This paper aims to study the effects of innovation on the profitability of large wineries. In particular, organic growth is evaluated versus external growth.Design/methodology/approachData from balance sheets over more than a decade are used. The analysis is limited to large Italian wineries to include firms that constantly invest in R&D in the sample. The analysis focuses on 25 Italian wineries observed over eight years. Panel data estimation is used to analyse these data.FindingsThe paper shows that investments in R&D increase the profitability of innovative wineries in the long run but decrease it in the short run. Moreover, because of financial constraints, some wineries may invest too few resources in R&D.Research limitations/implicationsThe main limitation is that the focus is restricted to large wine producers, while many small producers that do not generally invest in R&D exist in the market. The practical implication is that governments should support R&D investments of wineries.Originality/valueThe main contributions are to show empirically the effects of investing in R&D on the profitability of large wineries and to highlight the possible presence of severe financial constraints, which require policy interventions.
International Journal of Wine Business Research – Emerald Publishing
Published: Jun 12, 2019
Keywords: Innovation; Wines; Econometric model; Italy; Competitive strategy; Time series; L66; M11; O30
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