How knowledge is transferred from a lead firm to its supplier can be illustrated with the case of a Colombian firm, Hugo Restrepo y Cía’s. The example is interesting for at least two reasons. First, the transfer of knowledge occurred in the agribusiness industry instead of the often discussed high-tech industries, showing that learning from global players can occur in traditional sectors. Second, the knowledge transfer was not limited to the core technology of the agribusiness industry but also included managerial aspects.

Hugo Restrepo y Cía’s is the main provider of chili pepper paste for the Tabasco brand owned by the American firm McIlhenny Company. Large-scale hot sauce makers frequently outsource the production of chili pepper paste to growers in relationships that require continuous interactions to guarantee the quality of the chilies that go into the production process.

The relationship between McIlhenny and Hugo Restrepo began in the late 1970s with a few chili pepper seeds provided by McIlhenny and a great deal of trial and error on the part of Hugo Restrepo. Both firms agreed on a business model in which McIlhenny would provide expertise to Hugo Restrepo in exchange for exclusivity for the next 15 years, during which Hugo Restrepo could not produce for other clients. The relationship was established by a long-term agreement based on contracts that were renewed every 2 years.

At the beginning of this relationship, the quality of the chili pepper paste produced by Hugo Restrepo was low, so McIlhenny sent an experienced agronomist to Hugo Restrepo twice a year to check on the crop and advise on technological innovations. As a result, over the next 15 years, Hugo Restrepo acquired key technical knowledge on crop management and production, and its agronomists developed expertise. After the exclusivity period ended, the firm no longer needed the technical assistance from McIlhenny.

Armed with its new technical knowledge, Hugo Restrepo ventured out on its own and expanded its business. It entered into many relationships with small farmers of chili pepper in Peru as well as in Colombia, providing them with technical knowledge originally acquired from McIlhenny and with seeds. As such, Hugo Restrepo applied lessons learned from McIlhenny to guarantee itself a stable supply of high-quality chili pepper through permanent technical support and appropriate and long-term agreements based on contracts renewed every 2 years. Meanwhile, Hugo Restrepo focused its attention on other activities in the supply chain, such as packaging and logistics.

In this way, Hugo Restrepo acquired not only key technical knowledge from a global buyer but also a successful business model that the firm was able to replicate with growers that eventually became its own suppliers.

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by Juan S. Blyde. Lynker


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