Dynamic capabilities in the context of Brexit and international wine business: An exploratory two‐country study

• Date: 01 March 2019
• DOI: http://doi.org/10.1002/tie.22011
• Author: Abel Duarte Alonso,Seng Kok
• Published date: 01 March 2019

AREA PERSPECTIVES: EUROPE

Dynamic capabilities in the context of Brexit and international

wine business: An exploratory two-country study

Abel Duarte Alonso

1,2

| Seng Kok

1

1

Liverpool Business School, Liverpool John

Moores University, Liverpool, UK

2

School of Business and Law, Edith Cowan

University, Joondalup, WA, Australia

Correspondence

Abel Duarte Alonso, PhD, Senior Lecturer,

Liverpool Business School, Liverpool John

Moores University, Redmonds Building

Brownlow Hill, Liverpool L3 5UG, UK.

Email: a.alonso@ecu.edu.au

This exploratory study proposes a conceptual framework based on the dynamic capabilities

approach (DCA) to advance the understanding of firms' responses to turbulence, illustrated by

the Brexit phenomenon. The case of wine producers is examined, with a particular focus on per-

ceived impacts of and responses to Brexit among wineries predominantly involved in exports.

Data from 281 mainly micro and small exporting Italian and Spanish winery firms were gathered.

Various differences emerged in how both groups of businesses perceived Brexit's impacts, and

how they planned to respond. Some of these ways revealed principles associated with the DCA,

such as possessing critical organizational resources, notably, tangible, intangible, and human to

create capabilities. Furthermore, while various comments denoted indecisiveness and uncer-

tainty, others underscored the vital need to exploit opportunities through engaging with new

international consumer markets. Overall, the proposed framework facilitates an in-depth under-

standing of winery entrepreneurs' strategic behavior in response to turbulent situations.

KEYWORDS

Brexit, dynamic capabilities, international business, small/micro winery owners/managers,

strategies

1|INTRODUCTION

In various nations, wine production contributes substantially to socio-

economic wealth and regional development; such a contribution is

particularly illustrated in the cases of Italy and Spain. Data from 2015

(Wine Institute, 2017) indicate these nations are two of the world's

three main wine producers. In 2015, Italy had the largest share in pro-

duction, with 17.4%, while Spain was third, with 13.1% (Wine Insti-

tute, 2017). Similarly, information from the International Organisation

of Vine and Wine (OIV) for 2015 reveals Spain was the world's largest

exporter, with 23% of the global share or 24 million hectoliters, fol-

lowed by Italy, with 20 million hectoliters (OIV, 2016). The same year,

the level of wine consumption in Italy was third in the world together

with that of Germany, while Spain's was the eighth (Wine Institute,

2017). The level of wine consumption in these two nations suggests

the potential of the domestic market and its ability to complement

sales volumes that come through exporting. In terms of value, the data

once again underline the socioeconomic importance of the wine sec-

tor. For instance, the value of Italy's production was 5.35 billion, while

that of Spain's still represented 2.64 billion Euros (OIV, 2016).

Although the wine industries of both Italy and Spain are dominant

players in world wine production and exports, they face significant

challenges. In fact, they operate in a highly competitive environment

(Bianchi, Drennan, & Proud, 2014; Overton & Murray, 2016), with the

emergence of new players from emerging wine-producing nations

(Morrison & Rabellotti, 2017). A more recent challenge that could aggra-

vatetheexistingfiercecompetitioninthewinemarketistheoutcomeof

the 2016 referendum in the United Kingdom, or “Brexit”(Anderson &

Wittwer, 2017a), in which the UK voters opted to leave the European

Union (EU). For many years, the United Kingdom has been one of the

world's largest wine-consumer markets (Bruwer, Jiranek, Halstead, &

Saliba, 2014).

Different reports and academic contributions highlight the eco-

nomic turbulence and uncertainty that Brexit has created, as well as

its potential political and economic consequences (Bachtler & Begg,

2017; Kokhanovskaia, 2017; Matthews, 2017; Revell, 2017;

Steinberg, 2017), including for the wine sector (Anderson & Wittwer,

2017a). The UK consumer market is significant for Italian and Spanish

wines. In 2015, Italy exported wines to the United Kingdom for a

value of 736 million Euros, and Spain for 284 million Euros; they are

among the world's four main wine-exporting nations to the United

Kingdom (Centre for the Promotion of Imports, CBI, 2016). The Span-

ish Wine Market Observatory (OEMV, 2016) notes, in 2015, the

United Kingdom represented Spain's second largest export market.

DOI: 10.1002/tie.22011

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