.
Wine Institute (2007), ‘‘Premium growth trend for California wine continues in 2006 as mainstream wine culture emerges in the US’’, pp. 1-4, available at www.wineinstitute.org/ industry/statistics/2007/wine_sales.php (accessed 1 June). Zhao, W. (2005), ‘‘Understanding classifications: empirical evidence from the American and French wine industries’’, Poetics, Vol. 33, pp. 179-200. Further reading Frank, R.H. (1999), Luxury Fever, Princeton University Press, Princeton, NJ. Laube, J. (2006), ‘‘California’s top 50’’, Wine Spectator, 15 November, pp. 48-60. Appendix. Questionnaire* Open ended questions. (*strict confidentiality is maintained and names of wineries or people involved in study not identified) History of winery Can you tell me about your founding, who was involved in it and where your resources came from? Principal types of wine sold: # cases: Acres under production: Ownership: family/corporate/private partnership Staff numbers. Production and operational aspects Are you profitable? Are you changing anything about your approach to winemaking? Do rating agencies (Parker, Wine Spectator etc) affect the way you make your own wine? Do you see these agencies as causing a homogenization in winemaking, a convergence of taste? Is this good, bad or irrelevant to your winery? How much has changed in your winery over the last few years? Would you describe these changes as pro-active or re-active? Do you plan to expand production? Reduce capacity? Any partnerships or joint ventures with other wineries in other areas/countries planned or currently existing? What are the challenges that you face in the current environment? Networks and interaction Would you say that a cooperative environment exists amongst premium producers whereby information is shared informally through established networks? Or is it more secretive and competitive? How much interaction do you have with fellow winemakers/owners/general managers? How would you characterize these interactions? Are there informal norms that encourage information sharing? How do you learn winemaking techniques and issues that are site specific? What attempts are made to collectively market the Napa brand as a status wine? Do you think more should be done to limit production and ensure quality control? If so what exactly? Regulatory problems Does the recent Supreme Court ruling on inter state shipments effect your winery? What are its implications for the premium producers if any? Do you foresee other government regulations affecting your production (environmental issues for example)? What steps do you take to anticipate potential changes? Competitive pressures What changes in the competitive landscape do you perceive? How are they affecting your particular winery?
From co-operation to competition 25
What about increased competition from overseas? What countries? Has this increased and do you expect it to continue to increase? How have you responded to these changes? Are your strategies different now than in the recent past? Do you think that your own position is more vulnerable now than in the past and if so what are you doing about this? Supply chain issues What are your thoughts on the recent concentration trend amongst distributors? Does this affect your winery and if so how? Do you see further concentration occurring? Are there other changes in the supply chain that you anticipate affecting premium producers in Napa in general and your winery in particular? If so how do you plan to respond to them? What’s happening in the valley and the industry in general Share your thoughts on how trends are developing and what this means for incumbents. This research is purely for academic purposes and has no commercial intent. All participants will remain anonymous. Thank you for your help Corresponding author Ian M. Taplin can be contacted at: Taplin@wfu.edu
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