Divergent Effects of InterFirm Collaboration on Product Quality

Divergent Effects of Inter-Firm Collaboration on Product Quality and Growth Ana Pérez-Luño Pablo de Olavide University Robert Nason Concordia University Johan Wiklund Syracuse University

Why is this research important? Long-term success of businesses stems from their ability to continually create knowledge. SMEs manage their knowledge on a more informal and adhoc basis or do not manage it at all We know very little about the mechanisms SMEs use to manage knowledge and how they work to create value.

Why is this research important? Far less attention has been paid to the potential downsides of collaborative arrangements. In this paper we take a resource-based perspective to examine the pros AND cons of inter-firm collaboration.

¿Why is it important in the wine industry? Jericho is an ancient city located in the West Bank , near the Jordan River in the State of Palestine. Archaeological findings show that this city was built more than ten thousand years ago Possibly the oldest city in the world that already had places to store wine.

¿Why is it important in the wine industry? Spain has an old tradition in making wine and is now renewing the industry. The Spanish wine industry is the largest world producer of wine, the second largest exporter by volume and the third by value.

¿Why is it important in the wine industry? The Spanish wine industry faces important challenges related to value generation: ü It is dominated by local SMEs: lack of resources ü It has a low-qualified workforce (except for the oenologist). ü This workforce has significant amount of tacit knowledge. ü Challenges for small and medium wineries aiming to upgrade their products and processes and innovate to increase the value of their wines

External Resources and Sales Growth Collaborations provide resource constrained ventures with access to a greater resource pool. . H 1 The use of external resources will be positively related to sales growth.

Formal Collaborations & Growth Formalizing will institutionalize the relationship, but constrict the use of external resource services, reducing creativity H 2 The degree of collaboration formality will negatively moderate the relationship between external resource use and sales growth.

External Resources and Product Quality However, such resource-sharing also decreases resource control, which can have negative implications for the ability to maintain product quality. H 3: The use of external resources will be negatively related to product quality.

Formal Relationships and Product Quality Formalizing relationships will institutionalize the relationship which improves checks on the use of external resources and reduces the threat of messing up. H 4 The degree of collaboration formality will positively moderate the relationship between external resource use and product quality

Summary Collaboration Formally H 2 - Sales Growth External Resources H 1 + Collaboration Formally H 4 + External Resources H 3 - Product Quality

Sample The survey was collected between January and June 2014 520 Spanish wineries were included in the survey Responses of 91 directors and 54 enologists from 111 firms are received Responses from directors are considered first Responses from enologists are adopted only when the responses from directors are not available Sales data of the firms in 2014 are available through the SABI/AMADEUS database Average La Guia Penin scores of wines produced by the firms in 2015 are used as quality measure

Measures Objective information about the dependent variables was derived from external sources, reducing the risk of common method bias. Data on sales is available through the SABI/AMADEUS database. Product quality data is assembled by combining the ratings of three different wine ratings (Parker, Repsol and Peñin). All of them are internationally recognized systems adopted by popular wine magazines, suppliers, retailers, critics, and consumers alike. The degree to which wineries utilize external resources and the degree of collaboration formally constitute the main independent variables. This information was obtained through questionaires.

Results Regarding Growth of Sales VARIABLES (1) Growth_Sales_2014 (2) Growth_Sales_2014 (3) Growth_Sales_2014 (4) Growth_Sales_2014 0. 00318 (0. 00313) 0. 00368 (0. 00331) 0. 000317 (0. 000884) -0. 000653 (0. 000513) 0. 000332 (0. 000605) -0. 000284 (0. 00174) 0. 196* (0. 100) YES -0. 000829 (0. 000588) -0. 00129 (0. 00123) 0. 000153 (0. 00190) 0. 217* (0. 113) YES -0. 000803 (0. 000613) -0. 00157 (0. 00131) 0. 000870 (0. 00214) 0. 173 (0. 134) YES 0. 00967** (0. 00423) 0. 00303* (0. 00154) -0. 000161** (7. 67 e-05) -0. 00105* (0. 000592) -0. 00185 (0. 00125) 0. 00158 (0. 00205) 0. 0571 (0. 138) YES 57 52 48 48 0. 281 0. 334 0. 364 0. 451 RESOSUM COLL_FORMAL_PERC Interaction Firmage EMPLOY 2013 AVER 3 PENINPR Constant Region Fixed Effects Observations R-squared Standard errors in parentheses *** p<0. 01, ** p<0. 05, * p<0. 1 RESOSUM: Overall shared resources; COLL_FORMAL_PERC: Percentage that the collaboration is reflected in formal contracts AVER 3 PENINPR: the average price of products rated by La Guia Penin in the recent 3 years

Results Regarding Quality Ratings VARIABLES (1) (2) (3) (4) Pen_Avg_Rat 2015 -0. 178* (0. 0893) -0. 182* (0. 0948) -0. 334** (0. 137) -0. 000596 -0. 0519 (0. 0230) RESOSUM COLL_FORMAL_PERC 0. 000219 (0. 0132) -0. 00257 (0. 0174) 0. 138*** (0. 0510) 87. 16*** (2. 618) 0. 00479 (0. 0145) -0. 0276 (0. 0390) 0. 118** (0. 0560) 91. 12*** (3. 260) 0. 00500 (0. 0155) -0. 0253 (0. 0421) 0. 109* (0. 0627) 91. 35*** (3. 841) (0. 0406) 0. 00325 (0. 00214) 0. 0118 (0. 0159) -0. 0168 (0. 0418) 0. 0914 (0. 0628) 93. 18*** (3. 969) Region Fixed Effects YES YES Observations R-squared Standard errors in parentheses *** p<0. 01, ** p<0. 05, * p<0. 1 71 0. 172 64 0. 253 60 0. 244 60 0. 286 Interaction Firmage EMPLOY 2013 AVER 3 PENINPR Constant RESOSUM: Overall shared resources; COLL_FORMAL_PERC: Percentage that the collaboration is reflected in formal contracts AVER 3 PENINPR: the average price of products rated by La Guia Penin in the recent 3 years

Summary No support for H 1 External resources are not related to higher sales growth Support for H 2 Formal relationships positively moderators external resources – sales growth relationship Support for H 3: External resources are negatively related to product quality No support for H 4 Formal relationships do not moderate the relationship

Discussion Our results have several important implications for future research. 1 st We are able to distinguish between positive growth effects and negative product quality effects. Second, we provides important explanations as to why some firms refrain from engaging in collaborative arrangements, such as alliances. Third, we open up new avenues of theorizing by examining contingencies in inter-firm collaboration.

Limitations Small Sample size Null results may be due to a lack of power