An Examination of inter-business cooperation by wine and tourism small and medium-sized businesses in the Douro valley of Portugal.

Abstract

Businesses operate in an increasingly complex and competitive environment (Anderson and Atkins 2001; McGee and Sawyer 2003), which poses challenges and difficulties that no business can face alone (Beverland and Brotherton 2001). This is particularly true for micro, small and medium-sized enterprises (SMEs) (Fuller-Love and Thomas 2004), given their characteristics, especially at the current time when the western world is experiencing a severe economic and financial crisis. SMEs are characterised by having gaps in competences or resource portfolios (due to lack of substantial investments) (Dennis 2000), and by having small establishments, local ownership, lack of information and certain skills (Morrison 1998; European Commission 2003), lack of know-how (Schermerhorn 1980), and scarce resources (e.g. human, financial and material) (Morrison 1998; European Commission 2003). Thus, SMEs need to look for specific ways that can help them to bring in complementary strengths and thereby be more competitive. This is especially true for those SMEs located in peripheral and rural areas because they have to face additional constraints to their activity, such as location, limited size of the market and labour market conditions (e.g. Keeble and Tyler 1995; North and Smallbone 1996; Stathopulou et al. 2004). The establishment of cooperation relationships/initiatives comes at the forefront of the list of options that can be adopted by SMEs operating in specific contexts, namely operating in complementary industries (Wargenau and Che 2006; Roach 2010), as it is the case of wine and tourism industries, and operating in rural areas Smallbone et al. 2002). Inter-business cooperation can be adopted by SMEs to overcome some of their location-related difficulties (Smallbone et al. 2002), to face the challenges posed by the business environment, to achieve their objectives (e.g. European Commission 2003; Miller et al. 2007), to attain a stronger position, and be able to compete more effectively, than they would do if in isolation (Fyall and Garrod 2005). The (potential) benefits that may result from cooperation to businesses are widely acknowledged and therefore, cooperation relationships/initiatives are seen as strategic necessity rather than a choice (Chen and Chen 2002; Beckett 2005), being a major feature of contemporary competitive environment and central to overall business strategies (Abdy and Barclay 2001). However, and despite the above, cooperation between SMEs is more limited than what would be expected and suggested in the literature. Not only many SMEs have little knowledge about, and show a weak tendency towards cooperation as a means to overcome their natural weaknesses (e.g. European Commission 2003; Ussman and Franco 2000; Hoffman and Schlosser 2001, Correia et al. 2007), but they also struggle to reconcile the desire to follow their own interests with cooperation with other businesses (Fyall and Garrod 2005). Thus, it seems that the same characteristics that strengthen cooperation relationships/initiatives may simultaneously represent a hindrance to it. This seems to be particularly true in the case of Portugal (Ussman and Franco 2000; European Commission 2003). Therefore, this research aims at contributing to a comprehensive understanding of what are the influences on decisions towards cooperation, and on operation and outcomes of cooperation from the point of view of SMEs’ owners/managers because of their strong involvement in the owning, managing and making decisions. Literature of generic cooperation, SMEs, and on the specific context of wine and tourism industries supported and informed this study. To accomplish the proposed goals and objectives a quantitative methodology grounded in the positivism paradigm was adopted. Data was collected in the Douro Valley in the north of Portugal from wine and tourism businesses through structured face-to-face interviews (through interview-based questionnaire) (200 questionnaires were obtained). The selection of tourism owners/mangers was based on a stratified random selection. Wine respondents were selected through a systemic sampling method. Data collected has enabled the identification of the factors influencing the decision to whether, or not, cooperate, and also the influences on cooperation operation and outcomes. At the theoretical level, this research has demonstrated the appropriateness of studying inter-business cooperation from an all-encompassing perspective. This study has also shown the appropriateness of blending different theories to study reasons for cooperation in the context of SMEs. It has also identified the influences perceived as the most important by owners/managers for cooperation to happen between businesses operating in the same (horizontal) and/or in a different industry (diagonal). At the practical level, this study is contributing to applied knowledge in a specific region of Portugal by offering original data about inter-business cooperation in the Douro Valley in the context of wine and tourism industries, what has not been collected before. The results demonstrated that although cooperation is a practice that has been already adopted by owners/managers in the Douro Valley in that will be adopted in the future, this is not the case for a considerable number of the wine and tourism business. In the Douro Valley, inter-business cooperation is informal and is a relatively recent practice, involving a small number of partners. Perceptions and expectations of positive outcomes in terms of the achievement of businesses’ objectives, prior knowledge, personal relationships, and trust are crucial for cooperation to occur in the Douro.