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Interconnection and Co-ordination: An Application of Network Theory to Liner Shipping

Author

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  • Angela S Bergantino

    () (Department of Economics, University of Bari, Via C. Rosalba 53, 70124 Bari, Italy.)

  • Albert W Veenstra

    (Center for Maritime Economics and Logistics & Department of Management and Information Systems, Erasmus University Rotterdam, PO Box 1738, 3000 Dr Rotherdam, The Netherlands)

Abstract

Significant changes in the world economy, mainly linked to the increased internationalisation of the economy, have induced container shipping companies to rethink their strategies to face demand. Traditional forms of co-operation, generally based on route-related agreements, have been substituted or integrated with more articulated forms of alliances, the so-called global alliances, and a wave of mergers and acquisitions have taken place in the sector. The rationale behind the new strategies of the operators is that of extending market coverage globally. Global strategic alliances, alongside with more traditional agreements and with mergers, contribute towards establishing the interconnection of individual companies' networks; however, the former respond more directly to the need to extend the geographical scope of business and to offer higher quality services. The scope of this work is to investigate, within an analytical framework based on the recent literature on network theory, the functioning and the evolution of forms of co-operation in liner shipping; in particular of global strategic alliances. It is found that, while the exploitation of network externalities is the main scope of shipping network integration and one of the most important elements in determining their optimal size, co-ordination costs are often of such strength that nullifies their effect. This appears to be the main cause of the instability of such agreements and of the permanence of business integration initiatives alongside forms of network connection. Furthermore, it is shown that the potential cost saving advantages of interconnection are, often, not fully exploited due to the frequency with which restructuring takes place within the industry.International Journal of Maritime Economics (2002) 4, 231–248. doi: 10.1057/palgrave.ijme.9100044

Suggested Citation

  • Angela S Bergantino & Albert W Veenstra, 2002. "Interconnection and Co-ordination: An Application of Network Theory to Liner Shipping," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 4(3), pages 231-248, September.
  • Handle: RePEc:pal:marecl:v:4:y:2002:i:3:p:231-248
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    Citations

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    Cited by:

    1. Wang, Chengjin & Wang, Jiaoe, 2011. "Spatial pattern of the global shipping network and its hub-and-spoke system," Research in Transportation Economics, Elsevier, vol. 32(1), pages 54-63.
    2. Ishii, Masahiro & Lee, Paul Tae-Woo & Tezuka, Koichiro & Chang, Young-Tae, 2013. "A game theoretical analysis of port competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 92-106.
    3. Qu, Chenrui & Wang, Grace W.Y. & Zeng, Qingcheng, 2017. "Modelling port subsidy policies considering pricing decisions of feeder carriers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 99(C), pages 115-133.
    4. Panayides, Photis M. & Wiedmer, Robert, 2011. "Strategic alliances in container liner shipping," Research in Transportation Economics, Elsevier, vol. 32(1), pages 25-38.
    5. Simone Caschili & Francesca Medda & Francesco Parola & Claudio Ferrari, 2014. "An Analysis of Shipping Agreements: The Cooperative Container Network," Networks and Spatial Economics, Springer, vol. 14(3), pages 357-377, December.
    6. repec:pal:marecl:v:19:y:2017:i:3:d:10.1057_mel.2016.10 is not listed on IDEAS
    7. Talley, Wayne K., 2014. "Maritime transport chains: carrier, port and shipper choice effects," International Journal of Production Economics, Elsevier, vol. 151(C), pages 174-179.

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