Does passion for wine matter? The effects of owner motivation on pricing and quality decisions in emerging US wine regions

Abstract

AbstractIncreasing the success rate of start‐up wineries and fostering the wine–hospitality‐tourism clusters in emerging wine regions with substantial entrepreneurial activities have attracted considerable attention among public and private stakeholders. Understanding entrepreneur's motivation to enter the industry is crucial to understand winery behaviors and industry dynamics. Some entrepreneurs enter the industry motived by passion for wine whereas others are motived by profits. Differences in motivation may contribute to the high variability in quality and quality‐adjusted prices of wines in emerging wine regions. We used ordinary least square and Tobit regression models to investigate the influence of motivation on winery pricing and quality decisions using data on 700 wines from 102 wineries in emerging US wine regions. We find that passion‐oriented owners produce higher quality wines and set higher quality‐adjusted prices relative to profit‐oriented owners. Recognizing differences in owner motivation is critical to establish appropriate policies to support the development of the wine industry in emerging regions. [EconLit citations: Q13; L83; O25].