Through a comparative, longitudinal analysis of the wine industry in two Argentine provinces, this article finds that different political approaches to reform and not simply socioeconomic endowments determine the ability of societies to build new institutions for economic upgrading. A “depoliticization” approach emphasizes the imposition of arm’s-length incentives by a powerful, insulated government but exacerbates social fragmentation and impedes upgrading. A “participatory restructuring” approach promotes the creation and maintenance of new public-private institutions for upgrading via rules of inclusive membership and (...) multiparty, deliberative governance. This latter approach can facilitate collaboration and knowledge creation among the government and previously isolated, even antagonistic, stakeholder groups. (shrink)