Challenges of the croatian wine industry caused by the covid-19 pandemic
Project leader
Jana Katunar PhD, Assistant Professor
Faculty of Economics and Business, University of Rijeka
Project value: 16.105,54 HRK
Duration of the project: 20/04/2021 - 20/04/2022
Abstract
The theoretical basis of the research planned within this
project is related to the theory of the firm. i.e. agency theory. The
relationship between principal and agent is in the focus of agency theory.
According to the founders of agency theory, Jensen and Meckling (1976),
principal – agent relationship in most often interpreted as the relationship between the owner and manager in the company. The agency problem arises due to the separation of ownership and control, which leads to an asymmetry of information in favor of the agent. The goal of agency theory is to create a relationship, regulated by compensatory mechanisms, in which the agent's behavior will be aligned with the interests of the principal. The agency problem was further highlighted
in the crisis caused by the COVID-19 pandemic. Recent research within agency theory observes principal – agent relationship, among others, through the relationship of partners in the distribution chain (Whipple, Roh, 2010; Steinle et al. 2014). In those studies agency costs were viewed from the customer's point of view, while this study will look at agency costs from the producer's point of view, as producer is weaker contracting party due to the large number of small producers, and relatively small number of distributors in the Croatian wine industry. In this research the role of reputation will be also explored, because of its economic value and because of the role that reputation has in selecting a business partner. Research shows that reputation can even have the effect of reducing opportunistic behavior (Hill, 1990). Reputation plays an essential role in creating a competitive advantage for a company. In the wine industry reputation is associated with the wine quality and it has an influence on the price formation and company performance (Piacenza, Sacchetto, 2009; Schamel, 2014). Given the globalization of the wine market, increase in the quality of Croatian wines, increase in the exports, due to the tourism development, increase
in the information availability, and the emergence of an epidemic, today the role of reputation is more important than before. In this research it will also be investigated whether the epidemic has led to changes in wine industry, on the one hand on consumer preferences, and on the other on the business policies of wine producers due to the current crisis.
