An empirical test of the balanced theory of port competitiveness

• Pages: 363-378
• Date: 08 May 2017
• Published date: 08 May 2017
• DOI: https://doi.org/10.1108/IJLM-06-2015-0101
• Author: Douglas N. Hales,Y.T. Chang,Jasmine Siu Lee Lam,Olivier Desplebin,Nikhilesh Dholakia,Adel Al-Wugayan
• Subject Matter: Management science & operations,Logistics

An empirical test of the balanced

theory of port competitiveness

Douglas N. Hales

College of Business Administration, University of Rhode Island,

Kingston, Rhode Island, USA

Y.T. Chang

Graduate School of Logistics, Inha University, Incheon, South Korea

Jasmine Siu Lee Lam

School of Civil and Environmental Engineering,

Nanyang Technological University, Singapore, Singapore

Olivier Desplebin

Institute of Business Administration, Rouen University, Rouen, France

Nikhilesh Dholakia

College of Business Administration, University of Rhode Island,

Kingston, Rhode Island, USA, and

Adel Al-Wugayan

Department of Management and Marketing, College of Business Administration,

Kuwait University, Kuwait City, Kuwait

Abstract

Purpose –The purpose of this paper is to empirically test a new theory called the balanced theory of port

competitiveness.

Design/methodology/approach –Data were collected from multiple respondents in 72 of the largest

container ports. The instrument was translated into English, Simplified Chinese, Korean, and French. The

data were collected through online and paper-based surveys. The data were analyzed using analytical

hierarchy process.

Findings –The theory was shown to explain the behavior of port stakeholders in improving competitiveness

by balancing the need to attract new customers with that of attracting new investors when making decisions,

which can often be contradictory. The analysis showed significant effects for the five variables of volume

competitiveness (VC) and the five variables of investment competitiveness.

Research limitations/implications –This study is limited in that it only tested the balanced theory on the

largest container ports. The decisions by port managers may differ at smaller ports or those that do not

handle containers.

Practical implications –Port stakeholders now have a ten-variable model of the factors needed to attract

new customers and investors. These variables, and their tradeoffs, can evaluate the impact of managerial

decisions on port competitiveness.

Originality/value –This study informs the literature by being the first to test a new theory that explains a

greater level of port stakeholder behavior when improving competitiveness. Prior to this study, VC and

investor competitiveness had only been studied separately, although they were related in practice.

Keywords Analytical hierarchy process, Balanced theory of port competitiveness,

Improvement systems recovery, Port competitiveness, Port strategy

Paper type Research paper

1. Introduction

The 2012 economic recovery resulted in a resurgence of exports from Asia. This has

returned global shipping to the levels not seen since the recession. The growing traffic is

once again constraining the global logistics network, sometimes referred to as the shipping

network design problem (Plum et al., 2014); once again outstretching the ability of major

The International Journal of

Logistics Management

Vol. 28 No. 2, 2017

pp. 363-378

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-06-2015-0101

Received 22 June 2015

Revised 24 December 2015

4 February 2016

Accepted 5 February 2016

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

363

An empirical

test of the

balanced

theory

seaports to build new port infrastructure systems and hinterland access channels.

Since 2012, seaport owners and managers have sought new investment to build new

infrastructure systems and maintain physical assets. Competing for government funding

and taking advantage of new funding models such as public-private partnerships (PPPs),

ports started to build and update assets such as cranes, container storage facilities, channel

dredging, and drayage services. They offered more services to vessel crew members and

carriers, and some planned large-scale living facilities at the port for foreign workers.

One example is South Korea’s Busan New Port, where luxury living facilities were planned

for more than 300,000 foreign workers and their family members, including condominiums,

schools, recreational facilities, and healthcare services.

As infrastructure becomes congested, port fees rose, service levels dropped, and port

facilities expanded. This is in stark contrast to the recession where expensive assets such as

cranes sat idle, vessels shipped only a fraction of their capacity, container yards were no

longer filled and new expansion projects and plans were halted. In 2012, expansion projects

were restarted and such activities signaled a shift in the way ports competed. They changed

their primary focus from seeking new revenue sources from customer volume to seeking

expansion opportunities and investors. This noteworthy dynamic has produced a gap in the

literature on port competition. Previous studies of port competition models have focused

almost solely on activities undertaken by ports to compete in the market and attract new

business opportunities through new customers for a larger market share. Few studies have

focused on activities of ports to attract new investors, and more importantly, no study has

explained how an effective balance between these two factors, namely, attracting new

business opportunities and new investors, can be achieved. Some decisions of ports to

attract new business opportunities have often dissuaded new investors and vice versa.

That is, previous studies have focused on market activities, whereas port managers have to

balance market activities with investor concerns. Therefore, existing models are limited in

that they cannot explain or guide strategic decisions of port managers. One example is port

asset use in which customers (carriers and shippers) prefer ports with low use levels, such as

a low level of crane use, because they expect better service levels, whereas investors prefer a

high level of asset use because they imply a higher ROI.

The conceptual basis for explaining the balance between market and investor decisions

is a new theory called the balanced theory of port competition (Hales et al., 2016). This study

empirically tests the balanced theory of port competition by considering port directors,

senior managers, and researchers from the world’s top 200 seaports to examine the factors

used to balance market factors with investor concerns. The study refers to market factors as

customer-facing competitiveness and the relevant variable as “volume competitiveness”

(VC) and competition for investment as investor-facing competitiveness and the variable as

“investment competitiveness”(IC). These variables together compose the balanced theory of

port competitiveness, a model for explaining and guiding behaviors of managers in

selecting various strategies (Hales et al., 2016). Focusing on container ports, the scale

employs an overall quantitative score for “port competitiveness”and ranks each seaport

such that the higher the value, the greater the competitiveness.

2. A literature review and the theoretical background

Hales et al. (2016) developed a survey instrument to test the balanced theory of port

competiveness. The two factors influencing port competitiveness include VC and IC.

2.1 VC

Previous studies examining how ports compete have focused on competition mainly from the

perspective of customers (customer-facing VC) (e.g. Talley and Ng, 2013; Song and Yeo, 2004)

or only within a country or region (Yuen et al., 2012; Jacobs and Hall, 2007; Song and Yeo, 2004).

364

IJLM

28,2