Modelling inter-firm competitive rivalry in a port logistics cluster: a case study of Melbourne, Australia

• DOI: https://doi.org/10.1108/IJLM-01-2021-0053
• Published date: 10 January 2022
• Date: 10 January 2022
• Pages: 455-476
• Subject Matter: Management science & operations,Logistics
• Author: Amanpreet Singh,Prem Chhetri,Rajiv Padhye

Modelling inter-firm competitive

rivalry in a port logistics cluster:

acasestudyofMelbourne,Australia

Amanpreet Singh

College of Vocational Education, RMIT University, Melbourne, Australia

Prem Chhetri

School of Business IT and Logistics, RMIT University, Melbourne, Australia, and

Rajiv Padhye

School of Fashion and Textiles, RMIT University, Melbourne, Australia

Abstract

Purpose –The paper models the effect of spatial clustering on various dimensions of inter-firm competitive

rivalry among port logistics firms using Porter’s five forces model.

Design/methodology/approach –A survey-based quantitative approach is adopted to collect data from

logistics firms, which are directly or indirectly dependent on the Port of Melbourne in Australia. A structural

equation modelling (SEM) technique is used to examine the theorised relationships between various

dimensions of inter-firm competitive rivalry and the tendency of spatial clustering of logistics firms in the

vicinity of Port of Melbourne.

Findings –The results indicate that the inter-firm competitive rivalry increases significantly when logistics

firms are spatially clustered. This effect is further augmented when they cluster around the port. Co-location of

firms near the port tends to increase “bargaining power of buyers”, whilst indirectly affecting “competitive

rivalry”via “threats of substitutes”. This indicates that co-location enhances the bargaining power of buyers

through the greater availability of substitute services that in turn promotes competitive rivalry among firms.

However, co-location has an insignificant effect on “barriers to entry”and “bargaining power of suppliers”. Low

entry barrier thus favours high competitive rivalry among firms. Hence, this paper validates the Porter’s

cluster and five forces models that confirm the positive effect of port logistics clusters (PLCs) on bargaining

power of buyers and indirect effect on competitive rivalry partially mediated through threats of substitutes.

Practical implications –This study provides empirically grounded evidence for firms to evaluate

co-location decision choices and help buyers and sellers to devise business strategies to enhance inter-firm

competitive rivalry and bargaining power.

Originality/value –This is the first systematic attempt to empirically validate Porter’s five forces model in

the context of PLC. Furthermore, the conceptualisation of PLC concept both as spatial and functional

constructs (i.e. dependency on port) is novel. This study thus has broadened the meaning of cluster from a

geographic entity to a more useful functional construct to reflect inter-firm dependencies.

Keywords Logistics cluster, Competition, Agglomeration, Inter-firm network, Port centric logistics

Paper type Research paper

1. Introduction

Port logistics clusters (PLCs) are increasingly becoming global, strategically inter-connected and

functionally nodal to seamlessly integrate geographically fragmented supply chains. Logistics

clusters are spatial agglomerations of interconnected and interdependent logistics firms that

collaborate and compete within the globalised marketplace (Sheffi, 2013;Singh, 2020). The

advent of globalisation and the concomitant geographic dispersion of production activities has

enabled logistics firms to relocate closer to key intermodal hubs and growth centres to gain

location-b ased benefits along major t rade routes (Pettit and Beresford, 2009).

The effect of

spatial

clustering

455

This paper forms part of a special section “Resilient supply chains through innovative logistics

management”, guest edited by Peggy S. Chen and Jiangang Fei.

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

https://www.emerald.com/insight/0957-4093.htm

Received 27 January 2021

Revised 2 August 2021

26 October 2021

Accepted 10 December 2021

The International Journal of

Logistics Management

Vol. 33 No. 2, 2022

pp. 455-476

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-01-2021-0053

The growingimportance of PLC is attributed to theirgeostrategic locations to helpenhance

operational efficiency and resource utilisation (Rodrigue et al.,2016). Maritime clusters in

Rotterdam, Dubai, Singapore and Shanghai; logistics clusters in Memphis, Antwerp and

Zaragoza; and industrial clusters inHollywood, Northern Italy, California and Manhattanare

widely known production or service clusters of global significance. This phenomenon of

geographic clustering of firms is explained by the classical theories, such as economies of

agglomeration (Marshal, 1890), the localisation of economies through to industrial complexes

(Isard,1975) and innovation milieu(Maillat et al., 1993). Morerecently, Porter (2000) arguesthat

the success of an industry cluster lies in the broader context of competition and competitive

strategy in a globalised economy. Although globalisation has contributed to geographic

dispersionof the production network, nonetheless,the location is still one of the key driversof

inter-firm competitive rivalry.

Inter-firm competitive rivalry is a local phenomenon where geographical distance has a

greater influence on market dynamics and firm behaviour. Co-location of logistics firms within a

cluster is more likely to enable better and efficient utilisation of resources through increased

inter-firm competitive rivalry (Sheffi, 2013;Chhetriet al., 2014;Singh et al., 2016). Co-located firms

will have a better opportunity through observability and availability to compare cost

effectiveness within a clustered ecosystem. Through observability, firms will be much more

noticeable due to closer spatial proximity. Information and resources may also become readily

accessible and available for firms in a business cluster when compared to an isolated location.

Further, inter-firm competitive rivalry within a cluster may also create internal downward

pressure on firms to reduce cost through improved resource utilisation. In addition, closer spatial

proximity of firms provides conducive business conditions for frequent interaction s and closer

monitoring through collaborative work practices, relationship building between suppliers and

buyersand building trust(Tallman et al., 2004). This symbiotic busin essenv ironmentfacilitates

firms to collaborate and share resources to expand the market and improve operational

efficiency (e.g. full-truck load).

The spatial dispersion of production activities due to higher production cost, trade

liberalisation and the broader effects of globalisation has resulted in a greater spatial

concentration of logistics activities in strategic locations in Australia. This sp atial clustering of

logistics services creates operational efficiency by seamlessly connecting the local market with

global production networks (Chhetri et al., 2014). Sheffi (2013) identified thisbehaviour whenthe

firms work within geographic proximity and near to the major transport hubs, such as ports,

airports, major rail or road networks (Sheffi, 2013). This spatial arrangement may lead to

operational efficiencies, innovation opportunities and higher productivity that are driven by

high inter-firm competition and collaboration (Sheffi, 2013;Chhetriet al., 2014;Rivera et al., 2014;

Singh et al.,2016).How ever, there is scant evidence that empirically supports this argument in

the context of the port.

Spatial clustering of firms promotes the coexistence of both inter-firm competitive rivalry

and collaboration (Porter, 1998). Co-location enables firms to be more competitive in an

environment created by intense inter-firm rivalry and collaborative practices. Although there

is an assumption that localisation stimulates both inter-firm collaboration and competition,

yet, most studies have paid attention to collaboration benefits, such as offering value-added

services, career mobility, trust-building and sharing of resources and information (S€

olvell

et al., 2003;Li and Geng, 2012;Sheffi, 2013;Rivera Virg€

uez, 2014;Rivera et al., 2014), whilst the

probing of competitive rivalry is largely neglected until recent years.

Hence, this study aims to examine whether port logistics firms exhibit higher inter-firm

competitive rivalry when clustered within the geographic proximity of port than those that

are located away from the port. The geographic proximity of the firms to the port in this study

refers to the spatial co-location of firm’s operation near or at a distance from the port. To

accomplish this aim, the following two key questions are set out in this study:

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