Alliance Formation In The Agrifood Sector: The Case Of Cellars Of Canterbury

This paper focuses on expanding our understanding of how alliance formation and evolution occurs over time. Grounded in an empirical case study of “Cellars of Canterbury”, a New Zealand wine production and marketing joint venture between five Canterbury wineries, we analyze how alliance partners can create flexible alliance architectures capable of being successfully reconfigured to meet changing environmental and market conditions through the use of self-enforcing agreements. Our conceptual model identifies the necessary conditions to ensure that sufficient private enforcement capital is available to support the alliance, thereby allowing relationship-specific investments to be made and providing sufficient flexibility to ensure the alliance can withstand any unexpected shocks without being forced into premature failure. The remainder of the paper will proceed as follows. In the next section, we define strategic alliances and outline the importance of trust and private enforcement capital in supporting alliance formation and governance. We then develop a contractual enforcement model to explain the relationship between the amount of private enforcement capital held between alliance partners and the capacity of an alliance to successfully adapt to changing environmental and market conditions. Finally we use the case of Cellars of Canterbury to support this theoretical framework and draw a number of implications and conclusions.