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Anatolia – An International Journal of Tourism and Hospitality Research Vol. 23, No. 2, August 2012, 151–168

Destination management organizations as interface between destination governance and corporate governance Harald Pechlanera*, Michael Volggerb1 and Marcus Herntreib2 a European Academy of Bolzano-Bozen, Catholic University of Eichsta¨tt-Ingolstadt, Pater-Philipp-Jeningen-Platz 2, 85072 Eichsta¨tt, Germany; bEuropean Academy of Bolzano-Bozen, Viale Druso 1/Drususallee 1, 39100 Bolzano/Bozen, Italy

(Received 31 August 2011; final version received 25 November 2011) Destination management organizations (DMOs) play a major role in managing destination networks and in fostering cooperation between destination actors. DMOs are central figures in the governance of tourism destinations. However, being organizations, their operations are also judged according to their organizational efficiency and effectiveness. This paper applies the concept of corporate governance to capture these internal performance indicators, and investigates its relationship to the external performance of DMOs as promoters of cooperation. Very few studies have considered such inter-dependencies between DMO performance and destination performance; and even fewer have explicitly analysed the relationships between the destination governance and the corporate governance of DMOs. Therefore, this research uses an exploratory, theory-generating case study approach to develop testable hypotheses for future generalizing research attempts. Semi-structured interviews were conducted with several destination actors, and qualitatively analysed using the GABEK toolset. From this qualitative analysis four hypotheses emerged, which generally indicate a positive link between a DMO’s corporate governance characterized by a broad stakeholder involvement, an efficient way of working, visible signs of performance on the one hand, and both the DMO acceptance and the level of cooperation in the destination on the other hand. Keywords: destination governance; corporate governance; DMO; tourism organization; cooperation; collaboration

Introduction The current market environment in tourism is characterized by increasing international competition and fast-changing, challenging customer demands (Beritelli, Bieger, & Laesser, 2007). To maintain competitiveness, tourism scholars suggest two central measures: First is the professionalization of destination management organizations (DMOs),3 which can theoretically be captured by the concept corporate governance. Second is an intensified cooperation4 – understood in a very general sense to mean “work[ing] jointly towards the same end” (Pearsall, 2001, p. 313) – between the various actors involved in the production and distribution of the service bundle. Such cooperation is embraced in the concept of destination governance (see Pechlaner, Raich, & Kofink, 2011; Raich & Pechlaner, 2010). However, the causal and functional relationships between the two proposed measures are still largely unknown, and the analytical linkage

*Corresponding author. Email: harald.pechlaner@ku-eichstaett.de ISSN 1303-2917 print/ISSN 2156-6909 online q 2012 Taylor & Francis http://dx.doi.org/10.1080/13032917.2011.652137 http://www.tandfonline.com


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between the two areas of governance has not been treated extensively in the literature: “Further study is needed in order to . . . verify whether good corporate governance forms the requisite of an efficient and effective governance of destination networks” (Pechlaner et al., 2011). By generating testable hypotheses for future quantitative studies, this study aims to contribute to a stepwise reduction of this gap. In an exploratory research attempt, the interplay between the quality of the corporate governance of DMOs and the quality of destination governance is examined. Specifically, this inductive qualitative case study deals with the research question of how the corporate governance of DMOs influences destination governance in general, and the level of destination cooperation in particular. Intersecting destination governance and corporate governance Governance describes the “ways individuals and institutions, public and private, manage their common affairs” (Commission on Global Governance, 1995, p. 2). It has become a salient issue in several disciplines (Ruhanen, Scott, Ritchie, & Tkaczynski, 2010). Each discipline engaged in governance research has adapted the notion of governance to the peculiarities of their respective research fields, giving rise to the concepts of political, regional, destination, and corporate governance. This paper focuses on the governance discussion as it is presented and discussed among the economists and business scholars. In particular, a theoretical basis in corporate governance is adopted, but nevertheless the prominence of governance ideas in political science and the relevance of these contributions to destination governance are recognized. Due to this emphasis, the distinction between governance and management is particularly relevant to this paper. Comparing governance and management on general grounds, it is useful to conceptualize the question of governance as a problem of setting organizational boundaries and steering the flows across these boundaries; whereas management is concerned with issues clearly located within organizational boundaries (see Post, 1987). Understood thusly, the management of organizations is encapsulated in their governance. Presumably, one could also argue that governance lies somewhere between government and management, and is an expression of the blurring of boundaries. Accordingly, several papers in tourism approach governance issues from the political science or government side (e.g. Bramwell, 2011; Bramwell & Lane, 2011; Hall, 2011). This paper complements these contributions by tackling the question from the other way around; namely, with ideas rooted in management and corporate governance. In tourism, governance has gained a foothold particularly in the subfields of destination development and destination management. This can be attributed to the congruence between the “social coordination” (Wang & Xiang, 2007) and “network management” (Rhodes, 1996) — ideas that form the core of the governance concept, and the network nature of tourism destinations. The usefulness of the governance concept in dealing with destinations is further enhanced by the variety of actors, which forms actual destination networks (ranging from public to private organizations, private companies and individuals such as tourists and locals; Flagestad & Hope, 2001; Svensson, Nordin, & Flagestad, 2005). However, destination governance is related to the other dimension of governance in myriad ways. For instance, due to the spatial connotation of destinations, destination governance is embedded into regional governance (Raich, 2006). DMOs also play a crucial role in the governance of tourism destinations; indeed, they are in a position to


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promote the “common cause” and often serve as an intermediary between the different interests within destinations (Pechlaner et al., 2011). Thus, when investigating a destination’s governance, it is imperative to consider also the role of DMOs (Raich & Pechlaner, 2010). This research assumes that a fruitful way to meet this requirement is to apply the concept of corporate governance to DMOs. At least three justifications can be listed in support of this analogy. First, governance literature in the field of public management has, for some time, suggested the applicability of the corporate governance notion also to public organizations (see e.g. Bennington, 2010; Howard & Seth-Purdie, 2005). Second, in some countries, DMOs that had historically and prevalently been public organizations have undergone privatization in recent years. Similarly, the DMOs in the case study destination discussed below are primarily private-sector enterprises. They are organized and act under private law (as associations or as joint-stock companies) and, for all but one, public funding does not account for the major part of the total budget. The main source of financing for these DMOs is membership fees. Third, by making use of the corporate governance idea, the close conceptual relationship between corporate and destination governance can be taken advantage of. Previous studies on the relationship between DMOs and destinations Despite the listed good reasons, thus far, the interrelationships between destination governance and corporate governance have been largely neglected in tourism research (Pechlaner et al., 2011). The few papers dedicated to this venture either address the conceptual connections between corporate governance and destination governance (Beritelli et al., 2007; Ruhanen et al., 2010) or focus on the role of DMOs within destination governance (Bornhorst, Ritchie, & Sheehan, 2010; d’Angella & Go, 2009; Raich & Pechlaner, 2010). In a basic conceptual paper, Beritelli et al. (2007) discuss how the destination governance approach could be enriched by the integration of theoretical components from the more mature corporate governance literature. They identify four theories (transaction cost theory, property rights theory, principal agent theory, and network theory) and six dimensions (transaction costs, power asymmetries, interdependence, trust/control, knowledge, and informal as well as personal connections), which are considered pertinent contributions to the explanation of destination governance structures. Still on the conceptual front, Ruhanen et al. (2010) review the literature on corporate and political governance and identify the following interdisciplinary key elements of the governance concept: accountability, transparency, involvement, structure, effectiveness, and power. In addition to these two theoretical contributions, three other studies deal with the issue in a more practical manner. First, by analytically differentiating between the success of DMOs and the success of destinations, Bornhorst et al. (2010) show that the success of the two entities is interrelated. More precisely, they find three variables that determine the success of both destinations and DMOs: community support, marketing, and destination performance. The implications for this study are that stakeholder involvement and visibility through marketing activities, as well as destination performance, are important factors for successful DMOs and destinations. In contrast, and unique to the success of DMOs, the authors identify (amongst others) the efficient deployment of resources: “DMO managers must be cognizant that the DMO is an organization and much of its success will be determined by how well it is run and managed as an organization” (Bornhorst et al., 2010, p. 587).


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In the tourism literature, stakeholder theory is a research stream that puts a high emphasis on cooperation (Sautter & Leisen, 1999; Sheehan & Ritchie, 2005). In this context, d’Angella and Go (2009) discuss the (here) relevant question of how a DMO can enhance stakeholder cooperation. They conclude that efficient (defined as a contributions/rewards ratio) and inclusive DMO management is key to increasing the willingness of destination’s stakeholders to cooperate. However, only one paper explicitly applies the corporate governance concept to DMOs: Pechlaner et al. (2011) theoretically and empirically analyse the applicability of the notion of corporate governance to DMOs. They assert that corporate governance has a potential for guiding the future development of DMOs. Nevertheless, their paper leaves it to further studies to systematically explore the real-world effects of the corporate governance of DMOs on the governance of destinations. Thus, the primary goal of this paper is to advance tourism literature in this regard. Beside the theoretical question of how the concepts of corporate governance and destination governance are interconnected, this study examines empirically if corporate governance that adheres to specific principles might be a prerequisite for DMOs capable of supporting efficient and effective destination governance. Destination governance Destination governance has its intellectual roots in transaction cost economics and, to a somewhat lesser extent, in social network theory (Granovetter, 1985; Williamson, 1979, 1999). The foundations of transaction cost economics are laid down in a seminal paper of Coase (1937) and further developed by Williamson (1979). The latter identified in the distinction between market and hierarchy the analytical frame for the coordination of economic action. Building on this basis, an extension of the two initially proposed coordination principles led to a classification of three governance forms, that is markets, hierarchies, and — lying between the two extremes — networks (Powell, 1990). Within the transaction cost perspective a narrow usage of the governance concept was established. Williamson (1999, p. 1090) speaks of governance in terms of “economizing on transaction costs”. This definition refers to the idea that transactions should be embedded in the institutional framework that incurs the lowest costs. In turn, the cost burden of each governance form is highly contingent on the characteristics of the transactions concerned (their frequency, specificity, and uncertainty). Defined in a wider sense, governance describes the (self-) control of individual and collective actors by different kinds of mechanisms, and these can be (amongst others) rules, contracts, negotiations, money, or knowledge (Raich, 2006). This view stresses the encompassing concept of social coordination and social steering implied in the notion of governance. Besides the comprehensive vision, a further crucial element of the governance concept is its pragmatism, which has been already foreshadowed in transaction cost theory. Given that the efficiency of a governance form depends highly on the specific properties of the transactions in question, universal solutions may be viewed with scepticism. Instead, the context-dependency assumption calls for tailored approaches (Nordin & Svensson, 2007; Timur & Getz, 2008). In summary, destination governance is the application of the governance concept in the context of tourism destinations. It aims to improve a destination’s competitiveness by eliciting and steering common action. In this context, destination governance advocates a network form of governance and a relativistic approach (see d’Angella & Go, 2009; Pechlaner, Raich, & Beritelli, 2010). This deliberately fuzzy and flexible view makes it


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difficult to derive a normative perspective as envisaged, for example, by the idea of “good” destination governance. However, several authors have adopted a view similar to that of the above-mentioned stakeholder theory, and consistently stress the importance of inter-organizational cooperation. Thus, using the level of cooperation within a destination as a proxy for the quality of destination governance is tenable. DMOs and destination governance Tourism destinations can be regarded as strategic business units, which are, at least in the case of community orientation, characterized by numerous formally autonomous service providers (Flagestad & Hope, 2001). Following the destination management approach, the DMO is held responsible for the improvement of a destination’s competitiveness. Thus, the DMO assumes the destination’s central management functions, namely, strategic planning and destination development (Inskeep, 1991) as well as product development and marketing (Pechlaner & Fuchs, 2002). While these tasks imply a certain degree of cooperation between the DMO and the other stakeholders, the destination management approach confers on the DMO the central role in aligning the destination’s offer. However, due to a fast-changing environment, a lack of managerial authority, and the challenges presented by complex power structures in many destinations, DMOs have found it increasingly difficult to fulfil their assigned tasks (Socher, 2000). These difficulties have brought about a change in perspective. Through the destination governance lens, the DMO no longer sees its role as steering the network hierarchically, but instead defines itself as an intermediary and network manager. The main tasks of the DMO therefore are to provide coordination, to promote communication and the sharing of knowledge, and encourage the establishment of links between actors (Raich & Pechlaner, 2010). This study investigates the qualities that enable a DMO to accomplish the aforementioned tasks within the context of destination governance. It is suggested that corporate governance is a concept capable of capturing these required qualities of DMOs. After all, DMOs are not only an important player within the destination network, and thus of the destination governance, but being organizations, they can also be characterized on the basis of their corporate governance. As shown in the next section, having a functioning corporate governance enables DMOs to gain acceptance within the destination network. Consequently, a certain degree of acceptance among destination actors facilitates the DMO’s networking tasks and contributes to improvement of the destination governance. Corporate governance of DMOs Overall, two conceptualizations of corporate governance can be distinguished (Aguilera & Jackson, 2003; Morrison, 2004; Shankman, 1999). The first definition, which predominates in the literature and is inspired by the Anglo-Saxon view of the firm, can be termed the shareholder view of corporate governance. Based on agency theory (Jensen & Meckling, 1976; Ross, 1973), corporate governance is essentially an attempt to mitigate the negative consequences of the separation of ownership and management (see Berle & Means, 1932). As understood in this form, corporate governance embraces all the regulations in the context of the shareholder – management relationship that strive to align the agency of managers with the owners’ interests, and thus solve the principal – agent problem (see Morrison, 2004; Ramly & Rashid, 2010).


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The second definition of corporate governance builds on the Continental European and Japanese conceptualizations of the firm and on institutional theory (Aguilera & Jackson, 2003). In this more stakeholder-oriented view, non-shareholders such as debt-holders, employees, suppliers, and customers (and sometimes also government and the local community) are also regarded as “principals” (Shankman, 1999). From this point of view, corporate governance could be defined as the sum of all institutions (rules, routines, and organizations) governing the relations between the stakeholders and the management of a company – particularly in the context of decision-making and control (see Aguilera & Jackson, 2003; Luoma & Goodstein, 1999; Morrison, 2004; Turnbull, 1997). This paper adheres to the latter perspective of corporate governance: the stakeholderoriented view. The rationale for choosing this perspective of corporate governance is twofold. First, the private– public nature of DMOs implies a clear stakeholder mandate with complex decision-making structures and no profit orientation. Notwithstanding recent privatization, public administration still plays a critical role in many DMOs, particularly with regard to funding. Second, the tourism literature concurs that a stakeholder perspective is particularly well suited to deal with the peculiarities of tourism destinations; because of, for instance, the variety of actors involved and the bundle structure of tourism products (Presenza & Cipollina, 2010; Sheehan & Ritchie, 2005; Timur & Getz, 2008). What does this perspective imply for the measurement of the quality of corporate governance? Notwithstanding the embraced stakeholder perspective, the quality of corporate governance will be defined in the greatest possible accordance with international principles (OECD, 2004). However, in order to comply with the specific characteristics of DMOs, some adaptations, or perhaps more accurately, some generalizations, are inevitable. Building on the previous works of Bornhorst et al. (2010), d’Angella and Go (2009), Pechlaner et al. (2011), Ruhanen et al. (2010) as well as the German Code of Corporate Governance (Werder, 2000), the quality of corporate governance will be assessed on the basis of the principles of stakeholder involvement, effectiveness, efficiency, and transparency/accountability. . Stakeholder involvement: Stakeholder involvement refers to the organization of management and control in a way that balances the interests of all organizational stakeholders ex ante and ultimately aims to increase their welfare (see Vives, 2000). The principle of stakeholder involvement is probably the most obvious connection point with more politically oriented destination governance theories (see e.g. Hall, 2011). . Effectiveness: Following Drucker (1966), effectiveness means doing the right things in order to achieve predefined targets. In the context of corporate governance, effectiveness often refers to the whole process of strategic planning and the subsequent adoption of appropriate decisions and measures (see Pechlaner et al., 2011). Thus, when corporate governance is referred to as “the systems by which companies are directed and controlled” (Cadbury Committee, 1992, p. 15), then effectiveness takes the part of the direction. . Efficiency: Efficiency deals with the ratio of input and output in the direction of an organization. By avoiding frictional losses, such as internal and external transaction costs (or governance costs), efficient corporate governance thereby achieves the desired targets with a minimum of resources. . Transparency/accountability: Transparency and accountability refer to the control part of the above definition of corporate governance. By reducing the information


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asymmetries among the managers of organizations and their stakeholders, transparency and accountability ensure effectiveness, efficiency, and stakeholder involvement ex post (De Nicolo`, Laeven & Ueda, 2008; O’Sullivan, 2000). Methodology Given that research investigating the relationships between destination governance and corporate governance of DMOs is still in its infancy, a qualitative case study approach aimed at theory building rather than theory testing was deemed appropriate. During the summer of 2010, 15 semi-structured interviews with selected figures were carried out in the South Tyrolean destination of Eppan–Kaltern–Tramin (Italy). The interviews, which lasted approximately 1 h each, were taped and then transcribed. The resulting data were analysed with the aid of the GABEK toolset (including the software implementation WinRelan). Thereby, in the data analysis high transparency and inter-subjective verifiability were paired with closeness to the original data without losing the openness and flexibility in the previous data-gathering phase (Buber & Kraler, 2000; Zelger, 2000; Zelger & Oberprantacher, 2002). In 2010, the destination registered 216,000 tourist arrivals and 1.1 million overnight stays, almost exclusively in the summer season (ASTAT, 2011a). The main source markets were Germany (accounting for approximately two-thirds of the arrivals in 2010), followed by Italy, Austria, and Switzerland (ASTAT, 2011b). However, the destination was chosen because of its multifaceted organizational landscape. As shown by Figure 1, a high number of DMOs operate in the destination of Eppan–Kaltern–Tramin, so that it can be considered a rather extreme case from this point of view. Three local tourism associations (LTAs) are supported by three DMOs on the regional level, one of them a DMO (called the “regional tourism association”) with a narrow scope of duties limited to the tourism sector and two organizations (the “Wineroute association” and the “Winepoint Kaltern”) working in the interspace between tourism and wine industry and thereby explicitly taking into account the intersectoral nature of tourism. The picture is completed by the provincial tourism association, located at the highest level of the various DMOs considered in this study. Concerning the spatial dimensions of the different DMOs, local refers to the municipal level, regional to the inter-municipal level and provincial to the sub-state level.

Figure 1. Organizational landscape of the destination and its representation through the selected interviewees. Note: LTA refers to local tourism association.


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Wine plays a prominent role among the destination’s DMOs. The destination is located within a famous wine-growing region, which produces numerous internationally awardwinning wines and schnapps. Several autochtone grapes are unique to the region, which in 1964 led to its classification as a wine route. Thus, together with architecture, sports, and the traditional way of life, wine is an important tourist theme in the area. However, the integration of wine and tourism is not only market- and communication-oriented, but has also been considerably developed on the supply side. The regional DMOs testify to this fact. The interview partners were selected by purposeful sampling applying two criteria: diversity and knowledgeability (Eisenhardt & Graebner, 2007; Pratt, 2009). First, they were singled out so that every stakeholder group was included, and thus a wide variety of views were captured. In addition to the representatives of the above-mentioned organizations, the hoteliers and restaurateurs, agriculture (in this specific case, the wine industry), the trade sector, and the local population (represented by the local public administration) were considered (see Figure 1). Including diverse perspectives from different functional areas can be considered as a preventive measure to limit interviewee bias (see Eisenhardt & Graebner, 2007). The second criterion applied was that the interviewees were highly knowledgeable about the studied phenomena. The researchers limited the number of conducted interviews to 15, which they deemed tenable for several reasons. First, considering the degree of overlap of the respondents’ answers, a high saturation of information was noticeable. Second, as in most qualitative research, the study did not strive for representative findings, because its purpose was to develop theory, not to test it (Eisenhardt & Graebner, 2007). Third, given the limited size of the destination, the inner circle of knowledgeable persons could be largely covered. The interviews included seven open-ended guiding questions that allowed the respondents to convey their views and opinions. Thematically, the questions covered tourism development, organizational issues, and cooperation in the destination. The collected linguistic data were analysed with GABEK/Winrelan (see Zelger & Oberprantacher, 2002). GABEK assists the researcher in handling the complexity of collected qualitative data by enabling an overview of the material from different perspectives and distances. In summary, the method permits a complexity reduction while maintaining a comprehensive portrayal. In this study, by following the subsequent steps, the interviews’ content is displayed in the form of networks of interrelated keywords (association graphs and causal net graphs): 1. definition of text units; 2. coding: a. coding of keywords, b. coding of evaluations, c. coding of causal relations; 3. analysis (in the narrow sense): a. analysis of association graphs (with evaluations), b. analysis of causal nets. Steps 1 and 2 ensure the complexity reduction of the interview data; whereas Step 3 restructures them in a more clearly arranged manner and displays them in the form of graphs. Steps 1 and 2 consist of the interviews’ partitioning into closed statements (i.e. text units) and their coding with respect to the contained keywords, evaluations, and causal relations. Step 3 provides two types of graphs to illustrate the connections between the various elements defined in the previous steps in order to capture the basic messages of the


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interview set; namely, association graphs and causal net graphs. Association graphs are very similar to mind maps, and are used to show undirected connections between the coded keywords. They are generated by regarding all keywords that appear together in one paragraph as interrelated. As done in this study, association graphs can be enriched by evaluative data. Causal net graphs display the cause and effect relationships between the keywords, as the respondents perceive them. Generally, each connection in the association and causal net graphs is based on statements taken directly from the interviews. Similar to grounded theory/ATLAS.ti (see Mehmetoglu & Altinay, 2006), GABEK/WinRelan differs from more generic qualitative analysis tools (such as NVivo). GABEK/WinRelan is more than just a data analysis tool. It is better understood as a research strategy with a specific methodological background that puts a special emphasis on the data analysis phase, and provides a sophisticated tool for its execution. As such, GABEK follows a clear and predefined rule-guided process of data-analysis, which, in comparison to other qualitative data analysis techniques, results in relatively systematic and inter-subjectively traceable findings. However, this also means that GABEK is not directly compatible with other qualitative research strategies, which somewhat hinders its dissemination. Unique to GABEK is its keyword-based analysis and the consequent output in the form of network graphs of keywords. These features allow for a simultaneous comprehensive interpretation and a comprehensible presentation of qualitative data. The keywords are rooted in the interviewees’ statements (typically, the keywords are their own words) and the graphs, which show the connections of these keywords, are automatically generated by following specific rules. The interpretation process only starts afterwards (for instance, in the grouping and categorization of keywords) and thus remains clearly distinguishable. However, the strict separation of coding and interpretation, being one of the main strengths of GABEK, also produces a weakness: this strict separation does not allow for prioritization or preselection in the coding process, thereby considerably increasing the coding effort. Results Figure 2 shows an association graph with evaluations around the keyword cooperation. The association graph is limited to the organizations involved in the governance of the case study destination that is mainly DMOs at the different levels and local public administration. The positive numbers indicate the amount of positive evaluations that the respondents attributed to the various concepts (in this particular case organizations); whereas the negative numbers illustrate the respective quantity of negative evaluations. At first glance positive numbers predominate, revealing the overall positive evaluation of the different organizations engaged in promoting and managing cooperation in tourism. However, substantial discrepancies in evaluating the different organizations deserve closer examination. Three organizations, two with extraordinarily positive net evaluations and one with a very ambiguous net evaluation, are exemplarily examined to investigate the causes of such different evaluations, especially concerning their impact on destination cooperation. Differences in the corporate governance of these organizations seem to be responsible for their dissimilar perception by tourism actors, as discussed below. The selected organizations are the three placed in the bubbles on the top of Figure 2, namely the Winepoint Kaltern and the Wineroute association (taken as examples for a notably positive perception) on one hand, and the regional tourism association (exemplifying negatively evaluated organizations) on the other. The remainder of this section analyses each of the three organizations regarding how and why they affect the


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Winepoint Kaltern +15–0

Regional tourism association +23–23

Provincial tourism association +7–0

Municipal adminstration +12–2

Tramin +15–9

Cooperation +98–58 Tourism association Kaltern +41–4

Kaltern +47–17

Tourism association Tramin +16–5

Eppan +7–28

Tourism association Eppan +26–13

Figure 2. Association graph showing the evaluations of organizations involved in the governance of the case study destination. Notes: Positive numbers indicate the absolute amount of positive evaluations that the respondents attributed to the various concepts (in this particular case, organizations). Negative numbers illustrate the respective quantity of negative evaluations.

cooperation level in the destination. Thereby, the critical role of their corporate governance will become evident. Winepoint Kaltern The Winepoint Kaltern can be classified as a DMO in the broadest of terms. It is both the umbrella organization of the local wine industry and simultaneously closely integrated with the LTA. It has been deliberately designed to promote the cooperation between the tourism and wine industries. The causal net graph displayed in Figure 3 indicates that the Winepoint Kaltern is characterized by a series of phenomena, the majority of which have positive impacts on the level of cooperation. The interpretation of the causal net graph can be facilitated by categorizing these characteristics associated with the Winepoint Kaltern into the three groups of stakeholder involvement, evidence of performance, and efficiency. The denomination of the groups clearly shows the close link to the concept of corporate governance as defined above. The group of keywords referred to as stakeholder involvement indicates that the Winepoint Kaltern is appreciated as being a participative organization involving the most important stakeholders. It encourages conversations – especially between tourism actors in the narrower sense and the wine industry. Such an extensive stakeholder involvement has the potential to increase the acceptance of the organization and – partly as a direct


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Figure 3. Causal net graph connecting Winepoint Kaltern and cooperation.

consequence of this effect – to promote cooperation in the destination. The following exemplary statement, which was taken from one of the qualitative interviews, further emphasizes the significance of a wide stakeholder involvement: To us, the Winepoint Kaltern is a stunning project, because representatives from the political arena, from tourism and wine industry are involved . . . everybody is represented . . . everybody gets round a table to discuss. Nobody is ignored. (Interviewee)

The positive perception and the cooperative influence of the Winepoint Kaltern are also due to the embeddedness of the stakeholder orientation into an efficient structure and into efficient processes. Respondents refer to the Winepoint as offering “clear contact persons” and as “speaking with a single competent voice to the outside world, which is moreover authorized to negotiate binding contracts”. Finally, the Winepoint Kaltern can also provide some evidence of performance and point to several achieved objectives and pioneering efforts. It stands for quality and success, and thus has assumed the status of a brand. In summary, the example of the Winepoint Kaltern shows that elements of corporate governance, such as stakeholder involvement, efficiency, and evidence of performance, exert a positive influence on both the perception of the DMO by the affected actors and the level of cooperation in the destination. Wineroute association A very similar picture emerges in considering the second DMO with relatively good evaluations, that is the Wineroute association. Similar to the Winepoint Kaltern, the Wineroute association is a DMO in the wider sense of the concept, and is dedicated to improving the cooperation between the wine industry, tourism, and public administration. Unlike the Winepoint, it has a broader regional scope. The causal net graph in Figure 4 illustrates the reasons why the Wineroute association is in a condition to promote cooperation. Again, it is possible to facilitate the interpretation


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Figure 4. Causal net graph connecting the Wineroute association and cooperation.

of the WinRelan output by grouping these causes into the supersets of evidence of performance and stakeholder involvement. Both are related to the notion of corporate governance, and both were already discussed above regarding the Winepoint Kaltern. Analogous to the Winepoint Kaltern, the Wineroute association is seen as a pioneer in the effective promotion of cooperation in the destination. As an unambiguous evidence of performance, it managed to set some tangible signs of improving cooperation through, for instance, the installation of joint informative road signs throughout the destination. No less important, the Wineroute association is also characterized by a broad stakeholder involvement: respondents mentioned that the Wineroute association promotes joint product development and takes an inter-municipal perspective (see the circular ending connecting line denoting a negative relationship to the keyword focus on a single municipality). It succeeds in coordinating different interests, because the various groups of actors are represented in its panels and therefore everyone in the destination identifies with this specific DMO. If only one sector is represented in the different panels, resistance is provoked. (Interviewee)

Hence, the insights gained from the analysis of the interrelationships between the Wineroute association, the positive perceptions it elicits, and its cooperation promoting effect further confirm what was already concluded from the above investigation of the Winepoint Kaltern: a corporate governance of the DMOs characterized by an extensive stakeholder involvement and by the provision of some evidence of performance seems to positively influence cooperation in particular, and destination governance in general. Regional tourism association It is fruitful to consider the dissenting example of the regional tourism association, which is probably the most negatively perceived DMO in the case study destination (see Figure 1). The regional tourism association focuses on the commercialization and the coordination of the supra-local tourism offer. However, the circular end of the leftmost


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Figure 5. Causal net graph connecting the regional tourism association and cooperation.

connecting line in Figure 5 underlines that respondents did not assess the contribution of this specific DMO to the level of cooperation in a uniformly positive manner (circular ending connecting lines show negative relationships between keywords). What can this ambiguous effect be attributed to? Figure 5 suggests that the regional tourism association has not succeeded in being perceived as operating close to the local tourism companies. Indeed, the mentioned distance of the regional tourism association indicates a low involvement of an important subset of stakeholders; namely, the private service providers. In a way, the moderate visibility could also be interpreted as a lack of evidence of performance. Other, mostly organizational stakeholders appear to be involved to a greater extent. By establishing joint workgroups and bringing these actors together, the regional tourism association plays an undeniably crucial role in the promotion of cooperative thinking on the inter-municipal level. Yet, according to most respondents, the structure of the regional tourism association is rather inefficient. In several statements, it is associated with an excess of structure costs, as illustrated in the following quotation: I think that currently the regional tourism association is plagued with too much bureaucracy and its structural costs are by far too high. (Interviewee)

In being a dissenting example, the case of the regional tourism association conforms with the results obtained in the context of the other two DMOs. It supports the proposition that the corporate governance of DMOs is a critical aspect in the steering of tourism destinations. The ambiguous effect of the regional tourism association on the degree of cooperation (identifiable through the circular ending connecting line) as well as its modest acceptance (mirrored in the relatively low evaluations) seems to be related to its specific form of corporate governance, which the respondents perceive to be characterized by an incomplete stakeholder involvement, an inefficient structure, and the absence of evidence of performance.


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Conclusion and implications The purpose of the conducted case study was to explore the relationships between the corporate governance of DMOs and destination governance. The obtained results lead to three conclusions and associated practical implications. Considering the qualitative approach, the conclusions are of an idiosyncratic nature and hold so far only as for the specific case examined. Therefore, they are stated as a set of four hypotheses, which makes them more accessible for a generalized testing (verification or falsification) in subsequent quantitative studies. First, on a general level, the study suggests that DMOs may have a positive effect on destination governance. Both organizations (the Winepoint Kaltern on the local level and the Wineroute association on the regional level) occupy hub positions in creating communication channels within the case study destination, and thus facilitate internal networking. Mainly by bringing together the various destination stakeholders, combined with fostering common product development in these networks, they contribute to the improvement of the destination’s competitiveness. In contrast, the regional tourism association seems to have a more limited — but still overall positive — influence on destination governance. H1:

Generally, DMOs have a positive influence on the level of cooperation in destinations.

Second, the study indicates that the extent to which organizations can affect destination governance is strongly linked with their acceptance by the destination stakeholders. They tend to accept DMOs that guarantee broad stakeholder involvement and show a sufficient degree of efficiency and performance. These abilities are strongly tied to the concept of corporate governance. Thus, the collected evidence concerning the three DMOs supports the proposition that appropriate corporate governance may increase the acceptance of the DMOs, which consequently promotes cooperation in the destination in general. H2:

H3:

The acceptance of DMOs is positively correlated with the following aspects of their corporate governance: (a) extent of stakeholder involvement, (b) efficiency, and (c) evidence of performance. The cooperative effect of DMOs is positively correlated with their acceptance by the destination stakeholders.

Therefore, as a third conclusion, we tentatively suggest a positive relationship between a corporate governance of DMOs characterized by a broad stakeholder involvement as well as an efficient way of working and a visible performance and a destination governance associated with a high level of cooperation. This is largely congruent with the findings of Bornhorst et al. (2010) and d’Angella and Go (2009). H4:

The specified aspects of corporate governance are positively correlated with a high level of cooperation.

In an attempt to summarize the findings of this study regarding the links between destination governance and the corporate governance of DMOs, Figure 6 aggregates the four hypotheses into a comprehensive model. Limitations and future research This study is a first step to fill the identified research gap regarding the interrelationship between corporate governance and destination governance. However, it has some


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Figure 6. Model showing the hypothesized relationships between the corporate governance of tourism organizations and destination governance.

limitations. Besides the already mentioned idiosyncrasy of the results and similar limitations of qualitative research (which can be tackled by quantitative testing of the elaborated hypotheses), even more qualitative theory building may be necessary before engaging in cross-sectional or longitudinal studies. To deepen the obtained findings, for instance, further context-sensitive studies in other destinations and on different spatial levels are encouraged. In particular, the “thick descriptions” produced by ethnographic studies may be useful to complement the above findings in order to shed light on the root causes of ineffective management of DMOs. In particular, a need exists to crosscheck the obtained results with respect to the regional tourism association. Regional tourism organizations predominantly engage in advertising, and are only marginally involved in product development. Hence, they do not have the spatial proximity and the high degree of stakeholder involvement that characterize locally based DMOs. This means that they have structurally anchored difficulties to gain acceptance among their stakeholders. Because the tasks of the regional tourism associations are nevertheless crucial for a destination’s competitiveness and often attract significant public funding, further research on the issue of increasing the acceptance of regional tourism associations is desirable. A potential methodological weakness lies in the chance of an evaluation bias being present among the chosen interviewees, which could persist even though the purposeful sampling aimed to reduce such bias. Another limitation concerns the considered dimensions of corporate governance. The three elements that could be found in this study can be classified as means to reduce the information asymmetry between principals (stakeholders) and agents (DMO executives) and to increase the direct control of the former over the latter to ensure a fair use of funds. At least two important aspects of corporate governance were neglected or not present in the data: incentives (Jensen & Murphy, 1990), and mechanisms of checks and balances through different levels of management and monitoring mechanisms (Rediker & Seth, 1995). However, this paper could make a case for intersecting the concepts of corporate governance and destination governance, which seem to be a fruitful analytical frame for future research projects.


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Notes 1. Email: michael.volgger@eurac.edu 2. Email: herntrei@gmail.com 3. DMOs “include convention and visitor bureaux, national and regional tourism organizations” (Dwyer & Kim, 2003, p. 388). They “have an overall responsibility for the entire destination product and through incentives and policies facilitate the development of products . . . [by being] the guardians of the image and resources of destinations . . . [and creating] local partnerships for the delivery of seamless experiences” (Buhalis, 2000, p. 109). 4. This paper makes no distinction between the concepts of cooperation and collaboration.

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