CSBER - Research Projects

Rural entrepreneurship and the economics of industry competitiveness Research Projects

 

Understanding the Okanagan Tree Fruit Industry and Opportunities for Value Chain Innovation (Principal Investigators - Lee Cartier and Svan Lembke):

Exports of agricultural products, including fresh and processed food products, wine and non-alcoholic beverages make a significant contribution to the Okanagan region economy. The transformational changes occurring in the tree fruit industry have resulted in significant changes in scale and relationships across the value chains of all related industries. Understanding the interdependencies and similarities between the tree fruits value chain and the wine value chain have the potential for insights and learnings across both industries.

A multitude of bilateral and mega trade agreements, such as the Trans-Pacific Partnership (TPP) and the Comprehensive Economic and Trade Agreement (CETA) are presently being negotiated, ratified and implemented. The scale and complexity of these new trade agreements may fundamentally change the value chains that define agricultural products cluster, where traditionally many trade barriers exist. Current trade barriers effect domestic competition which also has a strong positive association with international competitiveness in some industries.

The purpose of this research is threefold. It seeks to identify: 

  1. the dynamics of multiple forces and their threats to existing parts or entire value chains within these industries,
  2. the value of investment into parts or entire value chains, and also
  3. opportunities for additional programs to accelerate and stabilize economic growth.

This study is funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) and the Social Sciences and Humanities Research Council (SSHRC).

 

Growth Opportunities for New Product Categories in the BC Wine Industry (Principal Investigator - Lee Cartier):

The British Columbia wine market is divided into three distinct market segments: premium wines, mid-value wines, and commercial vin-ordinaire.  In 2010, the age of grape plantings on approximately 3,000 acres of wine grapes, or 1/3 of the total grape acreage was less than four years. As these young plantings come into full production, grape production is forecast to increase from 17,333 tons to 39,196 tons by 2015. An additional 13.1 million litres (1.5 million cases) of wine could be produced from these new grapes. The additional wine production could supply 50% of the mid-value wine segment, adding $79 million revenue annually to BC wineries and increasing the total BC wine industry revenue by $198 million.

The purpose of this research is twofold. First, to identify the key elements of a successful mid-value wine brand. Second, to quantify the profit potential for wineries that commercialize new mid-value wine products. The findings from this investigation will be of interest to a number of stakeholders; including business entrepreneurs, regional economic development officers, lenders and venture capitalists.

This study is funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) and the Social Sciences and Humanities Research Council (SSHRC).

 

Benefit-cost analysis of the Okanagan Kootenay Sterile Insect Release Program (Principal Investigator - Lee Cartier):

This economic analysis compared the benefits and costs of using the Sterile Insect Technique (SIT) and Mating Disruption to control Codling moth in the Okanagan/Similkameen region of British Columbia. It formed part of a larger review of the regional Sterile Insect Release Program (SIR) conducted by the International Atomic Energy Agency.

The study measured the producer surplus, consumer surplus, and Okanagan residents’ tolerance for pesticide use by farmers. It also evaluated two potential strategic directions to expand the SIR program: an export strategy to increase the production of sterile Codling moths, and a diversification strategy to extend the SIT to other damaging insect pests, such as Spotted Wing Drosophila in the Okanagan/Similkameen.region. This research received funding support from the Okanagan-Kootenay Sterile Insect Release Program.

 

Rural Entrepreneurship and Industry Competitiveness – Value Chain Innovation in the Agricultural Products Cluster (Principal Investigator - Lee Cartier)

Funded by the Natural Sciences and Engineering Research Council of Canada (NSERC) and the Social Sciences and Humanities Research Council (SSHRC), the purpose of this project is to better understand the role of the entrepreneur in industry competitiveness and sustainable rural community development, and how they overcome the significant obstacles to business diversification and growth. Using an industry cluster approach to business model innovation and industry competitiveness, this investigation seeks to understand the extent and composition of business interdependence along the value chain, and how this interdependence stimulates innovation and leads to sustainable competitive advantage.

Major outcomes of the research were: industry workshops, a comprehensive report and presentations, all designed to inform stakeholders about emerging strategic issues.

Value Chain Analysis of the British Columbia (BC) Wine Industry (Principal Investigator - Lee Cartier)

This study quantified the value chain activities of the three industry sectors that comprise the BC wine industry: grape growing, wine making, and wine retail. It measured two value added activities for each sector; labour expenditure (productivity), and firm operating profit. This study helps industry firms to understand where value is created in their industry, and where to adjust firm and industry level strategy to improve value creating activities.  This knowledge should help improve the competiveness of Canadian wineries relative to foreign wine imports.

A major outcome of the research was a report to the BC Wine Institute that measured the contribution of the BC wine industry to the BC economy. This report helps the industry to use its resources more effectively. Financial support for this research was provided by the B.C. Wine Institute.

 
Industry Cluster Analysis of the Okanagan Region (Principal Investigator - Lee Cartier):

Michael Porter, in his ground breaking book “The Competitive Advantage of Nations”, identified industry clusters as a source of regional competitive advantage. There are a number of definitions in use, but all involve the concepts of geographic concentration, similar or related firms, regional exports, and common regional infrastructure. Porter identifies that clusters have the potential to improve industry competitiveness; by increasing the productivity of the companies in the cluster, by driving innovation in the field, and by stimulating new businesses in the field.

An industry cluster analysis of the Okanagan region was completed in 2009. The purpose of this study was to identify leading and emerging Okanagan industry clusters, and to describe their influence on the regional economy, in terms of employment and export intensity. This work provides the foundation for further research into business and industry development strategy. Financial support for this research was provided by Okanagan College.

The Strategic Linkage Between the External Labour Market Conditions and the Internal Human Resource Management Processes In Rural Okanagan Businesses (Principal Investigator - Lee Cartier)

This study examined the question: “Is there a shortage of labour in the Okanagan region, and if so, how are agri-businesses dealing with the shortage”? At the time of the study, there was general agreement among business owners’ that there was a shortage of skilled agricultural workers in the region. This research investigated whether this shortage was structural, that is, not enough workers, or whether it was due to poor human resource management skills.

The findings provided insight into the causes of the problem, and identified strategies that could be used to improve the labour supply to agriculture. Financial support for this research was provided by the Economic Development Commission of the Central Okanagan and the B.C. Agriculture Council.

Entrepreneurship as an engine of British Columbia rural economic development (Principal Investigator - Lee Cartier):

This study investigated the relationship between the entrepreneur and rural economic development.

Rural communities in British Columbia are becoming more dependent on government transfer payments (social assistance), and remittance income (wages paid to residents that work away from their communities). This is not sustainable in the long run. As residents leave their region due to poor economic prospects the tax base is diminished; leading to fewer government services such as education and healthcare, and crumbling infrastructure. These factors lead to fewer opportunities for residents, and intensify the downward spiral into poverty.

Regional economic development strategies typically fall into two categories; recruitment and retention of corporate enterprises into rural regions, and the bottom-up development of local entrepreneurs. There is strong support in the literature for the bottom-up development of local entrepreneurs over recruitment of new corporate firms. Local entrepreneurs have a strong connection to their home communities, and exhibit a strong desire to contribute to the well-being of their communities. In contrast, luring large corporations to rural settings through temporary financial incentives or rural cost advantages is far less effective in creating long term sustainable communities. Retention of these relocated companies is low, as these firms often leave when the temporary incentives expire. Furthermore, the effect of globalization on resource industries has significantly reduced the cost advantage of rural areas.

The findings from this study were presented, as a report, to the Canadian Rural Partnership. The outcome of this research will be new models for business growth and rural development. These new models will be of special interest to rural entrepreneurs and individuals interested in community development work. They can be applied across industry sectors and all rural Canadian regions. Financial support for this research was provided by Agriculture and Agri-Food Canada (Canadian Rural Partnerships).

New product Development Process (Process Developer – Lee Cartier):

New Product development (NPD) is the process of taking a technology product from the idea stage to the commercialization stage. There are four stages to the process:

1. Environmental scan and strategic direction: Involves an in-depth analysis of the external and internal environments, comprehensive competitive intelligence, and an analysis of state-of-the-art.

2. Proof-of Concept: Identifies and quantifies the critical issues related to marketing, technology, intellectual property (IP), operations, and financial requirements. The stage ends with a benefit-cost analysis and acts as a go/no go gate to the Pre-production Stage.

3. Pre-production: Often referred to as the ‘prototype' stage, quantifies the requirements of the prototype development, including; test-market plan, technology design and IP issues, operational issues related to the small scale production of the prototype, and potential venture capital sources. This stage is the final ‘testing’ stage before the new product proceeds to commercialization.

4. Commercialization: Essentially there are only two options available to a R&D company to bring a new product to the marketplace. The first option is to license the rights to manufacture and distribute the product to an organization with the resources and expertise to successfully launch the product. The second option is to vertically integrate the R&D business with manufacturing and distribution capability. A third option, a combination or hybrid, generally involves the R&D company developing limited manufacturing and distribution capability. The commercialization plan requires detailed planning around each option, and ultimately selecting the most appropriate strategic direction. Key issues to be considered include technology transfer agreements, full scale manufacturing and distribution options, and exit strategies for venture capitalists.

The New Product Development process includes the support of a comprehensive NPD website, and the use of the powerful DecisionCraftertm modeling software. The process, and its tools, has been used in a number of projects by the Business Development Bank’s management consulting group. The NPD process has also been adapted as course curriculum for a 4th year course in the entrepreneurship concentration at the Okanagan College School of Business.