Characterising governance, innovations and sustainability in the French wine industry: a comparison between cooperatives and investor owned firms

Background: Facing the climate change and the need for more environmentally friendly practices all along the value chain, wine industry is in a period of transition, characterized by new form of innovations in order to be more sustainable. In this context, several sustainability initiatives have been launched in the French wine sector to comply with sustainability requirements, whether at the firm or at the chain level (Pavez et al., 2022). These initiatives are strongly anchored in innovation that have been adopted namely by wine co-ops, representing 40% of the whole wine production, seeking for competitive advantages and the fulfillment of social responsibility. However, managerial decisions for sustainability can be influenced by the type of governance, i.e. Cooperatives and Investor Owned Firms (IOF). Cooperatives, as social economy organizations, play a central role in achieving sustainability. However, contrary to the IOF, cooperatives face a dilemma between their solidarity principles and the competitive and capitalistic needs (Draperi & Le Corroller, 2016). Previous studies showed that beyond governance, size, networking and environmental factors are key performance and innovation drivers (Basterretxea & Martínez, 2012) In our study, we applied a multi-paradigmatic theoretical perspective. We considered the governance structures of the wine chain following Ménard (2018) and Pavez et al. (2022). We also analyzed firm governance thanks to the transaction cost economics and the cognitive theory of the firm (Saïsset & Codron, 2019). Moreover, we based our research on the OECD's concept of innovation (2018). Sustainability was based on Brundtland report (1987) dealing with its 3 dimensions (economic, social, environmental) and sustainability performance was based on Elkington (1998) and Marcis et al. (2019). Aims: Our objective is to understand how the characteristics of wine cooperatives and wine investor owned firms (IOF), as well as their forms of governance, can influence innovation orientation and sustainability performance. In other words, we wonder at what extent different ways of governance (co-op/IOF) can lead to different types of innovations and sustainability approaches. Methods: 202 Our methodology is qualitative and based on semi-structured interviews with wine estates, wine cooperatives and wine merchants. We studied 16 firms, located in Occitanie, Provence and Alsace. The 22 interviews to managers and presidents were quasi totally recorded and transcribed. These firms had different governance mechanisms, production orientation, size and commercial strategies. We established the differentiating factors, based on the firm characteristics, to elaborate a typology. Then, a thematic analysis was applied following the step-by-step approach proposed by Nowell et al. (2017), allowing an auditable trace of coding, interpretation and representation of textual data. Results and discussion: Our results show that innovations for sustainability are not only determined by the legal form but also by their business model, such as cooperatives innovating in their governance by benchmarking leading capitalistic firms. Process-related innovations were the most frequent and mainly concerned packaging, mostly oriented to recycling improvements (i.e. bottle deposit system), as well as vineyard (new agro- ecological practices), and irrigation from wastewater treatment plants. They were followed by organizational innovations, often related to governance (e.g. stakeholder committees and governing boards, horizontal and vertical alliances). Commercial (e.g. online sales, brands and labelling) and process innovations (e.g. extraction of local yeasts, new niche wines) were more numerous in the biggest and more decentralized firms (of which some wine co-ops). Upstream oriented firms developed significant governance innovations towards their stakeholders. Standards seemed to be the most widespread means to signal sustainability, especially for some IOF with numerous vineyards, developing direct exports. Corporate Social Responsibility (CSR)-oriented firms were prone to measure sustainability performance. Firms also implemented more flexible voluntary commitment strategies. Only a little part of the declared innovations can be considered as complete sustainability ones, whereas almost 50% were just economic centered. This situation was very contrasted thanks to CSR, but not systematically linked to a type of firm. Professionals pointed out that Protected Denominations of Origin could hinder innovation, namely concerning new resistant varieties and new oenological practices. They didn't appear either as sustainability-oriented. However, Protected Geographical Indications seemed more flexible to innovate, mainly because it allows for greater flexibility in the use of new varieties and blends to diversify the commercial strategy towards new markets. Contributions and implications: This study underlined the great diversity of the wine firms in terms of types of innovations and sustainability orientation. It provides an insight and understanding of the main concerns and efforts undertaken by wine firms to meet competitiveness and sustainability challenges, such as water management, pesticide use reduction, development of organic and biodynamic viticulture, internal and external social initiatives. Also, it allowed us to design a typology of wine firms based on their governance characteristics and strategies.