STRATEGIES FOR BUILDING THE MARKET LEGITIMACY OF ENTREPRENEURIAL WINERIES IN A NASCENT WINE REGION 

By

KathleenSprouse

ATHESIS

SubmittedtoMichiganStateUniversity

inpartialfulfillmentofthedegreerequirementsforthedegreeof

Agriculture,FoodandResourceEconomics—MasterofScience

2013

ABSTRACT 

STRATEGIES FOR BUILDING THE MARKET LEGITIMACY OF ENTREPRENEURIAL WINERIES IN A NASCENT WINE REGION 

By 

Kathleen Sprouse 

Newwineriesoperatinginanascentwineregionneedstrategiestobuildmarketlegitimacyand

gainaccesstoresourcescrucialtothesurvivalandgrowthofthewinery.Sincemostwineriesin

thecoolclimatewineregionarelessthan10yearsoldandproducelessthan3,000cases

annually,thesefirmsstruggletoattractcustomersandselltheirwineoutsidetheirowntasting

room.Throughsurveying113wineriesinMichigan,MissouriandNewYork,anoverviewofthe

currentmanagementandmarketingstrategieswerecapturedinadditiontodefiningeight

indicatorsoflegitimacy(thepercentofwineafirmsellsthroughformaldistributionchannels,

obtainingexternalfunding,numberofemployeeshired,breathoftradingnetworkandhaving

anarrangementwithatourbuscompany).Throughbivariateandmultivariateanalyses,we

foundstrongcorrelationsamongthelegitimacyindicatorsandwineries'managementand

marketingdecisions.Thekeystrategiesrecommendedinthisthesisfornewwineriesisto,use

moreviniferagrapes,increaseproduction,applyforandadvertiseawards,offerfoodproducts

andclubpromotions,haveagiftshopandutilizesocialmedia.Sincenewwineriesoftenlacka

performancerecord,ourresultsshowindicatethatnewwineriesarenotatadisadvantagein

gainingexternalfundingcomparedtoolder,moreestablishedwineries.Theresultsand

strategiesarebeneficialtonewfirms,supportingindustries,extensioneffortsandacademic

research.Finally,thefindingsandstrategiescontributetotheliteratureonlegitimacy,

developingwineregionsandstrategiesforentrepreneurialventuresintheagri‐foodsector.

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ACKNOWLEDGMENTS 

 

ThisplanAthesispaperisdedicatedtomyparentsfortheirallsupportandencouragement.A

specialthankyoutomythreesisters,theKiliesFamily,theChristopherFamilyandallmy

extendedfamilyandfriendsfortheirmotivationandsupport.

Thankyoutomymajorprofessor,BrentRoss,Ph.D.,forsharinghisknowledgeandexpertise,

andguidingmethroughoutthemaster’sprogram.IwanttothankDanMcCole,Ph.D.,for

servingasacommitteememberandsharinghisresearchfindingsandexperiencestudying

tourismanddevelopingwineregions.IalsowanttothankChrisPeterson,Ph.D.,forservingasa

committeememberandforhisadviceandhelp,especiallyregardingmylegitimacyindicators.

Finally,Iamgratefulandhonoredfortheopportunitytocollaboratewiththeseexperienced

andenergeticprofessors.

AspecialthankyoutotheMichiganGrapeandWineCouncilanditsmembers,aswellasthe

wineriesinMichigan,MissouriandNewYorkwhoparticipatedinthissurvey.Theirhelpand

participationwasgreatlyappreciatedandbeneficialtothefutureofthecoolclimatewine

regionaswellasagriculturaleconomicsresearch.

Finally,IwanttothankallofmyfriendsImetatMichiganStateUniversity.Thepassionand

driveamongthestudentsintheAgriculture,FoodandResourceEconomicsdepartmentwas

inspiringandmotivating,Iwishyouallthebestinyourfutureendeavors.

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TABLE OF CONTENTS 

 

 

LIST OF TABLES                    vii  LIST OF FIGURES                    xi  CHAPTER 1:  INTRODUCTION                 1  CHAPTER 2:  LITERATURE REVIEW                8 

Defining a “wine region”                8 Building a wine region                9 New grape varietals and wine blends             13 Building a market category                14 Developing a regional identity              15 Survival and growth require legitimacy            16 Defining legitimacy                  17 Types of legitimacy                  19 Regulative legitimacy                20 Normative legitimacy                20 Cognitive legitimacy                  20 Key strategies used to achieve legitimacy            21 Conformance, “fitting in”, as a legitimacy strategy        22 Collaboration                  24 Acting strategically, “standing out”, as a legitimation strategy      24 The individual                   25 Organization                    27 Environment                    27 The process                    28 

 CHAPTER 3:  RESEARCH METHODOLOGY              31   Survey Instrument                  31   Data Collection                  31   Methodology                    33   Relationships                    35  CHAPTER 4:  RESULTS                   46     Descriptive Results                  46       Age of wineries                46 

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    Volume produced                46     Main ingredient or inputs used to produce wine         49     Types of grapes used in production            51     Procuring grapes                53     Procuring grapes through a contract           54 

Custom crush services               57 How wine is bottled                 58 Taste of wine                  59 Price of the wine                59 Where the wine is sold              61 Distribution channels used to sell the wine           62 Promotional activities               67 Respondents’ view on how consumers perceive the region’s wine    69 INDIVIDUAL FIRMS                69 Organizational structure              69 Financed                  69   Reason owners enter the wine business             71 Employees                  73 Products and Services offered             74 Industry certifications               75 Awards                  76 Respondents’ satisfaction with winery’s current performance    76 WINERY OWNER                77 Membership                  78 

  Bivariate Results                  80 Wine production                80 Employees                  83 Full‐time, year round                83 Full‐time, seasonal employees            84 Part‐time employees                85 Prior experience of firm owner            87 Wine industry experience              87 Business experience                88 Grape production experience             88 Type of grape                  89 Vinifera vitis                  89 Hybrid grapes                  91 Native American                91 Other                    92 Inputs used to produce wine             92 Grapes                   92 Grape juice                  93 Bulk wine                  94 Other                    94 

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Procuring grapes                96   Estate grown                  97 Spot market contracts               97 Verbal (handshake) contracts             97 Written contracts                98 Winemaking                  98 Wine sales                  101 In‐state sales                  101 Out‐of‐state sales                103 Percent of wine volume sold at the winery          106 Percent of wine volume sold direct to a liquor store        107 Percent of wine volume sold through distributors        109 Wine pricing                  110 Price of wineries’ highest priced wine           111 Price of wineries’ lowest priced wine            112 Price of a wineries top selling wine            112 Awards                  113 Wine competitions                113 Trade Press Award                114 

 CHAPTER 5: DISCUSSION AND CONCLUSION            124  APPENDICES                      132   APPENDIX A                    133   APPENDIX B                    140    BIBLIOGRAPHY                    148 

              

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LIST OF TABLES 

  

Table 1: Emerging Wine Region Statistics............................................................................. 2 Table 2: Percent of Top Three Varietals Planted by State ..................................................... 4 Table 3: Key development issues Australia faced ............................................................... 10 Table 4: 2012 Survey Response Rate .................................................................................. 32 Table 5: Legitimacy variables ............................................................................................. 34 Table 6: Type of grape and how it signals legitimacy.......................................................... 38 Table 7: Number of Firms that use a Single or Combination of Main Inputs to Produce Wine     ............................................................................................................................. 49 Table 8: Percent of Total Wine Volume Produced with Grapes, Grape Juice, Bulk Wine or 

Other ........................................................................................................................ 51 Table 9: Strategies use to Determine Contract Prices ......................................................... 55 Table 10: Promotional Activities used by Wineries by State ............................................... 67 Table 11: Financing Strategies used by Wineries, by State ................................................. 70 Table 12: Products and Services Wineries Offer ................................................................. 75 Table 13: Awards Won by Wineries in the Emerging Wine Region...................................... 76 Table 14: Demographics of Winery Owners in the Emerging Wine Region by State ............ 78 Table 16: Correlation Results with the Number of Years a Firm has Commercially Produced 

Wine ......................................................................................................................... 82 Table 17: Correlation Results of the Average Number of Full‐time, Year Round Employees.83 Table 18: Correlation Results of the Average Number of Full‐time, Seasonal Employees.... 84 Table 19: Correlation Results of the Average Number of Part‐time Employees .................. 86 

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Table 20: Correlation Results of the Average Number of Years of Experience Owner has in the Wine Industry, Grape Production and Business ................................................... 87

 Table 21: Correlation Results of Percent of a Firm’s Total Wine Production Made from 

Vinifera Grapes ......................................................................................................... 89 Table 22: Correlation Results of a Percent of a Firm’s Total Wine Production with Hybrid 

Grapes ...................................................................................................................... 91 Table 23: Correlation Results of a Percent of a Firm’s Total Wine Production Made with 

native American Grapes ............................................................................................ 92 Table 24: Correlation Results of the Percent of Firm that use Grapes as Main Input in    Wine ......................................................................................................................... 92 Table 25: Correlation Results of the Percent of Firm that use Grape Juice as Main Input in 

Wine ......................................................................................................................... 93 Table 26: Correlation Results of the Percent of Firm that use Bulk Wine as Main Input in 

Wine ......................................................................................................................... 94 Table 27: Correlation Results of the Percent of Firm that use Other as Main Input in Wine 94 Table 28: Contingency Table Between Using “Other” as a Main Input and Wineries having a 

Large Trading Network .............................................................................................. 95 Table 29: Correlation Results of Different Procurement Strategies Firms Use..................... 96 Table 30: Two Sample T‐Test with Unequal Variances for Differences in Mean for Firms that 

Outsource Winemaking............................................................................................. 99 Table 31: Contingency Table Between Firms that Outsource Winemaking and Firms that 

have an Arrangement with a Tour Bus Company ....................................................... 99 Table 32: Contingency Table Between Firms that Outsource Winemaking and Firms that 

Obtain External Funding...........................................................................................100 Table 33: Correlation Results of the Percent of Winery’s 2011 Gross Revenue from Wine 

Sales Only ................................................................................................................101 Table 34: Correlation Results of Firms’ Percent of In‐State Sales .......................................102 Table 35: Correlation Results of Firms’ Percent of Out‐of‐State Sales................................103 

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Table 36: Correlation Results of Firms’ Percent of Total Wine Volume Sold through Distribution Channels...............................................................................................105

 Table 37: Correlation Results of Firms’ Percent of Wine Volume Sold at the Winery .........106 Table 38: Correlation Results of Firms’ Percent of Wine Volume Sold Direct to a Liquor    Store .......................................................................................................................107 Table 39: Correlation Results of Firms’ Percent of Wine Volume Sold through   Distributors ..............................................................................................................109 Table 40: Correlation Results of Firms’ Average Prices of their Highest, Lowest and Top 

Selling Wines............................................................................................................111 Table 41: Correlation Results of Firms that Won Awards from Wine Competitions ...........113 Table 42: Contingency Table Between Firms that Won an Award from a Wine Competition 

and Firms that have an Arrangement with a Tour Bus Company...............................114 Table 43: Contingency Table Between Firms that Won an Award from a Wine Competition 

and Firms that have Obtained External Funding .......................................................114 Table 44: Correlation Results of Firms that Won a Trade Press Award...............................115 Table 45: Contingency Table Between Firms that Won a Trade Press Award and Firms that 

have an Arrangement with a Tour Bus Company ......................................................116 Table 46: Contingency Table Between Firms that Won a Trade Press Award and Firms that 

Obtained External Funding .......................................................................................116 Table 47: Two Sample T‐Tests with Unequal Variances Results of Promotional Activities 

Firms Use .................................................................................................................117 Table 48: Chi‐Square Results of Promotional Activities Firms Use .....................................119 Table 49: Contingency Table Between Firms that use Social Media and Obtain External 

Funding ....................................................................................................................121 Table 50: Two Sample T‐Tests with Unequal Variances Results of Products and Services 

Firms Offer ...............................................................................................................122 Table 51: Chi‐Square Results of Products or Services Firms Use ........................................123 Table 52: Current Status of the Emerging Wine Region based on Easingwood (2006)  

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    model................................................................................................................129 Table 53: The continuous variables that correlated with the greatest number of legitimacy 

indicators at the 1, 5, 10 percent significant levels....................................................134 Table 54: The binary variables that correlated with the greatest number of legitimacy 

indicators at the 1, 5 and 10 percent significant levels..............................................138    

Table 55: The categorical variables (more than 2 groups) that correlated with the greatest number of legitimacy indicators at the 1, 5 and 10 percent significant levels............140

                             

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LIST OF FIGURES 

 

Figure 1: Legitimacy Model of Emerging Firms Framework................................................. 36 Figure 2: Average Number of Cases Produced by Wineries in 2011 .................................... 47 Figure 3: Production in 2011 and Number of Years Firm has been Commercially Producing 

Wine, R=0.60............................................................................................................. 48 Figure 4: Percent of Total Wine Volume Produced with Various Inputs.............................. 50 Figure 5: Percent of Total Wine Production with Different Grapes by State........................ 52 Figure 6: Percent of Grapes Procured through Various Strategies by State......................... 54 Figure 7: Length of Contracts used with Grape or Juice Suppliers by State ......................... 56 Figure 8: Bottling Style by State ......................................................................................... 58 Figure 9: Average Prices of Wine by State .......................................................................... 60  

   Figure 10: Percent of Total Wine Sales Sold Within the Wineries’ Home State, Outside their 

Home State and Outside the U.S., by State................................................................ 62  Figure 11: Percent of Wine Volume Sold through Various Distribution Channels, by State . 64  Figure 12: Percent of Wine Volume Sold through Specific Distributions Channels by State. 65 Figure 13: Production and Reason for Entering the Industry .............................................. 73               of Contents 

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CHAPTER 1:  INTRODUCTION 

 

 

Inthelastdecade,moregrapevineshavebeenseenacrossMichigan,MissouriandNewYork

andmorewineriesareopeningtheirdoorstowelcomevisitorsandpotentialcustomers.

MichiganandNewYorkareoftenreferredtoasthecoolclimatewineregionsandMissouriasa

continentalwineregion,buttogetherthesestatesarepartofarelativelyundiscoveredwine

producingarea.Manyoftheentrepreneursstartingthesewinerieswereoncefarmers,fruit

growers(includinggrapes),orhobbywinemakersinsearchofabusinessopportunityorrural

lifestylewhodecidedtostartacommercialwinery.Together,thisburstofnewwineriesand

vineyardsarecreatingarapidlyexpandingindustryleadingtoboostsinruraldevelopmentand

creatingopportunitiestofosterthegrowthofcollaborativeindustriesliketourism.However,

themajorityofthewineriesinthisemergingwineregionarelessthan10yearsold,andmany

ofthegrapesthatgrowbestintheregionarenotwellknownamongconsumerstoday,

thereforemostfirmsstrugglewiththe“liabilityofnewness”(Stinchcombe,1965)asthey

overcomechallengesasanewfirmbutalsoasafirmoperatinginanemergingindustry.Firms

inemergingwineregionsneedtobuildlegitimacyasawaytogainaccesstoresourcescrucialto

thefirmandtheregion’ssuccess.

Wineriesinemergingwineregionsstruggletoaccessdistributionchannels.Inapreliminary

studydonein2012byMichiganStateUniversity,theUniversityofMissouri‐Columbiaand

CornellUniversity,86wineriesinthisemergingwineregionweresurveyed,andwineries

rankedmanagingdistributionchannelsastheirNo.1marketingchallenge.Thewineriesand

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theregionneedastrategytoovercomethebarriersofdistributingoutsidetheirtastingrooms.

Researchingthewineries’currentmanagementandmarketingstrategiesiscrucialindevisinga

plantohelpovercomethewineriesandregion’sshared,topthreechallenges,grape

production,winemakingandmarketing.Throughfirsthelpingthefirmsandindustrybuild

legitimacy,wineriescanleveragelegitimacyasaresourcetogainaccesstomoreresourceslike

distributionchannels,skilledemployeesandfinancing.

Eventhoughthesestatesarenotoftenassociatedwithwinemaking,allthreestateshavegrape

growingandwinemakinghistoriesthatdatebackpastthelastcentury.Inthelastdecade,a

nationalincreaseinthenumberofwinerieshasoccurred.Between1999and2010,thenumber

ofwineriesintheU.S.rosefrom2,688wineriesto6,668,withthemajorityinCalifornia

followedbyWashington,OregonandNewYork.Alongwithanationalincreaseinthenumber

ofwineries,afewstatesemergedtoformanewwineregion,boostinglocalagri‐tourismand

opportunitiesforeconomicdevelopment.Inthelastdecade,Michigan,MissouriandNew

York’swineindustriesgrewdramatically.

Table 1: Emerging Wine Region Statistics 

Response  MICHIGAN  MISSOURI  NEW YORK 

101 88 133Numberofwineries Upfrom25in

2000Upfrom31in

2000Upfrom113in

2000Grapeacreage(acres) 14,200 1,700 37,000WineVolume(2009,inmilliongallons)

1.4 1.1 28.7

Numberofgrapegrowers 711 393 1,438Winegrapeproduction(intons) 93,000 5,200 188,000Winetrails 7 11 8

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Table 1: (Cont’d) 

Wneindustryeconomicimpact$790million(in2005)

$1.6billion $2.5billion

 

Note:(1)ForInterpretationofthereferencestocolorinthisandallothertablesandfigures,

thereaderisreferredtotheelectronicversionofthisthesis.(2)Alldataiscurrent,unless

noted.Sources:U.S.DepartmentofAgriculture,AlcoholandTobaccoTaxandTradeBureau,

MichiganGrapeandWineIndustryCouncil,MissouriWineandGrapeBoard,andNewYork

WineandGrapeFoundation.

Together,Michigan,MissouriandNewYorksharesimilarclimateandsoilcharacteristicsthat

areunlikeotherwineproducingregionsintheU.S.ViticultureexpertPaoloSabbitiniat

MichiganStateUniversityexplainsthattodaywinesarecomingfromallovertheworldand

tastingthesame.SabbitiniexplainsthatunlikeestablishedregionslikeCaliforniathatfocuson

producingthesamewineeachyearbecauseoftheirconsistentweather,historyofgrowing

theirgrapesinacertainwayandproducingtheirwinethesamewayaswell,thecoolclimate

hasestablishedadifferentfocus.

“In the cool climate we can play some with the game of the vintage effect, so every year 

  the wines are different because the weather is different. So, winemakers have the 

  chance to produce different wines every year and really work on the fact that there 

  are no Rieslings from 2010 that are completely the same as a Riesling form 2012. 

  Therefore, using that to build a recognition in the people that drink your wine with what 

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  they really want to test is the different vintages, and the climate of that year and to 

  really enjoy the fact that we [the cool climate region] are producing distinctive wines 

  every year,” Sabbitini said, viticulture expert at Michigan State University.  

Themaintypesofgrapestheregiongrowsareindescendingorderofthemost“coldhardy”

meaningleastsusceptibletothewinterinjury,firstaresuperhardy(i.e.Frontenac,St.Croix,

etc.),secondarenativeAmericangrapes(i.e.Concord,Niagara,etc.),thirdarehybrids(i.e.

Chambourcin,Vidal,etc.)andfourth,andthemostsusceptibletowinterinjury,areVitis

vinifera(Riesling,CabernetFranc,etc.)grapes.AccordingtotheUSDA,from1999to2011,the

percentofgrapebearingacresincreased17.8percentinNewYork,Michigan’sgrapebearing

acreageincreased21.4percentandMissouri’sgrapebearingacreageincreased113percent.

Table 2: Percent of Top Three Varietals Planted by State 

MICHIGAN  MISSOURI  NEW YORK Concord(64%)

Norton(19.3%)

Concord(59%)

Niagara(24%)

Vignoles(13%)

Niagara(8.9%)

Other(3.4%)

Chambourcin(10%)

Catawba(3.8%)

Source:U.S.DepartmentofAgriculture,MichiganStateUniversityDepartmentofHorticulture

Theregion’scoolerseasonaltemperaturesoftenproducewinesthatareunknowntomost

consumerslikeasemi‐dryVignoles,asmostconsumersareusedto“OldWorld”wineslike

chardonnayormerlot.Therefore,asnewfirmsworktosurvive,theyalsofindthemselves

promotinganewproductcategory.Further,theshiftinthethreestates’developmentasa

wineregioncomesfrommorewineriesopeningaswellasadvancementsinviticultureand

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enologypracticesandchangesintheclimateacrosstheregion,likemorewineriesbeingableto

growmoreVitisvinifera(Mediterraneanclimate)grapes.Whilethegrowthisdramatic,new

firmsstillstruggletosurvive.

Newwineriesoftenstruggletoobtainresourcescrucialtothefirm’sandtheindustry’sfuture

growthandsuccess.Previousresearchshows,“thatnewfirmshavelowerchancesofsurvivalin

newindustries,andsuggestedthismightbeduetothechallengesofdevelopingand

legitimatingafirm,”(DobrevandGotsopoulous,2010;ZuzulandEdmondson,2010).New

wineriesinthecoolclimateregionmustbuildlegitimacytogainaccesstokeyresources.

AccordingtoSuchman(1995),legitimacyisageneralizedperceptionorassumptionthatthe

actionsofafirmaredesirable,proper,orappropriateaccordingtosomesocialsystemof

norms,values,beliefsanddefinitions.Firmscanacquireorenhancetheleveloflegitimacythey

possessthroughdifferentstrategicactions.Legitimacyisakeyresourcethatallowsnewfirms

tothenacquireotherresourceslikeexternalfundingorgainaccesstovariousdistribution

channels.Finally,buildinglegitimacyandgainingaccesstokeyresourcesarecrucialfornew

venturegrowth(MoolhuijsenandBoudier‐Bakkerlaan,2011).However,previousresearchalso

showsthatoftentheindustrymustbedeemedlegitimatebeforefirmscanbeginlegitimizing

themselveswithinthatindustry.Thisappliestothecoolclimatewineregionwhereunlike

establishedwineregionslikeNapaValley,Calif.,orBordeaux,France,newfirmsmustnotonly

collaboratetoincreasethelegitimacyoftheemergingwineregionsbutalsoasakeystepin

legitimatizingtheirownwinery.“Thatis,entrepreneurscanlegitimateanascentfirmand

industrysimultaneouslybyrelayingaconsistent,symbolicstoryaboutthevalueoftheindustry

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whilesimultaneouslyemphasizingtheprivilegedpositionoftheirownbusiness,”(Zuzuland

Edmondson,p.34).Identifyingthebeststrategiesfornewfirmsandtheindustrytojointly

obtainandbuildlegitimacyisacrucialissueforemergingwineregionsandthereforeisthe

focusofthisthesis.

ThefirstgoalofthisthesisistosurveywineriesinMichigan,MissouriandNewYork,an

emergingwineregion,toproduceacompleteanalysisofthecurrentstatusoftheregion

throughcollectingdataonthecurrentproductionlevelsandtechniquesused,management

decisionsbeingmadeandmarketingstrategiesusedbythewineries.Thesecondgoalofthis

thesisistoidentifykeydeterminantsoflegitimacyfornewfirms(i.e.thewineries)operatingin

anewindustry(i.e.anemergingwineregion).Afteridentifyingthekeyindicatorsoflegitimacy,

thoseindicatorswillbeusedasquantitativemeasurementstoanalyzehowthemanagement

andmarketingdecisionsaffecttheindividualfirm’sabilityandleveloflegitimacyitacquiresas

wellasthelegitimacyoftheoverallregion.Identifyingtheeffectsofthewineries’decisionson

legitimacyiscrucialinformationthatcantranslateintostrategiesthatindividualfirmsandthe

industrycanadopt.Inaddition,showingthelinksbetweenthewineriesandthesupporting

industriesandtheeffectsthatthoselinkshaveontheindividualfirmsaswellastheregioncan

serveasakeyresourceinhelpingformulatethecollaborationstrategiesneededintheregion

aswellascommunicatingtheimportanceofcollaborating.Sincetheindustryisnew,anexciting

opportunityexiststoguidethefutureofthisindustryintoasuccessfulwineregion.

Throughanextensiveliteraturereviewonlegitimacy,developingwineregionsandcollective

behaviorstrategies,astructuredandsemi‐structuredinterviewinstrumentwasdevelopedin

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conjunctionwithMichiganStateUniversity,theUniversityofMissouri‐ColumbiaandCornell

Universitytogatherdataneededtoaddresstheresearchgoals.Thesurveywasusedto

interviewwineryownersinMichigan,MissouriandNewYorktogainanunderstandingofthe

coolclimatewineregionasanindustryandtounderstandthestatusandbehaviorofthe

individualfirmsthatcomprisethisrapidlygrowingindustry.Thesurveyanalyzedwinery

practicesforinputprocurement,wineproduction,firmstructureandhumanresources,

distribution,marketingandsales,networkingandfinancingofthewineries.Descriptiveanalysis

wascompletedaswellasconductingquantitativeanalysisincludingcorrelations,t‐tests,chi

squaretests,clusteranalysisandone‐wayANOVAsonthecollectedsurveydatatooffer

insightsabouttheoverallregionandcomputecomparisonsamongthestates.Theempirical

frameworkofthisthesiswasadoptedfromandexpandsonZimmermanandZeitz(2002)and

TornikoskiandNewbert(2007).

Thefirstsectionofthisthesisreviewsthepreviousliteratureonlegitimacy,emergingwine

regions,anddevelopingnewproductcategories.Thesecondsectiondescribesthedata

collectionprocessandmethodologyused.Thethirdsectionencompassestworesultssections,

adetailedoverviewofthedescriptivefindingsfromthe2012surveyandasupportingsection

thatconductscorrelations,t‐testsandchi‐squareteststodetectifrelationshipsexistbetween

theeightlegitimacyindicatorsandavarietyofmanagementandmarketingstrategiesusedby

thefirms.

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CHAPTER 2:  LITERATURE REVIEW 

 

 

Defining a “wine region” 

Awineregioncomprisesthecharacteristicsofthesoil,climateandsurroundingenvironment.

Previousresearchdefinesa“winescape”fromjusttheattributesofagrapewineregionandas

thewholeregionandallitsattributes(Peters,1997,AlebakiandLakovidou,2011).Johnson

andBruwer(2007)broadenthetermstatingawineregionis“aheldperception(orbelief)

aboutaboundedwineareaspacethatisusuallyholisticandmultidimensionalinnature,the

elementsofwhichare‘gluedtogether’byinter‐relatedwinescapeelementsand/orthepeople

andnaturalandphysicalattractionswithinit,”(JohnsonandBruwer,2007,p.277).Oftenthe

decisiontovisitawineregioncanbetheresultofproximitytoacitynearanalreadyplanned

tripdestinationlikeSanFranciscoandNapaValley,orasafunactivityforagroupofpeople(i.e.

abacheloretteparty)oracouple’sgetaway.Overall,Ifindmostwineenthusiastsorpeoplevisit

awineregioninsearchofanadventureorafunactivityandchoosethewineregiontheywant

tovisitbasedonthereputationoftheregion,suggestionsonvisitingtheregionfromfriendsor

fromadesiretosampleandlearnaboutwine.

GetzandBrown(2006)developedamodelofwinedestinationattractivenessthatincluded

threemainfeatures,thecorewineproduct,thecoredestinationappealandthecultural

product.Themaincomponentsofthecorewineproductaretheserviceattributes,thestaff’s

knowledgeandthewelcomingofvisitors.Interestingly,theauthors’wineproductdoesnot

9

mentionmanyofthe“core”featuresoftenassociatedwithwine,includingthegrapevarietal

usedtoproducethewine,thewine’sbottlingstyle(i.e.singlevarietalorblend),thewine’s

priceoranyqualitymeasures.Thecoredestinationappealincludes“attractivescenery,

pleasantclimate,moderatelypricedaccommodation,easytoobtaininformationandwell

signpostedwinetrails,”(GetzandBrown,p.155).Theculturalproductfocusesonthelocalityof

theregion,“uniqueaccommodationwithregionalcharacter,finediningandgourmet

restaurants,andtraditionalwinevillages,”(GetzandBrown,p.155).

Moresimplystated,BruwerandLesschaeve(2012)tiethedefinitiontotheconsumer’s

motivationtovisitawineregionas“impl[ying]motivationtopartakeinanintoxicating

substance(wine),interactionwithfoodculture,localpeople,andpleasurableleisureactivities,”

(BruwerandLesschaeve,p.615).Further,understandingthatvisitingawineregionextends

beyondconsumersjusttouringwineriesandvineyardsbutismoreimportantlythecomplete

experienceofthesurroundingenvironment,regionalculture,localwineandfood,andscenery.

Ibelievethecombinationofthegeographicallocationoftheregion,thereputationandquality

ofthewine,thelocalcultureandtheorganizationoftheregion(i.e.easeoftravelinginthe

regiontowineriesandrestaurants)createsawell‐definedwineregion.

Building a wine region 

GeoffreyBeames(2003)identifiedBordeaux,France,Tuscany,Italy,andNapaandSonoma

Valley,Calif.,assuccessfulwinedestinationsbecauseeachregionappreciatesandunderstands

theconceptofwinetourism.Throughconsciouslyprovidingfacilitiesforwine,food,lodging,

attractions,otheractivitiesandhistoryalongwithbeautifulscenery.Furthersupportingthe

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importanceofwinetourismforanemergingwineregion,Halletal.(2000)identifiesindividual

wineries’lackofinvestmentinwinetourismasakeyissue.Halletal.(2000)findswinetourism

asfallingsecondorthirdtootheractivitiesatwinerieslikewinemaking(Beames,2003).

Throughinterviewswithindustryexperts,Ilearnedthatwineriesandwineregionsdonotfocus

enoughattentiononaddingtourismtotheirbusinessstrategy.Wineregionsthatworktogether

tocreateeasysignstonavigatetheregion,mapstohelpguidedrivers,mobileappstoengage

thosetechsavvyvisitorsorcollaboratewithlocalhospitalityandservicesarelosingavaluable

opportunity.Peoplesearchforauthenticity,whichcanmeanseeingtheactualgrapes,the

physicalplantandthestaffthatproducethewine(BrownandGetz,2005).Finally,tourism,

visitorsandcellardoorsalesareoftentheeconomicbloodlineofasmallwineryyetmostlack

anunderstandingoftourism,marketingandservicestandards.

Beames(2003)highlightsAustraliaasakeyexampleofawineregionstrugglingtoovercome

keydevelopmentissues.

Table 3: Key development issues Australia faced 

Australia’skeydevelopmentissues• Lackingproductfocus• Cottage‐industrymentalityofwinetourism• Insufficientinter‐industrycollaborationbetweenthewineandthetourismindustry• Incompletetourismexperience• Lackoflocalplanninganddevelopmentconsentanddeficientinvestmentsfunds

However,theAustralianwineindustryinitiallyfoundsuccessinproducingwinesofconsistent

qualityyetlowprices,aswellasmarketingthecountryasawine‐producingregion.Now,

Australia’sstrategyhasshiftedfromlowcostandaveragequalitywinestohigherpricedand

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qualitywines,“ItislikelythatAustralianwineswillbeseenasmoresophisticated,andthat

thesemoreup‐marketwineswillappealtoawealthierandmoreeducatedmarket—people

whoarealsomorelikelytobeinternationaltourists,”(Beames,p.207).

AkeydevelopmentissueBeamespointsoutisthementalitythatwinetourismisstilla“cottage

industry”.Further,heacknowledgestheeffortsandsupportofestablishmentslikelocaltourism

officesorcoordinatedmarketingefforts,the“mainproblemisthatwinetourismhassimplynot

beenembracedbytherestofthetravelindustry,”(Beames,p.208).Anotherstudyonwine

tourisminNorthernMichiganhadsimilarfindings.

McCole’s(2013)researchontheNorthernMichiganwineregionrevealedthatwineriesvalue

collaboratingwithotherwineriesandorganizations.Themajorityofthewineriesfelt

collaboratingwithtourismorganizationswasmoreimportanttothesuccessoftheirwinery

thancollaboratingwithotherwineries.Thiswasasurprisingfindinginmyliteraturereview,

mostresearchsuggeststhattheindividualwineriesdonotoftencollaboratewiththetourism

industryorseecollaborationwithothersintheregionasanimportantbusinessstrategy.

However,McCole’sstudyfoundmorethanthree‐fourths(77percent)ofwineries,inregions

likePennsylvania,Virginia,Missouri,TexasandNorthCarolina,collaboratewithdestination

marketingorganizations,restaurantsandbedandbreakfasts,73percentcollaboratewith

hotelsandmotels,68percentwithtouroperators,55percentwithretailers,non‐grapeagri‐

tourismandrecreationproviders,and50percentcollaboratewithotherfoodandbeverage

organizations(McCole,2013.However,whenthetourismorganizationswereaskedtowhat

extentthewineriesimprovethetourismdestinationtheyoperatein,theresultsvaried.Ona

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scalefromoneto30,restaurantsratedwineries’impactthelowestat21.5,followedbyhotels

andmotels(22.0),recreationproviders(25.9),touroperators(26.1),bedandbreakfasts(28.5)

anddestinationmarketingorganizations(30).

Whilesomeofthetourismorganizationsdonotfeelthewinerieshaveanimpact,31percentof

visitorstotheNorthernMichiganregionsaidthewinerieswereveryimportantintheirdecision

totraveltothatarea.Another24percentofrespondentssaidvisitingawineryorwinerieswere

somewhatimportantandanother18percentsaidvisitingthewinerieswastheonlyreason

theydecidedtotraveltothatarea(McCole,2013).Thestudyalsorevealeddemographicand

psychographicinformationaboutwinetouristsvisitinganemergingwineregion.

McCole’s(2013)studyrevealedthat26percentoftouristswhovisitsatastingroominMichigan

areonaverage51to60yearsoldand21percentare21to30yearsold.Additionally,61

percentofthetouristsratetheirownknowledgeofwineingeneralas“somewhat

knowledgeable”,while21percentratethemselvesas“knowledgeable”.Ibelievehowtourists

viewtheirknowledgeofwineasanimportantfindingforwineriesandwineregionsespecially

inhowtheyinteractwithconsumersandthebrandingandmarketingstrategiesused.Overall,

McCole(2013)findsthatfacilitatingcollaborationamongwineriesandtheregionisimportant

inthedevelopmentofanewwineregion.

Establishingandbuildingawineregionrequirescollaborationamongavarietyofindustryand

non‐industrymembers.Beames(2003)emphasizestheneedoffederalandstategovernments

tomakeruralinvestmentsattractivetoinvestors,banksanddevelopers.Moreover,Beames

(2003)clearlystatesthatwinetourismneedstofocusonunderstandinghowitalignswithor

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connectstoactivitiesinaregionalareathroughstatingthat,“Currentlytheterm‘newproduct

development’toawinemakerwouldprobablybetakentorefertoanewblendortypeof

cork,”(Beames,p.209).Further,Beames(2003)andMcCole(2013)bothemphasizethe

importanceofcollaborationamongwineries,andwithorganizationsintheregionaswellas

understandinghowtoofferconsumersan“experience”whenvisitingtheirwineryandregion.

Mason(2008)iscarefultonotethatcollaborationiskeyforanewwineregionbutmustbe

strategic.Ifoundcollaborationtoconsistentlybesupportedasbeneficialandcrucialforwine

regionsthroughoutmyliteraturereviewandinterviewswithindustryexperts.Awineandfood

trailshouldbestructuredasatouristattractionlikeaculturalandheritagetrailandlesslikea

collaborativemarketingtool.Awineandfoodtrailshouldbe“[…]ameansoforganizingthe

visitorexperiencebyprovidingapurposeful,interpretedroutethatcanbefollowedbyfoot,by

car,bicycleorhorsebackandthat‘drawsonthenaturalorculturalheritageofanareato

provideaneducationalexperiencethatwillenhancevisitorenjoyment,”(Beames,p.3).While

emergingwineregiondevelopandnewwineriesopen,theregionsarealsooftenoperatingina

newproductcategory.

New grape varietals and wine blends  

Locksinetal.(2006)statesthatwineisaverydifferentproductbecauseofthegreatnumberof

productsavailableandthecomplexityofwineitself.Tounderstandconsumers’purchase

decisionofwine,thestudyanalyzedthelabelinformationonwinebyusingamarketshare

simulatorwitharandomizedfirstchoicealgorithmtounderstandhowconsumersusemajor

cueswhenpurchasingwine.Thestudyrevealedthatawardshadthegreatesteffectforlow

involvementconsumers,pricesensitivityvariesbetweenlowandhighinvolvementconsumers

14

andbrandsizeandhowwellknowntheregionisaddedimportanteffectsandchangedacross

pricepoints(Locksinetal.,2006).Althoughawardswereshownasanimportantcuefor

purchasingwine,manycontestsexistandoftenarecostlyfornew,smallwineriestoenter.Idid

notfindasignificantnumberofstudiesavailableonhelpingdeterminewhichawardsarethe

mostvaluableforwineriestoenterorwhichawardsconsumersreferencethemost.Alongwith

otherresearchers,thepapernotesthatthereputationoftheproducerandwinetraitslikethe

vintageorregionfromwhichthegrapesweresourcedandthegrapevarietyaresignificantly

relatedtoprice(Locksinetal.,2006).

Building a market category 

NavisandGlen(2010)investigatethetemporaldynamicsamonglegitimacy,identity,and

entrepreneurshiptocreateanencompassingframeworkthatanalyzestheemergenceofnew

marketcategoriesduringthedevelopmentofamarket(NavisandGlen,2010).Establishinga

collectiveidentifycreatesabasisforthecategory’smemberstotailortheirdistinctiveidentities

withinthecategoryandensuingthatanindividualorganizationcanthenclaimitsindividual

identitybutnotdifferentiateitselfandbeanunrecognizablememberofthatcategory(Navis

andGlen,2010).AkeypointofNavisandGlen(2010)is“withlegitimation,anewcategory

requireslessexplanation;asaresult,thefocusofmetaphorsshouldshiftfromdescribingthe

categorytodescribingtheindividualorganizationsandtheirdistinctivemembershipinthat

category,”(NavisandGlen,p.443).Throughaqualitativeandquantitativeresearchstudywith

16yearsofdataonthesatelliteradioindustry,NavisandGlenfoundintheemergenceperiod

thatfirmsclaimedcollectiveidentities,describedthecategorywithlinguisticframing(using

15

analogies,metaphorsorsimilestogivemeaningaroundthecategory)andannounced

affiliationsthatsanctionedthecategoryasawhole(NavisandGlen,2010).

Developing a regional identity 

RomanelliandKhessina(2005)arguethatregionsneedastrongindustrialidentityandcando

thiswhenalargenumberofobservers,insideandoutsidetheregion,discusskeyfeaturesof

theregion’sindustrialactivity(RomanelliandKhessina,2005).Aregionalidentityiswhen

residentsandexternalobserversareawareofthefeaturesoflifeandworkinaregion,like

knowingthatMichiganproduceswine.Buildingaregionalidentitythenallowspeopletobegin

toassociateanactivitylikewinemakingwitharegionthereforeleadingtomoreresources

beinggiventothisparticularindustry(RomanelliandKhessina,2005).Thisconceptapplieswell

toemergingwineregions,ifaconsistentmessageisrelayedamongallobserversaboutthe

importantfeaturesoftheregionandthewinesforexample,thenoutsiderswillbeableto

distinguishtheregionbetterandresourcegatekeepersmaythenviewtheregionasadesirable

investment.

Further,throughsurveyingthewineryownersinthisregion,weseektounderstandhowthe

currentstrategiesoffirmownersandtheirperceptionsofemergingwineregions.“Thus,

regionsthatconveyastrongexternalidentityaremorelikelytoattractgreateramountsof

resources(e.g.,fromtourism,migration,andeconomicinvestment),thanregionswithweaker

identities,”(RomanelliandKhessina,p.349).Further,theauthorsfinddeterminingthe

dominanceandinterrelatednessoftheclusterasimportantaspectsofregionalindustrial

identity.

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RomanelliandKhessina(2005)classifyaclusteraslargeanddominatewhenitcontributes

significantlytotheeconomicwealthofaregion.Further,smallerclustersarethosethat

contributelesseconomicwealthtoaregion,butcanalsoattractattention(potentiallythrough

theirrelationshipswithotherclustersinparticulardominantclusters)(RomanelliandKhessina,

2005).Thedegreeofdominanceofaclusterisdeterminedbythenumberoforganizations

proportionaltoemploymentinthecluster,thereforeahighnumberoforganizationswitha

significantproportionoftheresidentsemployedbythoseorganizationsindicatethedominance

oftheindustrycluster(RomanelliandKhessina,2005).

Insummary,RomanelliandKhessina(2005)findarelationshipbetweenthestrengthandfocus

ofaregion’sindustrialidentity,withbothhavingastrongregionalindustrialidentitiesbothwill

attractagreatamountofresourcesbutaregionwithamorefocusedidentifywillattractmore

homogenousresourceswhileamoregeneralizedidentitywillattractmoreheterogeneous

resources.Thisapplieswelltothisemergingwineregion,iftheregionassociatesitselfwithone

grapevarietal.

ThisemergingwineregionneedsaflagshipvarietallikeNapaValley,Calif.,beingknownfor

cabernetwine,thiscouldhelptheemergingwineregiongaininternationalrecognition,attract

attentionoflarge,nationaldistributors,createastrongregionalbrandthatnewerwineries

couldleveragelegitimacyfrom,andallowwineriestomoreeasilyshareequipmentand

knowledgewhengrowingasimilarvarietal.Inaddition,buildingastrong,regionalindustrial

identitycouldencouragefinancingagentstoinvestintheregionandindividualfirmsaswellas.

Survival and growth require legitimacy 

17

Survivalisthemostrecognizedeffectoflegitimacyfollowedbygrowth,efficiency,profit,size,

liquidity,success/failure,marketshareandleverage(ZimmermanandZeitz,2002).The

commonlyrecitedsurvivalrateofnewventures,reportedbytheSmallBusinessAssociation,

consistentlyshowsthatabouthalfofallnewventuresfailinthefirstfiveyearsofoperation.

Thecrucialtimebetweenfailingandsucceedingcanoftenbetheresultofinsufficientresources

(Shane,2000).ZimmermanandZeitz(2002)identifiedtwokeyissuesfornewfirms,resource

acquisitionandgrowth.

Newventurescanovercometheirlackofresourcesthroughengaginginactivitiesthatsignal

legitimacy.ZimmermanandZeitz(2002)identifythefollowingactivitiesaslegitimacybuilding

activities,establishingacrediblemanagementteam,showingindustrycompetence,obtaining

endorsementsandcertifications,developinganetwork,andoperatingasalow‐riskventure.

Theaboveactivities’assistanceinsignalinglegitimacywillhelpfirmsobtainmoreresources,

likeaccesstofinancing.

Inthisliteraturereview,thegoalistounderstandtheimportanceofobtaininglegitimacyto

acquireresourcesandencouragegrowthinnewfirms,butalsotounderstandthechallengesof

buildinglegitimacyinanewlydevelopingindustry.Thisisimportantbecausetheliterature

suggeststhat,newfirmshavealowerchanceofsurvivalinanewindustrycomparedtoan

establishedindustryandissuggestedtobetheresultofchallengesindevelopingand

legitimatingafirm(DobrevandGotsopoulos,2010).Further,theZimmermanandZeitz(2002)

arguethatwhetherafirmwantstogrowornot,legitimacyisnecessaryinobtainingaccessto

resources.First,wewilldefinelegitimacy,thetypesandstrategiesoftenusedtobuild

18

legitimacy.Next,weanalyzetheconformancestrategyofobtaininglegitimacyindetail.Then,

lookatGartner’s(1985)frameworkofhowanewventureisestablishedandhowTornikoski

andNewbert(2007)appliedGartner’sframeworktoentrepreneurs’decisiontoconformoract

strategicallytobuildlegitimacy.

Defining legitimacy 

Measuringlegitimacymustfirstbeexplicitlyaddressed.InSuchman’s1995article,hedescribed

thestudiesonlegitimacyprecedinghisarticleasfallingintwocategories,strategicand

institutionallegitimacy.Hedescribespreviousliterature’sdefinitionofstrategiclegitimacyas

havingamanagerialperspectivethatfocusesonhoworganizations“manipulateanddeploy

evocativesymbolsinordertogarnersocietalsupport,”(Suchman,p.572).Whereas

institutionallegitimacyhasamorebroadviewthatanalyzesthewaysthatsector‐wide

structurationdynamicscangenerateculturalpressuresthatexceedanorganization’scontrol.

Hargreaves(2003)explainssimplythatthestrategicschoolemphasizesbehaviorsandvalues

andtheinstitutionalschoolemphasizessymbolsandcognitiveprocesses.Suchman’s(1995)

broad‐baseddefinitionsoughttocombinetheinstitutionalandstrategicschool(Hargreaves,p.

1).

Suchman’softenquoted(1995)definitionreferstolegitimacyas,“ageneralizedperceptionor

assumptionthattheactionsofanentityaredesirable,proper,orappropriatewithinsome

sociallyconstructedsystemofnorms,values,beliefs,anddefinitions,”(Suchman,p.574).He

continuesbysayingthatlegitimacyisresilienttoparticulareventsyetdependentonahistory

ofeventsmeaning,anorganizationcanstrayfromsocietalnormsbutstillremainlegitimate.

19

Suchman(1995)alsostatesthatlegitimacyispossessedobjectivelyyetcreatedsubjectively.For

theemergingwineregionthismeansthatfirmswhooftenusestrategiestoobtainlegitimacy,

likeplantingmoreviniferagrapes,whichcanbeobjectivelymeasuredlikeacresplanted,

howeverhowresourcegatekeepersviewthewinery’sdecisiontoplantmoreviniferagrapesis

subjective.Meaning,resourcegatekeepersmayvalueawinery’sdecisiontoproducemore

wineusingviniferagrapesorvaluetheawardsawineryhasappliedforandwon,buttheir

opinionissubjectiveandoftenmoredifficulttoobjectivelymeasure.Understandinghow

legitimacyispossessedandcreatedisanimportantconceptandconveyingthattowineries.

ZimmermanandZeitz(2002)furtherdefinelegitimacyas(1),asocialjudgmentof

appropriateness,acceptance,anddesirability,and(2)asakeyresourcefornewventuresin

gainingaccesstoresourcesandforfuturegrowth.MoolhuijsenandBoudier‐Bakkerlaan(2011)

supportZimmermanandZeitz’sdefinitionandaddthatthelegitimacyprocessis“repeated

againandagainwherebyfeedbackloopscontinuouschangestrategicactions,legitimacyand

resourcesacquiredwhatultimatelyresultinvariousgrowthrates,”(Moolhuijsen,p.27).Three

typesoflegitimacyhavebeendefinedandarestillreferredtoandusedincurrentresearch.

Types of legitimacy 

Suchman(1995)definedthreetypesoforganizationallegitimacystrategies:pragmatic

legitimacy,morallegitimacyandcognitivelegitimacy.Similarly,institutionalliteraturerefersto

thosethreeexternalsourcesoflegitimacyas:sociopoliciticalregulatory,sociopolitical

normative,andcognitivelegitimacy.

Regulative legitimacy 

20

First,regulativelegitimacycanbederivedfrom“regulations,rules,standards,andexpectations

createdbygovernments,credentialingassociations,professionalbodies,andevenpowerful

organizations(suchasthosemanufacturingcompaniesrequiringtheirsupplierstohavesome

sortof"quality"certification),”(ZimmermanandZeitz,p.418).Themainideaofregulative

legitimacyistoshowthefirmisoperatinglawfullyandfairly.Finally,obtainingregulative

legitimacyoftenindicatestostakeholdersthat,“thenewventureisacceptabletothevarious

regulatoryagencies,evenwhenlittleisknownabouthoweffectivetherules,regulations,

standards,andexpectationsareinmeetingthedesiredends,”(ZimmermanandZetiz,p.419).

Thesecondtypeoflegitimacyisnormativelegitimacy.

Normative legitimacy 

Normativelegitimacyderivesfromthenormsandvaluesofsociety.ZimmermanandZeitz

(2002)stateprofitability,fairtreatmentofemployees,endorsementsandnetworkingas

examplesofnormsandvaluesthataidingainingaccesstoresourceswhilealsoemphasizing

theimportantroleofnetworks,bothinternalandexternaltothefirm.Networkshelp“aidthe

survivalofthenewventurebyprovidingcredibility,contact,andsupportfortheentrepreneur;

buildingapositiveimageofthenewventure;andfacilitatingaccesstoresources(Ostgaard&

Birley,1996;Westhead,1995;Zhao&Aram,1995),(ZimmermanandZetiz,p.419).Thethird

typeoflegitimacyiscognitivelegitimacy.

Cognitive legitimacy 

Cognitivelegitimacyderivesfromfollowingthegoalsandactivitiesthataredeemed

appropriateanddesirable.Johnson,DowdandRidgeway(2006)describecognitivelegitimacy

21

asderivingfromtheoccurrenceofcomparableorganizationalactorsthatthenprovide

templatesfororganizationalstructuresandactions.Cognitivelegitimacycanbeobtained

through“endorsingandimplementingmethods,models,practices,assumptions,knowledge,

ideas,realities,concepts,modesofthinking,”thatareallwidelyacceptedtosignalthatan

organizationisacceptableanddesirable(ZimmermanandZeitz,p.420).Alongwiththe

differenttypesoflegitimacy,threestrategiesareoftenreferredtoinbuildinglegitimacy.

Key strategies used to achieve legitimacy 

Firmstypicallyseekthesethreetypesoflegitimacythroughthefollowingstrategiesproposed

bySuchman(1995):conformance,selectionandmanipulation.ZimmermanandZeitz(2002)

proposecreationasanadditionalstrategybecauseofnewventures’developmentofnew

governmentrulesorregulations,norms,values,andmodelsthatmayshocksocietybut

ultimatelycausechange.

ZimmermanandZeitz(2002)describethefourstrategies.Conformanceapplieswhenafirm

“followstherules”,whenafirmdoesnotquestion,changeorviolatethesocialstructure.

Selectionfocusesonfindingadesirableenvironment.Manipulationfocusesoninnovating

and/orleavingapriorpracticebutisthemostdifficultforventures.Creationinvolves

developingsocietalrules,norms,values,beliefs,models,etc.,andisthemoststrategicofallthe

strategies.

ZuzulandEdmondson(2012)stresstheimportanceofmanagingboththeexternalandinternal

journeysandidentifyingthewaystheyconflictmaybetheessentialchallengeingrowinganew

businessinanascentindustry.Forexample,wineregionsareoftenassociatedbythegrape

22

thatwineriesintheregionpredominantlyproduce,thereforeifthewineriesintheregionare

producingalldifferentvarietals,thiscanbemoredifficultforconsumerstoestablishan

associationwiththatregion.ClercqandVoronov(2009)addressentrepreneurs’decisionto

conformortransformwhileacknowledgingtheresultingpressuretoobtainlegitimacy.

Decidingto“fitin”or“standout”isadifficultdecisionforentrepreneurs.“Theultimate

challengeforentrepreneursistocopewiththesimultaneousdemandstousemethods,

procedures,ortechnologythataresomewhatconsistentwithexistingpracticesandproduce

outcomesthatareinnovativeenoughtowarrantthegenerationofunexploitedeconomicprofit

intheirdomainofactivity(Atuahene‐Gima2005;Suchman1995;DowlingandPfeffer1975),”

(ClercqandVoronov,p.404).BasedonBourdieu’stheoryofpracticeinexamining

entrepreneurs’successofresourceacquisitioninapower‐ladden,sociallyembeddedprocess,

ClercqandVoronov(2009)addtotheentrepreneurshipliteraturethroughanalyzing

entrepreneurs’needtofitinandstandout.Theauthorsarguethattheabilitytofitinsignals

thatsomeoneisseriousandunderstandsthefield’srulesthereforemakingthematrustworthy

recipientofresources(ClercqandVoronov2009;LounsburgandGlynn2001;RingandVande

Ven1994).Whiletheabilitytostandoutshowstheentrepreneurhassomethingnovelor

previouslyunexploitedintheparticularbusinessfieldthereforeresourcesgiventothe

entrepreneurwilllikelyproducesuperiorreturns(Gartner2003;ClercqandVoronov,p.407).

Conformance, “fitting in”, as a legitimacy strategy 

Conformanceliterallymeansanorganizationthatisincompliancewiththedemandsand

expectationsofanalreadyestablishedsocialsystem.Again,becausemostnewventuresdonot

23

havetheresourcesorestablishedlegitimacyinitially,thenewventuresarelikelytofollowor

adapttotheindustry’scurrentrules,norms,valuesandmodels(ZimmermanandZeitz,p.422).

SuchmanandZimmermanandZeitz,recommendedtwostepsthatnewventurescantaketo

gainlegitimacy,firstischangingthefirmitselfandsecond,changingitsenvironmentandother

organizationswithinthatenvironment(Suchman,1995)(ZimmermanandZeitz,2002).

Conformanceisoftentherecommendedstrategyforanewventurethatplanstooperateina

well‐establishedindustry.ZimmermanandZeitz(2002)statedthatgenerallynewventureshave

littlepowerandfewresourcestochallengetheestablishedsocialstructure.Further,

conformanceinvolvestheleastamountofexternalchangerelativetotheotherthree

legitimacystrategiesmakingthestrategytheeasiesttoexecuteaswell.

Further,Gartner(1985)describesthecreationofanewventurethroughaframeworkoffour

dimensions:theindividual(s)whostartedthenewfirm,organizationmeaningthekindoffirm

started,theenvironment thatsurroundsandinfluencesthenewfirmandfinally,thenew 

venture processintermsoftheactionstheindividual(s)tooktostartthefirm.Further,Gartner

arguesthatallfourdimensionsmustbeanalyzedtounderstandorganizationalemergence.

TornikoskiandNewbert(2007)appliedGartner’sframeworkandcontendthatthelikelihoodof

anascentorganizationformingisafunctionofwhetherthefirm“(1)possessesthose

characteristicsdeemedcrediblebythesocietyinwhichitoperates,or‘conforminglegitimacy’;

and(2)engagesinactivitiesaimedatconvincingexternalaudiencesthattheorganizationis

operational,or‘strategiclegitimacy’,”(TornikoskiandNewbert,p.312).Nowamoredetailed

24

lookat,similartoTornikoskiandNewbert’s(2007)paper,thatappliesGartner’sframeworkto

analyzeanascentfirm’sdecisiontoconformoractstrategicallyinitssearchtobuildlegitimacy.

Collaboration 

Collaborationhasbeenwidelystudiedandrecognizedasacrucialstrategyforanemergingfirm

andindustry.GetzandBrown(2006)statethatcollaborationisnecessaryincreatingthewine

tourismexperienceandwhilewineriesarethemainattraction,theycannotstandalone.Hallet

al.(2000)findsthelackofinter‐industrycollaborationamongthewineandtourismregionsis

theresultinglackofthreefactors(1)therelativeinfancyofwinetourismwhichleadstopoor

communicationofinformationandresearchregardingwinetouristsandwinetourism,(2)not

asimportanttotheindividualwinery,and(3)winemakers’lackofexperiencewithtourism

(Beames,p.209).Inattemptingtoofferconsumersacompleteexperience,Beames(2003)

stressestheimportanceoflocalcouncils,businesses,restaurants,lodging,wineriesand

activitiesoperatorsinadevelopingregiontoworktogetherandultimatelybringprosperity,

employmentandgrowthtoruralareas.

Acting strategically, “standing out”, as a legitimation strategy 

Legitimacycanincreasewhennewventurestakestrategicactions(ZimmermanandZeitz,

2002).ZimmermanandZeitz(2002)findthatnewventurescanuseacombinationofthefour

strategiesbutwhengrowthorsurvivalispotentiallycompromised,manipulationmaybe

needed.TornikoskiandNewbert(2007)describeactivitiesthatnewfirmscandoto

demonstrateresourcecombinationbehaviorwhenfocusedonusingandtransformingthose

resourcesthattheypossessorhaveanimpactonproduction.ZimmermanandZeitz(2002)

25

describeimprovisingactivitieslikestartingmarketingefforts,openingabankaccountand

projectingfinancialstatementsasbehaviorsthataffectlegitimatizingnewfirms.

The individual  

Gartner’s(1985)firstdimensionistheindividual,theperson(s)whostartedthefirm.Baronand

Markman(2000)arguethatahavingahighlevelofsocialcapitalcanoftenhelpentrepreneurs

gainaccesstoventurecapitalists,potentialcustomers,informationandmarkets.Theauthors

notethatahighlevelofsocialcapitalcanbebuiltonafavorablereputation,relevantprevious

experience,anddirectpersonalcontacts.Further,BaronandMarkman(2000)statethat

entrepreneurscanincreasetheirsocialskillsthroughtrainingandthatanincreaseinsocialskills

willlikelyleadtomoresuccessandsocialcapital.

BaronandMarkman(2003)thenanalyzedtheimportanceofsocialcompetenceanditsroleon

afirm’sfinancialsuccess.Intheirstudy,twogroupsofentrepreneurs,oneinthecosmetics

industryandoneinthehigh‐techindustry,completedaquestionnaireabouttheirsocial

competenceasanindividual.Next,athirdgroupofentrepreneursweresurveyedbutto

increasethevalidityoftheentrepreneur’sselfreporting,BaronandMarkmanhadsomeone

whoknowstheentrepreneurwellratetheirsocialcompetence.Then,theresearcherslinked

thedatathroughparallelandfactoranalysistotheirfirm’sfinancialsuccessthroughaveraging

thefirm’sincomefromseveralyears.Socialperception,howoneaccuratelyperceivesothers,

wastheonlyvariablethatwaspositivelylinkedtofinancialsuccessinbothgroups,(Baronand

Markman,2003).Additionally,socialadaptability,theabilitytoadapttoawiderangeofsocial

situations,wasrelatedtofinancialsuccessforentrepreneursinthecosmeticsindustry,and

26

expressiveness,theabilitytoappropriatelyexpressemotionsandfeelings,waslinkedtothe

samesuccessforentrepreneursinthehigh‐techindustry.

Previousliteraturefocusesonvaryingaspectsoftheindividualentrepreneur’sroleinanascent

firm.Packalen(2013)formulatesaframeworkthatanalyzeshowanorganization’sinitial

legitimacyanditsproceedingabilitytoobtainresourcesarederivedfromtheinteraction

amongspecificcharacteristicsofafounder’sbackground.Throughsimultaneouslyanalyzingthe

industrystatus,entrepreneuriallyrelevantdemographiccharacteristicsandsocialcapitalthe

authorfindsthatonetypeofcapitalmayreducethedependenceonorneedforothers.

VandeVenet.al(1984)paperstudied14U.S.coursewarecompaniesin1983tounderstand

thefactorsthatinfluencethestartupsuccess.Thesurveyfoundthatstartupsuccessand

companystageofdevelopmentarepositivelyrelatedtoabroadsetofskillsandexpertiseof

theentrepreneur,explainedfurtherbyhowtheentrepreneurofasmallbusinessmustoften

actasmainbrainandagent.Inaddition,theeducationleveloftheentrepreneurisstronglyand

positivelycorrelatedwithcompanydevelopmentyetpriorexperienceinsmallbusinesswas

negativelyrelatedtothestageofdevelopment(VandeVenet.al,1984).Additionally,this

surveyrevealedthatstart‐upsuccesswaspositivelycorrelatedwiththefoundingteam’s

educationandexperience.TornikoskiandNewbert(2007)statethatanascentorganization’s

legitimacymaybeinpartdeterminedbythecollectiveabilityofitsfoundingteamorits

organizationalcapital.

Finally,inKunduandKatz(2003)studyof47born‐internationalsmallandmediumsized

businessesusedKatzandGartner(1988)frameworkandfoundthatresources,most

27

importantlythehumancapitaloftheownerwassignificantinpredictingtheexchangeoftheir

dependentvariables,exports(Brushet.al,2008).

Organization 

VandeVen(1984)describestheorganizationalapproachaslookingattheoverallnetworkof

peopleinvolvedinthecreationofanorganizationand“examinestheseriesofevents,planning

processes,andstructuralformsthatemergetomobilizecollectiveaction,”(VandeVan,p.88).

AsZimmermanandZeitz(2002)arguethatventurescanprojectdesirabilitythrough

highlightingthemanagementteam’scredentialsandindustrycompetence.Furtherstated,

withoutconformingtoinstitutionalizedexpectationslikepossessingamanagementteamwith

significanteducationandprofessionalexperience,anascentorganizationmaystruggletogain

accesstoresourcesnecessaryforoperating(TornikoskiandNewbert,2007).Inaddition,tothe

individualandtheorganization,theenvironmentthatventureemergesinisimportantto

consider.

Environment 

Theenvironment,itsgrowthrate,levelofcompetitionordemand,canallaffecttheventures

thatoperatewithin.Schumpeter(1934)describedentrepreneursinanemergingindustryas

havingtochangethecurrentequilibriumbyassemblingfactorsofproductioninnovelwaysto

create“newcombinations”.Examplesofthatcouldincludeexploitinganewsourceofsupplyor

technology,developinganewproduct,ortappinganewmarket(LowandAbrahahsmon,1997).

Additionally,LowandAbrahamson(1997)notethatinanemergingindustry,thekeychallenge

28

isachievinglegitimacy,throughbuildingcooperativerelationswithlegitimatedformsadds

credibility.

LowandAbrahamson(1997)statethatwhenanindustryisinagrowthphase,competitionis

lowbecausesomeformoftheentrepreneur’sventureorproductalreadyexistsandsome

degreeoflegitimacyhasbeenachieved.Therefore,entrepreneurscanprevailagainstthe

competitionbyrecognizinganewformormovingquicklytocaptureasignificantpieceofthat

potential(LowandAbrahamson,1997).

Finally,inamatureindustry,competitionisintenseandbusinessescompetebasedon“superior

execution,localmarketknowledge,orbyadoptingstate‐of‐the‐arttechnologyandbusiness

practices,”(LowandAbrahamson,p.444).Strongtiestoanindividualindustryareneededina

matureindustry,however,identifyingthedeterminantofsuccessbecomeeasier(Lowand

Abrahamson,1997).

The process 

Behaviorinfluenceshowfirmsobtainlegitimacy,morespecificallyincreasingtheactualor

potentialcompliancetoinstitutionalizedexpectations.AccordingtoTornikoskiandNewbert

(2007),newfirmscanstrategicallybuildlegitimacythroughatleastthreekeytypesofbehavior,

improvising,resourcecombinationandnetworking.First,improvisingbehaviorisusedwhen

firmstrytomaketheirfirmlooklikeamorefunctioning,establishedfirm,eveniftheyarenot.

DelmarandShane(2004)highlightthatduringtheearlymonthsofanewventure’screation,

mostfirmscannotbeevaluatingtheirhistoricalperformancebecausethatdatamaynotexist

thereforeexternalstakeholdersmaketheirdecisionsbasedontheirperceptionsofthenew

29

firm’slegimacy,(DelmarandShane,2004).Often,“theresultofthis‘impressionmanagement’

tacticsisthattheseexternalpartiesarelikelytorespondtothenascentorganization‘asif’it

wereanexistingorganizationbygrantingthemaccesstotheseresource,”(Schlenkler,1980)

(TornikoskiandNewbert,p.318).Further,theauthorsdescribeimprovisingbehaviorsasdoing

tacticsthataresimilartoexistingfirmslikecreatingabusinessplan,lobbying,advertising,event

sponsorshiporconductingscientificresearch,howeveroftenimpressionbehaviorissimply

creatinganimpressionorillusionthatthefirmisfullyoperationaltherefore,notproducing

tangibleoutputsunlikethesecondtypeofbehavior.Further,“goodstorytellingisusefulto

obtaininglegitimacybecausestoriesareevaluatedontheirinternalcoherenceratherthanon

externalvalidation,”(Fisher,1985)(DelmarandShane2004,p.390).Finally,thegoalofthese

differentperceptiontacticsistoconvinceothersthatthenewfirmisfunctioningandmoving

forward.

Resourcecombinationisthesecondtypeofbehaviorusedtobuildlegitimacy.Thistypeof

behaviorfocusesondevelopingoutputslikeproductsorservicesto“provideresource

gatekeeperswithatangibleassessmentofwhetherornotthenascentorganizationisactually

capableofdoingwhatitisorganizedtodo,”(TornikoskiandNewbert,p.319).Delmarand

Shane(2004)findfirmsthatobtaininputslikerawmaterialsarelesslikelytodisbandthan

otherfirms.Further,theauthorsfindfirmsurvivaltoincreaseinrelationtothetimingittakesa

newfirmtocompletethenewproductdevelopmentprocess.

Thethirdbehaviorisnetworking,whichTornikoskiandNewbert(2007)stateasanimportant

methodinbuildinglegitimacybecauseitenablenascentorganizationstoactuallymanipulate

30

theenvironmentandchangeexternalparties’perceptionoftheirfirm.Insupport,Delmarand

Shanefindgeneratingsocialrelationshipsearlyinthefirm’sdevelopmentwithitspotential

customersasimportantandawaytolearnaboutthefirm’scustomers’needsanddemandsand

toutilizetheircustomers’socialnetwork,(ShaneandDelmar,p.396).Further,theauthorsfind

thatfirmsthatnetworkwithpotentialfundersthroughearlyinthefirm’sdevelopmentprocess

askingpotentialfinanciersforfundssignificantlyreducethelikelihoodthatthefirmwillfail.

FinallyTornikoskiandNewbert(2007)emphasizethatfirmswhonetworkandinteractwith

resourcegatekeeperswillincreasetheopportunitiestoconvincethosepartiesthattheirnew

firmislegitimateandthereforeincreasingthelikelihoodthatthenewfirmwillobtainaccessto

thoseparties’resources.

 

 

 

 

 

 

 

 

 

 

 

 

31

CHAPTER 3: RESEARCH METHODOLOGY 

 

 

Survey Instrument 

Asemi‐structuredsurveyinstrumentwasusedtogatherdataonthisemergingwineregion.

Thesurveyquestionsanalyzedtheindividualfirmandtheindustryactivitiesthrougheliciting

responsesonmanagementpracticessuchasprocurement,production,marketingpractices,

industrycollaborationandinnovativeness,aswellasmanagementchallengesandconstraints.

Thesurveyiscomprisedof63questions.Thesurveywaspre‐testedwithasubsetofwineries

andresearchersfromthethreestatesthenrevisedbeforethebeingemailedtowineryowners.

Finally,thissurveyinstrumentwillberelevanttotheacademicandpractionercommunities.

 

Data Collection 

Wesurveyedwineryownersandmanagerstocollectprimarydataonthewineindustryin

Michigan,MissouriandNewYork.BeginninginAprilandMay2012,thesurveywasfirstsentto

318wineries:88inMichigan,116inMissouriand114inNewYork.Thedatawascollectedas

partofaninter‐collegiateprojectamongMichiganStateUniversity,theUniversityofMissouri‐

ColumbiaandCornellUniversitytostudyanemergingwineregioninthoseUniversities’states.

ThequestionnairewasconvertedforOnlineusethroughtheInternet‐basedsurveytoolSurvey

Monkey(SurveyMonkey.com).Anemailwithalinktothesurveywasfirstsenttothewinery

32

owners.Intheemailaswellasonthefirstpageofthesurveywasinformationtolegitimizethe

studyandencourageparticipationthroughdescribingtheUniversitiesinvolvedinthisresearch

project,thepurposeofproject,thesurvey’scontent,theconfidentialityofthesurveyand

respondents’rightstovoluntarilyparticipateinthesurvey.Inadditiontocollectingsurveys

throughSurveyMonkey,inJuneandJuly2012fieldvisitsweremadetovisitwineryownersand

conductinpersoninterviewusingthesamesurvey.Intotal,88wineriesinMichigan,116

wineriesinMissouriand114wineriesinNewYorkwerecontactedtoparticipateinthestudy.

ThesurveyscompletedOnlineandthroughthedifferentmodeswerethenloadeddirectlyinto

MicrosoftExcelforanalysis.“Theuseoftwoormoresurveymodesinasingledatacollection

effortraisesthepossibilityofimprovedresponseratesbeingachieved,”(Dillmanetal.,p.16).

Table 4: 2012 Survey Response Rate 

States surveyed  Surveys collected  Surveys sent  Response rate (%) Michigan 40 88 45%Missouri 40 116 42%NewYork 33 114 29%Allstates 113 318 36%

33

 

Methodology 

 

Thefollowingmethodologywasusedtostatisticallyanalyzethedata,(1)descriptivestatistics

(2)correlations(3)t‐tests(4)chi‐squaretestsand(5)ANOVAtests(analysisofvariances).The

datawascleanedinMicrosoftExcelandthebivariateanalysiswasdoneinSTATA.

Thestatisticalanalysisperformedonthedatawasdividedintwoparts.Firstadescriptive

analysisonthecurrentstatusoftheemergingwineregionandtheindividualfirms(i.e.the

wineries)ispresentedtoprovideanoverviewofthecurrentmanagementandmarketing

practicesused.Thedescriptiveanalysisalsoincludescomparisonsamongthethreestates.The

secondpartoftheresultsprovidesaquantitativeanalysisofthemarketlegitimacyofwineries

intheemergingwineregion,examiningstrategicmanagementandmarketingdecisionsmade

bywineriesandtheeightlegitimacyindicators.Thebivariateanalysesresultindiffering

findings,andwereselectedbasedonthetypesofdatacollectedfromthesurveyincluding,

continuous,binaryandcategorical.Correlationswererunbetweentwocontinuousvariables

anddescribethestrengthanddirection(positiveornegative)betweenthetwovariablesof

interest.Independenttwo‐samplet‐testswererunbetweenbinaryandcontinuousdata,the

resultsanalyzethemeansoftwodifferentvariablesandwhetherthedifferencebetweenthe

meansissignificant.Pleasenote,allt‐testswereinitiallytestedforequalityofvariance

assumption,forthosethatviolatedthisassumptionWelch’stestwasthenruntocorrectforthe

violation.Chi‐squaretestswererunwhentwobinaryvariableswerepresentorabinaryand

34

categoricalvariablewerebeingstudied.Thistestresultshighlightthedifferencesamonggroups

andwhetherthedifferencesarebychanceorarerelated.Finally,thefollowingresultsare

highlightingthesetypesofbivariateanalysesbetweenthelegitimacyindicatorsandthe

strategicmanagementandmarketingstrategiesusedbywineriesintheregionwereconducted.

Allofthestrategicmanagementandmarketingdecisionsweretestedagainstalleightofthe

legitimacyindicators,whicharebasedonresearchbyZimmermanandZeitz(2002),Tornikoski

andNewbert(2007)andDelmarandShane(2004).Fromtheliterature,theindicators

previouslynotedorusedtomeasuresignalsoflegitimacyarehiringanemployee,makingasale

andobtainingexternalfunding.Addingtothosemeasures,thisthesisextendstheprevious

researchandaddsvariablestohelpsignallegitimacyandmeasuringthoseindicatorsspecifically

fortheemergingwineregion.Listedinthetablebelowarethevariablesusedtosignal

legitimacyandthevariablesweremeasuredbasedondatafroma2012surveyofMichigan,

MissouriandNewYorkwineries.

Table 5: Legitimacy variables 

Legitimacy variables  How measured  Signals of  legitimacy 

Fulltime,yearroundemployees Nominalscale–actualnumberused +Fulltime,seasonalemployees Nominalscale–actualnumberused +Percentsoldthroughliquorstores

%oftotalwinevolumesoldthroughliquorstores

+

Percentsoldthroughrestaurants %oftotalwinevolumesoldthroughrestaurants

+

Percentsoldthroughdistributors %oftotalwinevolumesoldthroughdistributors

+

Arrangementwithtourbus Dichotomousvariable–Yescounted +

35

Table 5 (Cont’d):  

Largetradingnetwork Createddichotomousvariablefromanordinalscalewithascoreoffourtosevenonascaleofone,beinginteractswithfewtradingpartners,andsevenbeinginteractswithlargenumberoftradingpartners.

+

Obtainedexternalfunding Dichotomousvariable–Includesthosethatuseexternalfundingoracombinationofself‐financingandexternalfinancing

+

 

Relationships 

Throughreviewingtheliteratureanddoingin‐depthinterviews,welearnedtheimportanceof

thevolumeofwineafirmcanproduceandhowthisaffectsafirm’sabilitytogainaccessto

certainresources.“Toestablishareputationitisnecessarytohaveacertainsize,acertain

criticalmass.Criticalmassdeliversshelfspace,”(Easingwood,p.8).Further,LingandLockshin

(2003)foundsmallerwineries(producinglessthan2,500tonnes)chargemorefortheirwines

(andconsumersarepresumablywillingtopaymore)thanforwinefromlargersizedwineries

(producingmorethan10,000tonnes).TaplinandBreckenridge(2008)howevernotethatlarge

wineriescanincreasethequalitystandardsforgrapegrowingsinceintheinitialyearsthey

weremostlikelyforcedtoprocuretheirgrapeslocallytomeettheirfirm’sproductionneeds.

Thisconceptapplieswelltotheemergingwineregion,understandingtheeffectsoflargeand

smallwineriesinawineregionarea,likeimprovingtheskillsofgrapegrowers,educatinglocal

financersandengagingthecommunity.

36

Figure 1: Legitimacy Model of Emerging Firms Framework         

   

Analyzingtheageofthewineriescanserveasanimportantcharacteristictocomparethe

statesandindividualfirmstoeachotherandanalyzeagainstlegitimacyindicatorslike

distributionandbreathoftradingnetwork.Currentresearchdoesnotofferconclusivefindings

onhowtheageofthewineryaffectsthewinery’sbrand,reputationorproduct,asshown

throughLingandLockshin’s(2003)paperthatfoundunequalpricebehaviorsaccordingtothe

vintagesofthewine.Throughreviewingtheliterature,asignificantnumberofstudiesfocuson

studyingwhateffectscorrelateoraffectthepriceofwinehoweverfewstudiesseekto

understandthekeyfactorsaffectingawinery’sstart‐upandgrowth.Leadingustoourfirst

relationshipandinterestofstudy.

37

Relationship1:Therelationshipbetweenthenumberofcasesawineryproducesandthe

numberofyearsawineryhasbeencommerciallyproducingwinewillbothhavestrong,positive

correlationswithalleightlegitimacyindicators.

TorniskoskiandNewbert(2007)foundthroughanalyzinghumancapital,thatmanagerial

experiencerelatedtomanyemergencefactorsyetindustryexperienceandhavingacollege

degreewereunrelatedtowhetherafirmemerges(makesasale,obtainsexternalfunding,

etc.).However,theauthors’studydoessuggeststhat,“Engaginginimprovisingandresource

combinationbehavior,potentialcustomers,employees,andfinanciersmayperceivethe

nascentorganizationtobelegitimateand,inturn,bemorewillingtoenterintoresource

exchangeswiththem,”(TorniksoskiandNewbert,p.313).

However,throughpreviousliterature,welearnedthatduringthestart‐upphaseand

sometimesforafewyearsmostwineriesdonothaveanyemployees,“Inmanycases,the

owneristheonlyfull‐timeemployeeandassumesmultiplerolessuchastheviticulturalist,

mechanic,chemist,farmlaborer,purchasingofficer,andsalesperson,”(Edwards,p.14).

Therefore,employingindividualsservesasastronglegitimacyestimatorindicatingthatafirm

hassurpassedtheinitialstart‐upphase.

Finally,wewanttoanalyzehumancapitalbecauseoflinkstootherinterestingvariableslikea

winery’stradingnetwork,inwhichWebbetal.(2009)foundasignificantlinkbetweenawinery

owner’spersonalnetworkandtheaccessthefirmobtainedtoinformation,employees,

suppliersandcustomers.Inaddition,TaplinandBreckenridge(2008)foundwinemakersfrom

38

large,establishedwineriesoftenassumeleadershippositionsingrapegrowingorganizations

andextendtheirknowledgetoimprovethequalitystandardsandindustryefficiencies.

Therefore,wethinkwineriesthathavecredible,establishedowners,winemakers,grape

growersortastingroomstaffwillleadtostrong,positivecorrelationswithalleightlegitimacy

indicators.

Relationship2:Humancapitalwillhaveastrong,positiveassociationtoalleightlegitimacy

indicators.

ThodeandMaskulka(1992)studiedgeographicoriginandthelocationofacriticalingredient(s)

inaproduct.Throughapplyingthisconceptof“place‐based”marketingwhichisawayof

identifyingaconsumerproductwithageographiclocation,however,resultsshowedthata

marketingstrategyalonecannotmatchvineyard‐designatedwinesandgrapevarietalstothe

soil,oftenthisdependsmoreonhowimportantconsumersthinkrelatingplaceandgrapesis.

 

Relationship3:Firmswithagreaterpercentageofviniferagrapesandgrapesprocuredfrom

theirownestatewillhaveastrong,positiveassociationwithalleightlegitimacyindicators.

Table 6: Type of grape and how it signals legitimacy 

Legitimacy Signals  Vinifera grapes  Estate grown grapes 

Full‐time,yearroundemployees + +

Full‐time,seasonalemployees + +

%oftotalwinevolumesoldtoliquorstores + +

%oftotalwinevolumesolddirecttorestaurants + +

39

Table 6 (Cont’d):  

%oftotalwinevolumesoldthroughdistributors + +

Arrangementwithatourbuscompany + +

ObtainedExternalFinancing + +

LargeTradingNetwork + +

Note:Allassociationsareanticipatedofhavingap‐valuelessthan5percent.The+sign

indicatesthosevariablesarepositivelycorrelatedwithalegitimacyindicator,‐indicatesthose

variablesarenegativelycorrelatedwithalegitimacyindicator.

 

Wineriesthatuseahighpercentageofviniferagrapesintheirtotalwineproductionwill

positivelylinkwiththesignalsoflegitimacy.Wineriesthatusehybridgrapesarelesslikelyto

positivelysignallegitimacy.BruwerandJohnson(2005)identifiedgrapevariety,style,region

andcountryoforigin,peerinfluence,foodpairingsandpriceasstronglyinfluenceson

consumers’purchasingdecisionofwine.

 

Throughanalyzinghowfirmsprocuretheirgrapes,throughtheirownvineyard,spot/cash

markets,verbal(handshake)agreementsorwrittencontractsmayofferinsightonthe

developmentoftheindividualfirmsandtheoverallregion.TaplinandBreckenridge(2008)

foundthroughsurveyingfirmsthatlargerwineriesareaddingmoredetailspecificationsto

contractsandworkingwithgrowersthroughouttheseasontoeducatethemandmaintaina

dialogue.Further,theauthorsfindthisbehaviorinfluencestheefficiencyandproductqualityof

aregion’swineandincreasesthenetworkofknowledge,whichultimatelysupportshowthe

trustbuildinginstitutionsthatlocalgovernmentagenciesandindustryorganizationsoperate.

40

Finally,FernandezOlmos’(2010)studyontheimplicationsofbuyingandgrowingdecisionsona

vineyard’sperformanceshowedthatawidespreadbeliefexiststhatsourcingstrategieshave

significantdirecteffectsonperformancebuttheirpaperfoundthatwasnottrue.Therefore,we

wanttotestusingourstudy’slegitimacyindicatorsifapotentialrelationshipexistswiththe

procurementstrategyawineryuses.

Relationship4:Wineriesthatprocuretheirgrapesfromtheirownestateorthroughawritten

contractwillhaveastrong,positivecorrelationwiththeeightlegitimacyindicators.

Oneofthemostimportantchoicesforanagrarianfirmmanageristhedecisiontointegrateor

outsourceoneormorestagesoftheproductionprocess(FernandezOlmos,2010;Butlerand

Carney,1983;Leibleinetal.,2002;Díez‐Vial,2007).Trejo‐Pech(2011)interviewed12winery

ownersinBaja,Calif.,todetermineiftheregionqualifiesasawinecluster.Throughthisstudy

theresearchersnotedthatmostofthetimewineriesintheareahireenologistswhileother

firmsoutsourceenologyservicesbecauseinBajamanywineryownersfeelthereiseitherno

enologicaltechnologydevelopmentoccurringorthatthetechnologyorservicesareinsufficient.

AsresearchersweighifBajaisadevelopingregion,thisindicatesthatemergingwineregions

mayfaceasimilarsituation.Throughdeterminingthepercentofwineriesthatareoutsourcing

theirwinemakingaswellasthepotentialeffectsthatthismanagementdecisionhasonthe

industryisimportant.

Relationship5:Firmsthatoutsourcetheirwinemakinghaveastrong,positivecorrelationwith

obtainingexternalfunding,havingalargetradingnetworkandallthedistributionchannels.

41

 

O’Neilletal.(2002)foundthatasignificantmajorityoftheAustralianwineindustryconsistsof

mediumandsmallwineriesthatpredominantlysellthroughtheircellardoor.Thepaper

suggeststhatfortheMargaretRiverValleyalone,cellardoorsalesaccountfor34percentof

wineries’salesrevenueand15percentofthewineriesintheregionsaycellardoorsales

accountfor80percentoftheirsalesrevenue.Thisappliestothisemergingwineregionbecause

themajorityofthewineriesarenewandproducingasmallnumberofcaseseachyear

thereforeunderstandingtheeffectsoftheirmanagementandmarketingdecisionsonwhere

theyselltheirwineiscrucialinhelpingwineriesmakedecisionsandhowtorealignthembetter

togainaccesstootherresourceslikedifferentdistributionchannelsandhelpthewineriesbuild

theirfutureplans.

 

Relationship6:Firmsthatderiveahighpercentageoftheirgrossrevenuefromwinesaleshave

astrong,negativecorrelationwithallthreedistributionchannels,havingalargetrading

networkandobtainingexternalfunding.

 

Researchshowsthatmostnewwineriessellthemajorityoftheirwineattheirwinery,through

theirtastingroom,giftshop,restaurantorthrougheventsattheirwinery.Forwineriesseeking

togrow,extendingtheirwinesalesbeyondtheircellardoorsiscrucial.Wewanttoanalyze

whatmanagementandmarketingdecisionshelpwineriesincreasetheirsalesthroughother

distributionchannelsandunderstandifdifferencesexistsbetweenwineriesthatsellahigh

majoritythroughtheirtastingroomandthosethatsellahighpercentagethroughother

channels.

42

Relationship7:Firmsthatderiveahighpercentageoftheirgrossrevenuefromwinesaleswill

haveastrong,positivecorrelationwithhiringfull‐timeemployeesandhavinganarrangement

withatourbuscompany.

 

Anoverwhelmingnumberofstudiesresearchedthepricingofwineinrelationtoconsumers’

viewonwine’squalityaswellashowconsumersviewawinery,thetypeofgrapesusedandthe

overallregion.Weinsteadwhattounderstandifhowawinerypricestheirwinerelatestoa

wineryobtainingresources.Understandingifrelationshipsbetweenchargingahigheramount

fortheirwineandwhetherthatrelatestothefirmobtainingexternalfunding,orsellingtheir

winetorestaurantsversusdistributors?AsMeijerGrocery’swinebuyerMarkEstermannoted,

retailersoftenusepriceasanindicatorofqualitybecausetheyknowmanyoftheircustomers

do.Therefore,consideringpriceisanimportantaspecttounderstandingtheeffectsofa

winery’smanagementandmarketingdecisionsontheirfirm’sstrategy.

Relationship8:Firmsthatchargemorefortheirwinehaveastrong,positivecorrelationwith

thelegitimacyindicators.

Winninganawardisoftenagoalofmanywineriesandasignaltoconsumersthatawineryis

producingahighqualityproduct.Oftenawardscanbuildawineryorregion’sreputationquickly

onagloballevel.Gainingrecognitionfromanoutsidepartythatisalreadydeemedlegitimateis

akeyconceptandstrategyforfirmstoobtainlegitimacy,andoftenenteringawine

competitioncanhelpfirmsdothat.Lima(2000)testedavarietyofwinecompetitionstosee

43

whichcompetitionmeasuresawinequalitythebestandtheeffectsofwinningforawinery.

Theresultsfoundthatwinningcertaincompetitionsisassociatedwithahigherpriceforthe

winningwineandahigherqualitygiventothatwine.Further,animportantconsideration

notedbytheauthorsareconsumers,theyoftenplaceahighvalueonawardsandusethe

awardsassignalforquality.Thisleadstoanimportantpointtostudy,notonlywhatcorrelates

withwinninganawardbutwhattypeofawardismostimportant,leadingtopotential

recommendationsforwineryownersaswhattypeofcompetitiontoenter,sinceoftenentering

acompetitioniscostlyforawineryfinanciallyandinoftheirtime.

Also,attendingcompetitionscanbeawaytonetworkwithotherlegitimatebodies.Pereiraand

Goldsmith(2013)notethat,“Theseprofessionalassociationsnotonlyestablishnormsand

reflectchangesovertime,butmayalsoserveasalegitimatingbody,”(PereiraandGoldsmith,

p.11).Insupport,Webbetal.(2009)foundentrepreneursthatbelongedtotradeorbusiness

organizationsaswellascommunity,political,religiousandalumniorganizations,were

positivelyrelatedtoafirmprogressing.

Relationship9:Firmsthathavewonawardshaveastrong,positivecorrelationwiththe

legitimacyindicators.

Marketingandbuildingabrandishighlystressedfornewfirmstostrategizeandconsistently

maintain.Further,brandingishighlyimportantforaregion.Understandingwhattypesof

mediacorrelatewithawinery’sstrategyishighlyimportantasapreliminarystudydoneby

MichiganStateUniversity,UniversityofMissouri‐ColumbiaandCornellUniversityconductedin

44

thisemergingwineregionindicatedthatmarketingistheNo.3challengefortheindividual

wineriesandtheregion.

Relationship10:Firmsthatusepromotionalactivitieswillhaveastrong,positivecorrelation

withalleightlegitimacyindicators.

Offeringavarietyofproductsandservicesrelatestoawinerybeingabletoprovidethe

complete“experience”forconsumers.NowakandNewton(2006)stressthatawinerymust

haveenoughstafftohandlehighvolumesofpeople,otherwisenotenoughstaffcanbe

detrimentaltoawineryandhighlydisappointingfortheconsumers.Theauthorsstress

howeverthatofferingconsumersapositiveexperienceattheirwinerycanleadconsumersto

haveanincreasedperceptionofthewine’squality,agreaterrepurchaseintentandanoverall

strongercommitmenttothewinery’sbrand.ThisexperienceatthewineryiswhatEsterman

oftenlooksforwhendecidingwhetherornottosellawinery’sproducts,hefindsconsumers

thathavealreadyhadthat“experience”atwineryleadsthemtodemandthatwineandalready

haveaconnectionthathedoesnothavetoworkonbuilding.

Further,firmsthatworkincludeworkingwiththemediaintheirmarketingstrategycanoften

obtainattentionfromlocal,nationalorinternationalmedia.Thisisimportantstrategyforboth

theindividualwineriesandtheregionssincethepressoftenbenefitsboth.Thisemergingwine

regionhasbeenhighlightedinthemediathroughstorieslikeUSAToday’s,“6greatAmerican

wineregions,”whichshowcasestheFingerLakeregionsinNewYorkandtheLeelanau

PeninsulainMichigan,andanotherUSATodayarticletitled,“ExploringMissouriWineCountry.”

45

Inadditiontoarticlesdiscussingwhatcoolclimatewinearelike,manyarticleshighlightthe

economicbenefitsofthewineindustriesintheseregionslikeMetrofocus’article,“PourNew

York?:TheEconomicsofNewYorkStateWines,”orSt.LouisPost‐Dispatch’sarticle,“With108

wineries,isMissouritappedout?”ortheTraverseCityRecord‐Eagle’sarticle“Wineisastarin

Michiganeconomy.”

Relationship11:Astrong,positivecorrelationexistsbetweenofferingalloftheproductsand

servicesandtheeightlegitimacyindicators.

 

46

CHAPTER 4:  RESULTS 

 

 

Descriptive Results 

Age of wineries 

Theaveragewineryinthisemergingwineregionhasbeeninbusinessforalmostadecade(9.87

years).Thevalueismeasuredbythefirstyearthewinerybegancommercialwineproduction

until2012.Themedianvalueissixyears,whichislowerthantheaveragebutcanbeexplained

bythedramaticrangeinwineries’establishmentwiththeoldestwineryinthesurveyoperating

for91yearstoalmosthalf(46.9percent)ofthewineriessampledwhohavebeeninbusiness

lessthanfiveyears.About13percentofthewineriesintheregionhavebeenoperatingforone

yearorless(N=113).Finally,onaverage,Michiganwinerieshavebeencommerciallyproducing

winefor11.95years,Missourifor9.42yearsandNewYorkfor7.91years.

Volume produced 

 

 

 

 

 

47

Figure 2: Average Number of Cases Produced by Wineries in 2011 

 

Theaveragenumberofcasesbeingproducedbyasinglewineryinthisemergingwineregionis

6,910in2011.ThesurveyresultsindicateMichiganproducesthemostcasesofwine(11,834

cases)followedbyMissouri(5,089cases)andNewYork(3,185cases).

Themedianshowsalowerproductionvalueof1,500casesfortheregionthantheaverageat

6,910cases.Thedifferenceinthemeanandmedianvaluescanbeexplainedbythewiderange

ofproductionlevelsoccurringineachstate.Michiganhasthemostdramaticrangewiththe

mean(11,834cases)beingmorethanfivetimestheamountofcasesproducedasthemedian

indicates(2,236cases).Themaximumnumberofcasesproducedbyasinglewineryinthestate

was138,416caseswhiletheminimumonewineryproducedwas240cases.Thesignificantly

lowermedianhighlightsthelargerangeindicatingthatafewmajorwineriesareproducingthe

majorityofthestate’swine.Thisisacurrentcharacteristicofthisemergingwineregion,thata

6.8

11.8

5.1

3.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Num

ber of Cases in Tho

usan

ds 

COMBINED

MICHIGAN

MISSOURI

NEWYORK

48

fewlargewineriesareproducingmorethan100,000caseswhilethemajorityofthewineries

areproducingsignificantlyless.

Finally,ofthewineriessurveyed,abouthalf(51.3percent)saidtheirwineproductionincreased

from2008to2011.While9.73percentsaidtheirproductiondecreasedand20.4percentsaid

theirproductionhadremainedstableduringthattime.Amongthe58respondentsthat

increasedtheirwineproduction,theaverageincreasewas68.7percent.However,themedian

suggeststhepercentincreaseiscloserto25.5percent.Onlysevenofthe11respondents

whoseproductiondecreasedstatedtheactualpercentdecrease,whichaveragetobea2.45

percentdecreasefrom2008to2011.

Figure 3: Production in 2011 and Number of Years Firm has been Commercially Producing 

Wine, R=0.60 

 

0

25,000

50,000

75,000

100,000

125,000

150,000

0 10 20 30 40 50

Num

berofCasesProdu

ced

49

Main ingredient or inputs used to produce wine  

Thesurveyaskedrespondentstoselectthemaininputoringredientusedtoproducetheir

wine:grapes,grapejuice,bulkwineorother.Anoverwhelming87percentoftheregionuses

grapesasthemaininputinproducingwine(N=112).“Other”wasselectedasthesecondmost

commoninput,followedbygrapejuiceandfinallybulkwine.Whilethequestionasksforthe

maininputoringredientindividualfirmsusetoproducewine,moreanalysiswasrequiredto

understandtheresponsessincemostownersselectedmultipleinputs.Thechartbelowshows

theinputsandcombinationsofinputsthattheownersusetoproducewine.

Table 7: Number of Firms that use a Single or Combination of Main Inputs to Produce Wine 

Input Combinations 

Grapejuice

Bulkwine Other

Grapes 12 7 20

Grapejuice ‐ 3 0

Bulkwine ‐ ‐ 1

 

 

Finally,sevenwineriesuseacombinationofthreeinputs,grapes,grapejuiceandbulkwine.Six

wineriesusegrapes,grapejuiceandother.Twowineriesusegrapes,bulkwineandother.

While,fourwineriesusealloftheinputslisted,grapes,grapejuice,bulkwineandotherto

producetheirwine.Insummary,themajorityofwineriesintheemergingwineregionproduce

theirwinewithonlygrapes(42percent),another38.4percentusetwoinputs,while13.4

percentusethreeinputsand3.6percentusefourinputs(N=112).

Input Number of wineries 

Grapes 38

Grapejuice 2

Bulkwine 0

Other 7

50

Thesurveythenaskedwineryownersaboutthepercentageoftotalwinevolumeproduced

fromgrapes,grapejuice,bulkwineandother.Inthisemergingwineregion,69.3percentof

wineriesusegrapes,16.2percentuseother,8.4percentusegrapejuiceand6.1percentuse

bulkwine,(N=109).Throughanalyzingthestates,thegreatestdifferenceisinthe“other”

category,where27.4percentofMichiganwineriesuseother,11.7percentofMissouriwineries

and7.6percentofNewYorkwineries,(N=109).Thenextsignificantdifferenceexistsinthe

statesthatusegrapesastheirmaininput,76.2percentofMissouriwineriesusegrapesasthe

maininputintheirwinecomparedto71.2percentofNewYorkwineriesand62.8percentof

Michiganwineries,(N=109).Thechartbelowshowsthepercentageoftotalwinevolume

producedfromdifferentinputs.

Figure 4: Percent of Total Wine Volume Produced with Various Inputs 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Grapes Grapejuice Bulkwine Other

COMBINED

MICHIGAN

MISSOURI

NEWYORK

51

Table 8:  Percent of Total Wine Volume Produced with Grapes, Grape Juice, Bulk Wine or 

Other 

   COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Grapes 86.6% 90.0% 92.3% 75.8%

Grapejuice 31.3% 17.5% 40.5% 39.4%

Bulkwine 21.4% 25.0% 20.5% 18.2%

Other 36.6% 57.5% 30.8% 18.2%

Types of grapes used in production 

ThevarietiesofgrapesgrownintheU.S.fallintothreemajorcategories:Europeanvarieties

oftencalledvinifera,nativeAmericanandFrench/Americanhybrids.Themajority(41.6

percent)ofthewineproducedinthisemergingwineregionisfromhybridgrapes(i.e.Seyval

blanc,Chardonel,etc.).Thesecondmostpopulartypeofgrapesusedby27.6percentofthe

wineriesarevitisvinifera(i.e.Chardonnay,Riesling,PinotNoir,etc.)followedby(15.9percent)

usingnativeAmericanvarietals(i.e.Concord,Catawba,etc.)andlastly“other”types(13.4

percent).Wineriesthatselectedotherwereaskedtospecify,responsesincludedjuice(not

includinggrapejuice),grapeconcentrate,applecider,honey,cherries,apples,berries,black

currant,pecans,pumpkin,peachesandotherfruits.

52

Figure 5: Percent of Total Wine Production with Different Grapes by State 

 

UnlikeNewYorkandMissouri,Michiganproducesthemajority(42.4percent)ofitswineusing

viniferavarietals.Whereas,only8.6percentofMissouriand32.6percentofNewYork’s

productionarefromviniferavarietals.Additionally,Michiganalsohasthehighest(22.5

percent)ofitsproductionthatismadefrom“other”,whichcouldmeanthestateproduces

morewinesmadefromfruit(i.e.cherrywine).Finally,ofthethreestatesMichiganalsouses

theleastamountofnativeAmericanvarietals(5.1percent),Missouriusesalmostfivetimes

thatamount(29percent)andNewYorkusesmorethantwiceMichigan’samount(13.0

percent).

ThemajorityofMissouri’swineismadefromhybridgrapes(55.3percent)followedbynative

Americanvarietals(29percent),vinifera(18.5percent)andother(7.1percent).Themajorityof

0%

10%

20%

30%

40%

50%

60%

Vinifera Hybrid Naxve Other

COMBINED

MICHIGAN

MISSOURI

NEWYORK

53

NewYork’swineisalsomadewithhybridvarietals(42.1percent)followedbyviniferagrapes

(32.6percent),nativeAmericangrapes(13.0percent)andother(9.8percent).

Procuring grapes 

Thesurveyaskswineryownersforthepercentofgrapestheyprocurethroughtheirown

vineyards(estategrown),spotorcashmarketsasneeded,throughverbal(handshake)

contractsorthroughwrittencontracts.Intheemergingwineregion,halfofthewineries

procuretheirgrapesfromtheirownvineyard,(N=106).Another29.1percentuseverbal

(handshake)contracts,10.7percentusewrittencontractsand6.23percentacquiregrapes

throughspotorcashmarkets,(N=106).Whilethemajorityofwineriespredominantlyrelyon

theirownvineyardstoprocuregrapes,thepercentagesineachstatevary.

54

Figure 6: Percent of Grapes Procured through Various Strategies by State 

 

Missouriwineriesprocures57.4percent,thehighestpercent,ofgrapesfromtheirwon

vineyards,comparedtoMichiganwhoprocures50percentandNewYorkwhoprocuresthe

least,41.9percent.Thesecondgreatestdifferenceamongthestatesisbetweenthosethatuse

writtencontracts,Michiganprocures19.6percentofitsgrapesthroughwrittencontracts,New

Yorkgets10.6percentthroughwrittencontractsandMissourigets2.9percentthroughwritten

contracts.

Procuring grapes through a contract 

 

 

0.000

10.000

20.000

30.000

40.000

50.000

60.000

70.000

Estategrown Spot/cashmarket

Verbal(handshake)

Wriyencontract

Perecentofgrape

s

Procurementstrategy

COMBINED

MICHIGAN

MISSOURI

NEWYORK

55

Table 9: Strategies use to Determine Contract Prices 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

MarketPrices 60.5% 50.0% 66.7% 70.0%

Negotiatedwithsupplier

0.0% 0.0% 0.0% 0.0%

Setbywinery 11.6% 22.2% 6.7% 0.0%Setbysupplier 20.9% 16.7% 20.0% 30.0%Other 7.0% 11.1% 6.7% 0.0%

Thesurveyaskedthosewineryownersthatusecontractstoselectfromoneofthefollowing

optionsofhowthecontractpriceisdetermined,basedonmarketprices,negotiatedwiththe

supplier,setbythewinery,setbythesupplierorsomeothermethod(whichtheywereasked

towrite).Intotal,43wineriesacknowledgedusingoneofthesemethods,weexpectedahigher

percentageofwineriestousesometypeofcontract.Consistentacrossallthreestates,the

mostcommonmethodusedtosetcontractpricesisbasingthepricesonthemarketprices,70

percentofNewYorkwineriesfollowthismethod,66.7percentofMissouriwineriesand50

percentofMichiganwineries.Noneoftheownerscitednegotiatingwiththesupplierasthe

methodtheyusetodeterminecontractpriceshowever,20.9percentofcontractinthe

emergingwineregionaresetbythesupplier.NewYorkhasthehighestpercentageofcontracts

withpricessetbysuppliersfollowedbyMissouriwith20percentandMichiganwith16.7

percent.Akeydifferenceamongthestatesisthepercentageofcontractpricesthataresetby

thewinery.

Thegreatestdifferenceamongthestates’methodsofsettingthecontractpricesarethose

wineriesthatusecontractswherethefirmitselfsetstheprice.Overall,contractswithpricesset

56

bythewineriesaccreditfor11.6percentofthecontracts.However,inNewYorknoneofthe

wineriessetthecontractpriceswhile22.2percentofMichiganwineriesand6.7percentof

Missouriwineriessettheprices.Further,wineriesuseyeartoyearandmultipleyearcontracts.

Figure 7: Length of Contracts used with Grape or Juice Suppliers by State 

 

Next,thesurveyaskedthefirmsthatoutsourcetheirwinemakingfortheexactpercentageof

theirwineproductionthatisoutsourced.Theaveragepercentoftheregion’swineproduction

thatisoutsourcedis12.4percent,(N=112).Consistentwiththenumberofwineriesineach

statethatoutsourcesomeoftheirwinemaking,Michiganhasthegreatestnumberofwineries

thatoutsourcesomepartoftheirwinemakingandofthosewineriestheaveragepercentofthe

firm’swineproductiontheyoutsourceis20.4percent,(N=40).Again,inNewYork24.2percent

ofwineriesoutsourcetheirwinemaking,andtheaverageamountofthefirms’wineproduction

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

YeartoYear MulxpleYears

Percen

tofcon

tracttypesused

COMBINED

MICHIGAN

MISSOURI

NEWYORK

57

theysourceis7.3percent,(N=32).Finally,Missourihasthefewestnumberofwineriesthat

outsourcesomepartoftheirwinemaking(17.5percent),andtheaveragepercentofthefirms’

wineproductiontheyoutsourceis8.7percent,(N=40).Animportantfindingfromthepercent

ofthewineries’’productionthattheyoutsourceistherange.Inallthreestates,therangeof

thepercentthatthewineriesoutsourcevariesfromzeroto100percent,howeveronlyfour

wineriesintheregionoutsource100percentoftheirwinemaking.

Custom crush services 

Intheemergingwineregion,16.8percentofthewineriesproducewinefor,orrenttheir

facilitiesorequipmenttootherwineriesdoingcustomcrush,(N=113).Noneofthewineriesin

Missouridocustomcrush,(N=40),however11wineriesinNewYorkoffercustomcrush

servicesorrenttheirequipmenttootherwineries,(N=33)andeightMichiganwineriesalso

offertheseservicesandequipment,(N=40).

Next,25responsesindicatethatwineriesintheregionaccountcustomcrushservicesas19.2

percentoftheirfirms’grossrevenue.Therangeshowsthatsomefirmsonlyaccountcustom

crushservicesat1percentoftheirgrossrevenuewhileonefirmaccountthisserviceas90

percentofitsgrossrevenue.Inanalyzingthepercentofgrossrevenuethestatesderivefrom

theircustomcrushservices,NewYorkfirmsonaverageaccount28percent,(N=10),followed

byMichiganwhoaccounts13.6percent,(N=8),andMissouriwhoaccounts13percent,(N=7).

However,themedianvaluessuggesttheaveragepercentofgrossrevenuewineriesearnfrom

customcrushdifferfromthemeans.ForMichiganandMissouri,themedianpredictsthe

58

averagepercentcloserto15percentandforNewYork,themediansuggeststhestate’saverage

percentislowerthanthemeanandcloserto10percent.

How wine is bottled  

Wineismostcommonlybottledasastraightvarietal(i.e.merlot,vignoles,etc.)orasablendof

varietals.Awinery’sdecisiononhowtobottletheirwineisoftentheresultofmanyfactors,like

showcasingacertainvarietal’scharacteristics,ashortageingrapesupply,amarketingdecision

orthewinemakerorowner’spersonalpreference,etc.Themajority(45.2percent)ofthewine

producedintheemergingwineregionisbottledasagrape‐specificvarietalwine(N=112).

While34.1percentoftheregionbottlestheirwineasablendandanother18.1percentbottles

theirwineas“other”,(N=112).

Figure 8: Bottling Style by State 

 

0%

10%

20%

30%

40%

50%

60%

Varietal Blend Other

COMBINED

MICHIGAN

MISSOURI

NEWYORK

59

Missouribottlesthemostwine(51.3percent)asavarietal,NewYorkevenless(43.7percent)

andfinallyMichigan(40.2percent).Similarly,Missourihasthehighestpercentagebottledasa

blendamongthethreestates(38.2percent),thenNewYork(33.8percent)andfinallyMichigan

(30.3percent).However,amongthethreestates,Michiganbottlessignificantlymorewineas

“other”(27percent)comparedtoNewYorkwhichbottlesabout16.3percentandMissouri

whobottleslessthanahalfofthatamountas“other”(10.6).

Taste of wine 

Thesurveyaskedwineryownerstodescribehowtheirwinerydecidestoproducethetasteof

theirwine.Aseven‐pointscaleisusedwithonebeingproducingwinethattastessimilarto

whatconsumersarefamiliarwithtosevenbeingthewineryfocusesonproducingwinethathas

anoveltastecomparedtowhatconsumersarefamiliarwith.Onaverage,wineriesinthe

emergingwineregiondescribetheirfirmsasa4.3ontheseven‐pointscale,meaningfirms

producewinethatisneitherfamiliarnornovelrelativetowhatconsumershavetasted.Across

thestates,thescoreisquitesimilar,NewYorkwineriesdescribethewinetheyproduceas

slightlymorenovel(4.6),comparedtoMichigan’sscoreof4.4andMissouri’sscoreof4.1,

(N=106).WhileNewYorkandMichigan’sscoresarethemostsimilarandslightlyhigherthan

thescale’sneutralvalueof4,themediansinbothstatesarehigherthanthemeans,atavalue

of5.0.Finally,allofthestatessharethesamelargerange,withscoresrangingfromoneto

seven.

Price of the wine 

60

Thesurveyedaskedrespondentstheaverageretailpriceoftheirhighest,lowestandtopselling

wines.Onaverage,thepriceofwineriesinthisregion’shighestpricedwineis$25.32andthe

lowestpriceis$11.16.Theaverageretailpriceofwineries’topsellingwineis$14.10.

Figure 9: Average Prices of Wine by State 

Michiganwastheonlystatewhosehighestandlowestpricedwinesfelloutsidetheregion’s

rangewithMichigan’shighestpricewinebeing14.1percent($29.48)greaterthantheregion’s

average($25.32)andthelowestpricedwinebeing5.4percent($10.55)lessthantheregion’s

lowestpricedwine($11.16).Finally,therangeofMichigan’shighestpricedwinehadthe

greatestrangeamongthestateswiththeminimumbeing$10andthemaximumat$85.

UnlikeMichigan,therangeofMissouri’slowestandhighestpricedwineswaswithinthe

region’srange.TheaverageretailpriceforMissouri’shighestpricedwineis$21.35,whichis

15.7percentloweror$4lessthantheregion’saverageprice.Theaverageretailpriceof

Missouri’slowestwineis$11.53,whichis3.2percenthigherthantheregion’saverageprice.In

summary,thepricesofMissouri’swinearelowerthantheregion’saverage.

$0.00$5.00

$10.00$15.00$20.00$25.00$30.00$35.00

HighestPricedWine

LowestPricedWine

TopSellingWine

COMBINED

MICHIGAN

MISSOURI

NEWYORK

61

InNewYork,theaverageretailpriceofthestate’shighestandlowestpricedwineswerethe

closestofthethreestatestotheregion’saverages.TheaverageretailpriceofNewYork’smost

expensivewinewasonly23centslowerthantheregion’saverageandtheState’slowestpriced

winewasjust31centshighertheregion’saverage.However,therangeofNewYork’slowest

pricewinewasthegreatestamongthestates,withaminimumpricerecordedat$8and

maximumpriceof$40.

Theretailpriceoftheregion’stopsellingwineis$14.10.NewYorkcommandedthehighest

retailpriceof$14.72,14.2percentabovetheregionaverage.Additionally,comparedto

MichiganandNewYork,NewYorkhasthegreatestrangeamongitstopsellingwinewithprices

rangingfrom$8to$40.NextisMissouri,theaverageretailpriceofthestate’stopsellingwine

is$13.93,1.2percentlessthanregionaverage.Finally,theretailpriceofMichigan’swineisthe

lowestamongthethreestates,sellingfor$13.78,whichis2.3percentlowerthantheregion

average.

Where the wine is sold 

Onaverage,96percentofwineriesintheemergingwineregion’ssalesarefromwithinthe

winery’shomestate,(N=111).Thisfindingwasexpectedsincemostwineriessellahighportion

oftheirtotalsalesvolumeattheirwinery.Missouriwineriescredit96.6percentoftheirtotal

winesalesfrominstatesales(N=40),NewYorksells96.4percentinstate(N=31)andMichigan

sells94.7percentinstate(N=40).

62

Figure 10: Percent of Total Wine Sales Sold Within the Wineries’ Home State, Outside their 

Home State and Outside the U.S., by State 

 

Onaverage,wineriescredit4.1percentoftheirtotalsalesfromoutofstate(N=111).However,

themedianvalueis0.1forregionindicatingthatonlyafewwineriesaresellingwineoutside

theirhomestate.Alowermedianvalueexplainsthehighermedianvalueof99.9percentforin‐

statesalesagainreemphasizingthatonlyafewwineriesintheregionaresellingwineoutside

theirstateandthereforethemajorityoftheregiononlysellswinewithintheirhomestate.

Contrarytoin‐statesales,Michiganhasthehighestpercentofitstotalwinessalesfromoutof

state(5.2percent,N=40),comparedtoNewYorkwhosells3.5percentofitstotalwinesales

outsidethestate,(N=31),andMissouriwhosells3.4percentoutsidethestate,(N=40).

Finally,onaverage,0.1percentofthetotalwinesalesintheregionarefromoutsidetheU.S.,

(N=111).OnlyfourofthewineriessurveyedsellwineoutsidetheU.S.,accountingforthe

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

In‐state Out‐of‐state OutsideU.S.

Percen

toftotalwinesales

MICHIGAN

MISSOURI

NEWYORK

63

averagevalueof0.1percentoftotalwinesalesfortheregionsoldoutsidetheU.S.Two

wineriesinMichiganandtwowineriesinNewYorksellwineoutsidetheU.S.,allfourofthe

wineriesaccountoutofthecountrysalesasonetotwopercentoftheirfirm’stotalwine

volumesales.

Distribution channels used to sell the wine 

Surveyrespondentsweregivenalistofeightdistributionchannelsthattheypotentiallysell

theirwinethroughincludingattheirwinery,aliquorstore,arestaurant,afarmer’smarket,

throughdirectshipment,throughadistributor,atfestivalsorcommunityevents,orother.An

overwhelmingmajorityofthewineintheemergingregionissoldatthewineries.Thealmost

threequarters(73.9percent)oftheregionthatsellstheirwinedirectlyatthewineryis

consistentwithanotherfindingthatshowsasignificantnumberofwineriesthathavegiftshops

orarestaurantinadditiontotheirtastingroomtoselltheirproductsonsite.

64

Figure 11: Percent of Wine Volume Sold through Various Distribution Channels, by

 

Anoverwhelming99percentoftheregion’swinerieshaveatastingroom,(N=113).Three

quartersofthewinerieshaveagiftshop,andafourthhavearestaurant.Alongwithsalesfrom

thetastingroom,65percentofthewineriessaidtheyareabletohosteventslikeweddingsand

receptions,whichcreatesanotheropportunityforthewineriestomarketandselltheirwineat

theirwinery.Sixty‐onepercentofthewineriesexpecttoincreasethepercentofwinevolume

theysellattheirwineryfrom2012to2015.

Thesecondmostcommondistributionchannelforwinefromtheemergingwineregionissold

throughaliquorstore.Althoughonly7.7percentofwineriesselldirectlytoaliquorstore,half

ofthewineriesexpecttoincreasethepercentoftheirwinevolumetheyselltoliquorsstoresin

thenextthreeyears.

0%10%20%30%40%50%60%70%80%90%

COMBINED

MICHIGAN

MISSOURI

NEWYORK

65

Thethirdmostcommondistributionchannelutilizedbywineriesintheemergingwineregionis

sellingthroughdistributors.Ofthe110ownersthatrespondedtothisquestion,sellingthrough

adistributoraccountedfor7.4percentoftheirwinevolumesold.Sevenofthe110wineriessell

morethan50percentoftheirwinethroughdistributors.Inthenextthreeyears,35wineries

(31.3percent)expecttoincreasethevolumeofwinetheysellthroughdistributors.

Figure 12: Percent of Wine Volume Sold through Specific Distributions Channels by State 

 

Then,theregion’spercentagesdroppedtolessthan3percentsoldthroughtheremaining

channels:2percentatfarmersmarkets,2.3percenttorestaurantsand1.6percentatfestivals

orcommunityevents.Inthenextthreeyears,17percentofwineriesexpecttoincreasethe

percentofwinevolumetheysellatfarmersmarkets,halfofownersexpectthepercentofwine

volumetheyselltorestaurantstoincreaseand30percentofrespondentsexpecttoincrease

0%

2%

4%

6%

8%

10%

12%

Percen

tofw

inevolumesold

MICHIGAN

MISSOURI

NEWYORK

66

thepercentofwinevolumetheysellatfestivalsorcommunityevents,(N=112).Finally,selling

winethroughdirectshipmentswasthelowestusedchannelofthewinerieswithonly1.4

percentofwineriesusingthismethod.However,39.3percentofwineriesnotedtheyexpect

thepercentofwinesoldasdirectshipmentstoincrease,(N=112).

Whenanalyzingthedifferencesinstates,MissouriandNewYorksellmorewinethrougha

liquorstorethanMichigan.Theaveragepercenttheregionsellsthroughaliquorstoreis7.7

percent:Missourisells9.9percent,NewYorksells8.8percentandMichigansells4.7percent.

Whiletheaveragepercentageofwinesoldatafarmersmarketis2percent,theaverage

percentMichiganandMissourisellis0percentwhileNewYorksells7.1percentofitswine

throughthischannel.Thethirdmostvariedcategoryamongthestatesisthepercentsold

throughadistributor.Onaverage,theregionsells7.4percentthroughdistributors:Michigan

sellsthemostat8.9percentfollowedbyMissouriat7.1percentandNewYorkat5.9percent.

Finally,anothernotablerangeamongthestatesisthe“other”categoryinwhichtheregion’s

averageis2.9percentyetMichiganhas5.2percent,Missouri2.4percentandNewYork0.9

percent.

Finally,18.8percentofwineriesintheemergingregionplantoreducethepercentoftheirwine

volumesales“atthewinery”,(N=112).Thiswasasurprisingfinding,weanticipatedmore

wineriesseekingtoincreasesalesbeyondtheirwineryinthenextthreeyears,becausethe46.9

percentoftheregion’swinerieshavebeenoperatingforlessthanfiveyears,therefore

expandingbeyondthetastingroommaynotcurrentlybereasonableoraccessibleforthese

newwineries.Next,9.82percentofwineriesplantodecreasethepercentofwinetheysellto

67

“other”inthenextthreeyears,(N=112).Then,7.14percentofwineriesanticipatedecreasing

thevolumeofwinetheyselldirectlytoliquorstores,(N=112).Finally,intheremainingfive

categories,lessthan7percentofwineriesanticipatedecreasingtheirwinevolumesales

throughthosechannels.

Promotional activities  

Table 10: Promotional Activities used by Wineries by State 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Arrangementswithtourorbuscompanies 33.9% 52.5% 12.5% 37.5%

Promotionsforreturningcustomers 50.9% 52.5% 45.0% 56.3%

Customerdatabase 71.6% 67.5% 68.4% 80.6%

Clubpromotions 41.1% 35.0% 35.0% 56.3%

Website 99.1% 100.0% 100.0% 96.9%

Newsletter 54.5% 50.0% 57.5% 56.3%

Socialmedia 87.4% 85.0% 87.2% 90.6%

Volumediscounts 96.4% 97.5% 100.0% 90.6%

Other 13.4% 22.5% 5.0% 12.5%

Thesurveyaskedwineryownerstoselectallofthepromotionalactivitiesthattheirwineyuses,

includinganarrangementwithatourbuscompany,promotionsforreturningcustomers,a

customerdatabase,clubpromotions,awebsite,anewsletter,socialmedia,volumediscounts

orother.Themostpopularpromotionalactivityusedbyfirmsintheemergingwineregionis

68

theutilizationofawebsite,99percentofwinerieshaveawebsite,(N=112).Secondly,96

percentofwineriesoffervolumediscounts,(N=112).Intheregion,87percentofwineriesuse

socialmedialikeFacebookandTwitter,(N=111).Seventy‐twopercentofwinerieshavea

customerdatabase,(N=109).However,only51percentofwineriesofferpromotionsfor

returningcustomersorofferclubpromotions,(N=112).Withalmostthreefourthsofthe

wineriesmaintainingacustomerdatabase,weanticipatedthepercentageofwineriesthatoffer

promotionsforreturningcustomersandofferclubpromotionstobeclosertothepercentage

ofwineriesthathaveacustomerdatabasesincemostlikelythosetwoactivitiesrequireusinga

customerdatabase.Finally,54percentofwineriesuseanewsletter,howeverweareunsure

howthenewsletterisdistributed,byemailormail,andhowoftenthenewsletterissentout,

(N=112).Next,34percentofwinerieshavearrangementswithtourbuscompanies,(N=112).

Then,theleastusedpromotionalactivityusedis“other”,whichonly13percentofwineriessaid

theyuse,(N=112).

Comparingthestatesamongthepromotionalactivities,themostsignificantdifferenceamong

thestatesarethewineriesthathavearrangementswithtourbuscompany.InMichigan,53

percentofwinerieshaveanarrangementwithatourbuscompany,37.5percentofNewYork

winerieshaveanarrangementand13percentofMissouriwinerieshaveanarrangementwitha

tourbuscompany,(N=112).Thesecondgreatestdifferenceamongthestatesisinbetweenthe

wineriesthatofferclubpromotions,56.3percentofNewYorkwineriesofferclubpromotions,

and35percentofwineriesinMichiganandMissouriofferclubpromotions,(N=112).Thethird

importantdifferenceisbetweenthewineriesthatusesome“other”promotionalactivity,23

percentofMichiganwineriesreportusingthis“other”promotionalactivities,12.5percentof

69

NewYorkwineriesuse“other”promotionalactivitiesand5percentofMissouriwineriesuse

“other”activities,(N=112).

Respondents’ view on how consumers perceive the region’s wine 

Wineryownersfoundconsumers’familiaritywithwinefromtheregiontobeneitherunfamiliar

norhighlyknowledgeable.Givenaseven‐pointscalewithaonebeingcustomersareunfamiliar

withwinefromtheowner’sregiontosevenbeingconsumersarelikelytobehighly

knowledgeableaboutwinesfromtheowner’sregion,theaverageofthe107respondentswas

3.71.Thealmostneutralscorewasconsistentamongallthreestates.Similarly,111winery

ownersratedconsumers’degreeofknowledgeandfamiliaritywiththeirspecificwinery’s

productsorwineryasa4.13onthesameseven‐pointscale.

INDIVIDUAL FIRMS 

Organizational structure 

Themajority(58.9percent)ofthewineriesareorganizedaslimitedliabilitycompanies.The

secondmostcommontypeoffirmisacloselyheldorganization(17.0percent)andthethirdisa

soleproprietorship(11.6percent).Only8.03percentoftheregion’swineriesareorganizedas

partnershipsandanother3.57percentoperateassome“other”typeoforganizationlikean

estate,trustorcooperative.Finally,afewofthewineriesintheemergingwineregionare

publicallytraded.

Financed 

70

Halfofthewineriesintheemergingwineregionareself‐fundedbytheowner,(N=113).While

another43.36percentoftheownersself‐financedtheirwineryinadditiontoreceivingexternal

funding.Theremaining7.08percentofthewineriesonlyuseexternalfunding.Missourihas

morewineriesthatareself‐financed,60.0percent,comparedtoMichiganwith42.5percent

andNewYorkwith45.5percent.However,zerooftheMissouriwineriessurveyedreportonly

usingexternalfinancing,unlikethetwootherstates.InMichigan,fiverespondents(12.5

percent)onlyuseexternalfinancingtosupporttheirwineryandinNewYorkevenless,only

threerespondents(9.1percent).Insummary,themajorityofthewineriesintheemerging

regionareselffinancedbytheowner(49.6percent)and43.4percentofwineriesarefundedby

acombinationofexternalfunding,likeabankloan,andtheowner’sinvestment,(N=113).

Table 11: Financing Strategies used by Wineries, by State 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Selffinanced 49.6% 42.5% 60.0% 45.5%

Externallyfinanced 7.1% 12.5% 0.0% 9.1%

Both  43.4% 45.0% 40.0% 45.5%

Tofurtherexplainthewineries’financing,thesurveyaskedtheownerstostatethepercentof

theirselfworththeyinvestedintheirwinery.Ofthe103responses,theaveragewineryowner

invested45.5percentoftheirnetworthintheirwinery.Themediansuggeststhepercentageis

50.0percentandthemodeis50.Finally,therangeacrossallofthestatesvariesfrom0to100

percent.NewYorkrespondentshavethehighestaveragepercentinvestedinthewineries

(56.97percent),followedbyMissouri(42.85percent)andMichigan(38.0percent).However,

71

themedianvalueofNewYork’saveragepercentis8.53percenthigherthanthemean,while

Michigan’smedianis7percentlowerandMissouri’smedianis7.85percentislowerthantheir

respectivestates’means.Anotherquestionaskedrespondentstorateexternalfunders’

familiaritywiththewinebusinessintheirregion.

Thesurveyaskedrespondentsaboutexternalfunders’(i.e.banks,investors,etc.)familiarity

withthewinebusinessintheirregionbasedonaseven‐pointscale.Thescalerangedfromone,

fundersdonotunderstandmanagementpracticesofwineriesintheowner’sregion,toseven,

fundersdounderstandthemanagementpracticesofwineriesintheowner’sregion,andthe

averagescoreamongthe93respondentswas2.84.Thescoreindicatesthatrespondentsthink

externalfunderslackanunderstandingofthemanagementpracticesofwineriesinthe

emergingwineregion.Missourihadthemostresponses(38intotal)tothequestionandthe

lowestscore(2.11).Ofthe27NewYorkresponses,theaveragescorewas3.37andMichigan

with30responseshadanaveragescoreof3.47.Next,thesurveyrevealsinformationaboutthe

respondentandtheirmotivationstoenterthewinebusiness.

Reason owners enter the wine business    

Thesurveyaskedwineryownerstoselectthemainreasonwhytheyenteredthewinebusiness.

Respondentscouldonlyselectoneoptionfromthefollowingsevenpossiblereasons:

opportunitytoenterfamilybusiness,goodbusinessopportunity,lifestyleorhobbyobjectives,

retirementnestegg,passionforwineandfood,communitydevelopmentorother(inwhich

respondentswereaskedtospecify).Themostpopularreason,selectedby23percentof

participantsforenteringthewinebusinesswasbecauseofagoodbusinessopportunity.The

72

secondmostpopularreasonselectedby21percentofrespondentswastofulfilllifestyleor

hobbyobjectives.Thethirdreason,selectedby21percentofrespondentswasbecauseofa

passionforwineandfood.Next,17percentofrespondentsenteredthewinebusinessan

opportunitytoenterafamilybusiness.While8percententeredthebusinessasaretirement

nestegg,5percentforcommunitydevelopmentreasonsand4percentforotherreasons,

(N=113).

Thetopthreereasonsforenteringthewinebusinessvaryacrossthethreestates.InMichigan,

theNo.1reasonwasasagoodbusinessopportunity(28percent),No.2wasbecauseofa

passionforwineandfood(21percent)andNo.3wasfromanopportunitytoenterthefamily

business(17percent),(N=40).InMissouri,theNo.1reasonwasbecauseoflifestyleorhobby

objectives(33percent)andtheNo.2and3reasonshadthesameamountofresponseswere

becauseofanopportunitytoenterthefamilybusinessandasagoodbusinessopportunity,

(N=40).NewYorkandMichigansharethesameNo.1and2reasonsofenteringasagood

businessopportunity(27percent)andbecauseofapassionforwineandfood(24percent)but

NewYork’sNo.3reasonisdividedbetweenanopportunitytoenterthefamilybusiness(15

percent)andforlifestyleorhobbyobjectives(15percent).Insummary,thereasonsarequite

similaracrossthestateswiththeonlysignificantpercentagedifferenceinthereasonof

enteringforlifestyleorhobbyobjectives.Finally,Missourihasthehighestnumberof

respondentsthatselectedlifestyleorhobbyobjectives(33percent)followbyMichiganand

Missouri(15percent).Belowshowsaninterestinglookatthenumberofcaseswineries

producebasedonthereasonstheownersenteredthewineindustry.

73

Figure 13: Production and Reason for Entering the Industry 

 

Employees 

Onaverage,awineryintheemergingwineregionemploysthreefulltime,yearroundpeople,

twofulltime,seasonalpeopleand7parttimepeople,(N=113).However,almosthalfofthe

wineriesinthisstudyhavebeenoperatingforlessthanfiveyearsand49percentofthose

wineriesdonotemployanyfulltime,yearroundhelp(N=53).Further,forwineriesthatareless

than5yearsold,therangeofthenumberofemployeestheyhiredoublesforthefulltime,

seasonalemployees.While75.5percentoftheseownersdonothaveanyfulltime,seasonal

employees,17percenthaveonetofiveemployees,5.66percenthavesixto10employeesand

finallyonewineryhas20employees,(N=53).Finally,39.62percentofthewineriesthatareless

02468

101214161820

Num

berofCasesinTho

usands

Mean 

Median

74

than5yearsoldhirezeropart‐timeemployees,37.74percenthireonetofiveemployees,13.21

percenthire6to10employeesand3.78percenthiremorethan45part‐timeemployees,

(N=53).

Fifty‐threepercentofthewinerieshavebeeninbusinessforsixormoreyears(N=60)and26.67

percentstillhirezerofulltime,yearroundemployees.However,manydohirefulltime,year

roundemployees:55percenthaveonetofiveemployees,15percenthiresixto20employees

and3.34percenthire47to84employees,(N=60).Forthenumberoffulltime,seasonal

employees,61.67percentofthewineriesthatare6yearsandolderhirezerofulltime,seasonal

employees,30.02percenthireoneto10employeesand8.35percenthire12to28employees,

(N=60).Finally,forthenumberofpart‐timeemployees,15percenthirezero,35percenthire

onetofiveemployees,26.66percenthire6to10employees,16.67percenthire11to20

employees,3.34percenthire23to30employeesand3.34percenthire50to80employees.

Products and Services offered 

Thesurveyaskedwineryownerstocheckallofthefollowingproductsandservicestheirwinery

offers,tours,arestaurant,atastingroom,agiftshop,foodproductsandwhetherthewinery

hostsevents(i.e.awedding).Allbutoneofthe113wineriessurveyedhaveatastingroom.The

nextmostpopularproductorserviceishavingagiftshop,onaverage74percentofthe

wineriesintheregionhaveagiftshop,66percentoffertoursoftheirvineyardorwinery,65

percentofferfoodproducts,65percentcanhostevents(i.e.weddings,receptions,etc.)and25

percentofthewinerieshavearestaurant,(N=113).

75

Table 12: Products and Services Wineries Offer 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Winery/VineyardTours

66.4% 52.5% 75.0% 72.7%

Restaurant 24.8% 19.1% 31.9% 18.2%

Tastingroom 99.1% 100.0% 100.0% 97.0%

GiftShop 74.3% 72.5% 77.5% 72.7%

Foodproducts 64.6% 65.0% 72.5% 54.5%

Hostswineryevents

64.6% 52.5% 82.5% 57.6%

 

Whencomparingthedifferencesamongthestates,themostsignificantdifferenceisbetween

whetherwinerieshostevents.InMissouri,82.5percentofwinerieshosteventswhereasonly

57.6percentofNewYorkwinerieshosteventsandonly52.5percentofMichiganwineries,

(N=113).Thesecondlargestdifferenceinamongthewineriesthatofferwineryorvineyard

tours.InMissouri75percentofwineriesoffertoursand72.7percentofNewYorkwineries

offertoursaswellbutonly52.5percentofMichiganwineriesoffertours,(N=113).Finally,the

thirdmostnotabledifferenceamongthestatesisthewineriesthatofferfoodproducts.The

numberofwineriesthatofferfoodproductsvariesfromonly54.6percentofNewYork

wineriesofferingfoodproductsto65percentofMichiganwineriesand72.5percentof

Missouriwineriesthatofferfoodproducts,(N=113).

Industry certifications 

76

Thesurveyasksrespondentsiftheirwineryorvineyardshasobtainedanyindustry

certifications(i.e.sustainable,organic,etc.).Interestingly,zerowineriesinMissourihave

obtainedwineryorvineyardcertification,(N=40).InMichigan,25percentofwineriesand

vineyardshavecertifications,(N=40).And,12.12percentofNewYorkwineriesandvineyards

havecertifications,(N=33).

Awards 

Table 13: Awards Won by Wineries in the Emerging Wine Region 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Winecompetitions 68.1% 75.0% 62.5% 63.6%

Tradepress 38.9% 45.0% 22.5% 51.5%

Othersources 37.2% 47.5% 27.5% 36.4%

Almost70percent(68.14percent)ofthewineriesintheemergingwineregionhavewonan

awardatawinecompetition.Seventy‐sevenwineriesintotalhavereceivedawards:75percent

oftheMichiganwineries,65percentoftheMissouriwineriesand63.64percentofNewYork

wineries,(N=113).Lessthanhalf(38.94percent)ofthewinerieswontradepressawards,

(N=113).Amongthestates,werequitedifferent,51.52percentofNewYorkwineries,45

percentofMichiganwineriesand22.50percentofMissouriwineries,(N=133).Intotal,37.17

percentofthewineriesreceivedanawardfromsome“other”source:47.50ofMichigan

wineries,36.36percentofNewYorkwineriesand27.50ofMissouriwineriesallreceivedsome

typeof“other”award,(N=113).

77

Respondents’ satisfaction with winery’s current performance 

Thesurveyaskedrespondentsabouttheirlevelofsatisfactionwiththecurrentperformanceof

theirwinerybasedonafive‐pointLikertscalerangingfromveryunsatisfiedtoverysatisfied.

Acrossallthreestates,46.9percentofwineryownersweregenerally“satisfied"withthe

performanceoftheirwinery(N=113).Missourihadthegreatestnumberofwineryowners,55

percent,thatwere“satisfied”withtheirwinery’scurrentperformance(N=40).However,52.5

percentofMichiganwineryownersdescribebeing“verysatisfied”withthecurrent

performanceoftheirwinery(N=40).

Overall,analyzingtheresultsacrossthestate,Michiganhasthehighestnumberofownersthat

aresatisfiedorverysatisfied,87.2percent,(N=39).Zerorespondentsexpressedbeing“very

unsatisfied”withtheirwinery’sperformance,however;NewYorkwinerieshadthehighest

numberofrespondentswhowere“neithersatisfiedorunsatisfied”(15.6percent)or

“unsatisfied”(9.4percent)withtheirwinery’sperformance(N=32).Finally,MissouriandNew

Yorkaremostsimilaramongthestates,withthemajorityoftherespondentsbeing“satisfied”

withtheirwinery’scurrentperformance.

WINERY OWNER 

Theaveragewineryowneris52yearsold.Abouthalf(45.5percent)haveabachelor’sdegreein

additiontoyearsofexperienceinbusiness,thewineindustryandgrapeproduction.Ofthe31

NewYorkrespondents,morethanhalf(55percent)haveoneormoregraduatedegrees,this

washigherthanMichigan(21percent)andMissouri(33percent),(N=113).Theaveragewinery

ownerhas21.2yearsofexperienceinbusiness,12.5yearsofexperienceinthewineindustry

78

and11.2yearsofexperienceingrapeproduction.Aboutoneineveryeightwineryownershasa

certificateinwinemakingorviticulture.Theaverageownerinvested44.6percentoftheirnet

worthintothewinery,andspendsaboutthree‐fourthsoftheirtimeworkingatthewinery

conductingactivitiesrelatedtothebusinesslikeplanningorworkinginthetastingroom.

Table 14: Demographics of Winery Owners in the Emerging Wine Region by State 

Response  COMBINED  MICHIGAN  MISSOURI  NEW YORK 

Age(years) 52 51 52 52

Educationlevel(Bachelor’sdegreeorhigher) 81.3% 72.5% 89.7% 81.8%

Certifiedinwinemakingorviticulture 16.1% 10.0% 15.4% 24.2%

Wineindustryexperience(years) 12.7 12.8 12.2 13.2

Grapeproductionexperience(years) 11.2 13.5 11.5 8.3

Businessexperience(years) 21.5 21.2 21.7 21.5

Timespentatwinery(%) 77.28% 76.3% 75.8% 80.3%

Networthinvestedinwinery(%) 45.4% 38.0% 42.8% 57.0%

Membership 

Belongingtoalocalorregionalchamberofcommerceispopularamongrespondentswith90

ownersacknowledgingtheirmembership.Michiganhadthehighestmembershipamong

ownersinbelongingtoachamberofcommerce(85percent),followedbyMissouri(72.50

percent),andNewYork(81.82percent).

79

Thesurveyaskedownersiftheyareamemberofawinetradeassociation(boardorcouncil).

Membershipprovedhighagainwith86ownersacknowledgingtheirmembershiptoawine

tradeassociation.InNewYork,85percentoftheownersaremembersofawineassociation

(N=33),inMichigan80percentoftheownersaremembers(N=40)and65percentofMissouri

ownersbelongtoawineassociation(N=40).

80

Bivariate Results 

 

 

ThischapterincludestheresultsofthebivariatetestsincludingPearsoncorrelations,

independent,twosamplet‐testsandchi‐squaretests.Thesetestswerechosenbasedonthe

typeofdatabeinganalyzed,whichincludedcontinuous,binaryandcategoricaldata.Before

runningat‐test,thedatawascheckedforequalvariances,andifneededcorrectedusinga

robustf‐test.ThroughrunningaPearsoncorrelation,welearnedifastatisticallysignificant

relationshipexistsbetweenthevariablesandhowstronglythevariablesarerelated.Byrunning

anindependent,twosamplet‐testwewereabletoseeifthepopulationofthemeansofthe

twosampleswerestatisticallysignificantandhowthetwogroupsvaried.Inanindependent

two‐samplet‐testthevariancesareassumedtobeequalandwhendetectedthattheywere

not,Welch’stestwasusedtocorrectfortheviolatedassumption.Finally,achi‐squaretestwas

usedtodetermineiftheobservedobservationsareindependentandhowlikelythatthe

observeddistributionisduetochance.

 

Relationship1:Therelationshipbetweenthenumberofcasesandthenumberofyearsa

wineryhasbeencommerciallyproducingwinewillbothhaveastrong,positivecorrelationwith

alleightlegitimacyindicators.  

Wine production 

 

81

Table 15: Correlation Values of Legitimacy Variables with the Average Number of Cases 

Wineries in the Region Produced in 2011 

Variable  Covariance Full‐time,yearroundemployees 0.6615***Full‐time,seasonalemployees 0.2903***Percentofwinevolumesoldthroughaliquorstore ‐0.1292Percentofwinesoldtoarestaurant ‐0.0781Percentsoldthroughadistributor 0.7085***Arrangementwithatourbuscompany 0.2492***Receivedexternalfunding 0.2114***Largetradingnetwork 0.1313   

Astrong,positivecorrelationexistsbetweenthenumberofcasesawineryproducedin2011

andthenumberoffull‐time,yearroundemployeesthefirmemploys,(r=0.6615,p=0.0000)and

thepercentofwinevolumethefirmsellsthroughdistributors,(r=0.7085,p=0.0000).This

means,themorecasesofwineawineryproducesisrelatedtoanincreaseinthenumberof

full‐time,yearroundemployeesawineryemploys.Further,asexpectedthemorecasesa

wineryproducesisrelatedtosellingagreaterpercentofthefirm’stotalwinevolumesales

throughdistributors.

Aweak,positivecorrelationexistsbetweenthenumberofcasesawineryproducesandthe

numberoffull‐time,seasonalemployeesawineryemploys(r=0.2903,p=0.0021),whetherthey

haveanarrangementwithatourbuscompany(r=0.2903,p=0.0090)andhaveobtained

externalfinancing(r=0.2114,p=0.0266).Awinerythatproducesmorecasesofwineis

associatedwithagreaternumberoffull‐time,seasonalemployees.Whetherawineryhasan

arrangementwithatourbuscompanyisassociatedwithanincreaseinthenumberofcases

82

produced.Finally,anassociationexistsbetweenanincreaseinwineproductionandthe

wineriesthathaveexternalfunding.

Table 16: Correlation Results with the Number of Years a Firm has Commercially Produced 

Wine 

Variable  Covariance Full‐time,yearroundemployees 0.6304***Full‐time,seasonalemployees 0.2866***Percentofwinevolumesoldthroughaliquorstore ‐0.0424Percentofwinesoldtoarestaurant ‐0.1275Percentsoldthroughadistributor 0.5001***Arrangementwithatourbuscompany 0.1773*Receivedexternalfunding 0.1338Largetradingnetwork 0.0514 

Astrong,positivecorrelationexistsbetweenthenumberofyearsawineryhasbeen

commerciallyproducingwineandthenumberoffull‐time,yearroundemployeesthefirm

employs,(r=0.6304,p=0.0000)andthepercentofwinevolumethefirmsellsthrough

distributors,(r=0.5001,p=0.0000).Thismeans,thelongerawineryhasbeenproducing,oran

olderwinery,isrelatedtoemployingmorefull‐time,yearroundemployeesthanayoungor

newlyestablishedwinery.Further,whilebothfindingswereexpected,thesecondstrong

correlationstatesthatagainanolderwineryiscorrelatedwithsellingahigherpercentageofits

totalwinevolumethroughdistributors. 

 

Next,twoweak,positivecorrelationsexistbetweentheageofawineryandthenumberoffull‐

time,seasonalemployeesawineryhiresandhavinganarrangementwithatourbuscompany.

Themoreyearsawineryhasbeenproducingcorrelateswithanincreasingnumberoffull‐time,

83

seasonalemployees,(r=0.2866,p=o.0021).Second,themoreyearsawineryhasbeen

producingcorrelateswiththewineryhavinganarrangementwithatourbuscompany,

(r=01773,p=0.0615).Surprisingly,acorrelationwasnotfoundbetweenthenumberofyearsa

wineryhasbeencommerciallyproducingwineandreceivingexternalfunding,weanticipated

seeingastrong,positivecorrelationbetweenthetwovariables.

Relationship2:Humancapitalhasastrong,positivecorrelationtotheeightlegitimacy

indicators.

Employees 

Full‐time, year round 

Table 17: Correlation Results of the Average Number of Full‐time, Year Round Employees  

Variable  Covariance Full‐time,seasonalemployees 0.3261**Percentofwinevolumesoldthroughaliquorstore ‐0.1192Percentofwinesoldtoarestaurant ‐0.0516Percentsoldthroughadistributor 0.4291***Arrangementwithatourbuscompany 0.2276**Receivedexternalfunding 0.2014**Largetradingnetwork 0.0957

Amoderatetostrong,positivecorrelationexistsbetweenthenumberoffull‐time,yearround

employeesawineryhiresandthepercentofthefirm’swinevolumethatitsellsthrough

distributors(r=0.4291,p=0.0000).Anothermoderate,positivecorrelationexistsbetweenthe

numberoffull‐time,yearroundemployeesworkingatawineryandthenumberoffull‐time,

seasonalemployeesworkingatawinery(r=0.321,p=0.0021).Overall,themorefull‐time,year

roundemployeesawineryemploysiscorrelatedwithincreasesinthepercentofawinery’s

84

winevolumesoldthroughdistributorsaswellasthenumberoffull‐time,seasonalemployeesa

wineryemploys.

Aweak,positivecorrelationexistsbetweenthenumberoffull‐time,yearroundemployeesand

whetherawineryhasanarrangementwithatourbuscompany(r=0.2276,p=0.0158).This

meansacorrelationexistsbetweenincreasesinthenumberoffull‐time,yearroundemployees

awineryhiresandawineryhavinganestablishedarrangementwithatourbuscompany.

Aweak,positivecorrelationexistsbetweenthenumberoffull‐time,yearroundemployeesa

wineryemploysandwhetherthewineryreceivesexternalfunding(r=0.2013,p=0.0324).

Therefore,whenawineryhiresmorefull‐time,yearroundemployeesacorrelationexistswith

anincreaseinthewineryreceivingexternalfunding.

Full‐time, seasonal employees 

Table 18: Correlation Results of the Average Number of Full‐time, Seasonal Employees 

Variable  Covariance Full‐time,yearroundemployees 0.3261***Percentofwinevolumesoldthroughaliquorstore ‐0.1595*Percentofwinesoldtoarestaurant ‐0.0275Percentsoldthroughadistributor 0.3833***Arrangementwithatourbuscompany 0.2799***Receivedexternalfunding 0.2760***Largetradingnetwork 0.0000

Amoderate,positivecorrelationexistsbetweenthenumberoffull‐time,seasonalemployeesa

wineryemploysandthepercentofwinevolumesalessoldthroughdistributors(r=0.3833,

p=0.0000).Increasesinthenumberoffull‐time,seasonalemployeesawineryhascorrelate

withincreasesinthepercentofawinery’stotalsalesvolumesoldthroughdistributors.Another

85

moderate,positivecorrelationexistsbetweenthenumberoffull‐time,seasonalemployeesa

wineryemploysandthenumberoffull‐time,yearroundemployeesawineryhas(r=0.3261,

p=0.0004).Therefore,anincreaseinthenumberoffull‐time,seasonalemployeesawineryhas

iscorrelatedwithincreasesinthenumberoffull‐time,yearroundemployeesawineryhas.

Aweak,positivecorrelationexistsbetweenthenumberoffull‐time,seasonalemployeesand

whetherawineryhasestablishedanarrangementwithatourbuscompany(r=0.2799,

p=0.0028).Therefore,anincreaseinthenumberoffull‐time,seasonalemployeesiscorrelated

withwineriesthathaveanarrangementwithatourbuscompany.

Aweak,positivecorrelationexistsbetweenthenumberoffull‐time,seasonalemployeesa

wineryemploysandwhetherthewineryobtainsexternalfunding(r=0.2760,p=0.0031).So,

havingexternalfundingisassociatedwithanincreasingnumberoffull‐time,seasonal

employees.

Aweak,negativecorrelationexistsbetweenthenumberoffull‐time,seasonalemployeesa

wineryemploysandthepercentofawinery’stotalwinevolumesalessolddirecttoaliquor

store(r=‐0.1595,p=0.0960).Therefore,winerieswithfewerfull‐time,seasonalemployeesis

associatedwithwineriesthathavesellagreaterpercentageoftheirtotalwinevolumedirectto

aliquorstore.However,sincethisrelationshipisnegative,therelationshipalsofindsa

correlationbetweenawineryincreasingnumbersoffull‐time,seasonalemployeesandalower

percentageofwinevolumesellingdirectlythroughaliquorstore.

Part‐time employees 

86

Table 19: Correlation Results of the Average Number of Part‐time Employees 

Variable  Covariance Full‐time,yearroundemployees 0.6363***Full‐time,seasonalemployees 0.3402***Percentofwinevolumesoldthroughaliquorstore ‐0.1229Percentofwinesoldtoarestaurant ‐0.066Percentsoldthroughadistributor 0.3656***Arrangementwithatourbuscompany 0.3286***Receivedexternalfunding 0.2526***Largetradingnetwork ‐0.033

Astrong,positivecorrelationexistsbetweenthenumberofpart‐timeemployeesawinery

employsandthenumberoffull‐time,yearroundemployeesawineryemploys(r=0.6363,

p=0.0000).Thereforeanincreasingnumberoffull‐time,yearroundemployeesisassociated

withanincreaseinthenumberofpart‐timeemployees.

Amoderate,positivecorrelationexistsamongthenumberofpart‐timeemployeesawineryhas

andthreevariables,thenumberoffull‐time,seasonalemployeesawineryhas(r=0.3402,

p=0.0002),thepercentofwinevolumesalessoldthroughdistributors(r=0.3656,p=0.0001)and

whetherawineryhasanarrangementwithatourbuscompany(r=0.3286,p=0.0004).Asthe

numberofpart‐timeemployeesincreasesacorrelationexistsbetweenanincreasingnumberof

full‐time,seasonalemployeesawineryemploys.Second,acorrelationexistsbetweenawinery

increasingthenumberofpart‐timeemployeesandanincreasingpercentinthetotalwine

volumesalessoldthroughdistributors.Third,havinganarrangementwithatourbuscompany

isassociatedwithanincreasingnumberofpart‐timeemployees.Againthesefindingsare

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correlations;thereforethetwovariablesarenotaffectingeachotherbutmoresimplyshowing

thattheyarerelated.

Aweak,positiverelationshipexistsbetweenthenumberofpart‐timeemployeesawineryhas

andwhetherthewineryhasexternalfunding(r=0.2526,p=0.0070).Sincethepoint‐biserial

valueisweakyetpositive,thissuggeststhatwinerieswhoreceivedexternalfundingare

associatedwithhavingmorepart‐timeemployees.

Prior experience of firm owner 

Table 20: Correlation Results of the Average Number of Years of Experience Owner has in the 

Wine Industry, Grape Production and Business 

Covariance Variable  Wine 

industry Grape production  Business 

Full‐time,yearroundemployees 0.3604*** 0.4195*** 0.1753*Full‐time,seasonalemployees 0.2263** 0.2221** 0.023Percentofwinevolumesoldthroughaliquorstore 0.1037 ‐0.0813 ‐0.21423**Percentofwinesoldtoarestaurant 0.0931 ‐0.0777 ‐0.0757Percentsoldthroughadistributor 0.2437** 0.3286*** ‐0.0489Arrangementwithatourbuscompany 0.0351 0.0156 0.1182Receivedexternalfunding ‐0.0019 0.0312 ‐0.0699Largetradingnetwork ‐0.0422 ‐0.1042 ‐0.0115Note:***=significantlydifferentatthe1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentatthe10%significancelevel

 

Wine industry experience 

88

Wineryownerswereaskedhowmanyyearsofexperiencetheyhaveinthewineindustry,in

grapeproductionandinbusinessingeneral.Thenumberofyearsofexperienceanownerhas

inthewineindustrysharedamoderate,positiverelationshiptothenumberoffull‐time,year

roundemployeesawineryemploys(r=0.3604,p=0.0001).Therefore,awineryownerthathas

moreexperienceinthewineindustrycorrelateswithawineryhavingmorefull‐time,year

roundemployees.Thesecondandthirdcorrelationsshowwineryownerswithagainmorewine

industryexperienceareassociatedwithwineriesthathaveagreaterpercentageoftheirwine

volumesoldthroughadistributor(r=0.2436,p=0.0110)aswellasagreaternumberoffull‐time,

seasonalemployees(r=0.2263,p=0.0169).

Business experience 

Next,twocorrelationswerefoundbetweenthenumberofyearsinbusinessawineryowner

hasandthepercentofwinevolumeawinerysellsdirecttoaliquorstore(r=‐0.2142,p=0.0283)

andthenumberoffull‐time,yearroundemployeesawineryemploys(r=0.1753,p=0.0709).

Thisweak,negativecorrelationsuggeststhatwineryownerswithlessbusinessexperienceare

associatedwithwineriesthatdistributeagreaterpercentageoftheirwinevolumedirecttoa

liquorstore.Further,thesecondcorrelationssuggestswinerieswithownerswhohavemore

businessexperiencearerelatedtowineriesthatalsohaveagreaternumberoffull‐time,year

roundemployees.Thiscouldmeanthattheownerunderstandsthebusinessaspectofthe

winerybuthiresotherswhohavemoreexperienceinviticultureandenologythatcanhelprun

thoseaspectsofthewinery.

Grape production experience 

89

Correlationsshowthatwinerieswhoseownerswhohavemoreyearsofexperienceingrape

productionareassociatedwithwineriesthathaveincreasingnumbersoffull‐timeemployees

(bothyearroundandseasonal),aswellasthewinerieswithahighpercentageoftheirtotal

winevolumebeingsoldthroughdistributors.Amoderatetostrong,positivecorrelationexists

betweenwinerieswithownerswhohaveasignificantnumberofyearsexperienceingrape

productionandthosewineriesthatemployanincreasingnumberoffull‐time,yearround

employees(r=0.4195,p=0.0000).Next,amoderate,positivecorrelationexistswithawinery’s

ownerwithincreasingexperienceingrapeproductionandwineriesthatsellanincreasing

percentoftheirtotalwinevolumethroughdistributors(r=0.3286,p=0.0007).Finally,aweak,

positiverelationshipexistsbetweentheowner’sgrapeproductionexperienceandwineriesthat

employanincreasingnumberoffull‐time,seasonalemployees(r=0.2221,p=0.0228).

Relationship3:Therelationshipsvaryamongthepercentofproductionfromcertaingrapes(i.e.

Viniferavitis,hybrid,nativeAmericanorother),themaininputsusedtoproducethewine,the

bottlingstylesusedbywineriesandthestrategyusedtoprocuregrapes.

Type of grape 

Vinifera vitis 

Table 21: Correlation Results of Percent of a Firm’s Total Wine Production Made from 

Vinifera Grapes 

Variable  Covariance Full‐time,yearroundemployees ‐0.0021Full‐time,seasonalemployees 0.2377**Percentofwinevolumesoldthroughaliquorstore ‐0.1952**Percentofwinesoldtoarestaurant 0.0528

90

Table 21 (Cont’d):  

Percentsoldthroughadistributor 0.3514***Arrangementwithatourbuscompany 0.3806***Receivedexternalfunding 0.2263**Largetradingnetwork ‐0.0066   

Moderate,positivecorrelationsexistbetweenthewinerieswithhigherpercentagesoftotal

wineproductionbeingmadefromviniferagrapesandwhetherawineryhasanarrangement

withatourbuscompany(r=0.3806,p=0.0004)andthepercentofwinevolumesoldthrough

distributors(r=0.3512,p=0.0002).Arelationshipexistsbetweenawinerythathasan

arrangementwithatourbuscompanyandanincreasingpercentageofitstotalwine

productionmadefromviniferagrapes.Next,anincreasingpercentofawinery’stotalsales

volumesoldthroughdistributorsisrelatedtoanincreasingpercentageofviniferagrapesthata

wineryusestoproduceitswine.

Aweak,positivecorrelationexistsbetweenthepercentofviniferagrapesusedandthenumber

offull‐time,yearseasonalemployeesawineryhas(r=0.2377,p=0.0112)andwhetherthe

wineryhasfinancing(r=0.2263,p=0.0159).Therefore,arelationshipexistsbetweenanincrease

inthepercentofviniferagrapesusedandanincreasingnumberoffull‐time,seasonalworkersa

wineryemploys.Second,wineriesthathaveexternalfundingareassociatedwithhavinga

higherpercentageoftheirwinemadefromviniferagrapes.Weanticipatedseeingapositive,

moderatetostrongcorrelationdevelopbetweenwineriesthatuseahighpercentageofvinifera

grapesandthosewineriesthathaveexternalfundingsinceviniferagrapesarewellknown(i.e.

merlot,cabernetfranc,chardonnay,etc.).

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Finally,aweak,negativecorrelationexistsbetweenthepercentofviniferagrapesusedin

productionandthepercentoftotalwinesalessoldataliquorstore(r=‐0.1952,p<0.0410).This

inverserelationshipindicatesthatwineriesthatusealowpercentageofviniferagrapesto

producetheirwineareassociatedwithsellmorewinedirecttoliquorstores.

Hybrid grapes 

Table 22: Correlation Results of a Percent of a Firm’s Total Wine Production with Hybrid 

Grapes 

Variable  Covariance Full‐time,yearroundemployees ‐0.0376Full‐time,seasonalemployees ‐0.0576Percentofwinevolumesoldthroughaliquorstore 0.0373Percentofwinesoldtoarestaurant 0.0518Percentsoldthroughadistributor ‐0.1967**Arrangementwithatourbuscompany ‐0.3120***Receivedexternalfunding ‐0.0993Largetradingnetwork ‐0.0145

Onemoderate,negativecorrelationexistsbetweenthepercentofhybridgrapesawineryuses

initstotalwineproductionandwhetherthewineryhasobtainedexternalfunding(r=‐.3120,

p=0.000).Therefore,thefirmsthathaveexternalfundingareassociatedwithhavingalower

percentageoftheirwineproductionfromhybridgrapes.

Aweak,negativecorrelationexistsbetweenthepercentofhybridgrapesawineryusesandthe

percentofwinevolumesoldthroughdistributors(r=‐0.1967,p=0.0395).Therefore,usingless

hybridgrapesisassociatedwithsellingmorewinethroughdistributors.

Native American 

92

Table 23: Correlation Results of a Percent of a Firm’s Total Wine Production Made with native 

American Grapes 

Variable  Covariance Full‐time,yearroundemployees ‐0.0677Full‐time,seasonalemployees ‐0.1405Percentofwinevolumesoldthroughaliquorstore ‐0.0636Percentofwinesoldtoarestaurant ‐0.0845Percentsoldthroughadistributor ‐0.1222Arrangementwithatourbuscompany 0.0546Receivedexternalfunding 0.0201Largetradingnetwork 0.0166 

Other 

Wineryownerswereaskedaboutthepercentoftheirtotalwineproductionthatwasmade

fromviniferagrapes,hybridgrapes,nativeAmericangrapesorother.Nosignificantcorrelations

werefoundamong“other”andtheeightvariablesofinterest.Thisissurprising,weanticipated

findingastrong,negativerelationshipamongwinerieswithhighpercentagesof“other”andall

threedistributionchannelstestedaswellasinwhetherthewineryhadexternalfunding.

Inputs used to produce wine 

Grapes 

Table 24: Correlation Results of the Percent of Firm that use Grapes as Main Input in Wine 

Variable  Mean Full‐time,yearroundemployees 3.804**Full‐time,seasonalemployees 2.298969***Percentofwinevolumesoldthroughaliquorstore 7.023404Percentofwinesoldtoarestaurant 1.911702Percentsoldthroughadistributor 8.017021***

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Threeoftheeightvariablesofinterestaresignificantlyrelatedtothewineriesthatusegrapes

asthemaininputintheirwine.Atwo‐sample,independentt‐testshowedthatthewineries

whousegrapesasitsmaininputinproducingtheirwineemploymorefull‐time,yearround

employees(M=3.804,SD=10.1156)thanthosethatdonotusegrapesasthemaininputin

producingtheirwine(M=1.2,SD=1.4736),t(109.957)=‐2.3776.Secondly,wineriesthatuse

grapesasthemaininputintheirwinealsoemploymorefull‐time,seasonalemployees(M=

2.298969,SD=5.148149)thanthosethatdonotusegrapesastheirmaininput(M=.3333,

SD=1.046536),t(103.488)=‐3.3405,p=0.0012.Andthird,thosewineriesthatconsidergrapes

themaininputintheirwineareassociatedwithsellingmorewinethroughdistributors

(M=8.017021,p=0.0001)thanthewineriesmakeusegrapejuice,bulkwineorotherastheir

maininput(M=0.6666667,p=0.0001).

Grape juice 

Table 25: Correlation Results of the Percent of Firm that use Grape Juice as Main Input in 

Wine 

Variable  Mean Full‐time,yearroundemployees 1.742857*Full‐time,seasonalemployees 1.485714Percentofwinevolumesoldthroughaliquorstore 8.58Percentofwinesoldtoarestaurant 2.485714Percentsoldthroughadistributor 9.571429 

Theonlysignificantrelationshipthatexistsshowsthatwinerieswhouseagrapejuiceastheir

maininputandassociatedwithhiringmorefull‐time,yearroundemployees(M=1.742857,

94

SD=3.58381)thanthosethatdonotusegrapejuiceastheirmaininput(M=4.33766,

SD=11.09516),t(102.788)=1.7766,p=0.0786.

Bulk wine 

Table 26: Correlation Results of the Percent of Firm that use Bulk Wine as Main Input in Wine  

Variable  Mean Full‐time,yearroundemployees 3.375Full‐time,seasonalemployees 2.833333Percentofwinevolumesoldthroughaliquorstore 7.583333Percentofwinesoldtoarestaurant 2.416667Percentsoldthroughadistributor 15.16667* 

Atwo‐sample,independentt‐testsrevealedthatwineriesthatusebulkwineasthemaininput

oringredienttoproducetheirwineareonlyrelatedtoonevariable.Wineriesthatusebulk

wineasthemaininputareassociatedwithsellingahigherpercentageoftheirtotalwine

volumethroughdistributorsthanthosethatdonotusebulkwineasthemaininput

(M=4.701176,SD=11.17848),t(25.6989)=‐2.0131,p=0.0547.However,wineriesthatusegrapes

astheirmaininputshowedastrongercorrelationthanthewineriesthatusebulkwineasthe

maininputinrelationtoahighpercentageofwinebeingsoldthroughdistributors.

Other 

Table 27: Correlation Results of the Percent of Firm that use Other as Main Input in Wine 

Variable  Mean Full‐time,yearroundemployees 4.853659Full‐time,seasonalemployees 1.878049Percentofwinevolumesoldthroughaliquorstore 10.1Percentofwinesoldtoarestaurant 1.8375Percentsoldthroughadistributor 7.3925 

95

Winerieswereaskedwhatwasthemaininputusedtoproducetheirwine,thosethatselected

“other”listedjuice(notincludinggrapejuice),grapeconcentrate,applecider,honey,cherries,

apples,berries,blackcurrant,pecans,pumpkin,peachesandotherfruits.Atwo‐sample,

independentt‐testshowedthatthewinerieswhoselected“other”asthemaininputusedto

producewineandassociatedwithhavingalargetradingnetwork(M=0.625,SD=0.4903)than

thosewineriesthatdonotuse“other”asthemaininputwhenproducingtheirwine

(M=0.4225,SD=0.4975),t(81.994)=‐2.0778,p=0.0409.Noneoftheothersevenvariablesof

interestweresignificantlyrelatedtothosewineriesthatuse“other”astheirmaininput.

Achi‐squaretestfoundamoderatelystrong,positivecorrelationbetweenthosewineriesthat

said“other”wasthemaininputtheirwineryusedtoproducewineandwineriesthathavea

largetradingnetwork.

Table 28: Contingency Table Between Using “Other” as a Main Input and Wineries having a 

Large Trading Network  

 Other as main 

input Large Trading Network 

No YesTotal 

No 41 15 56Yes 30 25 55Total  71 40 111

Asignificantcorrelationexistsbetweenwhetherthewineryuses“other”astheirmaininput

andwhetherthewineryhasalargetradingnetwork,chi‐square(1,N=111)=4.1956,p=0.041.

96

Relationship4:Wineriesthatprocuretheirgrapesfromtheirownestateorthroughawritten

contractwillhaveastrong,positivecorrelationwiththeeightlegitimacyindicators.

Procuring grapes 

Thesurveyaskedwineryownerstosumthepercentageoftheirgrapesthattheyprocure

throughtheirownvineyards(estategrown),acquireinaspotorcashmarket,procurethrough

averbal(handshake)contractorthroughawrittencontract.Correlationswererunwiththe

eightvariablesofinterestandthesefourprocurementstrategies.Onlysixsignificant

correlationswerefoundbetweenallthecorrelations.Belowisatablerepresentingthe

correlationsbetweenthepercentofgrapesfirmsintheemergingwineregionprocurethrough

thedifferenttypesofcontractoptions:

Table 29: Correlation Results of Different Procurement Strategies Firms Use  

Covariance Variable 

Estate grown Spot/cash market 

Verbal (handshake) 

Written Contract 

Full‐time,yearroundemployees ‐0.0361 ‐0.049 ‐0.0584 0.2060**Full‐time,seasonalemployees 0.005 ‐0.0455 ‐0.0967 0.2146**Percentofwinevolumesoldthroughaliquorstore ‐0.1159 0.0342 0.1081 ‐0.0224Percentofwinesoldtoarestaurant ‐0.0385 0.2328** ‐0.07 0.0475Percentsoldthroughadistributor ‐0.0836 ‐0.0438 ‐0.0264 0.2674***Arrangementwithatourbuscompany ‐0.1205 0.0663 0.0926 0.096Receivedexternalfunding 0.047 ‐0.0527 ‐0.0126 0.0809Largetradingnetwork ‐0.3286*** 0.073 0.2149** 0.148

97

Table 29 (Cont’d):  

Note:***=significantlydifferentatthe1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentatthe10%significancelevel

Estate grown 

Amoderate,negativecorrelationwasfoundbetweenthepercentofgrapesprocuredthrougha

winery’sownvineyardandthebreadthofawinery’stradingnetwork(r=‐0.3286,p<0.0006).

Thecorrelationshowswineriesthathavealargetradingnetworkareassociatedwithprocuring

lessgrapesformtheirownvineyards.Thisfindingwasexpected,wineriesthatdonotgrowa

significantpercentageoftheirowngrapeshavetointeractmorewithotherstoobtaingrapes,

unlikeforexampleanestablishedwinerythatmanagestheirownlargevineyardorhas

establishedormulti‐yearcontractswiththesamegrapegrowers.

Spot market contracts 

Thepercentageofgrapesawineryprocuresthroughspotorcashmarketshasaweak,positive

correlationwiththepercentofwineawinerysellstoarestaurant(r=0.2328,p=0.0179).This

findingshowsanassociationbetweenthewineriesthathaveanincreasingpercentoftheir

grapesprocuredthroughspotorcashmarketsandthosewineriesthathaveanincreasing

percentageoftheirwineriesbeingsoldtorestaurants.Thisfindingwasnotexpected,because

oftensupplyingtoabusinessrequiresawinerytoprovideaconsistentandoftenhighvolume

ofwinethereforeleadingthewineriestodesireamoresecurecontracttoobtaingrapes.

Verbal (handshake) contracts 

98

Aweak,positivecorrelationexistsbetweenwineriesthatprocureahighpercentageoftheir

grapesthroughverbalcontractsandthosewineriesthathavealargetradingnetwork

(r=0.2149,p=0.0277).Weanticipatedthisfindingtohaveastrongercorrelationvalue,however

dependingonthenumberofverbalcontractsawineryneedstheymayonlyneedto

communicatewithafewgrapesgrowersandtheymayevenusethesamegrowerseachyear.

Written contracts 

Thepercentofgrapesawineryprocuresthroughawrittencontractcorrelateswiththree

variables.Thefirstcorrelationiswiththepercentofwinevolumesoldthroughdistributors

(r=0.2674,p=0.0066),thisweak,positivecorrelationshowsarelationshipexistsbetweenahigh

percentageofgrapesbeingprocuredthroughawrittencontractandthosewineriesthatsella

highpercentageoftheirwinethroughdistributors.Twomoreweak,positivecorrelationsexist

betweenthepercentageofgrapesprocuredandthenumberoffull‐time,yearround

employeesawineryhas(r=0.2060,p=0.0350)andthenumberoffull‐time,seasonalemployees

awineryhas(r=0.2146,p=0.0279).Thesetwocorrelationsindicatethatwineriesthatusemore

writtencontractswhenbuyinggrapesarerelatedtowineriesthathaveanincreasingnumberof

full‐timeemployees.

Relationship5:Firmswhooutsourcetheirwineries’winemakinghaveastrong,positive

correlationwiththeeightlegitimacyindicators.

Winemaking 

99

Table 30: Two Sample T‐Test with Unequal Variances for Differences in Mean for Firms that 

Outsource Winemaking 

Variable  Mean Full‐time,yearroundemployees 3.65625Full‐time,seasonalemployees 3.84375*Percentofwinevolumesoldthroughaliquorstore 4.865625*Percentofwinesoldtoarestaurant 1.7875Percentsoldthroughadistributor 9.371875

Atwo‐sample,independentt‐testshowedthosefirmsthatoutsourcetheirwinemakinghire

morefull‐time,seasonalemployees(M=3.8438,SD=7.5993)thanthefirmsthatdoalltheirown

winemaking(M=1.2963,SD=2.045),t(34.6367)=‐1.8438,p=0.0738.Interestingly,ofthethree

distributionchannelsthatwerant‐testsagainstifafirmoutsourcestheirwinemaking,theonly

significantdistributionchannelwasthepercentofwinevolumeawinerysellsdirecttoaliquor

store,comparedtothosewineriesthatdonotoutsourcetheirwinemaking(M=8.9038,

SD=14.8370),t(94.5422)=1.7701,p=0.0799.

Table 31: Contingency Table Between Firms that Outsource Winemaking and Firms that have 

an Arrangement with a Tour Bus Company 

  Outsource winemaking Arrangement with tour bus company  No  Yes 

Total 

No 59 15 74Yes 21 17 38Total  80 32 112

Asignificantcorrelationexistsbetweenwhetherawineryoutsourcestheirwinemakingand

whetherthewineryhasanarrangementwithatourbuscompany,chi‐

square(1,N=112)=7.3644,p=0.007.Thisfindingwassurprising,howeveroutsourcingthe

100

winemakingmeansawineryisinteractingwithsomeoneoutsidethefirmwhichcouldleadtoa

networkexpansionthatcouldincludegainingaccessandbuildingarelationshipwithatourbus

company.

Table 32: Contingency Table Between Firms that Outsource Winemaking and Firms that 

Obtain External Funding 

 Outsource winemaking 

Obtained external funding  No                     Yes Total 

47 9 56NoYes 34 23 57Total  81 32 113

Asignificantcorrelationexistsbetweenawinerythatoutsourcestheirfirm’swinemakingand

whetherthefirmobtainsexternalfinancingornot,chi‐square(1,N=113)=8.2032,p=0.004.This

findingcouldbefromexternalfundersviewingtheoutsourcingofasignificantcosttothefirm,

winemaking,aspositiveorasanindicatoroflegitimacythatthewineryisworkingwithaskilled

orestablishedwinemakerthereforepotentiallyincreasingthepotentialsuccessofthenew

firm.However,outsourcingthewinemakingcouldalsobeariskforthewineryiftheywinery

developsareputationbasedonthestyleorreputationofaspecificwinemaker.Awinerycould

reducethisriskthroughhavingaformalcontractwiththewinemaker.Further,indeveloping

wineregions,ahigherpercentageofwineriesoftensharethesamewinemaker.

Relationship6:Firmsthatderiveahigherpercentageoftheirgrossrevenuefromwinesales

onlycorrelatenegativelywiththelegitimacyindicators.Further,firmsthathaveahigh

percentageofinstatesaleshaveanegativerelationshipwiththelegitimacyindicators.Firms

101

withahighpercentageofsalesoutsidetheirwinery’shomestatehaveastrong,positive

correlationwiththelegitimacyindicators.

Wine sales 

Table 33: Correlation Results of the Percent of Winery’s 2011 Gross Revenue from Wine Sales 

Only 

Variable  Covariance Full‐time,yearroundemployees ‐0.049Full‐time,seasonalemployees ‐0.1448Percentofwinevolumesoldthroughaliquorstore 0.1854**Percentofwinesoldtoarestaurant 0.0065Percentsoldthroughadistributor 0.0618Arrangementwithatourbuscompany ‐0.1567Receivedexternalfunding ‐0.0875Largetradingnetwork 0.0112   

Wineriesprovidedthepercentoftheirgrossrevenuethatisfromwinesalesonly:thisvariable

onlycorrelatedwithonevariable.Aweak,positiverelationshipexistsbetweenthepercentof

totalwinesalessoldthroughaliquorstoreandpercentofgrossrevenuefromwinesalesonly

(r=0.1854,p=0.0560).Thereforeshowingthatasthepercentofgrossrevenuefromwinesales

increases,thepercentofwinevolumesolddirecttoaliquorstoreisalsoincreasing.Finally,we

weresurprisedthatnoothercorrelationsexistedwiththisvariable,sinceanincreaseinthe

percentofgrossrevenuefromwinesalesonlycouldmeananincreaseintheproductionof

wineleadingtoagreaterneedformoreemployeesormorewinebeingdistributedoutsidethe

winery’stastingroomtorestaurantsorthroughdistributors.

In‐state sales 

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Table 34: Correlation Results of Firms’ Percent of In‐State Sales 

Variable  Covariance Full‐time,yearroundemployees ‐0.3647***Full‐time,seasonalemployees ‐0.2061**Percentofwinevolumesoldthroughaliquorstore 0.0703Percentofwinesoldtoarestaurant 0.0555Percentsoldthroughadistributor ‐0.3629***Arrangementwithatourbuscompany ‐0.2376**Receivedexternalfunding ‐0.1910**Largetradingnetwork ‐0.1481

Thepercentofawinery’sin‐statesalescorrelatedwithfivevariables.Amoderate,negative

correlationexistsbetweenthewineries’in‐statesalesandthenumberoffull‐timeemployeesa

wineryemploys(r=‐0.3647,p=0.0001).Thisfindingcouldbeexplainedbyasthepercentofin‐

statesalesdecreases,thenumberoffull‐time,yearroundemployeesincreases,thiscouldbe

duetoincreasingoutofstatesaleswhichmayrequiremoreemployeestoassistwithgrowing

thegrapes,producingthewineandestablishingandfacilitatingoutofstatesales.Thesecond

moderate,negativecorrelationiswiththepercentofwinesalessoldthroughadistributor(r=‐

0.3629,p=0.0001).Thismeansadecreaseintheamountofin‐statesalesisrelatedtoan

increaseinthepercentofwinesalessoldthroughdistributors,thiscanbeexplainedbya

winerypotentiallyworkingwitharegionaldistributorwhocouldhelpthewineryincreaseits

distributiontomorechannelsoutsidethewinery’shomestate.

Aweak,negativerelationshipexistsbetweenthepercentofin‐statesalesandwhetherawinery

hasarelationshipwithatourbuscompany(r=‐0.2376,p=0.0120).Therefore,wineriesthat

haveanarrangementwithatourbuscompanyareoftenassociatedwithhavingalower

percentoftheirsalesfrominstate.Thesecondnegative,weakrelationshipisbetweenthe

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percentofin‐statesalesandthenumberoffull‐time,seasonalemployeesawineryhires(r=‐

0.2061,p=0.0300).Therefore,anassociationexistsbetweenadecreaseinthepercentofin‐

statesalesandanincreaseinthenumberoffull‐time,seasonalemployeesawineryhires.The

finalweak,negativecorrelationiswiththewhetherthewineryhasobtainedexternalfunding

(r=‐0.1910,p<0.0446).Therefore,wineriesthathaveexternalfundingareassociatedwith

havingalowerpercentoftheirsalesfrominstate,insidethewinery’shomestate.

Out‐of‐state sales 

Table 35: Correlation Results of Firms’ Percent of Out‐of‐State Sales 

Variable  Covariance Full‐time,yearroundemployees 0.3713***Full‐time,seasonalemployees 0.2111**Percentofwinevolumesoldthroughaliquorstore ‐0.0699Percentofwinesoldtoarestaurant ‐0.0574Percentsoldthroughadistributor 0.3635***Arrangementwithatourbuscompany 0.2370**Receivedexternalfunding 0.1919**Largetradingnetwork 0.144

Similartothepercentofin‐statesales,fivevariablescorrelatewiththepercentofawinery’s

out‐of‐statesales,however;unlikein‐statesales,thesamevariablesarepositivelycorrelated

without‐of‐statesales.Amoderate,positivecorrelationexistswiththenumberoffull‐time,

yearroundemployeesawineryhires(r=0.3713,p=0.0001).Therefore,anincreaseinthe

percentofsalesawinerysellsoutsidetheirhomestateisrelatedtoanincreaseinthenumber

offull‐time,yearroundemployeesthewineryhires.Thesecondvariablethatsharesa

moderate,positivecorrelationisthepercentofwinevolumesoldthroughdistributors

(r=0.3629,p=0.0001).Thisisunderstandable,sinceoftentimesawinerywillworkwitha

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distributortohelpincreasetheirdistributionnetworktooutsidethewinery’shomestate.So,

wineriesthatworkwithadistributorareassociatedwithsellingmorewineoutsidetheirhome

state.

Threeweak,positivecorrelationsexistbetweenthepercentofout‐of‐statesales.Thefirstis

thosewineriesthathaveanarrangementwithatourbuscompany(r=0.2370,p=0.0123).

Wineriesthathaveanarrangementwithatourbuscompanyareassociatedwithhavingan

increasingpercentofthewinesalesfromoutofstate,outsidethewinery’shomestate.The

secondweak,positivecorrelationisbetweenthenumberoffull‐time,seasonalemployees

(r=0.2111,p<0.0262),thereforeanassociationexistsbetweenanincreasingpercentofout‐of‐

statesalesandanincreaseinthenumberoffull‐time,seasonalemployeesawineryhires.The

thirdcorrelationisamongthosewineriesthathaveexternalfunding(r=0.1919,p<0.0436).

Therefore,winerieswithexternalfundingareassociatedwithhavingagreaterpercentageof

theirsalesfromoutsidetheirstate.Finally,oneweak,positivecorrelationwasfoundbetween

thosewinerieswithanincreasingpercentageofsalesoutsidetheU.S.andthosewinerieswith

anincreasingpercentageoftheirwinevolumebeingsoldthroughdistributors(r=0.1778,

p=0.0644).

Relationship7:Firmsthatsellahighpercentageoftheirtotalwinevolumeattheirwineryhave

astrong,negativecorrelationwiththelegitimacyindicators.

Distributionchannels

Thesurveyaskedwineriestosumthepercentoftheirwinevolumesoldthrougheightdifferent

distributionchannelsto100percent,thefollowingarethedistributionchannelslistedonthe

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survey,atthewinery,toaliquorstore,toarestaurant,throughadistributor,throughdirect

mail,atfestivalsorother.Correlationswereconductedtoseeifrelationshipsexistbetween

thosesevendistributionchannelsandtheeightvariablesofinterest,listedbelowarethe

significantcorrelationsfound.

Table 36: Correlation Results of Firms’ Percent of Total Wine Volume Sold through 

Distribution Channels 

Variables 

Number of full‐time, year round employees 

Number of full‐time, seasonal employees 

Wine volume sold direct to liquor store (%) 

Wine volume sold direct to restaurant (%) 

Wine volume sold through distributor (%) 

Atthewinery ‐0.1949** ‐0.1061 ‐0.4561*** ‐0.3616*** ‐0.4487***Farmersmarket ‐0.0642 ‐0.0896 0.0379 0.0355 ‐0.0896Directmail 0.1385 0.1178 ‐0.1177 0.0075 0.2195**Festivalsorcommunityevents

‐0.0258 0.0003 0.1361 0.0835 ‐0.0899

Other 0.0308 ‐0.0375 ‐0.0920 ‐0.0487 ‐0.0626

NOTE:***=significantlydifferentat1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentat10%significancelevel 

Regulationscanalsodeterminewhichdistributionchannelawinerysellsthroughsince

regulationscanoftenincludewinerieshavingtoobtainpermitsorpayfees.InMichigan,

wineriescanofferfreesamplesorchargeforsamplesbutarerestrictedattheirfacilitywhere

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winecanbeserved.Forexample,Michiganwineriescanonlyserveglassesofwineina

restaurantthatis“ownedbytheWineMakerorSmallWineMakerorisleasedtoanother

person,”(MLCC,p.2).Additionally,allglassesofwinesoldmustbewinemadebythewinery.

AccordingtoaMissourialcoholandtobaccoagent,wineriesthathaveadomesticwinery

permit,whichmeansthosefirmsthatselllessthan500,000gallonsayearofwine,cansellany

alcoholicproductsfromtheirownwineryorotheralcoholproducersintheirtastingroom.

Further,domesticwineriesareabletoselloutsideMissouriandcanselldirecttoconsumers,

retailersandwholesalers.Theagentsuggeststhatnewfirms’challengetosellthroughformal

distributionchannelsisnotduetoregulations,sayingthatthepossibilitiesfordomestic

wineriesis“wideopen.”

Percent of wine volume sold at the winery 

Table 37: Correlation Results of Firms’ Percent of Wine Volume Sold at the Winery  

Variable  Covariance Full‐time,yearroundemployees ‐0.1949**Full‐time,seasonalemployees ‐0.1061Percentofwinevolumesoldthroughaliquorstore ‐0.4561***Percentofwinesoldtoarestaurant ‐0.3616***Percentsoldthroughadistributor ‐0.4487***Arrangementwithatourbuscompany ‐0.044Receivedexternalfunding 0.1085Largetradingnetwork ‐0.0898   

Fourvariablesnegativelycorrelatewiththepercentofwinevolumeawinerysellsattheir

winery(i.e.inatastingroom,giftshop,etc.).First,amoderatetostrong,negativecorrelation

existsbetweenthepercentofwinevolumesoldatthewineryandthepercentofwinevolume

solddirecttoaliquorstore(r=‐0.4561,p=0.0000),meaningadecreaseinthepercentofwine

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volumesoldatthewineryisrelatedtoanincreaseinthepercentofwinevolumeawinerysells

directtoaliquorstore.Next,anothermoderatetostrong,negativecorrelationispresented

betweenthepercentofwinevolumesoldatawineryandthepercentofwinevolumesold

throughdistributors(r=‐0.4487,p=0.0000).Finally,amoderate,negativecorrelationexists

betweenthepercentofwinevolumesoldatthewineryandthepercentofwinevolumesoldto

arestaurant(r=‐0.3616,p=0.0001).Therelationshipsofthesethreedistributionchannelsand

thepercentofwinesoldatthewineryaresimilarsinceallnegative,leadingtoaninverse

relationshipwiththepercentofwinesoldatawinery.

Oneweak,negativerelationshipexistsbetweenthepercentofwinevolumesoldatthewinery

andthenumberoffull‐time,yearroundemployeesawineryemploys(r=‐0.1949,p=0.0413).

Percent of wine volume sold direct to a liquor store 

Table 38: Correlation Results of Firms’ Percent of Wine Volume Sold Direct to a Liquor Store 

Variable  Covariance Full‐time,yearroundemployees ‐0.1192Full‐time,seasonalemployees ‐0.1595*Percentofwinevolumesoldthroughaliquorstore 1.0000***Percentofwinesoldtoarestaurant 0.3736***Percentsoldthroughadistributor ‐0.1892**Arrangementwithatourbuscompany ‐0.1539Receivedexternalfunding ‐0.113Largetradingnetwork ‐0.0401Note:***=significantlydifferentatthe1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentatthe10%significancelevel

 

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Threevariablescorrelatewiththepercentofwinevolumeawinerysellsdirecttoaliquorstore.

First,amoderate,positivecorrelationispresentbetweenthepercentofwinevolumeawinery

sellstoaliquorstoreandthepercentofwinevolumethewinerysellstoarestaurant(r=0.3726,

p=0.0001).Therefore,apercentincreaseinthesetwodistributionchannelsisrelated.An

importantnote,acomparisoncanbefoundbetweenthismoderateandpositivecorrelationto

thepercentofwinevolumesoldtoarestaurantandtothepreviouscorrelation,wherea

moderatebutnegativecorrelationwasfoundbetweenthepercentofwinevolumesoldtoa

restaurantandthepercentofwinevolumesoldatthewinery.Insummary,thepercentofwine

volumesoldatthewineryandtoarestauranthavearenegativelycorrelatedwhereasan

increaseinthepercentofwinevolumesoldtoaliquorstoreisrelatedtoanincreaseinthe

winevolumesoldtoarestaurant.

Thepercentofwinevolumesoldtoaliquorstoreandthepercentofwinevolumesoldthrough

distributorshasaweak,negativecorrelation(r=‐1892,p=0.0477).Thisshowsanassociation

betweenadecreaseinthepercentofwinevolumesoldthroughaliquorstoreandanincrease

inthepercentofwinevolumesoldthroughdistributors.

Anothervariablesharesaweak,negativecorrelationwiththepercentofwinevolumesoldtoa

liquorstore,thenumberoffull‐time,yearroundemployeesawineryhires(r=‐0.1595,

p=0.0960).Thiscorrelationshowsadecreaseinthepercentofwinevolumesoldthrougha

liquorstoreisrelatedtoanincreaseinthenumberoffull‐time,yearroundemployeesawinery

has.Thecorrelationresultissurprising,onepossiblereasoningcouldbethatthewineryis

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sellingmorevolumethroughitstastingroomthereforetheyneedmorefull‐time,yearround

employeestomanagetheirtastingroom.

Percent of wine volume sold through distributors 

Table 39: Correlation Results of Firms’ Percent of Wine Volume Sold through Distributors 

Variable  Covariance Full‐time,yearroundemployees 0.4291***Full‐time,seasonalemployees 0.3833***Percentofwinevolumesoldthroughaliquorstore ‐0.1892**Percentofwinesoldtoarestaurant ‐0.1069Arrangementwithatourbuscompany 0.1758*Receivedexternalfunding 0.2604***Largetradingnetwork 0.2288**       

Amoderatetostrong,positivecorrelationexistsbetweenthepercentofwinevolumesold

throughadistributorandthenumberoffull‐time,yearroundemployeesawineryemploys

(r=0.4291,p=0.0000).Asecondmoderate,positivecorrelationwasfoundbetweenthenumber

offull‐time,seasonalemployeesawineryhas(r=0.3833,p=0.0000).Thesetwofindingswere

expected,anassociationbetweenanincreaseinthepercentofwinevolumesoldthrough

distributorsandanincreaseinthenumberoffull‐timeemployeesawineryhasbecauseoften

toworkwithdistributors,wineriesneedtobeproducingaconsistentandoftenhighvolumeof

winetosupportthevolumeneedsofthealcoholdistributors.Additionally,accordingtoMark

Esterman,winebuyeratMeijerGrocery,distributorsaremorelikelytoworkwithawineryif

theyhaveatastingroomthereforerequiringstafftooperateandmanageatastingroom

experienceforconsumers.

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Aweak,positivecorrelationexistsbetweenthepercentofwinevolumesoldthrough

distributorsandthosewinerieswithalargetradingnetwork(r=0.2288,p=0.0167).Thisfinding

wasexpected;wineriesthathavealargetradingnetworkareassociatedwithsellingahigh

percentageofwinevolumethroughdistributors.

Thesecondcorrelationisalsoweakbutnegativewiththepercentofwinevolumesoldthrough

distributorsandthepercentofwinevolumesolddirecttoaliquorstore(r=‐.1892,p=0.0477).

Thecorrelationhasaninverserelationshipthereforethosewineriesthatselllessthrough

distributorsareassociatedwiththosewineriesthatsellagreaterpercentthroughaliquor

store.However,asstatedinanearliercorrelation,thisrelationshipcanbetheoppositewitha

winerythatsellslesstoaliquorstoreandonethatsellsmorethroughdistributors(r=‐0.1892,

p=0.0477).Thethirdcorrelationiswiththosewineriesthathaveanarrangementwithatour

buscompanyandthosethathaveanincreasingpercentoftheirwinevolumesoldthrough

distributors(r=0.1758,p<0.0662).Therefore,wineriesthathaveanarrangementwithatour

buscompanyareassociatedwithsellingagreaterpercentageofwinethroughdistributors.

Relationship8:Firmsthatchargemorefortheirwinehaveastrong,positivecorrelationwith

thelegitimacyindicators.

 Wine pricing 

 

 

 

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Table 40: Correlation Results of Firms’ Average Prices of their Highest, Lowest and Top Selling 

Wines 

Covariance 

Variable Highest priced 

Lowest priced 

Top selling 

Full‐time,yearroundemployees 0.151 ‐0.1242 ‐0.1433Full‐time,seasonalemployees 0.5504*** 0.0701 0.1531Percentofwinevolumesoldthroughaliquorstore ‐0.2240** ‐0.1421 ‐0.1794*Percentofwinesoldtoarestaurant 0.0313 0.0974 0.1474Percentsoldthroughadistributor 0.3476*** ‐0.1606* ‐0.0791Arrangementwithatourbuscompany 0.3433*** 0.0657 0.0816Receivedexternalfunding 0.3250*** ‐0.1069 ‐0.0425Largetradingnetwork ‐0.0789 ‐0.024 ‐0.0058NOTE:***=significantlydifferentat1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentat10%significancelevel

 

Price of wineries’ highest priced wine 

Astrong,positivecorrelationexistsbetweenthecostofwineries’highestpricedwineandthe

numberoffull‐time,seasonalemployeesawineryemploys,(r=0.5504,p=0.0000).This

correlationhighlightsarelationshipbetweenahigherpricedwineandanincreasingnumberof

full‐time,seasonalemployeesthatawineryemploys.

Amoderate,positiverelationshipexistsbetweenthecostofawinery’shighestpricedwineand

thepercentofwinesoldthroughdistributors,whetherthewineryhasanarrangementwitha

tourbuscompanyandifthewineryhasobtainedexternalfunding.Thecorrelationbetweenthe

percentofwinesoldthroughdistributors(r=0.3476,p=0.0002),revealsthathavingahigh

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pricedwinecorrelateswithanincreasingpercentofwinebeingsoldthroughdistributors.

Secondly,acorrelationexistsbetweenawinerythathasanarrangementwithatourbus

companyandawinerywithanincreasinglyhighpricedwine(r=0.3433,p=0.0002).Thethird

moderatelystrong,positivecorrelationisbetweenawinerythathasexternalfundingandthe

increasingcostofawinery’shighestpricedwine,(r=0.3250,p=0.0005).

Finally,oneweak,negativecorrelationexistsbetweenthecostofawinery’shighestpriced

wineandthepercentofwinesolddirecttoaliquorstore,(r=‐0.2240,p=0.0186).Therefore,a

winerythathasalowerpriceofitshighestpricedwineiscorrelatedwithawinerythatsellsa

higherpercentageofitswinesalesdirecttoaliquorstore.

Price of wineries’ lowest priced wine 

Onlyonevariablecorrelatedwiththevaluesofawinery’slowestpricedwine.Thepercentof

winesoldthroughdistributorshasaweakandnegativerelationshipwiththecostofawinery’s

lowestpricedwine(r=‐0.1606,p=0.0937).Thisfindingisinterestingbecauseofitsnegativesign,

statingthataninverserelationshipexistsbetweenthetwovariables,soawinerythatincreases

theirlowestpricedwineisassociatedwithadecreasingpercentoftheirwinebeingsold

throughdistributors.Finally,weanticipatedseeingcorrelationsamongtheothertwo

distributionchannelsofinterest.

Price of a wineries top selling wine 

Again,onlyonevariablecorrelatedwiththepriceofthewineries’topsellingwineandeightof

thevariablesofinterest.Aweak,negativerelationshipexistswiththepercentoftotalwine

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volumesoldthroughaliquorstore(r=‐0.1794,p=0.0608).Therefore,arelationshipexists

betweenthepriceofawineries’topsellingwinedecreasing,thetotalwinevolumesolddirect

toaliquorstoreincreasing,however;becausethisisonlyacorrelationwecannotsaythatone

affectstheother,simplythetwovariablesarerelated.

Relationship9:Firmsthathavewonawardshaveastrong,positivecorrelationwiththe

legitimacyindicators.

Awards 

Table 41: Correlation Results of Firms that Won Awards from Wine Competitions  

Variable  Mean Full‐time,yearroundemployees 4.519481**Full‐time,seasonalemployees 2.454545Percentofwinevolumesoldthroughaliquorstore 7.713158Percentofwinesoldtoarestaurant 1.956579Percentsoldthroughadistributor 10.41579***

 

Wine competitions 

Atwo‐sample,independentt‐testshowedthewinerieswhowonawinecompetitionaward

hiremorefull‐time,yearroundemployees(M=4.5195,SD=11.2069)thanthosewinerieswho

havenotwonanaward(M=1.0833,SD=1.842),t(84.4243)=‐2.6160,p=0.0105.Asexpected,the

winerieswhowonanawardfromawinecompetitionsellahigherpercentageoftheirtotal

winevolumethroughdistributors(M=10.4158,SD=18.652)thanthosewineriesthathavenot

wonanaward(M=0.6471,SD=2.058),t(79.0027)=‐4.5040.However,thequestionaskswineries

114

iftheyhavewonanawardfromawinecompetition,sowhetherawineryhasevenentereda

winecompetitionisunknown.

Table 42: Contingency Table Between Firms that Won an Award from a Wine Competition 

and Firms that have an Arrangement with a Tour Bus Company 

 Won wine 

competition award Arrangement with tour bus company  No  Yes 

Total 

No 29 45 74Yes 6 32 38Total 35 77 112

Achi‐squaretestshowsthatwinerieswhohavewonwinecompetitionsarecorrelatedwith

havinganarrangementwithatourbuscompany,chi‐square(1,N=112)=6.3988,p=0.011.The

resultsshowthat58percentwineriesthatwonanawardfromawinecompetitionwerenot

morelikelytohaveanarrangementwithatourbuscompany.

Table 43: Contingency Table Between Firms that Won an Award from a Wine Competition 

and Firms that have Obtained External Funding 

 Won wine 

competition award Obtained external funding  No  Yes 

Total 

No 24 32 56Yes 12 45 57Total  36 77 113

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Achi‐squaretestshowsthatwinerieswhohavewonwinecompetitionsarecorrelatedwith

havingobtainedexternalfunding,chi‐square,chi‐square(1,N=113)=6.1864,p=0.013.Wineries

thatwonanawardfromawinecompetitionweremorelikelytoobtainexternalfunding.

Trade Press Award 

Table 44: Correlation Results of Firms that Won a Trade Press Award   

Variable  Mean Full‐time,yearroundemployees 6.818182**Full‐time,seasonalemployees 4.113636***Percentofwinevolumesoldthroughaliquorstore 6.055814Percentofwinesoldtoarestaurant 2.539535Percentsoldthroughadistributor 14.87442*** 

Throughconductingtwo‐sample,independentt‐tests,resultsshowedthosewineriesthathave

wonatradepressawardemploymorefull‐time,yearroundandseasonalemployeesthanthe

wineriesthathavenotwonatradepressaward.Thewinningwinerieshiredmorefull‐time,

yearroundemployees(M=6.8182,SD=14.2963)thanthosenotwinningwineries(M=1.2609,

SD=2.2206),t(44.3266)=‐2.5589,p=0.0140.Inadditionwinningwinerieshiredmorefull‐time,

seasonalemployees(M=4.1136,SD=6.9088)thanthewineriesthatdidnotwinthesameaward

(M=0.68116,SD=1.8981),t(47.1699)=‐3.2190,p=0.0023.

Wineriesthathavewonatradepressawardsellagreaterpercentoftheirwinevolumethrough

distributors(M=14.8744,SD=19.6852)thanthosewineriesthathavenotwonanaward

(M=2.5970,SD=11.1886),t(59.591)=‐3.7221,p=0.0004.

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Table 45: Contingency Table Between Firms that Won a Trade Press Award and Firms that 

have an Arrangement with a Tour Bus Company 

Additionally,asignificantcorrelationexistsbetweenthosewineriesthathavewonatradepress

awardandwhetherthewinerieshaveanarrangementwithatourbuscompany,chi‐

square(1)=8.3501,p=0.004.

Table 46: Contingency Table Between Firms that Won a Trade Press Award and Firms that 

Obtained External Funding 

Finally,asignificantcorrelationexistsbetweenwineriesthathavewonatradepressawardand

whetherthewineryobtainsexternalfunding,chi‐square(1)=6.8955,p‐value=0.009.No

significantfindingswerefoundbetweenawinerythatwinsatradepressawardandhavinga

largetradingnetwork.

  Won trade press award Arrangement with tour bus company  No  Yes 

Total 

No 52 22 74Yes 26 22 38Total  68 44 112

 Won trade press 

award Obtained external funding  No  Yes 

Total 

No 41 15 56Yes 28 29 57Total  69 44 113

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Relationship10:Firmsthatutilizenewformsofmediahaveastrong,positiverelationshipwith

thelegitimacyindicators,inthissurveynewmediaincludes.Firmsthatusetraditionalformsof

mediahavenegativerelationshipwiththelegitimacyindicators.

Table 47: Two Sample T‐Tests with Unequal Variances Results of Promotional Activities Firms 

Use 

Variables 

Number of full‐time, year round employees 

Number of full‐time, seasonal employees 

Wine volume sold direct to liquor stores (%) 

Wine volume sold direct to restaurants (%) 

Wine volume sold through distributors (%) 

Promotionsforreturningcustomers

4.82456

2.5088

5.1554**

1.7268

8.9929

Customerdatabase

4.4744***

2.5128**

6.0442

3.0807

9.8779***

Clubpromotions

4.7826

4.02174***

5.26*

1.8156 11.9311**Newsletter 5.2951** 2.5574

6.8254

2.3848

9.7390*

Socialmedia

3.8557***

2.1237

7.5547

2.5653**

8.4905***

Volumediscounts

3.5648***

2.1111***

7.5962

1.9359

7.6566***

Other 11.5333

3.9333

6.000

2.7857

9.55

NOTE:***=significantlydifferentat1%significancelevel

**=significantlydifferentatthe5%significancelevel

118

*=significantlydifferentat10%significancelevel

Throughconductingtwo‐sample,independentt‐testsandchi‐squaretestsresultsshowedclub

promotionsasbeingthemostsignificantacrossalleightlegitimacyindicators.Thewineriesthat

offerclubpromotionshiremorefull,timeseasonalemployees,andsellahigherpercentageof

theirtotalwinevolumethroughliquorstoresanddistributors.

Thenexthighlycorrelatedpromotionalactivitywassocialmedia(i.e.FacebookandTwitter).

Wineriesthatusesocialmediaarecorrelatedwithhiringmorefull‐time,yearroundemployees,

andsellinganincreasingpercentageoftheirtotalwinevolumethroughrestaurantsand

distributors.First,wineriesthatusesocialmediaareassociatedwithhiringmorefull‐time,year

roundemployees(M=3.86,SD=10.11)thanwineriesthatdonotusesocialmedia(M=0.929,

SD=1.27),t(108.5)=‐2.71,p=0.0079.Second,wineriesthatusesocialmediaarecorrelatedwith

sellinganincreasingpercentoftheirtotalwinevolumethroughrestaurants(M=2.57,SD=5.52)

thanwineriesthatdonotusesocialmedia(M=0.964,SD=1.84),t(56.4)=‐2.13.Thisresultwas

expected,associalmediacancreateawarenessquicklyaboutabrandandserveasatoolto

interactwithotherbrandsorsupportingindustrieslikerestaurants.Thethirdcorrelationis

betweenthosewineriesthatusesocialmediasellahigherpercentageoftheirtotalwine

volumethroughdistributors(M=8.49,SD=17.14)thanwineriesthatdonotusesocialmedia

(M=0.5,SD=1.24),t(100.74)=‐4.45.

Asurprisingfindingwaswineriesthatusenewsletterswaspositivelycorrelatedwithtwoofthe

legitimacyindicators,weanticipatedthistraditionalmediaformtobenegativelycorrelated

withseveraloftheindicators.First,wineriesthatusenewslettershiremorefull‐time,year

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roundemployees(M=5.30,SD=12.45)thanthosethatdonotcreatenewsletters(M=1.25,

SD=1.91),t(63.35)=‐2.50.Second,andthemostsurprisingfinding,wineriesthatcreate

newsletterssellagreaterpercentageoftheirtotalwinevolumethroughdistributors(M=9.74,

SD=17.6)thanwineriesthatdonotusenewsletters(M=4.69,SD=14.01),t(107.32)=‐1.67.

Table 48: Chi‐Square Results of Promotional Activities Firms Use 

Variables Arrangement with tour bus company 

Obtained external funding 

Large trading network 

Promotionsforreturningcustomers

7.0704***

9.1283***

2.0360

120

Table 48 (Cont’d):  

Customerdatabase 0.2824

1.2589

1.4063

Clubpromotions 3.1756** 6.4090** 0.2164

Website 0.5181

1.0457

0.9911

Newsletter 0.0148

5.1090**

2.0744

Socialmedia 0.0156

8.8105***

0.3274

Volumediscounts 0.1475

1.1128

0.0003

Other 1.2536

0.1238

0.0993

NOTE:***=significantlydifferentat1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentat10%significancelevel

Asignificantrelationshipexistsbetweenwineriesthatofferpromotionsforreturningcustomers

andhavinganarrangementwithatourbuscompany,chi‐square(1)=7.0704,p‐value=0.008.A

significantrelationshipexistsbetweenwineriesthatofferpromotionsforreturningcustomers

andobtainingexternalfunding,chi‐square(1)=9.1283,p‐value=0.003.

Asignificantrelationshipexistsbetweenwineriesthatofferclubpromotionsandhavean

arrangementwithatourbuscompany,chi‐square(1)=3.1756,p‐value=0.075.Asignificant

relationshipexistsbetweenwineriesthatofferclubpromotionsandobtainingexternalfunding,

chi‐square(1)=6.4090,p‐value=0.011.

Asignificantrelationshipexistsbetweenwineriesthathavenewslettersandfirmsthatobtained

externalfunding,chi‐square(1)=5.1090,p‐value=0.024.Thisfindingwassincenewslettersare

associatedwithbeingatraditional,anoldertypeofmedia.Further,insteadofsendingout

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monthlyupdatesmanywineriesandbusinesseschoosetoupdatedailyorweeklythrough

socialmediaoutlets.Inaddition,printingandmailingnewsletterisoftenquitecostlyfor

businesses,however,thisnewslettercouldbesentthroughemailbutthisinformationwasnot

collectedinoursurvey.

Asignificantrelationshipexistsbetweenwineriesthatusesocialmediaandobtainingexternal

funding,chi‐square(1)=5.1090,p‐value=0.003.

Table 49: Contingency Table Between Firms that use Social Media and Obtain External 

Funding 

 Utilizes social 

media Obtained external funding  No  Yes 

Total 

No 12 42 54Yes 2 55 57Total  14 97 111

Pearsonchi2(1)=8.8105,P‐Value=0.003

NOTE:***=significantlydifferentat1%significancelevel

**=significantlydifferentatthe5%significancelevel

*=significantlydifferentat10%significancelevel

 

Thechi‐squareresultshowsthatasignificantrelationshipexistsbetweenthosewineriesthat

usesocialmediaandthosethatdonotandthelikelihoodthatawineryobtainsexternal

funding.Thecontingencytableaboverevealsthat57percentofthewineriesthatusesocial

mediaobtainedexternalfunding.However,another43percentofwineriesalsousesocial

mediabutdidnotobtainexternalfunding.Weanticipatedahigherpercentageofthewineries

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thatusesocialmediatoobtainexternalfunding,insteadofthisresultsthatshowthegroups

arequitesimilar.

Table 50: Two Sample T‐Tests with Unequal Variances Results of Products and Services Firms 

Offer 

 Variable  Number of full‐time, year round employees 

Number of full‐time, seasonal employees 

Wine volume sold direct to liquor store (%) 

Wine volume sold direct to restaurant (%) 

Wine volume sold through distributors (%) 

Wineryand/orvineyardtours

4.0933

2.6267**

6.6904

2.5849

5.9945

Restaurant 6.6786

3.2857 3.2964***

2.1429

11.7036

Giftshop 4.1905**

2.3691*

7.3256

1.3866**

8.2512Offerfood

products4.6712**

2.7945***

7.3901 2.1366

9.3887*

Hostswineevents

4.1644

2.6438**

6.7264 1.6875

8.1347

Throughconductingtwo‐sample,independentt‐testswiththosewineriesthatofferfood

productsandtheeightindicatorsoflegitimacy,wefoundfivesignificantcorrelations.Wineries

whoofferfoodproductshiremorefull‐time,yearroundemployeesandmorefull‐time,

seasonalemployees.Inadditionwineriesthatofferfoodproductssellahigherpercentageof

theirtotalwinevolumethroughdistributors.

Wineriesthathaveagiftshopcorrelatedamongfiveofthelegitimacyindicators.Winerieswith

giftshopsemploymorefull‐time,yearroundemployeesandfull‐time,seasonalemployees

123

thanwineriesthatdonothaveagiftshop.Inadditionwinerieswithgiftshopsareassociated

withsellingahigherpercentageoftheirtotalwinevolumethroughrestaurants.

Wineriesthathavearestaurantandtheeightindicatorsoflegitimacy,resultsshoweda

correlationwithoneofthelegitimacyindicatorsandwineriesthathavearestaurant.Wineries

withrestaurantsemploysellahigherpercentageoftheirtotalwinevolumethroughliquor

stores.

Finally,weanticipatedseeingwineriesthatoffertoursoftheirwineryorvineyardtocorrelate

withmoreofthelegitimacyindicatorsthanjustanincreaseinthenumberoffull‐time,seasonal

employeesawineryhires.

Table 51: Chi‐Square Results of Products or Services Firms Use 

   Arrangement with tour bus company 

Obtained external funding 

Large trading network 

Wineryand/ortours

0.4345 0.1098

0.0404

Restaurant 0.4780

6.5581***

1.905

Tastingroom ‐‐

1.0269

1.0090

Giftshop 2.6022

3.9750** 1.7143

Offerfoodproducts

6.8159***

13.0374*** 0.3541

Hostsevents 0.8744 2.7010

8.8514***

Asignificantrelationshipexistsbetweenwineriesthathavearestaurantandobtainingexternal

funding,chi‐square(1)=6.5581,p‐value=0.010.Inaddition,asignificantrelationshipexists

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betweenwineriesthathaveagiftshopandwineriesthatobtainexternalfunding,chi‐

square(1)=3.9750,p‐value=0.046.

Asignificantrelationshipexistsbetweenwineriesthatofferfoodproductsandhavingan

arrangementwithatourbuscompany,chi‐square(1)=6.8159,p‐value=0.009.Another

significantrelationshipexistswiththosewineriesthatofferfoodproductsandobtaining

externalfunding,chi‐square(1)=13.0374,p‐value=0.000.

Asignificantrelationshipexistsbetweenwineriesthathostevents(i.e.weddingsand

receptions)andhavingalargetradingnetwork,chi‐square(1)=8.8514,p‐value=0.003.This

resultwasanticipatedbecausehostingeventsofteninvolvescollaboratingwithother

supportingindustrieslikepartyplanners,caterers,tentcompaniesandpartyrentalcompanies.

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CHAPTER 5: DISCUSSION AND CONCLUSION 

 

Newfirmsneedtofirstobtainlegitimacyasaresourcetogainaccesstootherresourcescrucial

totheirsurvivalandgrowth.Throughthisstudy,weanalyzedhowwineries’managementand

marketingdecisionsaffectthenumberoflegitimacyindicatorsawineryobtains.Thebivariate

resultsindicatedthegreatestnumberofindicatorsonevariablecorrelatedwithwasfive.

Further,onlyeightvariablescorrelatedwithfivelegitimacyindicators.Further,onlythree

variablescorrelatedwithfourofthelegitimacyindicators.Finally,manyofourstudy’s

predictionsweresignificantleadingustoformdirectstrategiesfornascentfirmsoperatinga

developingindustry,andcontributetotheliteratureonlegitimacyanddevelopingwine

regions.

Interestingly,thenumberofyearsofexperienceawineryownerhasinthewineindustry,grape

productionorbusinessdoesnotrelatetoafirmobtainingfinancingorhavingalargetrading

network.Thiswassurprising,sincemuchofthepreviousliteraturesuggestsanownerwith

previousrelevantexperienceoftenassociateswiththesuccessofnewventure.Further,owners

withpreviousexperienceindifferentindustriesorthewineorgrapeindustrywould

presumablyhavealargenetwork.TorniskoskiandNewberg(2005)hadsimilarfindingsintheir

study,networkingbehaviorhadamuchlesssignificanteffectonemergingfactorsthan

anticipated.

Ouranalysisrevealedthatwineriesneedtofocusonincreasingproductionlevels(numberof

casesproducedannually)toincreasetheirabilitytoobtainlegitimacy.Unlikeotherlegitimacy

126

indicators,theageofthewinerydoesnotcorrelatewithobtainingexternalfunding,thisis

positivefornewfirmsseekingfunding.Further,producesasignificantpercentofwinefrom

viniferagrapescorrelatedwithfiveofthelegitimacyindicators.Interestingly,theprocurement

methodthatwineriesusetoobtaingrapesdidnotcorrelatewithobtainingexternalfunding.

Weanticipatedexternalfundersviewingformalcontractmethodsasthefirmbehavinglikean

establishedfirm.However,wineriesthatoutsourcesomepartoftheirwinemakingaremore

likelytoobtainexternalfunding.Throughin‐depthsinterviewswithlendersinandoutsidethe

emergingregioncouldhelptounderstandwhatfactorsexternalfundersdeemimportant.

Interestingly,wineriesthatdeclared,“bulkwine”asthemaininputcorrelatedwithsellingan

increasingpercentofwinethroughdistributors.Finally,akeyrelationshipwasrejectedwhen

using“other”(i.e.cherries,pecans,etc.),asthemaininputtoproducewinedidnotnegatively

correlatewithsellinganwinethroughdistributors.Surprisingly,increasingproductiondidnot

correlatewithanincreasingpercentageofwinesellingthroughrestaurantsorliquorstores.

Finally,informationislackingonwhatowners’idealvisionsarefortheirwinery,whichcould

offerinsighttohowfirmsandtheregionitselfviewslegitimacy,aswellasthegrowthand

successoftheirfirmandtheregion.Thisinformationcouldbegatheredthroughaskingwinery

ownersonafuturestudyiftheyhaveanidealnumberofcasestheyhopetoproduceandby

when,oraskingtheownersiftheywanttobecomeaboutiquestylewineryorawinerywith

large,nationaldistribution.

Wineriesthatuse“other”asthemaininputintheirwinearemorelikelytohavealargetrading

network.Inthisemergingwineregion,manywineriesmakewinefrommanyfruits,whichcould

127

requirealargenetworkofsuppliers.Thiswasconfirmedintheresultsthroughwineriesthat

growtheirowngrapescorrelatingnegativelywithhavingalargetradingnetwork.Surprisingly,

noneofthepromotionalactivitiesincludingsocialmediaorclubpromotionscorrelatedwith

winerieshavingalargetradingnetwork.

Further,themoreawinerychargesforitshighestpricedwinecorrelateswithawinery

obtainingkeylegitimacyindicators.Asexpected,themorewineafirmselloutsideitshome

statecorrelateswithahighernumberoflegitimacyindicatorsandsellingahigherpercentofin‐

statesalesnegativelycorrelatestoobtainingthosesamelegitimacyindicators.Wineriesshould

offerfoodproducts,clubpromotionsandhaveagiftshop.Further,firmsshouldusesocial

mediatopromotetheirfirm,socialmediacorrelatedwiththegreatestnumberofindicators.

Wineriesthatwanttosellthroughdistributorsneedtoproduceacertainamountofwine.In

futurestudies,surveyingdistributorswouldhelptounderstandexactlyhowmuchwineafirm

needstosupply.Intermsofproduction,wineriesthatusemoreviniferagrapesandgrapesas

themaininputintheirwinesoldmorewinethroughdistributors.Finally,insupportofour

relationship,wineriesthatproduceahighpercentoftheirwinefromhybridgrapessoldless

throughdistributors,andfurtherusinghybridgrapesdidnotcorrelatewithsellingwinethrough

liquorstoresorrestaurants.

Winninganaward,havingreturningcustomerpromotionsandclubpromotionsmayincrease

thelikelihoodofhavinganarrangementwithatourbuscompany.Again,awardsandthe

pricingofthewinecouldbethemeasurementsatourbuscompanyusesinselectingwhich

wineriesitwantstocollaboratewith.Weanticipatedthatafirmwhousessocialmediawould

128

bemorelikelytohaveanarrangementwithatourbuscompanybuttheresultsdonotsupport

thatrelationship.However,firmsthatofferfoodproductsaremorelikelytohavean

arrangementwithatourbuscompany. Surprisingly,nocorrelationwasfoundbetweenwineries

thathostevents.Weanticipatedaworkingrelationshipwiththewineriesandtourbus

companies.ThisalignswithCarlsen(2013)andHalletal.(1998)whichemphasizecompatibility

isimportanttoensurethattheexperienceofawineryvisitisnotcompromised,statingthat

somewineriesdonothavespaceforbusloadsofwinedrinkersandthereforesomewineries

areresistanttoevenhosttourbuseswithoutanappointment.

Wineriesthatwinawardsaremorelikelytoobtainexternalfunding.Therefore,wineriesshould

investinapplyingforawardsandadvertisetheirwinstocustomersandresourcegatekeepers. 

Whilehavingagiftshopandofferingfoodproductsisplausible,operatingarestaurantcanbe

quitedifferentthanrunningawinerytherefore,weweresurprisedbythestrongrelationship

betweenobtainingexternalfundingandhavingarestaurant.However,offeringtheseproducts

andservicesoftenhelpsbuildinterestinthewineryandhelpsconsumersconnectwiththe

wineryasdiscussedbyBrownandGetz(2005),“Therewillbeasearchforauthenticity,often

manifestedinseeingtheactualgrapes,physicalplant,andpersonnelthatproducefavored

wines,”(BrownandGetz,p.269). 

Weanticipatedolderwineriestohavealargetradingnetwork,however,overtimewineries

maybuymoreland,operatetheirownvineyardandstartverticallyintegratingmanyaspectsof

theirbusinessleadingthemtointeractlesswithothers.Thissamereasoningcouldalsoapplyto

increasesinproduction,aswineriesexpandtheymayestablishlong‐termcontractswiththe

129

samegrowersorgrowtheirowngrapes,andpotentiallyworkwithonedistributor,therefore

reducingtheirtradingnetwork.

Afewkeystrategiescanbesuggestedfortheregion.First,thesuccessoftheindividual

wineriesdependsonthesuccessoftheoverallregion;furtherlegitimizingtheregionmustbe

donefirstbeforewineriescanlegitimizetheirownfirm.“Thereforearegionalbrandismore

importanttonewwineriesandsmallbrandsthantolargewellknownbrands,”(McCutcheonet

al.,2013;JohnsonandBruwer,2007;Lockshinetal.,2006;VanZantenetal.,2003).Thisisakey

findingfortheregionthatnewerwineriesneedastrongregionalbrandmorethanwell‐known

wineriesandsincemoreestablishedfirmsmighthavemorepowerthiscouldbechallenging.

Table 52: Current Status of the Emerging Wine Region based on Easingwood (2006) model 

Variables  Emerging Wine Region 

Specializinginawinestyle Producingsignificantamountsofwine

Discussedbyopinionformers Consistentlyproduceshighqualitywines

Hasawineheritage Producesdistinctivewines Makeswinethatterroircanproduce

Note:AppliedEasingwood’s(2006)modelofkeyfeaturesthatdriveregionalityofawineregion

totheemergingwineregion

Whiletheemergingregionisnotproducingsignificantamountsofwine,thequalityofthewine

andpercentofviniferagrapesusedareincreasingaccordingtoMasterSommelierRon

Edwards.Further,viticultureexpertPaoloSabbitini,Ph.D.,findsthatwineriesthathavebeen

operatingfor30to40yearsdoa“portfolioswitch”fromsimplyproducingwinetopaytheir

130

billstoproducingwinethatbuildstheirwinery’sreputation.ThistransitioniswhatSabbitini

believesistheleadingcauseoftheincreasedplantingofviniferagrapesacrosstheregion.

Theemergingwineregionneedstoacknowledgeandfocusonproducingaflagshipvarietalto

increasetheregion’sreputationandrecognition.EdwardsandSabbitinibothagreeawinestyle

orflagshipvarietalislackingbutbothnotethisdecisionmaybestatebased.Easingwood(2006)

agreesthathavingaflagshipgrapeincreasesregionalitybutalsonotesthat,“italsohelpsifthe

wineisaresultofaparticularterroirsothatotherregionswillfindithardtoreplicatethewine

style,”(Easingwood,p.224).

Finally,theemergingwineregionmustchangeitsperceptionofbeingaserviceeconomytoan

experienceeconomy.AsGetzandBrown(2006)mentionwineriesinalmosteverygrowingarea

oftheworldcanproducehighqualitywinethereforeleadingconsumerstoeasilyswitchwines

sincetheoverallmessageisquality.Wineriesandsupportingindustriesinemergingwine

regionsneedtocollaborateandreinforcethesamemessageabouttheactivitiesthatwineries

offer,thequalityofthewineintheregionandtheculturalandrecreationalexperiencesthat

maketheregionanexcitingwinedestination.

Finally,weaddedtotheworkofNavisandGlynn(2006)onbuildingaproductcategory.Our

analysiscontributestotheresearchonthelegitimationofanewmarketcategorythrough

analyzingthefactorsinternaltothecategorylikethestrategicandsymbolicactionsofthefirms

andthefactorsexternaltothecategoryliketheresourcegatekeepersandlegitimizing

organizationswhojudgetheindividualfirmsandtheregion’scredibility,appropriatenessand

ultimatelyitslegitimacy.

131

Insummary,increasingthesurveyresponseratewouldincreasethevalidityoftheresultsand

offeramorecomprehensiveviewofthewineregion.Further,throughsurveyingthesame

winerieseveryfewyearswouldallowamorein‐depthanalysisoftheeffectsofthe

managementandmarketingstrategiesonthesuccessandlegitimacyoftheindividualfirmsand

theregion.Surveyingsupportingindustriescouldalsoofferinsightinhowthesekeyresource

gatekeepersperceivefirmsintheemergingregion,thiscouldoffermorestrengthandaccuracy

tothelegitimacyindicators.Overall,thefindingsfromthis2012surveyarehighlybeneficialto

wineryownerstounderstandhowotherwineriesareperformingandtogainperspectiveon

thedirectiontheregionisgoing.Finally,thisresearchwillalsoserveasaresourcefor

supportingindustriesandresourcegatekeeperstounderstandtherelationshipsofwineries’

strategiesanddifferentfactorsaswellanopportunitytohelpresourcegatekeepersmake

decisionsthatarelesssubjectiveandmoreobjectiveandinlinewithwineriesandtheregion’s

needstoobtainresourcesandultimatelyhelpfacilitategrowthandsuccessforboth.

Afewlimitationsexistinthisthesisresearch.First,thewineregionsinMichigan,Missouriand

NewYorkarearelativelysmallindustry,thereforewecouldincreasethesamplesize.In

surveyingthewineryownersagaininthefuture,afewquestionsshouldbeaddedtothesurvey

includingaskingtheownerswhattheirproductiongoalisinfiveyearsandwhatothergoalsthe

ownershavefortheirwineryinthefuture,i.e.selloutsidetheirhomestate,sellagreater

percentageoftotalwinevolumethroughdistributors,orincreasemarketingefforts,etc.The

thirdlimitationinthestudyisnocausationcanbeinferredmakingitdifficulttoinfer

recommendationstothewineryownersandtheindustrysincewedonothavecausaleffects.

Thefourthlimitationisthelackofalegitimacyindex,inthefuturethiswouldbenefitthe

132

researchfieldonlegitimacyandlegitimizingawineregion.Theideallegitimacyindexwould

collectdatathatwouldallowthewineriestothenberankedaslow,mediumorhighachievers

oflegitimacy.Finally,animportantlimitationisanadequatemodeloflegitimacyislackingand

crucialforfutureresearch.

Insummary,thegoalofthisthesiswastoanswerthefollowingquestions:Whatstrategiescan

firmsusetobuildlegitimacyandtherebygainaccesstokeyresourcescrucialtothefirm’s

survivalandgrowth?Aftercompletingathoroughreviewofpreviousliteratureonlegitimacy,

developingwineregions,collaborationandbuildingaregionalidentity,thispaperidentified

eightstrongindicatorsoflegitimacy.TheframeworkfollowedtheworkofZimmermanand

Zeitz(2002)andTorniksokiandNewbert(2007)categorizingtheindicatorsintofourcategories,

(1)hiringanemployee,(2)makingasale,(3)obtainingfinancingand(4)networking.Through

surveying113wineryownersintheemergingwineregion,wewereabletoconducta

comprehensivedescriptive,bivariateandmultivariateanalysisonthedatabetweenalleight

variablesandthemarketingandmanagementdecisionsofthewineries.Thepaperoffers

strategiesforwineriesandtheregiontobuildlegitimacyandthereforeuselegitimacyasa

resourcetoobtainotherkeyresourcescrucialtotheindividualfirms’andregion’ssuccessand

growth.

133

APPENDICES 

 

134

APPENDIX A 

 

Table 53: The continuous variables that correlated with the greatest number of legitimacy 

indicators at the 1, 5, 10 percent significant levels 

VARIABLE  1  2  3  4  5  6  7  8 

CORRELATION RESULTS  CHI‐SQUARE RESULTS 

Number of Years Winery has Commercially been Producing Wine and Number of Cases Produced in 2011

Yearsinbusiness

Casesproduced

Percent of Total Wine Production made from Vinifera, Hybrid, native American Grapes or Other (i.e. Cherries, Honey, Pecans, etc.)

%ofViniferagrapes ‐

%ofHybridgrapes ‐ ‐

%ofnativeAmericangrapes

%ofOther

Percent of Wine Bottled as Varietal, Blend or Other 

%ofoneVarietal

135

Table 53 (Cont’d): 

%ofBlends

%ofOther

Cost of Wineries’ Highest and Lowest Priced Wine and Top Selling Wine 

CostofHighestPricedWine ‐

CostofLowestPricedWine ‐

CostofTopSellingWine ‐

Percent of Gross Revenue from Wine Sales Only, Percent of Wine Sales from In‐State, Out of State and Outside the U.S. 

%GrossRevenuefromWineSales

%ofIn‐StateSales ‐ ‐ ‐ ‐ ‐

%ofOut‐of‐StateSales

%ofOut‐of‐CountrySales

Percent of Wine Volume Sold Through Various Distribution Channels 

Percent of Total Wine Volume Sold through Various Distribution Channels 

%SoldattheWinery ‐ ‐ ‐ ‐

136

Table 53 (Cont’d): 

%SoldatFarmersMarket

%SoldthroughDirectMail

%SoldthroughFestival ‐

%SoldthroughOther

Percent of Total Wine Volume Produced from Grapes, Grape Juice, Bulk Wine or Other 

%ProducedwithGrapes

%ProducedwithGrapeJuice

%ProducedwithBulkWine

%ProducedwithOther

Percent of Grapes Procured Using Different Strategies (Own vineyard, Spot/Cash Market (As Needed), Verbal (Handshake) Agreement or Through a Written Contract 

%viaOwnVineyard ‐

137

Table 53 (Cont’d): 

Note:1=Full‐Time,YearRoundEmployees,2=Full‐Time,SeasonalEmployees,3=WineVolume

SoldtoLiquorStores(%),4=WineVolumeSoldtoRestaurants(%),5=WineVolumeSold

%viaSpot/CashMkt

%viaVerbal/Handshake

%viaWrittenContract

Percent of Wine Production a Firm Outsources  

%ofWinemakingOutsourced

Owner Characteristics Including Prior Experience, Time Spent Working at Winery/Vineyard and Percent of Self Worth Invested in Winery

YearsinWineIndustry

YearsinBusiness ‐

YearsinGrapeIndustry

%TimeSpentatWinery

%SelfWorthInvestedinWinery

Owner’sAge

138

Table 53 (Cont’d): 

throughDistributors(%),6=ArrangementwithTourBusCompany,7=ReceivedExternal

Funding,and8=LargeTradingNetwork.

 

Table 54: The binary variables that correlated with the greatest number of legitimacy 

indicators at the 1, 5 and 10 percent significant levels

VARIABLE  1  2  3  4  5  6  7  8 T‐TEST RESULTS  CHI‐SQUARE RESULTS 

Main Input Used to Produce Wine 

Grapes

BulkWine

GrapeJuice

Other

Typical length of contract with grape or juice supplier 

Yeartoyear Multipleyears Firms that outsource some part of their winemaking 

Outsourcewinemaking Products or Services Wineries Offers Customers 

Winery/VineyardTours

Restaurant

TastingRoom

GiftShop

FoodProducts

Hostsevents

139

Table 54 (Cont’d): 

Note:1=Full‐Time,YearRoundEmployees,2=Full‐Time,SeasonalEmployees,3=WineVolume

SoldtoLiquorStores(%),4=WineVolumeSoldtoRestaurants(%),5=WineVolumeSold

Promotional Activities Wineries Utilize 

Promotionforreturningcustomers

CustomerDatabase

ClubPromotions

Website

Newsletter

SocialMedia

VolumeDiscount

Other

Winery Owner is a Member of an Association  

LocalChamberofCommerce

WineAssociation

Awards and Certifications Winery has Obtained 

IndustryCertification

WineCompetition

TradePress

Ownerhasvineyard/winemakingcertification

140

Table 54 (Cont’d): 

throughDistributors(%),6=ArrangementwithTourBusCompany,7=ReceivedExternal

Funding,and8=LargeTradingNetwork.

Table 55: The categorical variables (more than 2 groups) that correlated with the greatest 

number of legitimacy indicators at the 1, 5 and 10 percent significant levels 

VARIABLE  1  2  3  4  5  6  7  8 ONE‐WAY ANOVA RESULTS  CHI‐SQUARE RESULTS 

Reason Winery Owner Entered the Wine Business

Winery Owner’s Satisfaction Level with Performance of Winery (5‐point Likert scale)

How Winery Business is Organized (i.e. Sole proprietorship, partnership, L.L.C, etc.) 

Method Used to Determine Contract Price (i.e. Based on market prices, negotiated with supplier, set by winery, etc.) 

Owners’ Rating of their Typical Customer’s Degree of Knowledge and Familiarity with their Winery’s Products or Winery 

Owners’ Rating of Consumers’ Familiarity with Wine from Their Region 

Type of Financing a Winery Uses (Self‐financed, External Financing (bank, investor), or Both) 

Winery’s Method of producing wine that is 1) Similar to what consumers are familiar with to 7) Producing a novel taste compared to what consumers are used to 

Note:1=Full‐Time,YearRoundEmployees,2=Full‐Time,SeasonalEmployees,3=WineVolume

SoldtoLiquorStores(%),4=WineVolumeSoldtoRestaurants(%),5=WineVolumeSold

throughDistributors(%),6=ArrangementwithTourBusCompany,7=ReceivedExternal

Funding,and8=LargeTradingNetwork.

141

APPENDIX B 

 

Survey of Michigan Wineries Code No. ___

1. Name of Winery: _________________________________________________.

2. ZIP Code of your winery: ________________. 3. In what year was your winery licensed? ___________. 4. What was the first year of commercial wine production? _________.

5. Why did you decide to enter the wine business? Please check the main reason:

( ) Opportunity to enter the family business ( ) Good business opportunity ( ) Lifestyle or hobby objectives ( ) Retirement nest egg ( ) Passion for wine and food ( ) Community development ( ) Other (please specify):_____________________________________________________.

6. How satisfied are you with the performance of your winery? Please circle one option: Very

satisfied Satisfied Neither

satisfied nor unsatisfied

Unsatisfied Very unsatisfied

7. What best describes how your winery business is organized?

( ) Sole proprietorship ( ) Partnership ( ) Limited liability company (LLC) ( ) Closely held or family corporation ( ) Publically traded corporation ( ) Other (estate or trust, cooperative, etc.)

8. What was your total wine production in 2011? _____________cases or ___________gallons.

142

9. Over the previous three years, your annual wine production has: ( ) been stable at the same level. ( ) increased. By how much? ______________% ( ) decreased. By how much? ______________% ( ) Not applicable (if winery less than 3 years in business).

10. How many persons (excluding unpaid family workers and laborers supplied by third party contractors) worked at the winery (including the vineyard if applicable) in 2011?

Full time, year round ______; Full time, seasonal_____; Part time (year round and/or

seasonal)_________.

11. Currently, what percentage of your total wine production is made from (sum to 100%):

Vinifera Grapes ______% Hybrid Grapes ______% Native American Grapes _____% Other _____%

12. What percentage of your total wine production is bottled as (sum to 100%): Grape varietal? ______% Grape blends? ______% Other?______%

13. What is the average retail price for your: highest priced wine? $____________ per bottle lowest priced wine? $____________ per bottle top selling wine? $____________ per bottle

14. In addition to wine, what other products and services does your winery offer wine customers?

YES NO

Winery/vineyard tours?

Restaurant?

Tasting room?

Gift shop?

Food products?

Hosting winery events (weddings, receptions, etc.)?

15. What percentage of your winery’s 2011 gross revenue is from wine sales only? _______%.

143

16. What percentage of your total wine sales are: In state _____%; Out of state_____%; Out of country_____%

17. What percentage of your 2011 sales at the winery (tasting room or mail order shipments) were repeat purchases? _______ %.

18. Please answer the following questions about your wine distribution channels:

Currently, what percentage of wine volume is sold…?

Over the next three years, do you expect this percentage to decrease,

increase or stay the same? (Please check one)

At the winery % Decrease__ Stay the same__ Increase__

Direct to liquor stores % Decrease__ Stay the same__ Increase__

Direct to restaurants % Decrease__ Stay the same__ Increase__

At a farmers market % Decrease__ Stay the same__ Increase__

Direct mail order shipments % Decrease__ Stay the same__ Increase__

Through distributors % Decrease__ Stay the same__ Increase__

Festivals or community events % Decrease__ Stay the same__ Increase__

Other:_____________________ % Decrease__ Stay the same__ Increase__

19. Please answer the following questions regarding your promotional activities:

YES NO

Do you have arrangements with tour or bus companies?

Do you have promotions for returning customers?

Do you have a customer database?

Do you have club promotions?

Do you have a website?

19. Please answer the following questions regarding your promotional activities (continued):

YES NO

144

Do you have a newsletter?

Do you use social media (i.e. Facebook, Twitter, etc.)?

Do you offer volume discounts?

Other (please specify):____________________________________

20. What main input or ingredient do you use in the winery to produce wine?

YES NO

Percentage of total wine volume

produced from… Grapes %

Grape juice %

Bulk wine % Other: ________________________ (please specify)

%

Sum of all main inputs used to produce wine (as % of wine volume)

100%

21. What percentage of grapes do you currently: Produce in your own vineyards (estate grown)? _________% Acquire in spot/cash markets as needed? _________%_______% Procure via verbal (handshake) contract? _________%_______% Procure via written contract? _________%

Sum: 100%

If you do not use contracts to procure grapes, please skip to question 24.

22. How is the contract price determined?

( ) Contract price is based on market prices. ( ) Contract price is negotiated with supplier. ( ) Contract price is set by the winery. ( ) Contract price is set by the supplier. ( ) Other method. Please explain: ________________________________________________.

23. What is the typical length of a contract with your grape or juice supplier(s)? ( ) Year to year ( ) Multiple years (how many? _______).

145

24. What other terms are included in your contracts with grape or juice supplier(s)? Please check all that apply: ( ) Specific acreage ( ) Specific quantity (tonnage, gallons) ( ) Disagreement resolution clause ( ) Viticultural practices clause ( ) Bonuses/Penalties for: ( ) sugar ( ) acids ( ) defects (mold, rot) ( ) Other (specify______________).

25. Do you outsource any of your winemaking to another winery? ( ) No, I produce all wine on site. ( ) Yes, I outsource – Percentage of you wine production that is outsourced: _______%

26. Do you produce wine for, or rent your facilities/equipment to, other wineries (custom

crush)? ( ) No ( ) Yes – Percentage of winery’s gross revenue from custom crush services:

_______%

Please indicate how much you agree or disagree with the following statements...

27. I can easily and accurately measure all quality attributes of grapes used in winemaking. 1 2 3 4 5 6 7

28. It is easy to procure grapes of adequate quality. 1 2 3 4 5 6 7

29. Indicate the degree to which physical investments made in the winery (winemaking facilities and equipment) can be redeployed to other uses. Easily redeployed without cost 1 2 3 4 5 6 7 Cannot be redeployed for technical or economic reasons

30. Indicate the degree to which physical investments made to produce grapes (vineyard, equipment, and machinery) can be redeployed to other uses. Easily redeployed without cost 1 2 3 4 5 6 7 Cannot be redeployed for technical or economic reasons

31. If the transaction between your winery and your main grape supplier ceased unexpectedly, to what degree could the assets dedicated to that specific transaction be redeployed to other uses? Easily redeployed without cost 1 2 3 4 5 6 7 Cannot be redeployed for technical or economic reasons

Strongly

Agree

Strongly

Disagree

146

32. To what degree is the timing of grape deliveries (i.e. having access to grapes on a certain schedule) important to the profitability of your winery? Not important at all 1 2 3 4 5 6 7 Extremely important

33. To what degree has your relationship with your main grape supplier become important to the profitability of your winery? Not important at all 1 2 3 4 5 6 7 Extremely important

34. Indicate the degree of uncertainty you face with respect to grape yields (and thus quantity of grapes available to winemaking) from year to year. No uncertainty at all 1 2 3 4 5 6 7 Extremely high uncertainty

35. Indicate the degree of uncertainty you face with respect to grape quality available to winemaking from year to year. No uncertainty at all 1 2 3 4 5 6 7 Extremely high uncertainty

36. Are you a member of your local/regional chamber of commerce? ( ) Yes ( ) No 37. Are you a member of a wine trade association (board or council)? ( ) Yes ( ) No 38. Has your winery or vineyard obtained any industry certifications (i.e. sustainable, organic,

etc.)? ( ) Yes ( ) No 39. How would you rate your own knowledge of regulations affecting the wine industry (such as

Alcohol and Tobacco Tax and Trade Bureau (TTB), zoning, environmental, labor, food safety, etc.)? No knowledge 1 2 3 4 5 6 7 Full knowledge of industry regulations

40. Has your winery received any awards from: a. Wine competitions? ( ) Yes ( ) No b. Trade Press? ( ) Yes ( ) No c. Other sources? ( ) Yes ( ) No

41. How would you rate your winery’s performance relative to others in your region? Lower Than Average 1 2 3 4 5 6 7 Higher Than Average

42. How would you rate the breadth of your winery’s trading network (i.e. buyers, suppliers, etc.)?

Winery consistently interacts with a select few trading partners

1 2 3 4 5 6 7

Winery consistently interacts with a large

number of trading partners

43. How would you rate your typical customer’s degree of knowledge and familiarity with your

wine products or winery?

Customers are unfamiliar with our products and winery

1 2 3 4 5 6 7

Customers have a high degree of knowledge

and familiarity with our products and winery

147

44. How would you characterize the consumer’s familiarity with wine from your region?

Consumers are likely to be unfamiliar with wines

from my region

1 2 3 4 5 6 7

Consumers are likely to be highly

knowledgeable about wines from my region

45. How would you rate your typical input supplier’s (i.e. grapes, juice, bulk wine, etc.)

familiarity with the management practices of wineries in your region?

Input suppliers do not understand management practices of wineries in

my region

1 2 3 4 5 6 7 N/A

Input suppliers do understand the management practices of

wineries in my region

46. How is your winery financed? ( ) Self-financed ( ) External funding (bank, investor) ( ) Both

47. How would you rate an external funder’s (banks, investors, etc.) familiarity with the wine business in your region?

Funders do not understand management practices of

wineries in my region

1 2 3 4 5 6 7 N/A

Funders do understand the management practices of

wineries in my region

48. How would you characterize the strategic behavior of new entrants in your region’s wine industry?

New entrants are likely to copy the strategies of

existing wineries 1 2 3 4 5 6 7

New entrants are likely to experiment with new

strategies

49. Please describe the extent to which your winery focuses on: A. Adopting business

practices used by others in the wine

industry

1 2 3 4 5 6 7

Innovating and introducing new

business practices in the wine industry

B. Producing wine that

tastes similar to what consumers are familiar with

1 2 3 4 5 6 7

Producing wine that has a novel

taste compared to what consumers are

familiar with

Please answer this last set of questions about yourself (winery owner or general manager):

148

50. What is your age? ______. 51. What is your level of education?

( ) High school ( ) Some college ( ) Bachelor’s degree ( ) One or more graduate degrees

52. Have you received a certificate in winemaking or viticulture? ( ) Yes ( ) No 53. How many years of experience do you have…

In the wine industry? _______ years. In grape production? _______ years. In business? _______ years

54. What percentage of your time do you spend working on your winery or in conducting activities related to your wine business (e.g. vineyard, tasting room, planning, etc.)? ________%.

55. What percentage of your current net worth is invested in the winery? ________%.

149

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