spending on knowledge capital is a statistically significant and economically important correlate of growth as reflected in exports, both at industry and firm levels; and (ii) that spending on reputation & branding and on learning through global collaboration and network-building, namely on connecting firms to better existing global technology flows, are both statistically significant and economically more important at the firm level than other types of knowledge capital.

Why focus on the wine industry? Based on an international comparison between Italy and three New World wine producers, namely Argentina, Chile and South Africa, Giuliani et al. (2011) explain why the wine industry (rather than electronics, software, pharmaceuticals or telecommunications) is an ideal industry to investigate technological catch-up in emerging countries, and how R&D and innovation are indeed the main drivers of an agro-food industry such as wine. They document how, as latecomers in the international market, New World producers have radically changed how wine is produced, sold and consumed. Their main argument is that product and process innovations, spurred by investments in innovation capabilities, have played a prominent role in the emergence of New World producers in the international market. Their empirical evidence shows that New World producers have improved the quality of their wines, investing in research in universities and laboratories, strengthening the link between university and industry, and importing external knowledge through experts. They show how a traditional agro-food industry can become highly competitive and catch up in the global market, thereby contributing significantly to the process of growth in these countries – when following a trajectory where investments in R&D and innovation play a prominent role. However, their empirical evidence is based largely on a set of case studies of universities and researchers, public institutions and firms in Argentina, Chile and South Africa. While there exist a number of other empirical studies on the wine industry (for Chile, see for instance Troncoso and Aguirre 2006, Kunc and Bas 2009, and Moreira, Troncoso and Bravo-Ureta 2011), there is no measurement of levels of investment in knowledge capital by firms or by the State—a shortcoming this study seeks to address.

We adopt two complementary methodologies. First, based on a unique data set on public and private knowledge capital investments compiled at the industry level, we categorize individual project expenditures from Government of Chile databases covering all innovation support programs targeted at the wine industry from 1990 to 2012 into different types of intangible assets. We then explore aggregate industry-level time series correlations between bottled wine exports and expenditures on main types of knowledge capital, lagged area planted, and a measure of global demand. Second, the paper reports on the findings of a novel field survey of wine enterprises, based on a specifically-designed “Survey of Investments in Knowledge Capital”, adapted to a developing country context and to the wine industry, and pre-tested in the field in Chile. Finally, we explore correlations between export or domestic bottled wine sales and expenditures on main types of knowledge and physical capital. In terms of methodology, the paper is most closely related to enterprise survey work undertaken by the Kauffman Foundation in the US as reported in Haltiwanger, Haskel and Robb (2009), and undertaken by Awano et al. (2010a, b) in the UK.

The paper makes four contributions to the literature. First, in terms of linkages with risk management, we illustrate how specific knowledge capital investments can be interpreted as supports to firms’ four pillars of risk management, adapted and extended to include innovation risk, based on a framework suggested for risk management by Ehrlich and Becker (1972): the resilience of development outcomes can be 4