What role does politics play in producers’ attempts to create differentiated quality products? A comparison of French and Italian quality wine markets indicate that politics nurture divergent supply chain dynamics, leading to different definitions of quality and levels of market protection. Politicized French wine producers constructed regulation to protect their markets from both market challengers and from state interference, creating powerful corporatist organizations around the notion of “terroir”. Italian wine producers adopted French regulation to mimic French market outcomes, but the regulation lacked the political and economic incentives to encourage compromise and a common identity within producer organizations. As a result, the regulation relegated Italian producers to a less differentiated market space than their French counterparts, and the formal regulation failed to shift informal norms. Institutions which support cooperation and power sharing among producers ultimately yield greater market protection than mechanisms which support strong reliance on the market mechanism.
