IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpio/0504009.html
   My bibliography  Save this paper

Long–term Business Relationships between Consignor and Trucking Carrier in Japan

Author

Listed:
  • Norihiro KASUGA

    (Nagasaki University)

  • Akio Torii

    (Yokohama National University)

Abstract

In this paper, we have empirically analyzed the factors that lead to longer business relationships in the logistics industry. The main conclusions of this paper are summarized as follows. First, the terms of relationships observed between the consignors and the trucking carriers that receive consignment of the transportation of the consignor’s main products have significantly positive associations with the level of information exchanged and consignments of distribution processing operations proposed by the consignee. Transaction cost economics implies that long-term relationships facilitate investment in relation-specific assets so as to improve efficiency. Then, we have sound reason to assume that the content of the shared information and the equipment for distribution processing have a significantly relation-specific nature, and accumulation of the related human capital, such as skill in workers and know-how, is important to improve efficiency of the whole logistics system. At the same time, these assets may function as hostages to maintain the long-term relationships. In regard to all of these points, the same mechanism is at work as in the commercial distribution market. The second conclusion is that the long-term business relationship is affected by the demand volatility of the consignor’s product. Consignors who belong to industries with a large volatility of demand tend to rely on transportation services procured from spot logistics markets with a shorter contract term. This finding is also consistent with previous research in the commercial distribution market. These results suggest that the mechanism to minimize transaction costs by establishing long- term business relationships is likely to exist in the logistics market. This is the same mechanism which is pointed out in the commercial distribution market. Generally, assets consisting of a system with a network structure tend to be sunken. Therefore, in order to save coordination costs which are incurred to make the whole distribution market function efficiently, long-term business relationships are indispensable. Thus, relationships between companies in the logistics market are likely to be affected by the shortening of the delivery time in the commercial distribution market.

Suggested Citation

  • Norihiro KASUGA & Akio Torii, 2005. "Long–term Business Relationships between Consignor and Trucking Carrier in Japan," Industrial Organization 0504009, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0504009
    Note: Type of Document - pdf; pages: 25. Crew, M. and P. Kleindorfer ed., Current Directions in Postal Reform, Kluwer academic publishers, pp.413-438.
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/io/papers/0504/0504009.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Pirrong, Stephen Craig, 1993. "Contracting Practices in Bulk Shipping Markets: A Transactions Cost Explanation," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 937-976, October.
    2. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-185, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    transaction cost; logistics; Japanese system; long-term relationship;

    JEL classification:

    • L - Industrial Organization

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0504009. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.