from co-operation to competition

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International Journal of WineBusiness ResearchVol. 22 No. 1, 2010pp. 6-26# Emerald Group Publishing Limited

1751-1062DOI 10.1108/17511061011035170

From co-operation to competition:market transformation among

elite Napa Valley wine producersIan M. Taplin

Department of Sociology, Wake Forest University, Winston-Salem, North Carolina, USA

Abstract

Purpose The purpose of this paper is to argue that cooperative behavior by key actors is oftencrucial for collective organizational learning to occur and new markets to become established. Suchcooperation is gradually replaced by competition as network interactions become formalizedfollowing 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 highstatus good.Findings The sharing of tacit knowledge complements technical skills for key industry actors andfacilitates collective organizational learning in ways that expedite the emergence of a high statussector. Once knowledge is codified as the sector gains legitimacy, there is less need for informalstructured interactions as vital conduits of knowledge sharing.Originality/value This paper shows how knowledge sharing via cooperative relationshipunderlies competitive market formation and provides firms with requisite quality enhancementsnecessary for status attainment.

Keywords United States of America, Viticulture, Wines, Marketing strategy, Organizational change

Paper type Research paper

In this paper I use the example of ultra-luxury wines to examine how knowledge sharingbetween incumbents and newcomers was crucial in the formation of a market place forhigh status goods in a specific region. I argue that firms, through their winemakers,collaborated to forge a collective identity that led to operational upgrading andsubsequent improved consistency and quality in their products. As such improvementswere affirmed by official ratings groups, the region acquired high status attributes thatin turn attracted new entrants. The cooperative relationships that were crucial toorganizational learning in the early phase, and embedded in networks, became graduallyrecast in more competitive terms as firms now search to differentiate themselves fromothers. Given the codification of knowledge that has occurred with industry maturity, itis now less likely that reciprocal exchange relationships are necessary for new firms toattain 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 hasbecome more structured so that organizational sub-populations co-exist in what is nowa more formally circumscribed marketplace. Differentiation of sub-populations occurnot because actors are on the periphery of a market dominated by generalists asecological models of resource participation argue (Carroll, 1985; Swaminathan, 2001).Instead, they compete in separate niches where varying levels of resource availabilityshape market positioning and performance. Opportunities for resource rich specialistshave encouraged new entrants but it has not necessarily led to high mortality rates forincumbents as organizational ecology scholars might predict (see, for example,

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Delacroix et al., 1989). But it does explain the growth of niche resources that enablenewcomers to be less dependent upon informal knowledge networks.

My focus is on Napa Valley which in the last three decades has attained anindisputable recognition for quality (Kramer, 2004; Taber, 2005; Wall Street Journal,

November 3, 2006). By concentrating upon a fairly small geographic region wherebrand recognition and generalized high status permit premium prices, I analyze howthis luxury market[1] has emerged. By identifying the circumstances under whicheconomic transactions are embedded in networks, internal labor markets, trust, and/orinstitutions, one can assess the salience of such features in incipient market growthwhen product quality is difficult to measure or to predict in advance. Specifically, I lookat the cooperative knowledge sharing role played by key actors who were often owner/winemakers and whose network activities occurred within a quasi-competitiveframework and an emerging institutional structure that sustained production norms. Ialso show how the status signaling mechanisms that provided gradual legitimacy forthe industry in its infancy (when quality was either unknown or questionable) are nowused by newcomers as a benchmark for their own aspirations.

If we are to understand how markets develop and operate, including the evolution ofspecialist organizations therein, we need to determine how they are structured andwhat role is played by key individuals whose knowledge and expertise can aid firmsthat are attempting to establish a market presence in such a sector. It is precisely thenetwork or relations between key actors that provide resources for firms in theaggregate (Burt, 1983) and permit some form of structuring that results in overallgovernance becoming institutionalized (Podolny, 1993; Campbell et al., 1991).Meanwhile information exchange by key actors can act as conduits for organizationallearning and efficient market transactions (Granovetter, 1985; Uzzi, 1997). Ties amongsuch actors are crucial for this exchange to occur (Powell, 1990), as is an element oftrust and a willingness to exchange information that might seem to undermine thecompetitive advantage of a particular firm.

As markets mature, key actors within firms establish performance parameters byrelying upon information derived from similar placed actors in competitor firms. Ihypothesize that such knowledge (rather than merely information) sharing is crucial tothe performance of individual firms but also promotes enhanced quality in outputs ofthe market as a whole. In other words, embedded relationships structure knowledgetransfer in ways that enhance overall efficiency and sustain market growth.

Opportunistic behavior is less prescient here than informal and formal channels ofcommunication that are distinctly cooperative in nature. In a luxury goods marketwhere quality and status (or brand) are at a premium, gaining access to coreoperational competencies is essential for firms, but so is their success contingent uponthe market as a whole continuously upgrading its performance indicators. In such a

symbiotic relationship, firms establish reputations by market association but marketsdepend upon individual firms to continuously demonstrate their individual capabilitiesaccording to external evaluations.

As brand identity increases, however, the industry inevitably attracts newcomerswho often possess resources that enable them to purchase requisite inputs (best land,best viticulturalist, and best winemaker) and focus upon attaining high quality asmeasured 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 forviticulture becomes available in the area (transformations within the existingagricultural sector). An increasingly fluid labor market for winemakers (greater firm


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density, more formal training programs that increase the supply of winemakers) resultin firms bringing in outside specialists or poaching winemakers from incumbent firms.Therefore, I further hypothesis that the accessibility of community experience andcodified knowledge as the market has matured renders high-quality goals attainable

without necessary recourse to established networks, hence diluting the cooperativeendeavors that sustained the industry in its ascendancy.

Research methodologySemi-structured interviews with winery owners, general managers, and wine makersat 40 Napa Valley wineries were conducted between 2005 and 2007. Each winery in thissample produces at least one wine classified in the luxury category; some producedseveral 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 almostexclusively on wineries that produced a Cabernet Sauvignon or a Bordeaux blend sincethese are the signature grapes for this region and ones which are largely responsiblefor 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 alist derived from specialist publications, principally Wine Spectator and The WineAdvocate, as these are the principal ratings sources that score individual wines onquality and are accepted as industry benchmarks. Frequent rankings and listings ofNapa Valley Cabernet Sauvignons and Bordeaux blends are published and I focusedupon wineries which produced wines that obtained scores of at least 90 points fromone of the two publications in the past ten years. I used a ten-year period toinclude established wineries as well as new entrants to the market. From an initial listof 51 wineries, 28 of the interviews resulted from blind calling; the remaining 12followed the use of two informed insiders who contacted a resource person at adesignated winery and then provided me with an introduction. This proved anexpeditious way of securing interviews with wineries who otherwise (as severalsubsequently commented) would not have agreed to a meeting.

I further classified wineries according to size based upon the number of cases ofwine 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 ofthe wineries in the sample were privately owned. Also, I endeavored to get a balance ofestablished wineries (founded at least 20 years ago) as well as newcomers (entered themarket in the last five to ten years) in order to discern how differences betweenindustry founders and newcomers might be apparent. My assumption was that smallerwineries were more likely to be recent start ups, were better capitalized, and moreintent upon exploiting the reputational effects by establishing a high price, limitedproduction 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 andin some cases the vineyards. In four instances repeat visits were made. Wheninterviewing the owner, I was able to gain specific information about the winerysfinancial operations as well motivations behind the firms start-up, initial capitalizationcosts, revenue streams (including when profitability was attained, if at all), vision, andstrategic goals. With general managers much of the same information was providedbut less personal background was available. In my interviews with wine makersI asked specific questions about information sharing, relationship building, and inter-firm mobility since these were crucial to understanding market stability. From prior


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research in this area I realized that cooperation had become normative in the earlyphase of the industrys growth; in my interviews I wanted to pursue this line of enquiryfurther and systematically determine the mechanism for such cooperation and askedspecifically 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 jointposition. Table I provides a summary of the sample.

The questions were grouped into the following basic categories: history of wineryand personnel; production decisions and operational questions; interactions, bothformal and informal with others in the industry; marketing and brand building;

TableSummary of intervie

and organizationcharacteristics of firm

in the samp

Firm size: casesproduced Date of founding Person interviewed

Number ofinterview hours

Medium 100,000 1974 President and CEO 5 (on 2 visits)Medium 180,000 1972 President and COO 2

Medium 100,000 1972 General manager 2Medium 20,000 1994 President 2Medium 30,000 1992 Wine maker 3Medium 40,000 1973 Estate manager 3Medium 60,000 1981 Controller 1Medium 30,000 1982 President 2Medium 30,000 1998 President/owner 2Medium 25,000 1978 CEO 2Medium 75,000 1981 General manager 9 (on 4 visits)Medium 35,000 1978 President/owner 7 (on 4 visits)Medium 45,000 1979 General manager 2Medium 63,000 1969 President/ CEO 1Small 2,500 1997 Manager 1Small 10,000 1995 Winemaker 1

Small 20,000 1991 General manager/winemaker 2Small 1,300 1998 Owner 2Small 2,000 1992 Owner/winemaker 2Small 2,400 1987 Owner/winemaker 1Small 2,500 1989 Owner/winemaker 3Small 2,500 1996 Owner/winemaker 3Small 10,000 1986 General manager 1Small 12,500 1995 General manager 2Small 8,500 1994 Owner/winemaker 1Small 9,000 1996 Vice-President/winemaker 6 (2 visits)Small 1,200 1996 Owner/winemaker 2Small 4,200-6,200 1982 President 1Small 10,000 1992 Winemaker 2Small 3,000 1994 Manager 1

Small 2,000 1992 Owner/winemaker 1Small 2,500 2003 Owner/winemaker 2Small 7,500 1986 Sales director 2Small 7,000 1985 Sales and operations manager 1Small 10,000 2000 Owner 3Small 3,700 1984 Director 2Small 5,500 2002 Co-owner 1Small 4,400 1999 Owner/winemaker 2Small 4,000 1988 General manager 2Small 4,500 1999 Manager 1


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regulatory problems; competitive pressures; and supply chain issues. I was also able toask about reputation building and the problems associated with that, plus solicitgeneral comments about industry evolution, cooperation and competition within theValley, and perceived problems about stability within the industry. I encouraged

individuals to share their thoughts on what made the industry successful, what sorts ofthreats were emerging and how they thought the industry would be changing. A fulllist of the open ended questions is provided in the Appendix.

This detailed ethnographic approach permits one not only to determine answers tospecific question sets but also to provide an opportunity for respondents to add theirown stories. For example, wine makers were encouraged to talk about the pressuresthey experienced in producing certain types of wines; general managers how theydetermined the intent of owners who in many cases were absent from the property andbalance that with operational exigencies; and finally what owners saw as thelimitations of their endeavors. It also provided rich and detailed information on howinformation is exchanged through personal contacts, both formally among owners andinformally among winemakers, and general managers. In the latter cases, personal

relationships with fellow winemakers clearly shaped business activities in waysresonant of Granovetters (1985) notion of embeddedness, yet they complemented themore arms-length relationships that existed between owners. I did ask winemakerswho had earlier worked for wineries that had been sold about their experiences in suchfirms in order to gain a sense of how prior circumstances might have led to success orin their case firm failure. As with any organizational population it is difficult to gaindetailed information on firm failures other than second hand. Mortality rates amongNapa wineries in the period under discussion, however, did not appear to be extensiveand it is only in recent times that a pattern of sales to corporate entities whosubsequently consolidate operations has emerged. While understanding firm failurescan be an important dimension, I nonetheless felt that information derived fromwinemakers (their narratives and experiences) would provide sufficient details tosupport the analysis of network activities in the early phase of market formation.

Napa Valley: backgroundBoth the context and the structure which governs knowledge transmission areimportant components of the effectiveness of organizational learning within individualfirms. In the case of Napa valley one has a local market within a broader regionalmarket of California as a whole which continues to be the primary producer of wine inthe USA. With 391 brick and mortar wineries (and 704 grape growers), Napa valleyproduces 4 percent of Californias wine by volume but accounts for 27 percent of thesales value of the states wine (MKF Research, 2005). A combination of favorable terroirand climate, sophisticated viticulture techniques, adequate supplies of skilled

managerial, and technical labor, a supportive institutional structure, plus individualswith sufficient capital resources to fund new initiatives (see Siler, 2007) all combine toensure that premium prices for wines and grapes continue and the regions statusreinforced.

Although American Viticulture Areas (AVA classifications are not a guarantee ofproduct quality they are nonetheless an important source of identity for wineries sincethey both formalize and differentiate relationships between firms (Benjamin andPodolny, 1999; Zhao, 2005). In the case of Napa valley, the first AVA in California, therehas been a further subdivision into 14 smaller appellations although the officialdelimitation of Napa Valley appears on the bottles label. Wineries draw general


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reputational status from the broader collective identity (Napa Valley) but highlightunique aspects of site specificity by referring to their sub-viticultural area (SpringMountain, Oakville, Rutherford, etc.). Since some of the top quality wines come fromvery specific vineyard designations, price premiums and reputational effects have

inevitably followed. The subsequent status ordering between different appellationsemphasizes the consumers perception of respective quality and permits pricepremiums to be assigned to wines affiliated with the prestigious regions. As Benjaminand Podolny (1999) and Podolny (2005) argue, maintenance of high status affiliationssignifies product quality and therefore higher prices for their wine. This allows suchwineries to move away from being an undifferentiated commodity where pricecompetition is paramount.

Unlike luxury French wines where a long track record of high quality denotes highstatus, Napa valley producers have had to manufacture such status. They have donethis, especially in the last decade, by producing a high-quality product in very limitedquantities 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 pricesuggests quality. The success of this strategy has acted as a stimulus for new marketentrants with the requisite resource capabilities who seek external validation of theirdesired quality by district affiliation. Because high status affiliation wineries are likelyto produce high-quality wines (Benjamin and Podolny, 1999), such expectations on thepart of the winery and the resources they bring to the venture further legitimizes thestatus hierarchy.

Structure and governanceThe spatial proximity of firms within a strongly demarcated area, and the ensuingformal and informal interactions that structure inter-firm relationships, point to theexistence 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 areshaped by institutional activities, de facto governance by dominant firms and anoperational logic that emerges from consensual behavior by individual firms. Norms ofreciprocity consolidate individual relationships and legitimize specific organizationalforms, thus further sustaining the carrying capacity of the niche. This evolvingpopulation of organizations produces valuable knowledge resources which wheneventually systematized and codified, create a modified organizational structure lessovertly dependent upon informal cooperation. Similar clusters have evolved in otherwine regions (Chile and New Zealand for example) but the distinctiveness of Napa is itsquickly attained high status identity that was a product of effective networkgovernance in the early development phase.

It has been argued that informal contacts within clusters provide an easy conduitfor information and tacit knowledge transfer (Lazerson and Lorenzoni, 1999; Breschiand Lissoni, 2001). Tacit knowledge refers to specific skill sets possessed by keyindividuals within cluster firms which when aggregated becomes communityknowledge. Information on the other hand can be more widely available and accessibleto a broader audience, is less complex and more generalized. Knowledge transfer isstructured informally, based upon trust and social capital (Inkpen and Tsang, 2005).Informal relations between individuals provide an impetus for reciprocity-basedcollective learning since shared knowledge is indispensable for the maintenance ofreputation and status.


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I hypothesize that close relationships existed (embedded ties) among winemakerswhose sense of cohesion as a professional group was predicated upon interaction inwhich often proprietary information was knowingly divulged, and mutual obligationsand expectations existed in what amounts to communities of practice. The resulting

network was dense (many links between individuals) and decentralized (no onemember exerts a centrifugal pull). Winemakers shared their wines with otherwinemakers as a form of benchmarking and non-codifiable knowledge-seekingbehavior. This enabled them to learn about site-specific issues and gain access to non-technical details. By promoting long term, shared interests over short-term gains, suchaction further stimulated organizational learning in the network setting (see Visser anddeLangen, 2006). This form of collective learning depends upon synergies amongindividuals rather than firms as others have argued (Staber, 2001). I furtherhypothesize that firms that failed or have not been able to consistently produce highscoring wines which amounts to de facto failure had winemakers who were lessactive participants in such informal networks[2].

As populations of organizations evolve and the market legitimized, operational

knowledge becomes available without recourse to informal networks. Instead it isaccessible to actors with more or other resources. By eroding the rationale for informalnetworks of knowledge sharing, does this necessarily replace co-operation withcompetition? However, collective organizational learning can minimize tendenciestoward information hoarding and high status winemakers might be as likely to shareoperational details with newcomers as they were with their counterparts even if theyare not dependent upon networks for their own information sources.

Typically firms in a cluster operate within a set of rules that constrain them tocooperate to address competitive problems. Cluster governance involves a mix ofcoordination mechanisms, the efficacy of which is determined by the degree of trust, therole of leader firms, intermediaries, and how successful efforts are at minimizing freerider problems (deLangen, 2004). Because regional identity is crucial for reputationalstatus, firms must adhere to common practices and conform to guidelines that are inmany instances self-imposed although in some cases shaped by leader firms that areable to take the initiative on a particular issue. Trust refers to a sense of commonidentity and shared norms among key firms and individuals and the recognition thatcollective action can diminish opportunistic behavior. While institutional bodies provideregulatory parameters that govern basic operating procedures, industry-specificorganizations (intermediaries) emerge to promote products and protect identity.

Identity protection and constraintsCluster governance in wineries has been institutionalized in two ways: directly throughtrade organizations and indirectly through ratings agencies. Nationally, the Wine

Institutes (2007) role is to be an advocate for the industry, inform public policy and be ageneral 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 theNapa Valley appellation. In 1975 the Napa Valley Grapegrowers was organized torepresent over 500 grapegrowers in the valley and help promote best practices inagriculture, preserve the heritage, and strengthen the industrys economic viability, aswell as be a link with NVV members. Finally, a quasi-formal Napa Valley Wine Techgroup was formed in the 1970s so that winemakers and winery owners could shareinformation. They met regularly, sampled each others wines, and discussed ways ofaddressing problems that were part of an industry struggling in its infancy. The


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respondents in my sample who were part of this group at its inception argued that itwas one of the most important ways of learning non-technical aspects of winemakingand viticulture and crucial for the valleys subsequent rise in status. To varyingdegrees, 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 tonote the role played by agencies that evaluate wine quality using a scoring system. Thetwo widely accepted leaders in this category are Wine Spectator and Robert ParkersThe Wine Advocate. It is generally acknowledged that a high score (90 points on ascale of a 100) awarded to a wine by one of these signifies to the consumer that thewine is of the highest quality (and therefore status) and is a guarantee of increasedsales and enhanced reputation for the winery (and winemaker)[3]. Within the industry,it is recognized that such ratings reflect a certain style of wine (big, high alcohol, fruitforward, and immediately accessible rather than ageworthy)[4]. 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, notsurprisingly winemakers (and winery owners) attempted, and continue, to make theirwines accordingly. This can both lead to a convergence of style but also a product thatmore consistently reflects the preferences of such taste arbiters. Such agenciesreinforced product stylistic constraints that confer status but also provided firms withinthis cluster with the requisite guidelines for production. This effectively establishednorms, structures tacit knowledge, and helped consolidate regional identity around aparticular style of wine.

Status, identity formation, and the structure of knowledge sharingWinemakers are key actors in shaping the identity of a winery and through their skillscontribute to the status and reputation of the winery. As they move beyond formal

learning (institutionally provided and focusing upon techniques and the chemistry ofwinemaking) and the informal apprenticeships at wineries, there are two mechanismswhereby systematic knowledge transmission actually occurs within the cluster:informal exchanges and shared opinions on product characteristics and occupationalmobility 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 othersin 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) learningwhat others are doing is crucial for newcomers, as is the sharing of routine techniquesthat are discussed between established winemakers.

Every winemaker in my sample indicated how crucial such knowledge sharing wasfor them. One (10,000 case winery) said that quality is increasingly vineyard drivenwith 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 wasexpected. It was presumed that you share problem-solving details; that you solicitadvice on certain technical aspects, and actively discuss site-specific attributes. Asanother (30,000 case winery) commented:

Theres a lot of cooperation among winemakers. Thats whats expected and youd be foolishnot to do it. You help your neighbor in times of trouble, you share information, you visit other


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wineries, you go tasting. All of this helps you discern quality so that you can benefit andmake your own wine better. So in this sense, this constantly tasting other peoples winesmeans you can strive to make your wine better, and if everybody is doing that everybody ismaking wines better.

He added that such cooperation was both structured (through quasi-formal meetingsand organized tastings) and informal (show up at another winery and bring a bottleand solicit comments from the wine makers and his/her staff there) but the essence wasto learn both what to do and what not to do. Could it be that people merely broughttheir best wines to communal tasting, I asked in my interviews? Respondents saidprobably 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 inbuilding the reputation of her brand over the years was predicated upon the input ofothers who were frank and sometimes brutally honest about the quality of her earlywines. Her goal was to make a high-quality wine and she knew the techniques (learnedat 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 toproperly evaluate the product (from vineyard management techniques in the growingstages, to harvesting, and then aging in barrels before bottling can be up seven or eightyears) so if youre not doing it properly along the way you dont find out until its toolate. It wasnt so much basic mistakes but the more subtle things that can be easilyoverlooked. I probed, questioned, solicited from other winemakers.

Another owner/winemaker of a very small (2,000 case) winery said that she found itcrucial to establish links with the winemaking community and to routinize suchactivities.

It has to be fairly systematic and I find that my knowledge grows, not always in simpleincrements but in lots of subtle ways that cannot be really taught. I really believe that thesuccess 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 greatwine so thats it better than so and sos, but once weve done that, were happy to talk abouthow we did it, why we did it, etc. Its very competitive but in a friendly sort of way because wefigure that our own reputations can be built but not in isolation. We need to cooperate but bydoing this were 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 leastfour other Napa Valley wineries, and another 15 percent for at least two during the past15 years[5]. Winemakers make a reputation slowly, by working their way apprentice-like as cellar assistants, assistant winemakers, and then finally as winemakers. Suchinter-firm labor force mobility is unique because knowledge transcends individualfirms 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 enhanceefficiency as well as permit some diversity. Such ties are of strategic significance forfirms that implicitly encourage them (Gulati, 2000), but the knowledge sharing (resourcedynamism) becomes more dense, tacit, and informal the more restrictive de facto groupmembership 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 ismore than the social capital that Inkpen and Tsang (2005) correctly identify as crucialcomponents in contextualizing network resiliency. It is also the status gradations thatoccur on the basis of past individual successes that shape the dynamics of information


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exchange. Individual wine makers possess different but complementary resources. Theproblem of asymmetrical information is overcome and the knowledge base deepenedprecisely because individuals bring specialized knowledge that qualitatively andincrementally add to the resource pool (Maskell, 2001).

The actors within such a network have strong and mutual ties because theircollective identity was predicated upon the success of the districts wine while theirindividual 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 whatwere good at and are willing to talk about it in the hope that someone else will tell ussomething thats puzzled us. Another (owner/winemaker, 2,500 case winery)commented that it was a like a barter situation, with everyone bringing something tothe table to exchange; not formal but we recognized that this was what going on. Ibasically understand what theyre doing with vineyard management, etc.; its whatgoes on after harvest that intrigues me. This comes out at tastings and if its good theywant to talk about it. With more and more wineries able to produce a high-qualitywine on a regular basis, it suggests performance outcomes indicative of effective

knowledge transfer within the district. But it also belies the heuristic of measurableperformance outcomes following the widespread use of ratings.

While critics argue that more and more of the high scoring wines have the sametaste profile a criticism that is also leveled at the mass produced wines that areeasily 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 stylisticfeatures. However they nonetheless fall under the general rubric of critic friendlystyles. Better understanding of wine chemistry and the science of yeasts andfermentation, plus the growth of specialist consulting firms and individuals in theseareas, allows winemakers to tailor-make their product (Goode, 2005). Now winemakershave both the skills sets and the operational parameters to make certain styles of winesand an institutional framework that facilitates production efficiency. Utilizing suchresources they can reinforce their own reputation and if they so desire, move to anotherwinery where their mandate is probably to replicate their earlier success. Since everywinery in my sample indicated that ratings are very important (they can make orbreak you, especially if youre a new entrant), winemakers who can rise to thechallenge gain instant credibility and legitimize the reputation of the winery at whichthey work.

Such parameters (both externally derived and internally encouraged) imposedproduction guidelines, the understanding of which on a day-to-day basis came fromlearned techniques and tacit knowledge shared within the winemaking cluster. The tiesof reciprocity that bind individuals within this cluster foster collaboration by

encouraging the collective benefits of competition. Subsequent operational normsmaintained market stability since even newcomers strive to adhere to them because ofthe reputational implications. This helps eliminate much of the instability that oftenoccurs within markets between incumbents and new entrants, even as statushierarchies within the market are changing as newcomers attain legitimacy.

From the winemaker comments, I was unable to detect any significant differencesuntil recent years in relational network activities between winemakers at cult wineries,those with consistently high scoring wines, and those whose scores were in the 80-90range other than those one might normally attribute to personality issues. I was told onrepeated occasions that while a few cult winemakers could be prickly, arrogant,


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conceited, or condescending, most were approachable and eager to discuss theirwines. As one owner/winemaker (2,500 case winery) said, were passionate about ourwines and what we do. I wont say that egos arent out there they are. But for the mostpart were 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 theyre top of the heap this year, another harvest couldsee them fall. Its a fickle agricultural product; there are no guarantees. I dont have to like theperson to deal with him [her] or nonetheless respect them for what theyve done. Youve got tohave a certain amount of humility to survive around here even though there are a lot of egosclashing at formal settings.

The existence of a less systematic hierarchy and differentiated pattern of knowledgemight be a function of labor market mobility. Movement between wineries bywinemakers might dilute some of the expected restrictions on knowledge sharing sinceit diminishes some of the exclusivity that status differentials might impose. Whetherinterpersonal 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 understandinghow network ties are structured and network stability maintained (Adler and Kwon,2002; Inkpen and Tsang, 2005), but it also suggests how trust-based knowledgesharing 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 managerand winemaker to several major wineries in the area) said:

The innovators in this industry have been the small folks such as myself, with flair andcreativity that keeps the industry and quality improving. It might sound conceited but havingworked with Mondavi and other big ones I realize that were the ones that take the big risks,not them. But to do this Ive got to know whats going on, whos growing the best grapes, whodoes the best custom crush. I know exactly what it costs to grow grapes and whos 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 abreastof what others are doing.

From comments such as the above and other remarks that highlighted the annualuncertainty around the final product (wine), it appears that optimal levels ofcooperation emerged because to do otherwise was fraught with risk. Gaining access tothe resources and capabilities that inhere in networks of specialists (local winemakers)was important if one was to minimize learning curves and was crucial shouldoperational problems emerge and one needs a favor. It is such ties of reciprocity thatbound together otherwise disparate individuals and sustained norms of cooperationthat were crucial for market stability. Rather than growth of the wine cluster leading to

fragmentation, the sharing of industry-specific knowledge led to innovation andimprovements that actually consolidated the clusters initial advantages[6].I was unable to discern any reliable association between network membership/

interaction (specifically lack thereof) and organizational mortality. All of the winemakerswhom I interviewed had been part of such networks and therefore adducing failurethrough non-membership is spurious at best. Aside from possible selection bias (I wasunable to locate winemakers who had not been network members), it appears morelikely that some form of associational endeavor was commonplace. Three winemakersspecifically stated that not belonging to such informal groups would be impractical andinconceivable since such interactions were a rite of passage for newcomers coming to


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the area. Not all would necessarily gain the same benefits; hence individual capabilitiesmight be the telling factor in explaining different organizational outcomes.

Respondents talked freely about cult wineries and top gun winemakers, notingparticularly 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. Theydont 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. Theyre buying intothe industry but with their resources are able to maneuver themselves into a high visibilitysituation.

Another (President/COO, 180,000 case winery) said:

The top winemakers have really established not just their own reputations but that of thevalley in general. Theyve put their mark on the product, producing big, bold cabs [CabernetSauvignon] that Parker and Laube [Wine Spectator] like. Some are unpretentious and just do

their job, others clamor for recognition. Whatever the case, what theyre doing is spreadingaround the valley. Theyre the yardstick now and as long as you got some good blocks [areaswithin vineyards of specific plantings] you try and do what theyre doing. Why not [ . . .] itgenerates buzz.

A general manager (75,000 case winery) commented:

Wine tastes better now because of improvements in production techniques. Winemakers canalso take much credit for this. Theres about half a dozen who are really good and they set thestandard for the opulent wines of limited quantity and very high price. But the reason theyare good is often g reat attention to detail across the whole spectrum of the operation [as wellas having the best grapes etc.] and this is something that others can learn to do and havedone. The real difference between the cult wines and other chateau style wineries [20-30,000case 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 ascarce product. I believe there are many good wines being made because winemakers havelearned 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, creatinghierarchies that in some respects are artificial but are nonetheless resonant because ofthe perceptions of quality that inform consumer behavior. Diversification within theregional marketplace is increasing alongside complexity as individuals with deeppockets and utility maximizing aims have entered the sector. While intra-organizational struggles are inevitable (Fligstein, 2001) as a market matures, what isoccurring here is the gradual decline of cooperative behavior and a more nuanced

competitive edge to structured relationships. While this does not necessarilydestabilize the network (nor the market), if anything it strengthens it by affirming anindividual commitment to high quality. But it also limits the potential for core firmsseeking to coordinate and control networks because there is less collective recognitionof group norms of reciprocity. What controls come now in the form of reinvigoratedinstitutional supports and formal designed to protect the Napa brand.

Network competitionIf informal networks were crucial in building market prestige given limited formal site-specific operational knowledge, as such knowledge becomes codified and operational


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parameters more clearly defined and externally constrained, such networksconceivably become less relevant. Given decreased incentives for cooperativeknowledge transfer and brokering, logically the population of organizations shouldevolve 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 doingintroduce an element of competition that in the past was noticeably absent.

In evaluating such propositions, there are several dimensions to consider. First, it iswell accepted that the high status identity associated with the Napa brand came from acollective improvement in production methods since the 1970s[7]. While suchimprovements are individual winery-based, the majority in the AVA recognize thattheir reputation adheres from their regional association and it is therefore incumbenton them to ensure that their production methods are consistent with best practices thatmaximize their efficiency. Second, striving to differentiate themselves from theircompetitors 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)[8]. Withincreased density, firms with more valuable resources (prime vineyard location, topwinemakers) leverage those resources in their pricing and are able to command highstatus when receiving consistent high ratings. This results in a more differentiatedstructure within the region, as luxury producers meet different market segmentsfrom those less able to exploit scarcity/high-quality/high prices niches. But all retain anaffiliational identity with Napa Valley as this is the overarching imprimatur of quality.

Because of secular increases in the overall demand for higher end wines (consumerstrading 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 theirmarketing efforts; they work with distributors who play a crucial role in placing theirwines in appropriate markets. But unlike many competitive marketplaces where

producers emphasize their strengths and their competitors weaknesses, Napaproducers are more likely to highlight the somewhat unique characteristics of theirwine as a differentiating tool and/or rely upon high scores by experts to validate theirproduct. 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 Im also pushing the brand so in a wayevery one benefits. I asked him if he saw the several wineries that abut his property ascompetitors. He responded that in a way they are but theyre not trying to drive me outof business. I help them sometimes with vineyard stuff and they help me. There aresome who Im not particularly friendly with, some who are really secretive, some whoIm amazed at what they are trying to do. Do I get on with them? Superficially yes, withsome; close friends with others, neighborly with the rest. At the end of the day we allhave to work hard to keep the product out there. We go to the same pourings, workwith the same distributors and restaurants, do the same charity events. The bottomline is were selling a similar product thats expensive.

What does appear to have changed, and this might merely be a function ofincreased density, is that interaction is more likely to occur in formal settings whereinformation flow is more structured and less reciprocity-based. Trust remains becausewinemakers and winery owners have encouraged institutional agencies to fostercollective norms and they have agreed to abide by them. But weak ties now are morelikely to characterize many of these interactions even thought the sense of belonging byindividuals is strong. While not necessarily arms length of the type found in


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contractual market relationships, there is more differentiation among participants, withinteractions 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 theopinion of so many of my respondents on how relationships have changed in the Valley.

He said in a 2007 interview:What weve got now is a much more complex and competitive landscape. In the past youdhelp others because that was the way to learn and most of us were novices when it came to thedifferent aspects of winemaking. Sure I had technical skills but its so different with thepractical skills that you needed. Our various winemaker groups really helped me learn and Ibelieve they were crucial and getting the industry on the firm footing. Its a lot different nowbecause the newcomers bring so much money and there are so many [winemakers] with thenecessary skills out there. That means you dont really need all those informal groups. We stilltaste but its more to show off your wine than to say hey [ . . .] help me make this better. Werestill friendly and we talk a lot about the industry but theres an edge now to conversations. Ithink a lot of it is because the stakes are so much higher now and everyones expected to makegreat wines. Were Napa and that brand drives expectations so youd better deliver. In the pastId say we cooperated to help everyone make a better wine that would be competitive; nowwere competing to see who can make the best wine and get ahead of the pack.

Informal friendships inevitably exist and many owners claimed mentoring relationshipswith more old timers in the Valley. But theres also as one said a healthy suspicion thatpublicly some individuals could not be relied upon to be entirely accurate. One GM saidthat the annual pre Christmas parties and meetings are times when wineries can claimthat they have had the best harvest ever, the best quality grapes ever and lie about allsorts of things! Nobody really believes this rhetoric but it is the annual ritual of makebelieve. This is consistent with Johnson et al.s (2002) argument about the role ofdeclarative knowledge or know-what which is predicated upon low levels of informationcomplexity. In this case it emanates from the desire to trumpet the virtues of an individualwinery and hence imply a competitive advantage for that producer. According to my

sample, new winery owners were more likely to accentuate or distort facts pertainingto production and established vintners more guarded about their successes. As one ownerof a medium sized (35,000 cases) winery with a long track record of success said:

Theres a couple of people whom I trust and respect in the valley, whove been at this fordecades and whove taught me a lot. Others have come in and thrown money around andbought success but not necessarily respect. The latter want instant credibility but it takestime. Theyre impatient but often dont listen. They rely upon a few staff and possibly a highpaid consultant and think that they can ignore what goes on among the rest of us. Often theysucceed 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 butwent on to add that:

the new money and corporate wineries have moved aside the old agriculturalists who werepioneers back in the 1970s. A lots changed and while we still meet and talk, it seems moreformal now than in the past. I dont necessarily think of them as my competitors but I dorecognize that they have resources that I cannot match so I have to be careful[9].

The owner of a small (1,300 cases) winery, whose family has owned land in the valleyfor generations, was quite prescient in identifying the issues. She commented:

We make 1300 cases and we dont have lots of dot com money to throw around so theres noway we can realistically compete with the cult or even corporate owned wineries. We canmake good wine and look for smaller distributors to sell it, rely upon a few restaurants to


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promote it, and the rest goes through our wine club. Really we dont compete in the samemarketplace as the others yet we share a similar product. We go to the same meetings, sit onthe same boards, offer wines for charity events etc. Our winemaker gets around and hes greatat trying new things he learned from others. I suppose my conversations with fellow owners

is at a different, more formal level. But were all part of the same industry and I suppose weget along because we have to. Theres argument and dissent and even hostility to some of thenewcomers. They might not be bothered about being accepted into the community but theydesperately want to make a good wine [they hired a top winemaker to do this] and so in a waythey become part of the whole valley scene.

While this might sound like nostalgia for the old times and a reverence for the oldtimers, it nonetheless captures the perception by established producers that a certainformality now structures interactions and there is less transparency. There is certainlyresentment by old owners that they lack the resources to match the impact that newowners have been able to bring for their product. But the sub-population of smallproducers operate in a niche as specialists, competing on the periphery because of theirlimited resources. Such a view of resource partitioning allows parallel markets of

specialists to co-exist, some with extensive resources (new entrants) and otherswithout, but without this necessarily affecting mortality rates in which that earlierstudies predicted (Delacroix et al., 1989; Swaminathan, 2001).

All of the respondents commented that relationships now are more formalized andprescriptive and there is much more obsession with ratings and scores. New ownershave less need for informal community membership since it does not come with anygreater 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 ismaintained since it is an indispensable part of their own aspirational/reputationalidentity.

ConclusionResearch on clusters continues to emphasize the link between localized learning andinnovation (Maskell, 2001), building upon earlier work that identified the dynamism ofgeographically proximate firms as drivers of growth (Porter, 1990). These complementstudies in organizational evolution that focus upon resource partitioning (Carroll, 1985;Swaminathan, 2001). However, what is often lacking in such studies is the precise wayin which knowledge is transferred other than to suggest that firms are embedded innetworks, and how such actions can promote the successful growth of a cluster. Thisstudy attempts to specify exactly what the mechanisms are which structure learningand establish specialist organizations in what becomes a high status marketplace. Itthen shows how eventual industry stability around high status production normsmeans new entrants are less likely to need access to informal networks to attain such

effectiveness levels. Instead of claiming that increased density mitigates networkefficiency, I argue that the consolidation of operating principles renders networkmembership less important for new entrants than in the past when the industry wasstill climbing the quality ladder. Resource partitioning is both an enabling and adifferentiating concept whereby sub-populations of specialists co-exist in a marketniche despite having different resource bases.

Since the focus has been on luxury wineries, understanding how status is attainedand maintained is crucial. I have argued that the pursuit of a high status product, withattendant price premiums, has encouraged and required key actors to negotiate denseand tacit forms of knowledge sharing in a geographically specific network. While this


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network is inevitably restrictive in terms of membership, the success of individualmembers 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 byinternally accepted group norms of knowledge sharing plus externally by formal

organizational affiliations of the wineries themselves. New entrant firms typically seekout winemakers with established reputations and bring resources that permit them togain immediate entry into the high status marketplace. But the winemakersthemselves become part of the multifaceted sets of formal and informal relationshipswithin Napa Valley that structure interactions and shape behavioral conventions.While no clear evidence of leader firms shaping overall regional governance wasfound, it does appear likely that the most successful winemakers (those who garner thehighest scores) become effective benchmarks for others. Greater resource availabilitytherefore improves organizational survival and encourages new specialist foundings.The growth of a collective identity has been crucial for such organizational survival aswell as facilitating differentiation within the market for specialist firms. This meansthat 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 themarketplace. More resource scarce firms (generally small producers) nonethelesssurvive in a separate niche, but continue to draw their legitimacy from membership ofthe regional cluster (collective identity).

To conclude, there are three important findings that have been presented. First, Ishow how the interaction between key individuals within a marketplace of firms wasthe primary conduit for crucial knowledge sharing that was indispensable for theattainment of requisite quality for the growth of this luxury product. This waspredicated upon principles of reciprocity and a cooperative framework that sustainedtrust and respect among key actors. The practical learning that occurred within suchembedded networks (learning by doing) supplemented more formal training thatindividuals acquired either through educational programs or working ones way upthe winery (de facto apprenticeships). No matter what their background, the essence ofthe hands-on experience that enabled winemakers to comprehend the complexity ofsite-specific idiosyncrasies becomes part of the collective knowledge pool through suchinteractions. The ties between winemakers were dense and structured largely, but notsolely, through informal contacts. These interactions promoted common approaches orconventions and contributed to the upgrading of the sector over the past two decades.

Such networks of embedded interactions are responsible for the success of emergingspecialist organizations, the growing collective identity of which furthers resourcepartitioning but in ways that do not necessarily lead to increased firm mortality.

Second, once the industry became unambiguously associated with the production ofhigh status products, the means whereby such excellence could be easily replicated with

sufficient resources increased. This allowed new resource rich entrants to buy their wayinto the market and enabled them to function effectively without necessarily embracingthe cooperative network of relationships that had sustained the sectors growth. This didnot destroy reciprocal exchange relationships within the sector. It did, however, rendertheir utility more superfluous. Given easier access to tacit knowledge that hitherto hadbeen more privileged, new entrants were less likely to invest time and energy intorelationship building which in turn eroded the collective benefits of networks.

Third, competition has supplanted cooperation as winery owners compete to attractthe top winemakers and differentiate their product according to site-specificcharacteristics. This is not the cut throat competition one finds in less concentrated


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product markets but it is demonstrably different from the situation of several decadesago when the market was in its infancy. The risks are lower now than before whichmight explain current disincentives to embrace cooperation; similarly extantknowledge is widely available and publicly disseminated. Nonetheless, new and old

owners strive to maintain market parameters, enforce district conventions, and abideby 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 asmall 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 ownresource base permits a different form of network interaction. There are not necessarilygood guys and bad guys, merely different actors with varying resource bases whoforge an evolving collective identity which encourages further sub-specializtion oforganizational 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 informalstructures that supported the knowledge through cooperative endeavors. This waseven more crucial given the complexity of knowledge required to consistently make ahigh status product. Such sharing might seem inimical to normal competitivemarketplaces, but such sharing enabled new firms and established ones to attain andreproduce requisite quality levels to support their desired high status goals. Marketmaturity resulted in changes in such relationships precisely because the benefits ofsuch arrangements had diminished and boundaries are created that reinforce statusdistinctions. Competition replaces cooperation but only when the market has maturedsignificantly to render the latters utility less crucial to stability.

Research on other industries with similar growth trajectories, tacit knowledgeparameters, 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 winedistricts experienced a similar growth stage only to be thwarted by the lack ofinstitutional supports, the complete breakdown of consensual norms or high mortalityrates by firms lacking in resources to respond strategically to the challenge ofincreased specialist density.

Notes

1. Wine classifications according to price typically assign the top segment as ultrapremium which includes wines priced over $14 a bottle (retail). However, in this study Iclassify ultra-luxury wines as a sub-sector of this category and involve those whoseretail price is over $40 a bottle.

2. Actual mortality rates are difficult to determine. Here I use failure to secure high scoresas a proxy measure since this can seriously affect reputation and status and mostimportantly sales of wine.

3. Such ratings enable people who feel insecure about wine to use a seemingly objectivemeasure of quality and therefore look to scores to inform their buying. Retailers andrestaurants typically emphasize high scores as a sales tactic, and wineries invoke themin their own marketing. These agencies therefore legitimate tastes and also the highprice that is subsequently paid for the wine.

4. See Taplin (2006) and Colman (2008) for more detailed discussion on the role of ratingsand particularly the criticism leveled at Parker for his numerical scoring system and his


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preference for powerful wines that inevitably stand out in blind tastings but are perhapsless food friendly than other wines.

5. Steve Heimoffs (2008) recent book on his conversations with classic winemakers inCalifornia 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 choseseveral virtually unknown California wines over the more established and famous Frenchones. This brought significant attention and fame to the re-emerging California wineindustry and demonstrated that Napa Valley in particular could produce wines of extremelyhigh quality that would match the best from Europe. For furtherdetails of the event and howthis 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 withhis two buck chuck Charles Shaw wines that sell 5.5 million cases annually through Trader

Joes, has suffered legal setbacks after attempting to use the name Napa on three of hisNapa-named brands (Napa Ridge, Napa Creek, and Ruherford Vintners). The law requires75 percent of the grapes to come from the location listed on the label and since his wines donot have that percentage (most coming from the Central Valley of California), the NVV tooklegal action. Franzia lost in court because he was unwilling to pay the higher prices for Napagrapes that would be necessary if he were to continue the use of Napa on his labels. On theirpart, the NVV were arguing that they were merelyprotecting the integrityof their brand. SeeSogg (2006) for a fuller discussion of Franzia and this case.

9. Conaway (2003) and Siler (2007) provide interesting commentaries on the transformationsthat have occurred in Napa Valley during the past few decades, replete with personalityclashes, the flood of new money, and the ambitions of newcomers, hirings and firings, andstruggles 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 ofManagement Review, Vol. 27, pp. 17-40.

Benjamin, B.A. and Podolny, J.M. (1999), Status, quality, and social order in the California wineindustry,Administrative Science Quarterly, Vol. 44 No. 3, pp. 563-89.

Breschi, S. and Lissoni, F. (2001), Knowledge spillovers and local innovation systems: a criticalsurvey,Industrial and Corporate Change, Vol. 10 No. 4, pp. 975-1005.

Burt, R. (1983), Corporate Profits and Cooptation: Networks of Market Constraints andDirectorate 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 oforganizations,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 populationdynamics: an ecological study of failings in the California wine industry, AmericanSociological Review, Vol. 54, pp. 245-62.


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DeLangen, P.W. (2004), The Performance of Port Clusters: A Framework to Analyse ClusterPerformance and an Application to the Seaport Clusters of Durban, Rotterdam and theLower 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 ofManagement 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 theItalian source?, Industrial and Corporate Change, Vol. 8, pp. 235-66.

Maskell, P. (2001), Towards a knowledge-based theory of the geographical cluster, Industrialand 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 ofSociology, 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.

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Powell, W. (1990), Neither market nor hierarchy: network forms of organization, in Staw, B. andCummins, 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.

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Taplin, I.M. (2006), Competitive pressures and strategic repositioning in the California premiumwine 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 ofembeddedness, Administrative Science Quarterly, Vol. 42, pp. 35-67.

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Wine Institute (2007), Premium growth trend for California wine continues in 2006 asmainstream wine culture emerges in the US, pp. 1-4, available at www.wineinstitute.org/industry/statistics/2007/wine_sales.php (accessed 1 June).

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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), Californias top 50, Wine Spectator, 15 November, pp. 48-60.

Appendix. Questionnaire*Open ended questions. (*strict confidentiality is maintained and names of wineries or peopleinvolved in study not identified)

History of wineryCan 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 partnershipStaff numbers.

Production and operational aspectsAre you profitable?Are you changing anything about your approach to winemaking?Do rating agencies (Parker, Wine Spectatoretc) affect the way you make your own wine? Do yousee these agencies as causing a homogenization in winemaking, a convergence of taste? Is thisgood, bad or irrelevant to your winery?How much has changed in your winery over the last few years? Would you describe thesechanges as pro-active or re-active?Do you plan to expand production? Reduce capacity? Any partnerships or joint ventures withother wineries in other areas/countries planned or currently existing?What are the challenges that you face in the current environment?

Networks and interactionWould you say that a cooperative environment exists amongst premium producers wherebyinformation is shared informally through established networks? Or is it more secretive andcompetitive?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 problemsDoes the recent Supreme Court ruling on inter state shipments effect your winery? What are itsimplications for the premium producers if any?Do you foresee other government regulations affecting your production (environmental issues forexample)? What steps do you take to anticipate potential changes?

Competitive pressuresWhat changes in the competitive landscape do you perceive?How are they affecting your particular winery?


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What about increased competition from overseas? What countries? Has this increased and doyou expect it to continue to increase?How have you responded to these changes? Are your strategies different now than in the recentpast?Do you think that your own position is more vulnerable now than in the past and if so what areyou doing about this?

Supply chain issuesWhat are your thoughts on the recent concentration trend amongst distributors? Does this affectyour 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 inNapa in general and your winery in particular? If so how do you plan to respond to them?

Whats happening in the valley and the industry in generalShare 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 authorIan M. Taplin can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

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