Plural forms and differentiation strategies in the agri-food sector: Evidence from the U.S. wine industry

Abstract

This article investigates how measurement ability, trust, and the pursuit of differentiation strategies influence the adoption of plural forms in an agri-food system. We analyze a unique dataset of 314 winegrape sourcing choices from 74 wineries located in five U.S. states, investigating how the pursuit of differentiation influences the likelihood of adoption of a plural form—that is, the simultaneous adoption of a formal arrangement (i.e., vertical integration or long-term formal contract) and an informal arrangement (i.e., informal contracts or spot-market transactions). Consistent with previous studies, measurement ability and the existence of trust are both associated with a higher likelihood of adoption of informal arrangements in comparison to formal arrangements. Moreover, we show that the likelihood of adoption of a plural form increases as the differentiation potential of a winegrape variety also increases. Finally, we find that the use of plural forms is associated with a reduction in the importance of trust in the relationships with external suppliers. This study is important because it sheds light on the role of plural forms in the pursuit of competitive advantage in an agri-food system. Overall, it suggests that the current interpretations of the idea of “vertical coordination” may be enlarged to encompass a greater deal of organizational diversity.