Standing The Test of Time. Does Firm Performance Improve With Age An Analysis of The Wine Industry

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Standing the test of time. Does firm

performance improve with age? An
analysis of the wine industry
a b c
Arturo Capasso , Carmen Gallucci & Matteo Rossi
a
DEMM Department, University of Sannio, Benevento, Italy
b
DISTRA (M&IT) – Department of Management & Information
Technology, University of Salerno, Salerno, Italy
c
DEMM Department, University of Sannio, Benevento, Italy
Published online: 07 Apr 2015.
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To cite this article: Arturo Capasso, Carmen Gallucci & Matteo Rossi (2015): Standing the test of
time. Does firm performance improve with age? An analysis of the wine industry, Business History,
DOI: 10.1080/00076791.2014.993614
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Business History, 2015
http://dx.doi.org/10.1080/00076791.2014.993614
Standing the test of time. Does firm performance improve with age?
An analysis of the wine industry
Arturo Capassoa*, Carmen Galluccib and Matteo Rossic
a
DEMM Department, University of Sannio, Benevento, Italy; bDISTRA (M&IT) – Department of
Management & Information Technology, University of Salerno, Salerno, Italy; cDEMM Department,
University of Sannio, Benevento, Italy
Currently, few studies have investigated how longevity affects economic and financial
performance. These studies have generally approached the issue according to
theoretical perspectives; thus, even fewer empirical studies exist. The present work
aims to fill this gap by empirically verifying whether longevity is a variable that can
determine firm performance. Our main hypotheses are tested on a large sample of
Italian wineries by applying a panel model with time fixed effects on firm performance
measured from 2008 to 2011. Our main findings highlight that the oldest wineries
outperform the youngest wineries and that the longevity factor can significantly explain
the difference in performance. We also discuss some practical implications of our study
and intriguing directions for future research.
Keywords: longevity; firm performance; profitability; financial leverage; firm age;
firm survival; wine industry
1. Introduction
How does firm age affect firm performance? This is not an easy question to answer.
According to evolutionary theory, old organisations become increasingly dominant in
their environment while becoming less able to respond to new challenges as their age
increases. Moreover, empirical studies about the issue are scarce and do not reach a
consensus. The industry can play an important role to help researchers comprehend this
issue better. In particular, we believe that it would be interesting to study the effect of the
firm age on its performance in the wine industry, where the co-existence of long-lived and
young firms in the same environment provides an opportunity to conduct an empirical
study to verify whether longevity can be a value driver in the wine industry. In this
industry, the concept of longevity assumes a peculiar meaning in the light of the specific
characteristics of the product itself: wine is a product that is strongly linked to the passage
of time. For companies that produce aged wines, time is a real production factor that
influences not only the organoleptic properties of the wine but also its emotional value.1
Additionally, no empirical study that investigates the relation between longevity and
performance in the wine industry exists in the present academic literature. This article
aims to fill this gap by exploiting the availability of detailed information on firm age and
performance in Italy, which is one of the leading countries in wine production, with an
estimated 44 million hectoliters produced in 2013. The Italian wine industry is one of the
*Corresponding author. Email: capasso@unisannio.it
q 2015 Taylor & Francis

2 A. Capasso et al.
main sectors of the agricultural economy and one of the shining lights of Made in Italy.
The article also proposes to expand the literature about firm performance in the wine
industry. Despite the increasing interest in this subject, studies on economic and financial
features of the firms that operate in the wine industry are still scarce.2 Specifically, this
article makes a methodological contribution to wine industry research by explicitly
studying the impact of longevity on firm performance. We start with a sample of 455
wineries, forming two sub-groups: ‘old’ and ‘young’ wineries, based on the founding year.
We choose 1986 as the cut-off point. A broad consensus exists among scholars and
practitioners that 1986 represents a watershed year in the Italian wine industry because the
adulteration scandal, known as the methanol affair, produced the start of a new era for the
Italian wineries.3 Since then, on the demand side, there has been a major public awareness
of food safety; on the supply side, companies have been forced to direct their strategies to
pursue sustainability in the medium to long term. The companies who survived the scandal
showed ability to adapt to the changes recorded in that period. Therefore, we have
considered the surviving companies to be long-lived for their ability to translate this
capacity for survival into a new vision. Using descriptive analysis, we demonstrate that old
wineries outperform young ones in terms of revenue trend, profitability and financial
leverage. We then test whether longevity significantly influences economic and financial
performance by applying a regression model on a sample of 107 old wineries. Our main
results demonstrate that the old wineries are mainly family businesses, most of which use a
simpler and less structured governance model. The findings highlight a positive link
between longevity and revenue trend and a negative link between longevity and
profitability and financial leverage.
The paper is organised as follows. Section 2 presents a literature review on longevity
and firm performance and defines the research hypotheses. Section 3 describes the wine
industry and gives some information about the historical roots of this activity. Section 4
describes the research design and methodology. Section 5 discusses the results. Finally,
Section 6 presents some conclusive remarks and potential follow-ups.
2. Longevity and performance: a literature review

It is possible to recognise two different visions in the evolutionary theories of organisations:
the first one suggests that old and large organisations become increasingly dominant in their
environment; the second one suggests that as organisations age, they become less able to
respond to new challenges because of obsolescence and senescence liabilities. At a
theoretical level, Hannan and Freeman justify the effects of these liabilities as ‘an outcome
of an ecological-evolutionary process’.4 They maintain that the old firms are not able to fit
in well with the changing business environment. The old firms must adopt new strategies,
such as creating new firms to seize the advantages. Otherwise, as a result of a bundle of
new resources, new competitors will enter the industry and obtain better performance.
Firm life cycle, obsolescence and a firm’s original endowments are the main topics of two
important studies developed by Agarwal and Gort.5 They report evidence that the hazard
rates initially fall and then rebound as firms become older. The authors see survival as a
trade-off between obsolescence of a firm’s original endowments and net investments and
learning-by-doing. In fact, from a resource-based point of view, Helfat and Peteraf,6
underline that the learning-by-doing effect and the liability of obsolescence can coexist,
suggesting that there is a heterogeneity of capabilities and resources among firms. The
empirical studies explore the different firm dynamics with this perspective.
Business History 3
The empirical studies on firm dynamics have primarily focused on firm size rather than
firm age,7 and specifically on the relationship between firm size and growth rate.8 The
interest on firm age has begun to grow, but it has attracted comparatively little attention,9
except in the management literature10 as noted in the introductory essay in this special
issue:
The prior belief would seem to be that age benefits performance. For one thing, firms learn
about their abilities and about how to do things better as they become older. For another, the
available empirical evidence shows that life expectancy increases with age, and that better
firms survive. There are, however, reasons to disagree’.11
Indeed, in business history research longevity is used as a performance measure.
Therefore, the main studies focused on identifying the key factors of long-term success.
They can be exogenous factors12 or critical success factors13 as more detail discussed in
the introduction of this special issue.
Another part of management studies, instead, investigates longevity as an independent
variable, able to affect economic and financial performance, because it can be considered a
firm asset.14 The literature about this issue is highly fragmented. However, the primary
consideration in the earlier literature is given to the predominance of empirical research.
In fact, a number of studies have empirically evaluated the factors that influence the
probability of firms’ survival. At a firm level, these factors have traditionally been the size
and age of the firm, both of which increase the survival probability.15 At an industry level,
the characteristics of demand, such as market size and growth rates,16 the characteristics of
technology17, and the life cycle have been found to be important determinants of
survival.18 Growth has been often considered one of the preconditions for firm survival,
innovation, and technological change19 and it is generally recognised as a ‘stylised fact’
that the survival probability of a firm is positively correlated to its size and age.20 Sahut
et al.21 maintain that only firms that perform highly over a long period are able to
overcome the evolving environment, the risks of the market and crises. Thus, centenary
firms represent a minority that share, across the branches of industry, common
characteristics and values that we try to highlight.
A growing number of scholars22 have investigated the relationship between firm age
and survival, but the results are not clear. The seminal work on the subject by
Stinchcombe23 coined the term ‘liability of newness’ to describe how young organisations
face higher risks of failure. Evans’ study reveals that age and size exert a positive
interactive effect on firm survival: the probability of survival for large firms increases
more rapidly with age, and for older firms, it increases more rapidly with size.24 Evans also
observes a non-monotonic effect of the age of a firm and a negative interactive effect of the
size and age. Though the instantaneous risk of failure often decreases monotonically with
age,25 an inverted U-shaped function is observed in some cases, with the hazard increasing
soon after entry and then decreasing in later years.26 Other authors have referred to the
‘liability of adolescence’.27 Bruderl and Schussler distinguish two periods of an
organisational life cycle.28 In an early phase – adolescence – the death risks are low
because decision makers are monitoring performance and postponing judgment about
success or failure. In a later phase, initial monitoring has ended, and organisations are
subject to the usual risks of failure.29 Fichman and Levinthal have also performed research
on the liability of adolescence.30 They explain why firms face an initial honeymoon period
in which they are buffered from sudden exit by their initial stock of resources.
Deeds and Rothaermel analyse the relationship between age and performance in
research and development alliances.31 They test two competing hypotheses. Initially, they
test a liability of newness hypothesis, which posits that the performance of an alliance
4 A. Capasso et al.
increases in a linear fashion over time. Then, they test a honeymoon hypothesis, which
posits that the relationship between age and alliance performance is nonlinear, with
alliance performance decreasing initially but increasing over time.
An important study on size effects and age was conducted by Cefis and Marsili.32 By
estimating a parametric duration model, the authors observe that survival chances increase
with age and the growth rate of a firm. Their results, in line with the previous findings in
the literature, confirm that age and size positively affect firm survival. Furthermore, the
firm growth rate appears to play a major role in shaping survival.33 Despite the extreme
fragmentation of the literature, it is possible to divide the literature on longevity and
performance into two main areas:
(1) studies that analyse generic firm performance; and
(2) studies that examine economic and financial performance.
The research on economic and financial performance makes up a small part of the total
body of literature.
In the Industrial Organisation literature, various studies report that life expectancy
increases with age,34 and that better firms survive.35 Hopenhayn36 shows that older firms
enjoy higher profits and value.
Interesting research concerning longevity and performance was conducted by Coad
et al.37 The authors analyse firm performance related to firm age between 1998 and 2006
for Spanish manufacturing firms. They begin their work with a simple question: do firms
deteriorate with age (like milk), or do they improve with age (like wine)? The researchers
find evidence supporting both the milk hypothesis and the wine hypothesis. As evidence
that firms improve with age, they find that aging firms experience rising levels of
productivity, higher profits, increase in size and have lower debt/equity ratios. Furthermore,
older firms are better able to convert sales growth into subsequent productivity and
income growth. However, the authors also find evidence that firm performance
deteriorates with age. Older firms experience lower expected growth rates of productivity,
sales and income; they have lower profitability levels; and they appear to be less capable of
converting employment growth into productivity, sales and income growth. Analysis of
the growth rate distributions for different age groups shows that older firms are less likely
to experience fast growth, while they are just as likely as younger firms to experience rapid
decline.38 Furthermore, the authors’ results show that younger firms are more successful at
converting employment growth into growth of sales, profits, and productivity. Meanwhile,
older firms seem to be better at converting sales growth into growth of profits and
productivity.
Therefore, the following hypothesis was developed:
Hp 1): A positive relationship exists between longevity and the trend of revenue and
between longevity and profitability.
Studies about the link between financial structure and firm age are scarce. Some papers
show that financial structure is not independent on firm age because the external finance is
a key factor for survival and growth by allowing firms to be more competitive.39
Berger and Udell analyse the sources of small business finance and how capital
structure varies with firm size and age.40 They identify some qualitative differences
between the financing of small businesses of different ages (infants, adolescent,
middle-aged, old). The authors identify four different sources of equity and nine different
sources of debt and show how the capital structure changes with the size and age of the
firm.
Business History 5
Similarly, Reid observes small businesses and describes how financial structure
changes over time because the debt ratio decreases.41
Bontempi and Golinelli conduct research to analyze quantitative evidence of the
univariate behavior of Italian companies’ debt ratio.42 One of the most important results
is that many old firms use less debt than do younger firms. The authors suggest that
older firms have other financial opportunities, such as access to public debt markets,
retained earnings and internal capital markets within the group.
Therefore, the following hypothesis was developed:
Hp 2): A negative relationship exists between longevity and financial leverage.
Although some studies have been conducted on the relationship between age and firm
performance, little is known about how firm performance changes with age, perhaps
because of the scarcity of data on firm age. In this study, the dataset includes both firm age
and firm performance.
3. The wine industry: a historical perspective

Wine is one of the foundations of Western civilisation. The story of wine is that of
medicine, religion, war, discovery, science and dream.43
The Etruscans, a population in Central Italy, founded the wine industry of modern-day
Tuscany and were far ahead of their time when it came to winemaking technology. As the
Roman Empire expanded, the demand for wine increased. Wine production kept up with
this demand, and wine became an intricate part of Roman society. The Romans may have
also been the first to recognise the potential in wine and preferred wines aged 10 to 25
years. They also realised that they needed airtight containers to effectively age wines and
thus invented the wooden barrel. It is believed that they might have also been the first to
use glass jars and corks.
At the height of the Roman Empire, wines were exported to other parts of Europe, and
other regions adopted the winemaking practices that the Romans invented or improved
upon. However, with the fall of the Roman Empire, the demand for wine decreased, and its
popularity did not increase again until the Renaissance.
Indeed, until the second half of the twentieth century, the number of major wine
producing countries was limited to South Europe. At the end of the century, in a context of
increasing globalisation, the situation appeared completely changed: an emerging wine
producing frontier came forward in new regions.44 This new wine geography produced a
deep impact on the wine industry, changing it at a pace that left many wineries
disillusioned and unable to adapt to the modified environment.45
The largest part of wine production is achieved by European Union (EU) countries,
predominantly Italy, France, and Spain. In 2013, according to the data collected by
Organisation Internationale de la Vigne et du Vin, world wine production reached
approximately 281 Mhl as a consequence of expansion in the use of land and also because
of the development in the productivity of vineyards. European wineries account for almost
60% of the world production. In the EU, the main wine-producing countries indicate an
increase, which is very significant in some cases, over the previous harvest, despite the
persistent decline – by approximately 15,000 hectares – of the global vineyard surface
area. Outside the EU, all countries recorded significant growth in production of wine.46 In
the New World countries (Australia, New Zealand, South Africa, Argentina, the USA and
Chile), many large wineries achieved good performance and high market shares by
applying intensive production techniques and targeted marketing policies.
6 A. Capasso et al.
During the same period, the world wine consumption increased, especially in countries
such as China and the United States, while consumption was slightly down in the Old
World. From the demand side perspective, the vitivinicultural cluster has not yet
experienced a significant recovery following the 2008 economic crisis. However, the
world wine consumption estimates anticipate a consolidation in demand because of the
geographical expansion of the markets in new countries.
The data show that the wine industry has become increasingly sophisticated and
internationalised, with at least 67 nations now producing wine. Nevertheless, there are
significant distinctions between the Old and New World styles of winemaking that lead to
important business-side limitations. Several differences exist in tanks, packaging and caps.
However, the most important distinctions between Old and New World winemakers
occur even before the grapes are sent to the winery. First, there is a huge difference in the
average vineyard sizes. This is primarily a consequence of the old inheritance systems that
formed Europe between the sixteenth and nineteenth centuries, breaking estates up into
smaller holdings to be divided among sons. The constant splitting of properties led, in the
Old World, to an extremely fragmented supply market. Wineries and vineyards are small,
offering only specialised regional products. More importantly, wineries, vineyards and
distributors in the Old World are rarely under the ownership of the same entity. The US
and Australian wineries are quite the opposite: their large properties allow them to control
the entire supply chain from grape to bottle. Because of their organisation, the New World
producers are able to sense changes in consumer preferences downstream and thereby
respond to shifts more effectively.47
In this scenario, Italy remains one of the most important producers and the largest
exporter of wine in the world, although the domestic consumption shows a modest decline.
4. Research design: sample, variables and methodology

This research aims to assess whether longevity can enhance the financial strength and
economic results of firms operating in the wine industry.
We observed the collection of 550 firms from the AIDA Bureau van Dijk48 with
ATECO code 11.02 (wine producers) operating in Italy. These firms are mainly limited
liabilities companies (81% are S.p.A. and S.r.l.) and, to a lesser extent, cooperatives
(18.79%) and consortia (0.21%). We focused on limited liabilities companies (455)
because these firms, according to Italian law, must satisfy a stringent disclosure
requirement; consequently, their financial statements and accounting data are more
reliable, detailed and readily available. Using 1986 as the cut-off year, the sample of 455
firms was divided into two groups of wineries: ‘old’ and ‘young’. We ended up with 187
‘old’ and 268 ‘young’ firms. First, we observed the mean size and the geographical
distribution for each group, selecting the revenue as an indicator of the mean size.
Then, we calculated the mean of the following indexes for each group from 2008 to 2011:
the trend of revenue, calculated as the rate of sales growth; the profitability, calculated as
EBITDA/Total Asset ratio; and the financial leverage, represented by the debt/equity ratio.
Based on the results of a comparison between the groups, we decided to focus only on
the ‘old’ firms to examine the impact of longevity on financial and economic
performance. We considered it useful to find other information about the ‘old’ firms
group, regarding ownership and governance, also by consulting historical data from
the Chamber of Commerce. We found this information for only 107 firms and performed
an empirical analysis on them based on a longitudinal study, covering four years (2008 –
Business History 7
2011). Thus, we dropped the remaining 80 firms from the sample due to the difficulty in
finding all of the information needed.
By consulting financial statements and official documents, we obtained 369
observations that were suitable for elaboration. We adopted the following dependent
variables: the trend of revenue growth, the operating profitability and the financial leverage.
As an independent variable, longevity was calculated as the number of years that
passed between the year of reference of the analysis and the year of business start-up.49
We selected the firm size, location, accounting year, governance structure and family
control as control variables. The firm size is represented as the amount of total assets.50
The location is operationalised by indicating the geographical area of origin of the
company (North, Centre and South Islands). The location of the company is represented by
two dummy variables for companies located in North Italy and in Central Italy. Companies
located in the South Italy and Islands are the baseline of the analysis. The accounting year
is defined using three variable dummies (2009 – 2010– 2011). For corporate governance,
we considered the following types of company:
1. Companies led by a single director;

2. Companies controlled by a board of directors.
We used a dummy variable that took a value of 1 when the head of the enterprise was the
sole director and 0 in the presence of a board. The family control is calculated as family
power, i.e. the sum of the percentage of equity owned by the family members and the
percentage of family members who sit on the board. The family power is the structural
dimension of the F-PEC scale, which is used to measure the familiarity of a firm.51
With reference to the family power, it is worth highlighting that it is a continuous
measurement of the family influence on the business, varying from 0 to 2 (from non-family
to strong family). There are intermediate levels of family involvement in the business
between these limits. In non-family businesses, the indicator of family power is below
0.5.52
For our analysis, we used a panel model with time fixed effects. Therefore, a regression
model was estimated for each of the three selected performance indicators. The
specification of the estimated models is as follows:
Firm Performance ¼ b0 þ b1 ðLongevityÞ þ b2 ðControl VariablesÞ
þ b2008 – 2011 ðYear Dummy VariablesÞ þ 1
All of the Ordinary Least Square (OLS) assumptions were verified: control of
heteroskedasticity and serial correlation was carried out by calculating the robust standard
errors using the Huber White Sandwich estimator for clustered data;53 and control of
endogeneity between longevity and firm performance was conducted following the
approach present in Anderson and Reeb.54
Every analysis was performed using the SPSS statistical software.
5. Results and discussion

For the comparison between ‘old’ and ‘young’ wineries, the mean age of the ‘old’ wineries
is 43, and the mean age of ‘young’ wineries is 13.6. The median age is 38 in the ‘old’
category and 13 in the ‘young’ category. Therefore, with respect to the year chosen as the
cut-off (1986), age is significantly different between ‘old’ and ‘young’ wineries. The ‘old’
8 A. Capasso et al.
wineries are generally larger than the ‘young’ ones. Geographically, the ‘old’ and ‘young’
firms are situated in different areas: whereas the old wineries are mainly based in the
Northern area (74.33%), the young wineries are spread between Northern (43.28%) and
Southern Italy (45.52%).
Table 1 shows the mean values of the trends of revenue, profitability and financial
leverage.
The ‘old’ firms outperform the ‘young’ wineries in both the economic and financial
indexes. In particular, the ‘old’ wineries present a higher trend of revenue and profitability
and lower financial leverage. These results are supported by lower variability.
In this analysis, we have focused on the ‘old’ wineries to test, through an empirical
analysis, the existence and significance of the relationship between longevity and financial
and economic performance.
The analysis of the sample highlighted that the old wineries are primarily family
businesses: the average degree of family power was 1.40. In terms of governance, most of the
old wineries have a sole director (70%), a governance model that is simpler and less structured.
For the test of the research hypotheses, Table 2 supplies a summary of the main results.
The estimated models of hypotheses (1) and (2) are significant. The R-squared of the
model with the trend of revenue as the dependent variable is equal to 82.4%. The
R-squared of the models with profitability and financial leverage as the dependent
variables are equal to 11.8% and 36.8%, respectively. Models were estimated using robust
standard errors to serial correlation (Appendix 1) and heteroskedasticity.
Hypothesis (1) has been partially confirmed. In particular, the findings have
highlighted a positive link between longevity and the trend of revenue (blongevity ¼ 0.074,
p , 0.05). Therefore, the most long-lived firms show a higher trend of revenue. A negative
link exists between longevity and profitability (blongevity ¼ 2 0.269, p , 0.01), so the most
long-lived firms are less profitable. Hypothesis (2) has been confirmed: a negative link
exists between longevity and financial leverage (blongevity ¼ 2 0.3, p , 0.01). As firms
become more long-lived, their financial leverage decreases.
The results show that longevity seems to represent a value driver for firms in the wine
industry. The ‘old’ firms show a positive trend of revenue that is linked to their experience
and the brand equity of their products. The rate of sales growth could also be linked to the
strong family presence in the old wineries. Family gives inimitable resources to the
company: relations, reputation and values that facilitate customer relations. The family
conveys to customers an image of authenticity: it is contextualised in a time and place. The
provenance is to be understood not only as the spatial reference of terroir,55 but also as a
social and cultural background.56 Therefore, the family becomes a brand that is capable of
gaining the customer’s trust. It is not by chance that in family wine businesses, the
company presentation focuses on the family story and the family’s values and ideals.
Sharing the history of the entrepreneurial family and its traditions and values makes the
consumer feel like an integrated part of the social, cultural and productive experience of
the firm. On the one hand, it is the wine itself, a product that is strongly linked to time,
Table 1. Results of the descriptive analysis.

Mean old SD old Mean young SD young
Revenue 13,151 19,931 7,973 19,499

Profitability 5.43 6.68 5.35 7.84
Leverage 1.44 1.87 3.23 15.72
Business History 9
Table 2. Results of panel regression – non-standardized coefficients.
Revenue Profitability Leverage
Longevity .074* 2 .269** 2 .300**

Governance .098** 2 .191** .296**
Firm size .923** .028 2 .131**
Family power .024 .278** 2 .197**
Location dummy
North 2 .061* 2 .069 2 .155**
Centre 2 .001 2 .136* .067
R2 .824 .118 .368
N 356 341 365
Note: p , 0.1; *p , 0.05; **p , 0.01
place and tradition. Through the wine, the customer gets to know the family and the
different productive experiences of its members. For this reason, in the wine sector,
familiness,57 becomes an asset for customer relationship management.58 In this case,
customer loyalty can be achieved not only by satisfying tastes but also by sharing the life
and business experience of family members.59
On the other hand, and in line with national data,60 this growth could also be attributed
to an increase in foreign sales. New cultural trends and a consumer shift to more renowned
and expensive wines in emerging countries allowed firms to offset the decrease in sales in
the domestic market following the economic crisis of 2008 –2011.
Regarding profitability, our results show a negative link between longevity and
profitability. If, on the one hand, it may depend on some degree of inefficiency in
operating costs, on the other hand, it could be the result of larger investments in fixed
assets, primarily in land and research. This finding seems to be in line with the academic
literature on family business,61 according to which, older firms are defined as visionary
companies. They are ready to trade off short-term profitability for some immaterial
assets, such as emotional value, identity, reputation and strong local roots. The
importance recognised in these immaterial assets could be traced back to the family
nature of firms that emphasise the intangible aspects of transferring to next generations
not only the firm but also the family’s entrepreneurial orientation.62 Indeed, the
emerging literature on family business proposes an alternative to family transfer by
shifting the analysis from firm to family level and investigating the longevity and trans-
generational value creation.63
From a financial structure perspective, we observe a rather conservative approach of
the old wineries to investment and financing decisions. They show a significant preference
for self-financing, reducing dividends and retaining earnings. This finding is confirmed by
a lower financial leverage. Self-financing affords them greater independence and freedom
of action, making them free from influences either from banks or from the capital markets.
However, this choice may turn into a disadvantage if the family assets are not sufficient to
support firm growth and when profitable investment opportunities may be missed to avoid
raising external financing.
6. Conclusion and future paths for research

The main purpose of this study was to verify empirically whether the longevity factor
could represent a value driver in the wine industry.
10 A. Capasso et al.
The descriptive analysis highlighted that in the Italian wine industry, old firms
outperform the young firms in terms of revenue growth, profitability and financial strength.
The empirical analysis, which focused only on the old wineries, underlined the contention
that longevity significantly explains the different performances observed. Specifically, a
positive link exists between longevity and revenue growth and financial ratio, whereas a
negative link exists between longevity and profitability.
According to our results, being a long-lived firm in the wine industry seems to be an
advantage. The relationship between age and growth is strongly linked to environment-
specific factors, and ‘time’ is a fairly relevant factor in the wine industry. As time passes,
the firms acquire economies of experience and increase their brand equity and reputation;
this translates into better relationships with their stakeholders and a sustainable value
creation process.
When examining the oldest wineries, it is interesting to observe that although they
have better performance compared with the younger wineries, they remain relatively small
in size and generally have a sole director and are family-owned. The small size could
explain the high growth rate of old wineries because it is relatively easier to achieve a high
percentage growth moving from a smaller revenue base. At a certain point in their lifetime,
these firms might experience a spin-off, typically when it becomes cumbersome to keep
different branches of a large family under the same roof. Indeed, it is important to observe
that simple family-based governance facilitates sustainability over time due to the speed of
the decisions, the resilience in the processes and the ability to adapt to changes. However,
this implies a strong and recognised leadership in the hands of a sole chief. The peculiar
governance of old wineries has a strong influence on a firm’s goals. Unlike large profit-
oriented companies that are focused on short-term bottom-line performance, old wineries
are not solely concerned about economic returns. The noneconomic goals that meet
the family’s affective needs, such as maintaining family control, financial independence
of the firm and family harmony, are described as the family firm’s socioemotional
wealth.64 These firms usually adopt a double-bottom-line approach, balancing
social and family considerations with financial ones. Therefore, it is fairly reasonable to
conclude that long-lived firms, most of which are family firms, focus on ensuring
their business for future generations.65 Furthermore, family firms view customers,
employees and local communities as keys to this success. In doing so, they can secure
longevity by continuously rewarding their stakeholders and preserving their intangible
assets.66
The special attention of long-lived wineries to sustainability explains their relatively
low profitability because the desire to transfer the business to their progeny may lead
family firms to focus on investments that could maximise long-term returns for the benefit
of future generations and to avoid risky investments that could improve the immediate
profitability.67
The analysis of the financial structure further supports the prudent longevity-oriented
strategy of the old wineries because they present a lower degree of financial leverage and,
consequently, a less risky financial structure.
Considering that firms should pay special attention to relationships with stakeholders
and remain actually cautious in terms of strategic and financial risks to safeguard
longevity, it seems realistic that, in the long run, longevity can be obtained at the expense
of low or denied profitability.
These reflections should be evaluated considering the limits of the present study and, at
the same time, could provide inspiration for further research activity. From an overall
perspective, it must be noted that the investigation is based primarily on secondary data.
Business History 11
The analysis of financial statements did not allow us to detect other important control
variables for analysis. Other limits are related to the sample, which was focused on a
definite geographic area and on a single industry. It would be interesting to extend the
sample internationally, including the New World producers. There are also many
directions for further study that primarily concern the models of consumer choice in the
New and Old World wine sector and the role covered by the longevity inside these models.
Therefore, it would be interesting to understand whether longevity can become a driver to
exploit in communication strategies. These results could have managerial implications:
the longevity could emerge as a value driver that can be exploited in both institutional and
product communication. Longevity and wine are two concepts with a high evocative and
symbolic content. Thus, emphasising the longevity in communication strategies can
enhance the intangible and emotional characteristics of the wine. This aspect seems to
provide a value lever that is readily available, exploitable and low cost, especially for
SMEs. Italian SMEs suffer from chronic financial shortfalls that make it difficult to invest
significant resources in the development of intangible assets.68 Longevity is a value driver
that is ready to be used and exploited. For example, communicating the history and the
traditions could be a useful tool. In times of globalised competition, homogeneous
offerings and accelerated product life cycles, it can be useful to have a positive
differentiation from relatively young competitors.
Notes
1. Gallucci and D’Amato, “Exploring Nonlinear Effects,” 185.
2. Migliaccio, Matarazzo, and D’Ambra, “Entrepreneurial Process-driving Cooperation”; Rossi,
Vrontis, and Thrassou, “Wine Business”, 112; Gallucci and D’Amato, “Exploring Nonlinear
Effects,” 185.
3. Spahni, The International Wine Trade, 136.
4. Hannan and Freeman, “Structural Inertia,” 149– 164.
5. Agarwal and Gort, “The Evolution,” 489.
6. Helfat and Peteraf, “The Dynamic Resource-based,” 977– 1010.
7. Gibrat, Les inegalites; Hart and Prais, “The Analysis,” 150– 191; Simon and Bonini, “The Size
Distribution,” 607.
8. Hall, “The Relationship,” 583– 600; Hart and Oulton, “The Growth,” 1242– 1252.
9. Stinchcombe, Social Structure and Organizations; Dunne, Roberts, and Samuelson, “The
Growth and Failure,” 671; Bruderl and Schussler, “Organizational Mortality,” 530–547;
Barron et al., “A Time to Growth,” 381– 421; Caves, “Industrial Organization,” 1947– 1982;
Hannan, “Rethinking Age,” 126– 164; Hannan, Carroll, and Pólos, “A Formal Theory”; and
“The Organizational Niche,” 309– 340.
10. Church, “The Family Firm,” 17 – 43; Herbane, “The Evolution,” 978– 1002.
11. Loderer, Neusser, and Waelchli, “Firm Age and Survival,” 4.
12. Cassis, Big Business, 103.
13. Hofer and Schendel, La formulazione.
14. Desai, Kalra and Murthi, When Old is Gold, 95 – 107.
15. Evans, “The Relationship Between,” 567; Hall, “The Relationship,” 583– 600; Dunne et al.,
“The Growth and Failure,” 671– 398; Dunne and Hughes, “Age, Size, Growth and Survival,”
115.
16. Mata and Portugal, “Life Duration,” 227– 246.
17. Audtresch, “Innovation, Growth and Survival,” 441; Malerba and Orsenigo, “Technological
Entry, Exit and Survival,” 643– 660.
18. Suarez and Utterback, “Dominant Designs,” 415– 430; Agarwal and Gort, “The Evolution,”
489.
19. Pagano and Schivardi, “Firm Size Distribution,” 255– 274; Aghion, Fally, and Scarpetta,
“Credit Constraints,” 731– 790.
20. Sutton, “Gibrat’s Legacy,” 40; Caves, “Industrial Organization,” 1947– 1982.
21. Sahut, Boulerne, Mili, and Teulon, “What Relation,” 152– 162.
22. Evans, “The Relationship Between,” 567; Fariñas and Moreno, “Firms’ Growth,” 249–265;
Mata and Portugal, “Patterns of Entry,” 283; Bartelsman, Scarpetta, and Schivardi,
“Comparative analysis,” 365– 391.
23. Stinchcombe, Social Structure and Organization.
24. Evans, “The Relationship Between,” 567–581.
25. Mata and Portugal, “Life Duration,” 227– 246; Mata, Portugal, and Guimaraes, “The
Survival,” 459– 481.
26. Wagner, “The Post-entry Performance,” 141.
27. Bruderl and Schussler, “Organizational Mortality,” 530– 547; Fichman and Levinthal,
“Honeymoons and the Liability,” 443.
28. Bruderl and Schussler, “Organizational Mortality,” 530– 547.
29. Bruderl and Schussler, “Organizational Mortality,” 530.
30. Fichman and Levinthal, “Honeymoons and the Liability,” 442– 468.
31. Deeds and Rothaermel, “Honeymoons and Liabilities,” 468.
32. Cefis and Marsili, “A Matter of Life,” 1 – 26.
33. Cefis and Marsili, “A Matter of Life,” 22.
34. Dunne et al., “The Growth and Failure,” 671– 698.

35. Baker and Kennedy, “Survivorship,” 324–361.
36. Hopenhayn, “Entry, Exit,” 1127– 1150.
37. Coad, Segarra, and Teruel, “Like Milk or Wine.”
38. Coad et al., “Like Milk or Wine,” 26.
39. Aghion et al., “Credit Constraints,” 731–790.
40. Berger and Udell, “The Economics.”
41. Reid, “Trajectories of Small Business,” 273– 285.
42. Bontempi and Golinelli, “Is Financial Leverage.”
43. Estreicher, “WINE.”
44. Campbell and Guibert, Introduction.
45. Rossi et al., “Wine Business,” 112–130.
46. OIV, “State of the Vitiviniculture.”
47. Truong, “The Global Wine Industry.”
48. AIDA is a database that contains comprehensive information on companies in Italy.
49. Chrisman et al., “Comparing the Agency,” 335; Villalonga and Amit, “How do Family
Ownership,” 385– 417; Sraer and Thesmar, “Performance and Behavior,” 709.
50. Olson, Zuiker, Danes, Stafford, Heck, and Duncan, “The Impact,” 639– 666.
51. Astrachan, Klein, and Smyrnios, “The F-PEC Scale,” 45 – 57.
52. Giovannini, “Corporate Governance,” 145– 166.
53. Rogers, “Regression Standard Errors,” 19 – 23; Wooldridge, Econometric Analysis.
54. Anderson and Reeb, “Founding-family Ownership,” 1301 –1327.
55. Van Leeuwen and Seguin, “The Concept of Terroir,” 1.
56. Smith Maguire, “Provenance and the Liminality,” 269– 282.
57. Habbershon and Williams, “A Resource-based Framework,” 1 – 25; Habbershon, Williams,
and MacMillan, A Unified Systems, 451.
58. Colli, “Contextualizing Performances,” 1 –15.
59. Gallucci and Santulli, “The Family Brand,” 127–148.
60. Osservatorio AUB, Focus sulle aziende familiari.
61. Schillaci and Faraci, Concentrated Ownership; Giaretta, Vitalità e longevità d’impresa; Faraci,
Family Business.
62. Zellweger, Nason, and Nordqvist, “From Longevity of Firms,” 1 –20.
63. Astrachan, “Introduction,” 45 – 57; Nordqvist and Melin, “Entrepreneurial Families,” 1 – 29.
64. Gómez-Mejı́a, Katalin, Núnez-Nickel, Jacobson, and Moyano-Fuentes,
“Socioemotional Wealth,” 106–137; Gómez-Mejı́a, Cruz, Berrone, and De Castro, “The Bind
that Ties,” 653–707.
65. Chami, What’s Different.
66. Capasso, Cruz, and Gómez-Mejı́a, “Stakeholder Theory.”
67. Berrone et al., “Socioemotional Wealth,” 258– 279.
68. Rossi et al., “Wine Business,” 112–130.
Business History 13
Notes on contributors
Arturo Capasso is Full Professor at the University of Sannio. Presently he is Professor of Corporate
Governance, Director of the Graduate Program in Economics and Management and Director of the
Master in Clinical Governance at the University of Sannio. His chief research interests lie in the areas
of corporate strategy, corporate governance, finance, project finance, shipping finance, healthcare
management, venture capital and private equity finance. He was panelist or track organizer in several
editions of the AOM Conference and EURAM Conference. Sits in the editorial board of “Journal of
Management and Governance” and acts as referee for many international journals.
Carmen Gallucci is Associate Professor of Corporate Finance and Family Business at University of
Salerno. Her research interests relate to corporate financial issues and family business governance.
She has been involved in several research projects in the field of family business commissioned to
Observatory of Family business at University of Salerno. She is Author of various publications on
corporate finance and management.
Matteo Rossi is an Assistant Professor of Corporate Finance at the University of Sannio, Italy. He
holds a PhD in corporate governance, and his prime research interests are corporate finance,
financing innovation, wine business, and innovation systems. In all of these areas, he has published,
contributed chapters to books, edited books and presented papers to national and international
journals. He is Vice President for International Relations of the EuroMed Research Business Institute
(EMRBI). In 2014, he won the Highly Commended Paper Award of the International Journal of
Organizational Analysis (Emerald) for the paper “Mergers and Acquisitions In The Hightech
Industry: A Literature Review,” and in 2012, he won the Outstanding Paper Award of the
International Journal of Organizational Analysis (Emerald) for the paper “Italian Wine Firms:
Strategic Branding and Wine Performance.”
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Business History 17
Appendix 1. Correlation matrix.

Family North Centre Firm
Revenue power Governance dummy dummy size Longevity
Revenue 1
Family 2 .115 1
power
Governance 2 .090 .094 1
North 2 .174 2 .072 2 .186 1
dummy
Centre 2 .059 .159 2 .211 2 .224 1
dummy
Firm size .901 2 .178 2 .175 2 .115 2 .077 1
Longevity 2 .090 .151 2 .546 .182 .213 2.111 1

Profitability power Governance dummy dummy size Longevity
Profitability 1
Family .196 1
power
Governance .011 .098 1
North 2 .074 2 .070 2 .167 1
dummy
Centre 2 .093 .165 2 .203 2 .237 1
dummy
Firm size .076 2 .171 2 .215 2 .154 2 .080 1
Longevity 2 .170 .154 2 .525 .166 .209 2.123 1.000

Leverage power Governance dummy dummy size Longevity
Leverage 1
Family 2 .166 1
power
Governance .481 .095 1
North 2 .232 2 .090 2 .172 1
dummy
Centre 2 .046 .161 2 .204 2 .222 1
dummy
Firm size 2 .114 2 .162 2 .213 2 .140 2 .078 1
Longevity 2 .484 .143 2 .543 .158 .220 2.104 1.000

Standing The Test of Time. Does Firm Performance Improve With Age An Analysis of The Wine Industry

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This article was downloaded by: [Rutgers University]

On: 09 April 2015, At: 12:26

Standing the test of time. Does firm

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To link to this article: http://dx.doi.org/10.1080/00076791.2014.993614

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*Corresponding author. Email: capasso@unisannio.it

q 2015 Taylor & Francis

2. Longevity and performance: a literature review

3. The wine industry: a historical perspective

4. Research design: sample, variables and methodology

1. Companies led by a single director;

Firm Performance ¼ b0 þ b1 ðLongevityÞ þ b2 ðControl VariablesÞ

þ b2008 – 2011 ðYear Dummy VariablesÞ þ 1

5. Results and discussion

Table 1. Results of the descriptive analysis.

Revenue 13,151 19,931 7,973 19,499

Table 2. Results of panel regression – non-standardized coefficients.

Revenue Profitability Leverage

Longevity .074* 2 .269** 2 .300**

6. Conclusion and future paths for research

34. Dunne et al., “The Growth and Failure,” 671– 698.

Practice 28, no. 4 (2004): 335– 354.

Giovannini, Renato. “Corporate Governance, Family Ownership and Performance.” Journal of

Hannan, Michael T. “Rethinking Age Dependence in Organizational Mortality: Logical

Business 17, no. 2 (2012): 152– 162.

Appendix 1. Correlation matrix.

Family North Centre Firm

Family North Centre Firm

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Longevity .074* 2 .269 2 .300