International Journal of Wine Business ResearchCoopetition and institutions: a strategy for Brazilian wineries facinginternationalizationJefferson Marlon Monticelli, Ivan Lapuente Garrido, Silvio Luis de Vasconcellos,

Article information:To cite this document:Jefferson Marlon Monticelli, Ivan Lapuente Garrido, Silvio Luis de Vasconcellos, (2018) "Coopetitionand institutions: a strategy for Brazilian wineries facing internationalization", International Journal ofWine Business Research, Vol. 30 Issue: 1, pp.74-95, https://doi.org/10.1108/IJWBR-08-2016-0028Permanent link to this document:https://doi.org/10.1108/IJWBR-08-2016-0028

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Coopetition and institutions: astrategy for Brazilian wineriesfacing internationalization

Jefferson Marlon Monticelli, Ivan Lapuente Garrido andSilvio Luis de Vasconcellos

Universidade do Vale do Rio dos Sinos, Sao Leopoldo, Brazil

AbstractPurpose – The purpose of this study is to understand the role institutions play in driving theinternationalization of firms in an emerging country through promotion of coopetition. Investigating therelationships between coopetition, institutions and internationalization, especially among firms in emergingcountries, is an important approach that has received little attention.

Design/methodology/approach – This study has used a single case study interviewing managers ofBrazilian wineries and representatives of formal institutions in an emerging economy. A research frameworktaking an institutions-based view of strategy and applying it to study coopetition and internationalization isproposed.Findings – Formal institutions are the most important players in the promotion of coopetition betweenfirms in the Brazilian wine industry. Coopetition enables firms to access new resources and capabilities,promoting and facilitating internationalization, while also increasing firms’ competitiveness in the domesticmarket. The study also found evidence of certain limiting factors within these relationships, caused by theheterogeneous nature of the firms involved and by the asymmetries in their perceptions of the gains achieved.Research limitations/implications – As a consequence of the methodology adopted, the results of thisstudy are limited to the Brazilian wine industry. Future research should extend the approach to data collectedin different countries and industries. Another promising avenue for research is to explore how decisions of apolitical nature influence the institutions that coordinate an industry, which would provide a new perspectiveon the internationalization of the firms involved.Practical implications – The results offer governments and institutions an opportunity to betterunderstand, and therefore to better manage, their actions in relation to their role in the promotion of thecompetitiveness of firms and industries, both in international and domestic markets. For firms, the resultsoffer insights into the possible gains and the limitations of coopetition strategies, contributing to theirdecision-making on involvement. The study also contributes to understanding the competitiveness of theindustry investigated.Originality/value – This study approaches coopetition from the institutional perspective. It also focuseson internationalization of firms from an emerging country, which is characterized by a lack of firm-specificresources. The proposed framework seems promising for future research investigating coopetition andinstitutions within an integrated analytical framework.

Keywords Case study, Content analysis, Coopetition, Brazilian wine industry,Formal and informal networks in emerging economies, Institutions of the home country,SMEs in emerging economies

Paper type Case study

IntroductionIn a dynamic and complex business world, firms increasingly engage in a simultaneouspursuit of cooperation and competition – called coopetition – to deal with uncertaintiesdriven by the rising levels of global competition, the emergence of new markets and the

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Received 9 August 2016Revised 16 February 201726 June 2017Accepted 23August 2017

International Journal of WineBusiness ResearchVol. 30 No. 1, 2018pp. 74-95© EmeraldPublishingLimited1751-1062DOI 10.1108/IJWBR-08-2016-0028

The current issue and full text archive of this journal is available on Emerald Insight at:www.emeraldinsight.com/1751-1062.htm

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rapid technological changes (Bengtsson et al., 2010; Bengtsson and Kock, 2000; Park et al.,2014; Deitz et al., 2010)[1]. The duality of two contradicting interactions defines coopetitionas a paradoxical relationship (Bengtsson and Kock, 2014) and it is an emerging and trendingtopic in the strategies of relationships between firms and institutions.

Broadly, coopetition is analyzed from two different perspectives: either as a context or asa process (Bengtsson et al., 2010). In the first case, coopetition as the context is presented aspart of a chain that adds value to the company (Brandenburger and Nalebuff, 1995). Thischain includes customers, suppliers, substitutes and complementors. In this relationship,coopetition occurs between the firm and these elements, in any direction, and it has beenanalyzed using game theory (Nash, 1950). Seen as a process, coopetition involves strategiesof cooperation and competition simultaneously between competing firms, but in differentareas and at various levels of interaction (Bengtsson and Kock, 2000). For example, Applerecently hired Samsung to produce a chip for iPhone 7, aiming to solve problems found inthe previous version and reduce its dependency on a single supplier (Mendoza, 2014), whileSony has shared PlayStation Now content via Samsung Smart TVs (Snider, 2014). On theWest Coast of Finland, SMEs used cooperation with competitors to fosterinternationalization (Vanyushyn et al., 2009). In the wine industry, firms in Napa Valleyresort to coopetitive strategies to disseminate organizational learning (Taplin, 2010) andthey are used to promote knowledge exchange about climate change in Australia (Galbreath,2015).

Coopetition between rival firms can either be originated by the firms themselves or it canbe induced by an external agent, such as public or private sector entities, motivated byincentives that seek to motivate superior levels of efficiency. (Luo, 2005; Mariani, 2007;Mariani and Kylänen, 2014).

However, few studies have addressed coopetition from the perspective of the institutionalenvironment. One study that has done so investigated a consortium of Italian opera houses(Mariani, 2007) and another analyzed theme parks in Finland and Italy (Kylänen andMariani, 2012). This gap could be because most studies focus on developed countries, whichhave stronger institutions than emerging countries, where institutions can be unstable(Cuervo-Cazurra and Genc, 2008), as they are often marked by inefficient legal andregulatory systems, arbitrary government policies and inadequate infrastructure (Mesquitaand Lazzarini, 2008; Hoskisson et al., 2000). The focus on developed economies may, in turn,be because emerging countries and their firms are seen as having few competitivedifferentiating factors that are not based on cost advantages (Gammeltoft et al., 2010;Dunning and Lundan, 2008). However, in these circumstances, institutions can provide firmswith the support that is essential for their competitiveness. Furthermore, coopetition israrely addressed in emerging economies (Peng and Bourne, 2009).

This study contributes to the expanding knowledge about coopetition by relating it toinstitutions and firms in an emerging country. It focuses on understanding the role of formalinstitutions in the promotion of coopetition and investigating their impact on thecompetitiveness of firms in the wine industry. We focus on coopetition from the processperspective (Bengtsson and Kock, 2000), showing that the firms studied exhibit differentbehavior in different areas, competing in the domestic market and cooperating in theinternational market. Formal institutions are entities or agents in the public or private sectorwith formal legal structures, such as government, industrial or trade agencies, officesproviding support for organizations and banks, among others (He andWei, 2013).

This paper describes an empirical study of the coopetitive behavior of firms in theBrazilian wine industry, the influence that formal institutions have in the determination ofthis behavior and the impact of this behavior on these firms’ internationalization.

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Brazilian wineries are an appropriate object of study because they are members of anindustry in an emerging country and are still in the initial phases of internationalization.Additionally, both public and private institutions have a strong presence in this industry,and these firms exhibit competitive behavior on the domestic market whilst cooperating tointernationalize, fitting the definition of coopetition.

We aim to highlight how institutions influence the domestic and internationalcompetitiveness of firms in emerging economies through coopetitive strategies. Onecontribution this paper makes to theory is an improved understanding of how institutionsinfluence the internationalization of firms through coopetition strategies. Its empiricalcontribution is the investigation of coopetition strategies in the internationalization of anemerging country’s wine industry with the support of formal institutions, through theapplication of a case study method. Coopetition is an important crossroads betweeninternational business studies and the institutions-based view, particularly when it occurs inemerging economies. Coopetitive strategies increase in relevance when used to deal withweak institutional frameworks in emerging economies, where they can empower firms toovercome obstacles with support of competitors. Our level of analysis is, therefore, the firmand its relations with institutions in the industry, and the objective of the analysis is tounderstand coopetition.

We start by addressing the theoretical assumptions underlying the concept of coopetitionand then build on this theoretical foundation to propose a research framework. We thendescribe methodological aspects, outlining our research approach and providing details onthe wine industry, identifying the wineries and formal institutions studied. Later, whileoutlining our research framework, we discuss the role formal institutions play in promotingcoopetition and internationalization of the wine industry. We end the paper withconclusions, a discussion of limitations of our research and suggestions for a new researchagenda.

Theoretical backgroundUntil the mid-1980s, inter-organizational relations were mainly analyzed from the point ofview of competition between companies, and research was influenced by economic theories.In the second half of the 1980s, some researchers began to study cooperation between firms,while the first attempts to focus on the interaction between cooperation and competitionstrategies that occurred in the 1990s. Cooperation and coopetition strategies complement thecompetitive paradigm, generating new forms of intra-organizational governance andexpanding the alternatives for inter-organizational groupings (Brandenburger and Nalebuff,1995; Padula and Dagnino, 2007).

Coopetitive perspectiveUnlike cooperation and competition, coopetition has not yet achieved the status of aparadigm (Padula and Dagnino, 2007; Bengtsson et al., 2010). Coopetition is based on theinterdependence between firms, with the partial convergence of interests and objectivesthrough disparate relationships. It is founded on creating opportunities for the generation ofcompetitive advantages while removing external obstacles and threats (Chin et al., 2008).However, participants cooperate in fields that are distinct to those in which they arecompeting (Luo, 2005). This concept recently evolved further, by considering coopetition asa paradoxical relationship between two or more actors simultaneously involved incooperative and competitive (both horizontal and vertical) interaction (Bengtsson and Kock,2014). It is challenging to maintain the balance between the two approaches, marked by a

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constantly moving strategic mix of cooperation and competition (Bengtsson and Kock, 2000;Roy and Yami, 2009).

The objectives of coopetition are to improve conditions such as size or market demand,by cooperating with rival companies, and to increase profits, by competing with rivalcompanies (Okura, 2007). Even if a single firm is able to gather all the resources needed forcompetitiveness, it can still find it hard to access them alone. In this case, one alternative isto use cooperation to create value for parties that share knowledge and resources, while alsocompeting to achieve the best results. This type of relationship involves economic and non-economic exchanges; in the cooperative link, power is evident across the value chain, and inthe competitive link, evidence of the strength and position of the actors in the network canalso be observed (Bengtsson and Kock, 1999, 2000; Bengtsson et al., 2010). At this point, thegreater the interactions, the greater the possibility of improving the performance ofproducts, services, customer relationships, gains in productivity, efficiency and quality,which it would not be possible to obtain if working in isolation (Ganguli, 2007).

As a process of interaction between competition and cooperation between companies,coopetition is a relational concept with several dimensions, depending on the types ofstrategies pursued (Bengtsson et al., 2010). Companies assume dynamic combinationsaiming to balance competition and cooperation, according to the environment in which theyoperate (Figure 1). Firms with a central and autonomous position in the network assumegreater competitiveness than other agents. Firms with a greater variety of markets are morelikely to get results from centrality and the coopetitive relationship (Gnyawali et al., 2006).Three types of resources circulate in this relationship, namely, reputation, information andassets, which are optimized in accordance with the firm’s position (Gnyawalli andMadhavan, 2001).

Both coopetition and cooperation arise from common interests that substitute themaximization of individual gain. However, the gains will not necessarily be shared equally

Figure 1.Coopetition as two

continua

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between the parties (Padula and Dagnino, 2007). The coopetitive relationship maximizes theresults achieved by targeting efforts in the same direction, transcribed by formal or tacitagreements. Companies cooperate in activities that are distant from the target market,whereas companies compete in activities similar to the targeted market (Bengtsson andKock, 1999, 2000).

Coopetitive and cooperative relationships are based on trust, reciprocity and altruism(Kanter, 1994). Thus, the parties to such relationships gain access to resources and markets,economies of scale and scope, increased bargaining power, reduced transaction costs,periods of product development and innovation and contractual mechanisms to neutralizeopportunistic risks. Nevertheless, strategic options make it possible to adopt flexiblepositions (Lado et al., 1997). However, despite coopetition being based on convergentinterests, the model has been criticized for vulnerability to risks posed by opportunism andenvironmental dynamism (Gulati et al., 2000; Hamel, 1991). Therefore, coopetition is not adichotomous construct on a continuum between competition and cooperation. It is amultidimensional, complex and dynamic concept that takes different forms at multiplelevels of analysis in relation to structure, processes and standards (Padula and Dagnino,2007). Coopetition implies sharing goals that induce agents to cooperate and compete toreduce risks, losses and uncertainties, to expand their strategic options and to leverage theirearnings and performance.

Table I shows a framework outlining similarities and differences between competition,cooperation and coopetition constructed by comparing different relationship strategies.

Table I.Comparingcompetition,cooperation andcoopetition

Categories Competition Cooperation Coopetition

Concepts Agents dispute thesame resources, whichcannot be accessed byall (Padula andDagnino, 2007)Maximization ofindividual interests(Bengtsson and Kock,2000)

Division of skills or additionalresources seeking mutual orsuperior benefit (Jarillo, 1988,1993)

Cooperation in different areasfrom areas in which there iscompetition (Bengtsson andKock, 2000)

Objectives Higher gains thancompetitors

Resource sharing to accessnew markets, creation of entrybarriers, and focusing ontarget activity

Creation of opportunities,removal of externalobstacles, or neutralization ofthreats

Theoreticalbackground

Competitive advantageDistinctivecompetencies

Resource-based view Game theory

Premises Conflict, bargainingpower

Harmony, trust, reciprocity Interdependence, dynamism,complexity

Criticism Lack of recognition ofthe dependence of thefirm’s decisions inrelation to industry andeconomic imperfections(Padula and Dagnino,2007)

Lack of recognition ofcompetitive forces or thesebeing seen as negativeinfluences (Padula andDagnino, 2007)

Opportunism, asymmetry,perception of justice betweenthose involved (Gulati et al.,2000)

Source:Authors

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Having covered the characteristics of relationship strategies, we move on to discuss howinstitutions can influence firms from the same industry operating via competition orcooperation.

Internationalization and coopetition under the influence of formal institutionsInternationalization can be understood as firms extending their activities into atransnational dimension (Cavusgil et al., 2010). In emerging markets, firms tend tointernationalize later (Fleury and Fleury, 2011), and firms in these countries are marked bythe absence of advantages based on firm-specific resources and assets (Dunning andLundan, 2008) and by a national environment that is unfavorable to firms developingcompetitive differences other than those based on costs (Gammeltoft et al., 2010). Thesefirms primarily compete on the basis of country-specific cost advantages (Amighini et al.,2010).

The essence of emerging economies lies in their dynamics. Changes in the institutionalenvironment must be considered.While national policies are increasingly market-driven, thegovernments of emerging economies are opening their countries to foreign markets and arejoining regional commercial associations. Moreover, emerging economies are nothomogeneous, even those belonging to the same geographical region. For example, foursuch regions, Latin America, Asia, Africa/Middle East and Central and Eastern Europe havemanifestly different starting points, but even within these regions, individual countriesdiffer greatly (Hoskisson et al., 2000).

Although there is no conceptual consensus, an emerging economy can be defined as acountry meeting two criteria:

(1) a rapid rhythm of economic development and government policies protectingeconomic liberation; and

(2) adoption of a free-market system (Arnold and Quelch, 1998).

Additionally, emerging economies have different dimensions from mature markets (Sheth,2011) and are typically characterized by inefficient markets, active governmentparticipation, extensive business networks and high levels of uncertainty, all of whichchallenge the efficacy of business models and theories (Xu andMeyer, 2012).

The institutions-based view emphasizes that institutions matter to firms’ strategies. Thisapproach has deepened comparative studies between emerging and developed economies,stressing institutional differences and their impact on the performance of internationalbusinesses (Peng et al., 2008).

Both formal and informal institutions can influence the way a firm enters this kind ofmarket. However, while the former concentrate on aspects regulating individual andcompany behavior, the latter focus on aspects related to the political economy and theinstitutional economy (Peng et al., 2009). Firms in the process of internationalization are alsoconstantly involved with institutional systems, under the influence of different institutionallevels and factors, but in a multidimensional environment, i.e. a nonlinear, fragmented anddynamic environment. However, the significant role that these firms play in the context ofinternationalization enables them to overcome the deterministic view of institutionalaccommodation, while building, manipulating and negotiating their own institutionalenvironment (Kostova et al., 2008).

Because institutions are seen as independent variables, the institutions-based viewfocuses on the dynamic interaction between institutions and organizations, considering thestrategic choices that result from this relationship (Peng et al., 2009). According to thesestudies, a firm set in a particular institutional environment will optimize its performance

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considering the context in which it operates (Peng and Luo, 2000). Therefore, governmentpolicies exert influence by providing economic incentives, creating protection mechanismsin the domestic market (Sheth, 2011) and directing firms’ internationalization processes(Ramamurti, 2008). Just as firms strategically exploit the institutions to extract benefits(Martin, 2014), institutions also place restrictions on firms’ internationalization. Theserestrictions are imposed through norms, requirements and contractual mechanisms(Dunning and Lundan, 2008).

For North (1990), institutions play a crucial role in the economy because they reduceuncertainty and become a reference to individuals. When institutions are inefficient, orproperty rights are not guaranteed, generating high transaction costs, the result is anunfavorable environment for the success of national economies. This type of institutionalframework can be observed in emerging countries when political and economic institutionsdiscourage productive activity through political instability, government bureaucracy, lowquality of regulatory systems, unpredictable legal systems and poor control of corruption(Cuervo-Cazurra and Genc, 2008).

For internationalization purposes, institutions are formal structures responsible for guidingor restricting the choices of agents, acting in a positive, negative or even indifferent way, topromote international insertion. Formal institutions influence firms’ internationalization,enabling or hindering the process. Formal institutions are entities or agents with a formal legalstructure, that may be public or private sector, and include organizations such as governmentagencies, industrial bureaus, supporting organizations, tax bureaus, state banks andcommercial administration bureaus (He andWei, 2013).

Institutions play a predominant role in promoting networks and stimulating coopetitionstrategies in robust industries (Brito, 2001). Thus, they aim to increase the competitivenessof local businesses by developing learning and relationship networks, reducing transactioncosts and promoting internationalization. In industries with high levels of competition andcooperation, institutions stimulate coopetition between rival firms, so that they createbarriers to new entrants. Firms are strengthened to cope with foreign competitors throughidentification and complementarity of resources. They must align institutions’ influencewith their interests. These relationships are dynamic, as their goals evolve following theinterdependence of firms and institutions (Deligonul et al., 2013).

Home-country institutions can provide political advantages to firms to deal with or tomitigate political risks in host countries. Governments use promotion policies to support theinternationalization of firms, such as low cost of capital, bilateral treaties and trade shows(Gammeltoft et al., 2012). However, host-country institutions can affect transaction costs andresource access, shaping a firm’s market entry (Uhlenbruck et al., 2006) or attracting foreigndirect investment (FDI) through solid market institutions.

When firms enter the international market, dynamics are intensified. Relationships areper se a sensitive point, as the objectives of coopeting firms and the institutions supportingthem are not always congruent or aligned. Of relevance is the presence of strongrelationships between coopetition objectives and internationalization motives between firms(Vanyushyn et al., 2009) supported by institutions. This clarifies the influence of institutionson coopetition strategies in the internationalization of firms in emerging countries.

Research frameworkThe primary focus of this study is an attempt to extend knowledge about coopetition,especially within areas in which the subject has so far been explored little, in theinstitutional context of emerging countries (Peng and Bourne, 2009) and with relation to

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internationalization of firms from emerging countries, which are characterized by anabsence of firm-specific advantages (Dunning and Lundan, 2008).

Maintaining this focus, and working from the theoretical background presented above,we established some propositions to guide the research conducted in the field. Coopetition ischaracterized by a combination of competitive and collaborative behavior simultaneously,between rival firms and in different areas (Bengtsson and Kock, 2000).

Institutions influence firms’ entry to markets (Peng et al., 2009) and one form of influenceis by encouraging cooperation between rival firms (Brito, 2001). Using resources andincentives, formal institutions can promote collaboration between rival firms to enable themto do business in markets that have hitherto been exploited little, such as internationalmarkets, for example.

Based on these relationships, we venture the following proposition:

P1. Formal institutions can promote coopetition in an industry by contributing towardthe establishment of a collaborative strategy in a new or relatively unexploitedenvironment (international market) between firms that are rivals in a differentenvironment (domestic market).

Many different advantages can be achieved when competitors collaborate in differentenvironments to those in which they compete, including reduction of obstacles or threats(Chin et al., 2008), expansion of markets (Okura, 2007), access to new resources andimprovements to processes, products, quality and efficiency (Ganguli, 2007). Theseadvantages can facilitate access to new opportunities in new (international) markets and canalso reap gains in the traditional (domestic) markets. We, therefore, venture the followingpropositions:

P2. The coopetitive strategy offers gains in both the little-exploited environment(international market) and in the traditional environment of competition (domesticmarket).

P2a. In the international market, this is achieved by cooperation between firms.Cooperation allows firms to access more resources, in a shorter time, and withfewer risks than they would be able to access individually, facilitating theirinternationalization.

P2b. The gains accruing from internationalization spill over into the domestic market,increasing firms’ competitiveness in terms of creation of barriers to new entrants,such as better reputation, improved marketing strategies and higher-qualityprocesses and products, among others.

MethodWe conducted qualitative research using an exploratory case study approach (Flick, 2009).The case study is an appropriate method for the type of investigation proposed, as ourobjective is to understand whether and how a complex and little-explored phenomenontakes place (Yin, 2010) and, additionally, we are proposing an analysis using innovativetheoretical relationships, by applying the institutional approach to study coopetition andinternationalization.

The Brazilian wine industry is suitable to the study objectives because of the followingcharacteristics: it is an industry in an emerging country and is in an initial phase ofinternationalization; its members exhibit competitive behavior in the domestic market and

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collaborative behavior in international markets, characterizing coopetition; and, primarily,because it is an industry in which many formal institutions exist.

We interviewed representatives from formal institutions and from wineries to collectdata for the analysis of coopetition in the internationalization of this industry. Weinterviewed 12 representatives from formal institutions relevant to the industry (managers,researchers, consultants and industry executives) and 11 representatives from differentwineries (supervisors, managers, directors of export departments or enologists).

We collected data during 23 semi-structured interviews with supervisors, managers anddirectors of export departments or enologists from wineries and representatives from formalinstitutions (Table II), making it possible to conduct triangulation of data from differentaccounts of wineries and formal institutions.

We recorded and transcribed all interviews, generating 19 h of recordings and 400 pagesof statements by respondents. We also collected secondary data from institutions’ and

Table II.General informationof the interviewees

Firm or institution Scope General function Position

Delta Trade Association Management andPromotion

Technical Director

Alpha Trade Association Promotion Export ManagerWinery 1 Private Wine production Export SupervisorWinery 2 Private Wine production Export CoordinatorWinery 3 Private Wine production International Relations ManagerWinery 4 Private Wine production Export ManagerBeta Federal Research and

TechnicalSupport

Socioeconomic Researcher

Winery 3 Private Wine production International Relations ManagerWinery 5 Private Wine production Sales ManagerWinery 6 Private Wine production Sales ManagerSecretariat ofDevelopment, Science andTechnology of the State ofRio Grande do Sul

State Representation Business Promotion andCommercial IntelligenceCoordinator

Epsilon Federal Promotion andDevelopment

Brazilian CompaniesRelationship Manager

Wine Industry Union ofRio Grande do Sul

State Representation Executive Assistant

Alpha Trade Association Promotion Export ManagerGamma State Representation International Relations and

Trade ManagerWinery 2 Private Wine production Export CoordinatorWinery 7 Private Wine production EnologistSpecialist Private Consultant Specialist in the wine industryWinery 8 Private Wine production EnologistWinery 9 Private Wine production International Trade AnalystZeta Trade Assoc Promotion and

DevelopmentConsultant

Winery 10 Private Promotion andDevelopment

International Relations Manager

Winery 11 Private Promotion andDevelopment

Grape and Wine IndustryResearch Coordinator

Source:Authors

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wineries’ websites to complement and contrast with information from interviews, plusbibliographical material such as websites, annuals, magazines and books. Data frominterviews, secondary data, researchers’ observations and notes were all used for datatriangulation. Data were triangulated with the objective of increasing validity andreliability, by collecting data at different times from different sources or with differentinstruments to study a single phenomenon (Collis and Hussey, 2005; Stake, 1998).

The script used in the interviews was primarily based on the literature and encompassesfive analytical categories: competition, cooperation, coopetition, internationalization andinstitutional environment (Table III). Two researchers, who are expert practitioners in the field,helped to adapt the interview script for the context of the wine industry. We used thesecategories because they describe the relationship strategies adopted bywineries in the domesticmarket and, considering the support of formal institutions, further their internationalization.

For data analysis, we used the content analysis technique to infer knowledge through thegeneration or not of quantitative indicators (Bardin, 2011). We performed data analysis bypreparing summaries of interview recordings and the printed and digital materials. We usedNVivo software (version 10.0) to code data and help establish categories and subcategories.We then compared the fieldwork data to the subcategories derived from theory (Strauss andCorbin, 1990), analyzing subcategories based on the reorganization of the evidence providedby NVivo. This process led us to rename some subcategories and exclude others, with theinstitutional environment emerging as of considerable importance to coopetition.

Analysis of the dataRole of formal institutions in coopetitionBrazil is one of the countries in a group of wine-producing countries known as “NewWorld,”along with Argentina, Chile, South Africa, the USA and others, but it still struggles for

Table III.Categories used forthe interview script

Categories Subcategories References

Competition Competition for markets, products,geographic location; and factorsgenerating competitive advantages

Padula and Dagnino (2007), Hamel andPrahalad (1994), Prahalad and Hamel (1990)

Cooperation Actions, motivations, benefits,symmetries or asymmetries of powerand information, based on trust orcontracts, rules and standards requiredto be a member of Alpha

Jarillo (1988, 1993), Das and Teng (1998)

Coopetition Conflicts, advantages, difficulties,opportunities

Bengtsson and Kock (1999, 2000),Bengtsson et al. (2010), Gnyawali et al.(2006), Padula and Dagnino (2007)

Internationalizationprocesses

Motives, benefits, results, difficulties,adaptations for internationalization;international marketing strategies;entry modes; criteria for selection oftarget markets; Alpha

Sheth (2011), Gammeltoft et al. (2010),Ramamurti (2008)

Institutionalenvironment

Relationship with Alpha; perceptionsaffiliated firms have of Alpha, and theinfluence other formal institutions haveon them

North (1990), Peng and Luo (2000), Penget al. (2008, 2009), Cuervo-Cazurra and Genc(2008), Martin (2014)

Source:Authors

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global recognition of its products. The Brazilian Government’s strategic agenda for thewines, grapes and derivatives industry is oriented towards promoting theinternationalization of firms and their products through export incentives, participation ininternational events and expansion of the role of the institutions that are active in theindustry. According to the Organisation Internationale de la Vigne et du Vin (OIV) (2016)and the FAO (2015), Brazil is ranked 21st globally as a producer, 16th in terms of area undercultivation, 28th among exporters and 20th as an importer of wines.

The Brazilian wine industry is highly fragmented in terms of the number of competitorsbut relatively concentrated in terms of production capacity. Competition has historically beenprice-based, and it was only after creation and promotion of an identity for Brazilian wineabroad that the industry began to compete on the basis of product differentiation. However,there are still many obstacles hampering Brazilian wineries’ international competitiveness:

� macroeconomic problems (changes to macroeconomic policies, exchange rates);� climatic difficulties (increasing average annual rainfall and elevated air humidity); and� difficulties with coordination (high degree of industrial fragmentation with many

small firms and a high number of formal representative institutions in the sector)(Farias, 2011).

Currently, there are around 1,000 firms in the Brazilian wine industry, the majority of whichare small family properties, with a mean area of 2 ha per property, concentrating on craftwines or table wines. Only 150 firms produce fine wines. (Wines of Brasil, 2017). TheBrazilian wine industry is influenced by a large number of institutional entities that haveconsolidated over the years and were created to foster growth in the industry, to fill largegaps in knowledge, techniques, regulations, legislation, markets and other elements.

Themost relevant formal institutions that were highlighted during fieldworkwere:� Delta: An association that groups together all of the agents that make up the wine

value chain. Its mission is to institutionally organize and promote the industry, interms of production of grapes and grape-derived products, and to run projects inpartnership with governments and other institutions.

� Epsilon: a Federal Government agency that works to promote Brazilian productsand services abroad. It is responsible for investing financial resources to promotethe nation’s industries via partnerships with institutions that represent differentsectors, conducting market research and providing international infrastructure tosupport firms.

� Alpha: Is an integrated industry-based project set up by Delta and Epsilon. Itsmission is to promote the quality of wines on the international market throughimage promotion and positioning actions, and to engage in commercial promotionand training of member firms.

� Beta: Is a research institution, primarily dedicated to the development of grapeproduction.

Table IV summarizes the institutions identified in the study.Among these institutions, over the years, Delta has assumed the central institutional

position in the industry, whether in terms of its representativeness in relation to the firms orin terms of its representativeness with the other institutions. This is the institution thatseeks to unify and integrate the industry’s objectives. The organogram shown in Figure 2illustrates the structure of the industry.

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Table IV.Institutions and their

functions

Scope Institution General function of the institution

Trade Association Delta To promote and organize the wine industry; toconduct management and development policies

Trade Association Alpha To promote the quality of Brazilian wine on theinternational market; to conduct activitiesinvolving positioning, image promotion andtraining of participating firms

Federal Epsilon To promote exportation of Brazilian products; toact as an agency for attracting foreign investmentsto Brazil; to promote Brazilian investments abroad

State Secretariat ofDevelopment, Science andTechnology of the State ofRio Grande do Sul

To promote economic and social development ofthe state

Federal Beta To provide technological solutions for developingthe wine industry; to supply technical support toparticipants from the wine industry

State Gamma To represent and develop the industries of RioGrande do Sul, South Brazil

Federal Sebrae To promote competitiveness of micro and smallenterprises

Federal Ministry of ExternalRelations and Embassies

To formulate and execute policies outside thecountry

Public/Private Universities To promote research and provide technical supportFederal Ministry of Agriculture,

Livestock and SupplyManagement and promotion of policies in theindustry; Regulation and standardization of thesector

Federal Anvisa To promote and protect the health of thepopulation, intervening in the case of hazardsarising from products and services subject tohealth surveillance

Trade Association Zeta To promote the Vale dos Vinhedos region

Source:Authors

Figure 2.Structure of the wine

industry

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In general, the formal institutions act by pooling resources and promoting cooperationbetween the wineries. Thus, while the wineries compete intensely for markets, they alsocooperate in other aspects to access new resources and capabilities.

Our interest is specifically in understanding coopetition seen as a process, consideringadoption of competitive strategies in the domestic market and cooperation in theinternational market. One of the winery managers attests to this relationship: “Abroad, wehelp each other; here, we kill each other.” This illustrates the concept of coopetition, in whichrival firms cooperate and compete simultaneously, but in different areas (Bengtsson andKock, 2000).

Given the domestic competition between wineries and the differences between them inculture and resources and capabilities, it is unlikely that cooperation would be possiblewithout the stimulus given by formal institutions. As the manager from Gamma puts it:

The point is that [. . .] we are not used to working [. . .] in an associative way. We always aim atthe individual issue. I believe it is a matter of the individualist culture and a little difficulty inworking in a sharing way.

It was observed that the motives for promoting cooperation between wineries originate in atleast two aspects that are distinct, but interrelated: intangible resources, such asinformation, knowledge and technology, and tangible resources, primarily financial.

These stimuli are translated into awareness of the possible gains in the perceptions of themanagement of the wineries, which were evident in the interviews, with mention of detailssuch as the creation of a Brazil brand, of certificates of origin granted to certain regions,improvements in techniques for cultivation and production, training of management,reduction of costs andmany others.

Therefore, there is evidence in the Brazilian wine industry supporting the propositionabout the role of formal institutions as a means for promoting coopetition.

Figure 3 illustrates the role of institutions in terms of promotion of coopetition. Formalinstitutions act as an agent to balance firms’ competitive and cooperatives strategies.

However, this coopetition is not as simple or harmonious as it might appear. Certainissues had to be overcome gradually over time and others still present obstacles. To achieve

Figure 3.Coopetition underinfluence ofinstitutions

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effective coopetition, the role of institutions, considered by many of the interviewees as offundamental relevance, had to be constructed over a considerable period of time. Theinstitutions had to earn legitimacy and be recognized and accepted by the wineries. Thehigh number of institutions present in the industry is still a source of confusion amongthe wineries in terms of each one’s roles, making it hard for them to perceive the benefitsthey provide. Some interviewees made it clear that they did not know what some of theinstitutions did nor how to participate in their projects. Additionally, the diversity of thewineries in terms of size, resources, capabilities and experience, makes the process ofcooperation even more difficult.

Another issue is related to asymmetry of gains. The larger wineries believe they havemore to contribute than the smaller firms and see the major gains as consolidation ofregional designation of origin and access to financial resources, whereas they do notconsider that gains in management or knowledge are very significant, as they already havethese capacities and so they do not perceive that there is a clear contribution that the smallerwineries can make. At the other end of the scale, even when the smaller wineries recognizethe additional access they get to new resources and technologies, they still believe that thegreatest winners are the larger wineries, whether through influencing the institutions to actin line with their strategic objectives or because they have the capacity to take betteradvantage of the opportunities created through collaboration.

The coopetition relationship must be founded on clear motivations, easily recognizablebenefits and strategies, mechanisms for conflict resolution and clearly definedresponsibilities (Zineldin, 2004), and there must be a fair vision for sharing the results(Jarillo, 1988). In the Brazilian wine industry, which is characterized by fragmentationbetween firms and by numerous different formal institutions, conflicts, ill-definedresponsibilities and perceived unfairness in terms of gains are constant threats that createobstacles to the growth of the industry.

InternationalizationCompetition is much more intense in the international wine market than in the Brazilianmarket. To participate in the international market, firms must attain a high level ofprofessionalism in terms of knowledge, management, products and brands. Braziliancompanies, especially small businesses, consider internationalization as a secondary optionbecause of resource limitations. One of the principal problems is the small volume ofBrazilian wine production which, combined with the size of the market in Brazil, not onlydiscourages internationalization by Brazilian firms but also encourages imports of productsfrom other countries into the domestic market, especially from neighboring countries suchas Argentina, Chile and Uruguay. This has become a paradigm for Brazilian wineries,especially the small ones that are the great majority of firms and which, with scarceresources, try to internationalize at the same time that they are competing in the localmarket.

The resources needed can come from an institutional advantage, in which institutions areresponsible for transfer of resources between firms (Martin, 2014), enabling them toovercome barriers such as the bureaucracy of foreign institutions, unfavorable exchangerates, unknown brands and country of origin, high internal taxes and lack of knowledge ofmarkets. Institutions in emerging countries play a relevant role in strategy and in theperformance of domestic and foreign investments made by firms that competeinternationally (Gao et al., 2010).

Brazilian wineries take advantage of the institutions to internationalize. Two of theformal institutions in the industry were identified by interviewees as most influential in

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terms of internationalization: Epsilon and Alpha, both through their individual activitiesand in partnership, promoting collective action, encouraging cooperation between wineries,focusing on learning through exchanging knowledge and experience of the steps in theinternationalization process, supporting international sales and marketing programs,conducting international market research and helping with entry strategies.

Some of the interviewees’ utterances provide evidence of this status:

[. . .] but Epsilon is a fundamental part of the process (the internationalization process), both forenforcement and for support. So I would highlight Epsilon’s role today. (Sales Manager, Winery 6)

Beta is a great tool that the industry has to foster actions via fairs, events, business round tables[. . .] promoting the industry’s image [. . .] (Enologist, Winery 8)

Currently, the integrated industry-based project Alpha supports around 40 wineries throughfinancial subsidies of participation in international events and fairs, studies of targetmarkets, training in international business, support for marketing planning and customsand transport services:

[. . .] because it is through Alpha that we are managing to construct an image for Brazil, whichwould be much more difficult for a single winery to achieve alone [. . .] with Alpha we have thechance to participate in fairs together [. . .] alone we wouldn’t have this level of visibility [. . .](Export Coordinator, Winery 2)

We must present Brazil regardless of being Winery A or B. [In the foreign market], being alone ona trade stand, there would be nothing you could do. (Sales Manager of Winery 6)

The presence of Brazilian wines in foreign markets generates an exchange of experiences,learning gains and expansion of relationship networks through contact with wineries,institutions and events with more tradition and history. It increases the number of strategicoptions, reducing dependence on the domestic market; leads to recognition by Brazilianconsumers of their own country’s wines, which are now valued in the domestic market afterwinning international prestige and awards; and establishes new relationship strategies,highlighting coopetition (Monticelli et al., 2015).

Data on Brazilian exports are not consolidated, but some indicators demonstrate thatbusiness is growing. Brazil exports to more than 40 countries; in 2014, exports grew morethan 83 per cent in value (Wines of Brasil, 2017) and in the first six months of 2016, Brazilianwine exports grew by around 33 per cent in volume and 26 per cent in value [InstitutoBrasileiro do Vinho (IBRAVIN), 2017].

Data collected in this study confirm that cooperation between rival firms, withencouragement and help from institutions, allows them to access new resources and developnew capabilities that improve their chances of successful internationalization. The high levelof cooperation improves efficiency and reduces transaction costs while correcting for marketimperfections, and giving organizations the flexibility to deal with the volatility of theenvironments in which they are doing business (Williamson, 1985).

However, it was also observed that certain factors hampered this cooperation. One of themost important problems identified was the differences in wineries’ sizes and levels ofexperience. Larger wineries with more international experience enjoyed the greatestinternationalization gains because they had the capacity to take advantage of opportunities,because they have larger-scale production, greater management expertise and greaterinfluence over the formal institutions, even to the extent of directing some of their activities.The larger wineries consider that the smaller ones do not have the organizational resourcesnecessary to join the project or to compete internationally. In turn, the small-scale wineries

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also provided evidence of this asymmetry, stating the opinion that the institutions should bemore concerned with the small businesses than with the large firms, claiming that the Alphaproject is elitist and is oriented toward the large firms’ interests.

Notwithstanding this perceived asymmetry, the roles played by both large and smallfirms are fundamental. On the one hand, the large wineries are important to theinternationalization project, have an influence with the federal government and guaranteethe legitimacy of the integrated industry-based project Alpha, ensuring that there is aconstant investment to support it. The larger wineries encourage the smaller ones toparticipate because they understand the importance of strengthening the industry as awhole, to strengthen Brazil as a wine producing country. On the other hand, the smallerwineries are one of the reasons for government support because they fit its objectives ofnurturing the country’s industrial growth.

However, lack of trust among participants, the strategic mismatch between firms withdifferent goals and opportunism, all limit the collaborative strategy, in addition to firmsperceiving the benefits to be less substantial than they would like (Jarillo, 1988).

Notwithstanding these limitations, the recent and so far timid international expansion ofBrazilian wine also has benefits for these firms’ competitiveness in their own domesticmarket. Factors such as improved product quality, greater brand exposure, improvementsto wineries’ management and production processes and to cultivation techniques andgreater production chain integration, end up contributing to diversifying customer bases,increasing barriers to entry of imported wines, increasing per capita consumption, reducingproduction costs and expanding relationship networks.

In practice, participating in institutional relationships precedes the internationalizationprocess. Even wineries that do not participate in the Alpha project indicated that they havebenefited from its activities, primarily through exposure for the Brazil brand abroad, whichconfers greater perceived quality on the region of origin. The gains reaped by the wineries inboth domestic and international markets, therefore, provide evidence of the benefits ofcoopetition. Coopetition in industries with intense rivalries helps to improve firms’ marketpositioning (Peng and Bourne, 2009).

ConclusionsSome authors have tried to understand internationalization of firms and industries bystudying the role of the home-country institutions and in particular the role of governments(Ramamurti, 2008).

In this paper, we have focused on understanding how home-country formal institutionscan contribute to internationalization through coopetition. In general, the literature does nottake the role of institutions into account when coopetition is analyzed. In this study, wecontribute to advancing theory on coopetition by relating it to institutions.

We focused on understanding how formal institutions influence the internationalizationof firms through a series of propositions on coopetitive strategies. More robust institutionshave greater influence for promoting coopetition strategies and, therefore, strategies areactually more complex than they appear when only the organizational environment is takeninto account, involving both organizational strategies and institutional influences.Coopetition means dealing with strategy and choices, reciprocity and restrictions,interdependence and influences. It is not therefore enough to analyze coopetitiondisregarding the role of institutions.

Firms have reacted to highly competitive markets with coopetition, creating barriers tonew entrants and moderating rivalry between existing competitors. The wineriesunderstand that even internationalization on a small scale generates significant benefits for

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the industry as a whole, increasing the visibility of Brazilian wine, both domestically and onthe international market, and increasing the competitiveness of Brazilian firms. Dealingwith competition from foreign wines is their primary challenge. Internationalization isinduced by formal institutions that promote relationship building while leveraging learningwithin the network. As a result, firms acquire sources of competitiveness to compete inmarkets internationally.

For larger Brazilian wineries in the foreign market, for example, the relationshipnetworks that are formed during the internationalization process (through the formalinstitution Alpha) help to shape marketing strategies. The presence of Brazilian wines inforeign markets generates many gains, as mentioned above. In these external settings,confidentiality of information is not a predominant concern, but in the domestic market, theposition is completely different. This provides evidence in support of the concept ofcoopetition, in which agents cooperate and compete, but in different areas, creating value forthose involved, while sharing resources and knowledge.

In these terms, firms must adapt to institutional changes to grow (Martin, 2014). Thisimplies a dynamic, coopetitive movement between firms and institutions in accordance withthe firms’ interests and the influences of institutions. One of these concerns is how to obtainlegitimacy in the domestic and overseas markets, moving from one to another (Kostova andZaheer, 1999). In the case of Alpha, the wineries establish an image for Brazilian wine in theinternational market, which also increases the product’s legitimacy in the domestic market.Institutions increase their industries’ competitiveness through subsidies, protectionistmeasures, financial incentives or organizational restructuring. At this point, firms mustengage in institutional arbitrage with the support of institutions, avoiding structuraldeficiencies of the domestic environment and seeking advantages in the internationalmarket (Boisot andMeyer, 2008).

Considering the different concepts of coopetition, few studies have analyzed itsmultidimensional nature. Therefore, identifying the role of formal institutions in coopetitivestrategies between firms in the same industry is a relevant contribution to the advancementof this field. This is especially true with relation to emerging markets in which firms havefewer resources and capabilities than firms from developed markets and need institutionalsupport to be competitive. Establishing a perspective on coopetition in networks seems to bemore promising than limiting studies to coopetition in supply chains, as the relationshipsare more complex and multi-directional between participants. Moreover, the influence offormal institutions on coopetition strategies in networks can redefine levels of trust andcommitment, thereby resetting the balance or imbalance of inter-firm power.

Practical implications and recommendations for future researchThis study helps to explain relationship strategies of firms in the wine industry of anemerging economy using the perspective of coopetition strategies and internationalizationwith the support of institutions. The relevance of institutions as drivers of firms’competitiveness through coopetition, as demonstrated in this study, can contribute tostrategic decision-making, both for the management of formal institutions, whethergovernmental or industrial, and for firms. Equally, the results can contribute to avoidance ofthe possible pitfalls of coopetition and facilitate better management of problems such asasymmetry caused by a lack of uniformity between participants or by perceptions ofunequal gains.

Regardless of their perceptions of the Brazilian wine industry and Alpha, larger andsmaller wineries and the institutions themselves understand that they first must sell theBrazil brand abroad, before selling any of the wineries’wine.

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There have been few attempts to understand the dynamics of coopetition thatsimultaneously consider external and internal environments. Rather, coopetition hasbeen analyzed separately and only through the chosen unit of analysis. Institutions arerarely taken into account in studies of coopetition strategies. Consequently, an equationthat aims to understand the relationship between coopetition and institutions shouldfurther the theory. Therefore, industries from emerging economies are an appropriateobject of study in this context because of the institutional differences in relation todeveloped economies where the majority of studies have been conducted. Theinstitutional fragilities of emerging economies amplify the influence of institutions inpromoting coopetition within an industry aiming to enhance its internationalcompetitiveness.

The research framework proposed here appears a promising direction for futureattempts to investigate coopetition and institutions within an integrated analyticalframework. We suggest that future research could extend this approach to datacollected in different industries. Another promising avenue for research is to explorehow decisions of a political nature influence the institutions that coordinate the wineindustry, which would provide a new perspective on the internationalization of thefirms involved.

Research limitationsThe study, even bringing relevant contributions, also presents limitations. The mainone is the concentration in a particular industry, the Brazilian wine industry. Therefore,the results should be limited to this case. From the methodological approach, we adopta cross-sectional data collection method, making it difficult or even impossible to makea historical analysis of the facts that are limited to the present perception of theinterviewees. It should also be considered, from the institutional perspective, that weanalyze only the formal institutions, leaving out of context other institutionaldimensions such as political and cultural, for example.

Note

1. The institutions and wineries are here identified by a Greek letter.

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Corresponding authorJefferson Marlon Monticelli can be contacted at: jeffmarlon@hotmail.com

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