Internationalization and innovation in the Bavarian dairy industry
Dr. Corina Jantke, Fabian Frick
Conditions for milk production in the European Union face a significant modification in 2015. The milk quota regime which restricted member states and individual dairy farmers since 1984 to a given production volume will be abolished at the end of March 2015. So far there is still uncertainty how this will affect the milk market and dairy processors in detail. Projections assume, that within the EU the total amount of produced milk increases. Thus, dairy processors are challenged to market a greater volume of milk products abroad because domestic markets are mostly saturated. One consequence is that competition among European dairy processors will intensify. However, expressed in a positive way, dairy processors are also provided with the basis for the expansion of their distribution channels and selling their products on foreign markets outside the EU. The question is which enterprises cope best with increased competitive pressure and the opportunity to expand into foreign markets. Given the heterogeneous market structure in Germany and also Bavaria, the preconditions for the further development differ among the dairy processors. On the one hand there are several (multi‑) national enterprises which can afford the required resources for successfully handling foreign markets. On the other hand a great share of the produced milk is processed by small and medium-sized enterprises which act with differing intensity on foreign markets. The question of the most promising strategy for internationalization can therefore be asked for every enterprise individually.
In connection with this need for internationalization, also the enterprise’s production strategy has to be revaluated. A key question here may be the innovation performance of dairy processors. Innovation in production processes and organization can help to cut costs, while product and marketing innovations can increase the scope of application, quality and attractiveness of products and are able to open new markets. Enterprises with a greater innovation output are therefore expected to show better performance and may also be more active in foreign markets or vice versa.
Thus, the objective of the research project is to examine the mechanisms between internationalization, innovation and firm performance in the dairy industry. With focus on Bavarian dairy processors it aims to answer the following questions:
- To what extent do dairy processors have to follow different strategies of internationalization to be successful in the future?
- What are the specific strategies that are suitable for different types of enterprises?
- What is the significance of innovation for increasing internationalization in the future? Does greater innovation activity lead to success on foreign markets and/or vice versa?
- Which conclusions can be drawn from the experiences of international dairy industries of other countries for Bavarian dairy processors?
- Is there a need to modify the framework of public support or are additional measures necessary?
The econometric analyses will be applied to a set of panel data consisting of existing and additionally collected data. Relevance of the results for dairy processors is ensured by close cooperation with representatives of the Bavarian dairy industry throughout the research project.
The research project is funded by the Bavarian State Ministry of Food, Agriculture and Forestry.