A path dependency and cluster competitiveness framework to examine regional marketing systems and conflicts

Journal of Agricultural and Applied Economics, Aug 2003 by Woods, Timothy, Cook, Roberta

This paper develops a framework for competitiveness that incorporates path dependency within production regions. Patterns of technological innovation, product development, institutions, and market orientation follow a certain local path. This evolution creates regional economies that emerge with unexpected competitive advantage. The model draws on previous work looking at, among other things, induced innovation. The framework is applied here to the major regional tomato producers in North America. The paper examines the role of various institutions (grower associations, governments, research institutions, and support industry) in influencing the path along which a regional sector evolves.

Key Words: competitiveness, induced innovation, path dependency

The produce marketing system in North America has been undergoing considerable change. This change is exemplified by the recent antidumping lawsuits and countersuits filed by tomato growers in Canada and the United States. Several rounds of suspensions have evolved, but the competition between production regions has been well documented (Federal Register). This recent row falls just on the heels of the NAFTA debate where the U.S. winter vegetable growers took exception to trading practices by Mexican growers. The debate and tensions in the marketplace continue in earnest as regional grower groups try to preserve their markets and competitive position.

Many of the trade discussions focus on anticompetitive behavior, level playing fields, cost of production differences, and like product analyses. These matters are important, and reasonable justification can be made for implementing rules that facilitate orderly market development. Much of this debate, however, looks at static price and production conditions. There is much to be added to the discussion by digging deeper to better understand the dynamics of competitiveness and how institutions contribute to this evolution. There appears often to be a path along which unique resources are developed and a sense in which, because of search costs and market focus, key resources that define competitiveness are developed regionally.

This paper looks at the dynamics of resource development and competitiveness for four tomato production regions. Porter's concept of competitive clusters is examined, along with some perspectives drawn from some recent papers by Vernon Ruttan (1996, 1997) on induced innovation and applied to the context of these production regions. A discussion about the role of institutions follows, including observations about differences in institutions in these regions.

Regional Production Clusters

The tomato industry in North America has followed an interesting path of development. The steady increase in the demand for tomatoes in the United States, Canada, and Mexico created great opportunities for producers in a number of different areas. Florida came to eventually dominate as a production region for the winter months and developed a production system that emphasized growing mature green tomatoes in the field that could endure wide distribution. Florida continues to be the largest fresh tomato production region, accounting for about 38% of the total shipments.1 California was able to draw on its existing produce support industries to become an attractive production region in its own right. The market focus was slightly different from Florida, emphasizing the summer months and also growing vine-ripened products. California accounts for about 16% of the total shipments.

Mexico has been a significant production region for tomatoes since the early 1960s.2 Exports to the United States steadily grew, approximately by a factor of three between then and now. A substantial export emphasis to the U.S. markets developed during the winter months, largely in competition with Florida. Within Mexico, areas focused their production further, depending on their factors of production and support institutions. Sinaloa emerged as the primary production region and continues to emphasize vine ripe tomatoes, whereas the California Baja is a lesser production area and emphasizes specialty tomato products such as roma varieties. Mexico accounts for about 35% of the total shipments into U.S. markets, including 70% of the roma type market, which has seen especially significant growth in recent years.

Canada has emerged as another important production region with a different focus. The Canadian greenhouse industry has expanded substantially, particularly in Ontario. Approximately half of the greenhouse production by value is for tomatoes. Although growers in this region continue to look for ways to extend their season, they still focus on the summer months when there is adequate light. The products marketed are aimed at the higher end premium packs and clusters. Although only 4% of the total shipments to U.S. markets come from Canada, many U.S. growers have become concerned about the rapidly growing production capacity and, especially, the competition for high-end markets. Production and value have tripled in Canada since 1996.