Dynamics of Evolution in the Global Fuel-Ethanol Industry

We employ a value chain analysis approach to examine the forces shaping the industry structure, entry and inter-firm governance modes. Forty largest global and regional companies in the ethanol manufacturing stage have been classified according to their pre-entry industry of origin. Firms with pre-entry history in feedstock supply have shown higher resilient to market shock especially compared to de novo firms. In addition, we observe a trend of dual-directional vertical integration. Firms backward integrate to secure feedstock supply; firms forward integrate to gain access to the retail market. Security of feedstock has been identified as a critical success factor of the manufacturer in this resource intensive industry. Another critical success factor is gaining control over the end user market via forward integration. We propose that critical success factor is the important determinants of inter-firm governance mode.