Monday, April 25, 2016

What makes Napa Napa? The roots of success in the wine industry


Our analysis leaves us therefore with the search for explanations relating more closely to human agency, in terms of how the reputation for quality and the formal and tacit knowledge for fine winemaking were created within a region. We found in our model that as the number of wineries increases, so does the value of wine grapes, providing prima facie evidence of the importance of social capital. That is, when a wine district is dense, comparative advantage would suggest costs will go up, as land, labor and other inputs become more demanded. Cluster and social capital theory provide plausible explanations that density brings benefits, from labor and input specialisation to the easier sharing of tacit knowledge. It also brings the greater possibility of reputational capital, as more wineries see the benefit of collective action, and institutional creation and maintenance transactions costs lower, leading to the possibility for creating a strong regional brand.