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The time dimension and value of flexibility in resource allocation: The case of the maritime industry

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  • Axarloglou, Kostas
  • Visvikis, Ilias
  • Zarkos, Stefanos

Abstract

The study empirically analyses 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, it is demonstrated that the time-varying properties of the spread is the outcome of the strategic decision to time-commit company resources in the industry. 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.

Suggested Citation

  • Axarloglou, Kostas & Visvikis, Ilias & Zarkos, Stefanos, 2013. "The time dimension and value of flexibility in resource allocation: The case of the maritime industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 52(C), pages 35-48.
    • Handle: RePEc:eee:transe:v:52:y:2013:i:c:p:35-48
    DOI: 10.1016/j.tre.2012.11.010
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    Cited by:

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    2. Adland, Roar & Prochazka, Vit, 2021. "The value of timecharter optionality in the drybulk market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    3. Alexandridis, G. & Sahoo, S. & Visvikis, I., 2017. "Economic information transmissions and liquidity between shipping markets: New evidence from freight derivatives," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 82-104.

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    More about this item

    Keywords

    Maritime industry; Resource allocation; Strategic flexibility; Commitment; Real options; Market conditions;
    All these keywords.

    JEL classification:

    • A00 - General Economics and Teaching - - General - - - General

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