The Time Dimension And Value Of Flexibility In Resource Allocation: The Case Of The Maritime Industry
AbstractThe paper analyses empirically the time-varying properties of the spread between voyage and time-charter rates and presents evidence that these properties are directly related to the business cycle (market demand) of the maritime industry, to the expectations for the future market demand and to market volatility. Using a real options methodology, we demonstrate that the time-varying properties of the spread is the outcome of the strategic decision to time-commit company resources in the industry. It is shown that, during a market upturn (downturn) managers choose to commit company resources for a short period (long period), and thus, maintain flexibility (commitment) in better exploiting the upcoming business opportunities (protecting company resources from lack of business opportunities). Overall, the fluctuations of the time-varying spread, between voyage and time-charter rates, offer managerial insights in resource allocation that can better shape up chartering, budgeting and financial management decisions on the time commitment of resources in the maritime industry.
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Bibliographic InfoPaper provided by Democritus University of Thrace, Department of Economics in its series DUTH Research Papers in Economics with number 2-2012.
Length: 28 pages
Date of creation: 27 Jan 2012
Date of revision:
Contact details of provider:
Postal: Department of Economics, University Campus, Komotini, 69100, Greece
Phone: (25310) 39.503
Fax: (25310) 39.502
Web page: http://www.econ.duth.gr/
More information through EDIRC
Maritime Industry; Resource Allocation; Strategic Flexibility; Commitment; Real Options; Market Conditions;
Find related papers by JEL classification:
- A00 - General Economics and Teaching - - General - - - General
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