Smart upgrading innovation strategies in a traditional industry: Evidence from the wine production in the province of Arezzo

This paper examines the wine production industry in Arezzo, Tuscany, and explains the learning and upgrading trajectory it experienced during the last 15 years. The paper shows that the acquisition of technical knowledge external to the region initiated and promoted by local institutions spurred a process of awareness raising of local potentials and attracted new attention and investments to the sector by local entrepreneurs. In a decade, this enabled a radical shift in the knowledge sources exploited in the innovative processes adopted by local companies, from external ones to locally developed, accumulated and updated ones. Entrepreneurial creativity and outward-looking orientation turned to be the crucial enablers of the scouting, transfer, adoption and smart adaptation of external knowledge and competencies to local business needs. Ultimately, this allowed the area to depart from a passive imitation pattern of innovation and to engage into a smart and creative application pattern of innovation based on endogenous technical capabilities constantly augmented and updated with selective external knowledge sources. This evidence eventually points to the critical directing role of local governance as driver of structural change, modernization and upgrading in a traditional sector such as viticulture.