Innovation Patterns in the Canned Fish Industry in Galicia (Spain

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In this paper, we analyze the competitive and innovative trajectories followed by the canned fish industry in recent times. We base our study on four case studies from the Galician industry in Spain, which comprises the largest share of the European
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   45 DOI: 10.7341/20181413JEL codes: O31, Q55, Q22/ Innovaon Paerns in the Canned Fish Industry in Galicia (Spain) Manuel González-López 1  Abstract  In this paper, we analyze the compeve and innovave trajectories followed by the canned sh industry in recent mes. We base our study on four case studies from the Galician industry in Spain, which comprises the largest share of the European canned  sh sector. At least four dierent innovaon paerns are found in the industry. The  rst paern is a conservave one where innovaon is seen as a risk and therefore maintaining current rounes is the chosen opon. The second paern has been dened as “large retailer-dominated” and is followed by companies that have signed exclusive agreements with large retailers, which increasingly determine most of their innovaon acvies. The third strategy we have dened as “territory-orientated,” since product innovaon and incorporaon of quality disncons based on the territory are the main innovaon drivers. Finally, we have an “ecological or nature-orientated” innovaon strategy where meeng ecological normave requirements is the main innovaon driver. Keywords:  canned sh, innovaon, trajectories, food industry, value chain, retailers,  private labels, territory, ecological products. INTRODUCTION The canned sh industry is one of the rst examples of how modern industry entered into food producon, as factory processing in this sector had already started by the middle of the 19th century. As with many other tradional industries in Europe, the canned sh industry has been aected by delocalizaon processes during the last decades. Nevertheless, in some European regions, it sll has a strong presence in the economy and is also one of the few industries performing reasonably well in the current economic crisis. This is the case in Galicia, in North-West Spain, where less than 70 1 Manuel González-López, Ph.D., Department of Applied Economics, ICEDE Research Group, University of Sanago de Compostela, Rectorado, Praza do Obradoiro, s/n, 15782 Sanago de Compostela, La Coruña, Spain, e-mail: Manuel.gonzalez.lopez@usc.es. Recieved 22 May 2017; Revised 5 September2017, 12 January 2018, 18 January 2018; Accepted 19 January 2018  46 / Innovaon Paerns in the Canned Fish Industry In Galicia (Spain)Innovaon, Entrepreneurship and Psychological Traits as Factors Infuencing ProducvityJustyna Sokołowska-Woźniak and Dariusz Woźniak (Ed.) companies produce around 85% of the total Spanish canned sh products and, with regards to canned tuna, 50% of total European producon (ANFACO, 2013). Despite these gures, however, the sector has suered a deep restructuring process during the last decades as the number of companies declined abruptly and many of the surviving rms changed their compeve strategy (Carmona & Fernández, 2001). Since the 1990s, the sector has shown a strong concentraon of producon and a marked heterogeneous internal composion. On the one hand, there is a small of group of large companies which started an internaonalizaon strategy, both in terms of trade and capital, some of which have become major mulnaonal companies at a world level. Together with this small group of companies, the second group of SMEs has survived following dierent strategies. Some of them relied upon dierenaon, focusing on arsanal processing and seasonal local species while others tried to survive by means of collaboraon with larger companies or conserving their tradional client networks.This paper aims to discuss the compeve and innovave trajectories followed by the canned sh industry during recent years based on the case of Galicia. In parcular, we try to answer the queson of why canned sh producers have followed dierent evoluonary paths and how they have managed, from an innovaon strategy viewpoint, to follow such diverse trajectories. In the next secon, we will discuss the relevant literature concerning innovaon and change in the food industry, with a parcular focus on contribuons made by the Evoluonary School and the Relaonal Economic Geography stream. Later on, we present the main results of our empirical analysis, in which the cases of four representave companies have been studied in depth. Finally, some conclusions are drawn and summarized in the end secon of the paper. LITERATURE REVIEW Change and innovaon in the food industry: strategies of the embedded rmThe evoluonary theory of rms: rounes and changes Nelson and Winter (1982) established the foundaons of the Evoluonary theory of the rm in their book ‘An Evoluonary Theory of Economic Change.’ The evoluonary theory of the rm rests on the idea that companies cannot be considered as homogeneous units since they dier from one another in terms of their internal organizaons, knowledge bases, capabilies and also in terms of their respecve strategies for confronng change. A major concept of the evoluonary theory of rms refers to rounes. Rounes and habits explain a good deal of the behavior of rms since   47 Manuel González-López / Journal of Entrepreneurship, Management and Innovaon (JEMI),  Volume 14, Issue 1, 2018: 45-64 they facilitate decision-making, create stability and make the exchange of knowledge and informaon easier. As pointed out by (Nelson, 1994) a rm can be understood in terms of a hierarchy of pracced organizaon rounes. Cohen et al. (1996, p. 683) dene rounes as “an executable capability for repeated performance in some context that has been learned by an organizaon in response to selecon pressure.” Firms’ rounes are nevertheless subject to connuous changes due to internal and external forces. Breaking and changing rounes can, in the nal analysis, be associated with the process of innovaon itself, understood in Schumpeterian terms as new combinaons of producon factors. Therefore rms usually rely upon rounes that give them a basis of stability – but, at the same me, rms do change their rounes when they innovate. This leads us to a second major concept of the evoluonary theory of the rm, which is “path-dependency.” Firms evolve following a path determined by past rounes, pracces and knowledge that need to be adapted to new contexts and realies. Consequently, history maers and companies’ decisions are taken according to an established trajectory of knowledge accumulaon, past decisions, etc… The direcon of those changes and trajectories is not easily predictable because uncertainty, rather than perfect informaon, dominates the scene (Dosi, 1988). The former constutes a major dierence between the evoluonary and the neoclassical schools of economic thought. In fact, “bounded raonality” can be considered as another central concept for evoluonary advocates since they understand that economic actors cannot know exactly what the outcomes of their acons will be. Therefore there are hardly any opmal choices and ecient outcomes in the evoluonary paradigm, but rather trajectories shaped by incomplete informaon, past decisions and present circumstances. Moreover, rms dier in their innovaon strategies to confront market changes (Schamp, 2005). A large literature exists concerning the dierent innovave strategies of rms at both an individual and aggregate level. As pointed out by Freeman (1982), whilst some companies follow tradional, dependent or imitave strategies and hardly get involved in R&D acvies (apart from adapve R&D), others exhibit more proacve behavior where innovaon is concerned (defensive or oensive strategies). At sector level, the well-known taxonomy established by (Pavi, 1984) idenes dierent sectoral paerns of innovaon. While some companies, like the ones belonging to primary or tradional industries, are characterized as “supplier dominated” from a technological viewpoint, others are more prone to carry out their own innovave acvies (“science-based” sectors or “specialized suppliers” sectors). We could, therefore, say that the response to technological change varies according to the type of rm and sector.  48 / Innovaon Paerns in the Canned Fish Industry In Galicia (Spain)Innovaon, Entrepreneurship and Psychological Traits as Factors Infuencing ProducvityJustyna Sokołowska-Woźniak and Dariusz Woźniak (Ed.) Finally, every rm has its own knowledge base that Nelson and Winter (1982) refer to as “producon knowledge.” The authors put a parcular emphasis on tacit knowledge, capabilies and know-how stored in rms in the form of rounes. Some rms possess a strong scienc knowledge base, such as those belonging to research-intensive sectors such as pharmaceucals or chemicals, and all rms also have a basis of tacit knowledge, which can be understood as knowledge that cannot be easily codied or standardized. The importance given to implicit or tacit knowledge links the evoluonary theory of the rm with another important theorecal framework. Tacit knowledge is usually context-specic knowledge and hence is embedded in parcular geographical, cultural and instuonal contexts (Grabher, 1993). This consideraon narrowly links the evoluonary school of economic thought with some contemporary contribuons from the discipline of economic geography, somemes labeled as relaonal economic geography. 2   Hayter & Patchell (2011), following previous contribuons made by Storper (1997), indicate that the spaal distribuon of economic acvies must be understood within a framework of interacon between instuons, markets and technology that takes place in me and space. The context within which that interacon occurs is characterized by three principles that are easily connected to evoluonary economics: embeddedness, dierenaon and evoluon. Embeddedness refers to the inseparability of economic and non-economic factors where producon acvies are concerned. Evoluon implies that market processes are fundamentally transformave, and that market economies change over me with respect to the locaon, nature, and organizaon of economic acvies. Finally, dierenaon refers to the unique nature of the places and spaces where interacon between markets, instuons and technology takes place (Hayter & Patchell, 2011, p. xvi). As we will see in the next secon, changes in the food industry have already been analyzed from this perspecve by dierent authors. Changes in the food value chain: nature, territory and quality According to Malassis (1977), two main processes have determined food producon in contemporary mes, the rst being the growing industrializaon of the agro-food chain and the second one the growing level of capitalizaon, concentraon and internaonalizaon. Industrializaon has meant a structural transformaon of the food sector manifested in a relave decline of the value added by agrarian acvies (and a correlave increase of the value added in other stages like processing, distribuon, etc.). Besides this, such industrializaon processes have been associated with a generalizaon of industrial processes along the value chain. Regarding the second process, Malassis indicated that 2 For a review see Marn (1999) or Sco (1988).   49 Manuel González-López / Journal of Entrepreneurship, Management and Innovaon (JEMI),  Volume 14, Issue 1, 2018: 45-64 the introducon of capitalist forms into the agro-food sector has led to the emergence of giant industrial groups, operang on an internaonal scale, in both the processing and distribuon spheres. In this sense, according to the author, the agro-food market is a good example of an oligopolisc market based on monopolisc competence among a few stakeholders. The changes pointed out by Malassis at the end of the 1970s have probably deepened further during the last two decades, in parcular, due to the acceleraon of the globalizaon process which has occurred since that me. Thus, the new agro-food chain described by Malassis 40 years ago is usually referred to nowadays as the “convenonal mode of agriculture development and food producon” (Morgan & Murdoch, 2000). The oligopolisc character of the food sector is manifested now as the dominance of (a few) giant distributors and retailers that act as “price-makers” while a large number of farmers and primary producers have become “price-takers” (Morgan, Marsden & Murdoch, 2008). Even the large processors which emerged during the 20th century have had to readjust to the hegemonic role now played by large-scale retail (Wilkinson, 2002). This last author points out that two major factors have aected the food value chain in the last decades: on the one hand, there has been an emergence of funconal foods lead by science-based companies and on the other, as a response to the previous trend, there has been an explosion of organic food in food markets lead by large-scale retailers. As a result food producers now occupy a narrower space, parcularly in terms of innovaon, along with the food value chain. In the same vein, Burch and Lawrence (2005) consider that the eect of the dominance of large retailers that sell their own brand products is the creaon of a “third food regime” where food rms act merely as exible manufacturers aending retailers’ desires to aend highly-segmented niche markets. As pointed out by the authors “There seems to us to be clear evidence that a retailer-dominated food producon system has a dierent prole and trajectory from the two earlier regimes where power rested rst, with the seler capitalist state/farm lobby and, second with the mass producers of branded food products” (Burch & Lawrence, 2005, p. 14). From a dierent perspecve (Morgan & Murdoch, 2000) have discussed the role of knowledge producon and distribuon to explain the diversity of food supply chains. In parcular, they discuss the dierences between two food chains: the convenonal agri-food chain and the organic agri-food supply chain, and they argue that the way knowledge is distributed along the chain varies from one to the other and, to some extent, the knowledge type is also dierent in each case. According to the authors, the emergence of the convenonal chain meant that farmers’ local (tradional) knowledge was displaced by standardized knowledge coming from supply industries (such as growing mechanizaon, use of chemicals as ferlizers, etc.). The authors also
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