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Vertical integration and its implications to port expansion

Author

Listed:
  • Shengda Zhu
  • Shiyuan Zheng
  • Ying-En Ge
  • Xiaowen Fu
  • Breno Sampaio
  • Changmin Jiang

Abstract

Over the years many shipping lines have established terminal operation companies, with some set up as independent firms. However, port authorities and local governments have not always welcomed external investment and control with open arms. The economic implications and each stakeholder’s best strategies remain unclear. This study develops an analytical model in order to study the effects of vertical integration, with a focus on shipping lines’ investment in ports’ capacity. Modelling results suggest that vertical integration between terminal operator and a shipping line leads to higher port capacity, port charge, market output and consumer surplus. It also reduces delay costs. All these results suggest that vertical integration can be an important source of synergy for the maritime industry. Although vertical integration increases the participating carrier’s output at the expenses of non-integrating rival shipping firms, our numerical analysis suggests that the overall social welfare is likely to increase. Preliminary empirical tests confirm that vertically integrated ports handle more traffic volumes and are associated with better infrastructure and equipment. Therefore, port authorities and government regulators should carefully review the market competition status as well as port expansion plans.

Suggested Citation

  • Shengda Zhu & Shiyuan Zheng & Ying-En Ge & Xiaowen Fu & Breno Sampaio & Changmin Jiang, 2019. "Vertical integration and its implications to port expansion," Maritime Policy & Management, Taylor & Francis Journals, vol. 46(8), pages 920-938, November.
    • Handle: RePEc:taf:marpmg:v:46:y:2019:i:8:p:920-938
    DOI: 10.1080/03088839.2019.1594426
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    Citations

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    Cited by:

    1. Xu, Lili & Lee, Sang-Ho, 2021. "Port integration and competition under public and private ownership," MPRA Paper 106127, University Library of Munich, Germany.
    2. Marco Ferretti & Ugo Fiore & Francesca Perla & Marcello Risitano & Salvatore Scognamiglio, 2022. "Deep Learning Forecasting for Supporting Terminal Operators in Port Business Development," Future Internet, MDPI, vol. 14(8), pages 1-19, July.
    3. Xu, Lili & Lee, Sang-Ho, 2024. "Port supply chain integration under mixed ownership," Transport Policy, Elsevier, vol. 146(C), pages 371-385.
    4. Zheng, Shiyuan & Luo, Meifeng, 2021. "Competition or cooperation? Ports’ strategies and welfare analysis facing shipping alliances," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 153(C).
    5. Zheng, Shiyuan & Fu, Xiaowen & Wang, Kun & Li, Hongchang, 2021. "Seaport adaptation to climate change disasters: Subsidy policy vs. adaptation sharing under minimum requirement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    6. Zheng, Shiyuan & Ge, Ying-En & Fu, Xiaowen & (Marco) Nie, Yu & Xie, Chi, 2020. "Demand information sharing in port concession arrangements," Transportation Research Part B: Methodological, Elsevier, vol. 138(C), pages 118-143.
    7. Min Wang & Yu Lan & Huayu Li & Xiaodong Jing & Sitong Lu & Kexin Deng, 2024. "Spatial–Temporal Differentiation and Trend Prediction of Coupling Coordination Degree of Port Environmental Efficiency and Urban Economy: A Case Study of the Yangtze River Delta," Land, MDPI, vol. 13(3), pages 1-19, March.
    8. Zhu, Shengda & Fu, Xiaowen & Bell, Michael G.H., 2021. "Container shipping line port choice patterns in East Asia the effects of port affiliation and spatial dependence," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 156(C).
    9. Zheng, Shiyuan & Jiang, Changmin & Fu, Xiaowen, 2021. "Investment competition on dedicated terminals under demand ambiguity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 150(C).
    10. Zheng, Shiyuan & Wang, Kun & Fu, Xiaowen & Zhang, Anming & Ge, Ying-En, 2022. "The effects of information publicity and government subsidy on port climate change adaptation: Strategy and social welfare analysis," Transportation Research Part B: Methodological, Elsevier, vol. 166(C), pages 284-312.
    11. Daniele Crotti & Claudio Ferrari & Alessio Tei, 2022. "Understanding the impact of demand shocks on the container port industry," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(4), pages 778-805, December.
    12. Dongping Song, 2021. "A Literature Review, Container Shipping Supply Chain: Planning Problems and Research Opportunities," Logistics, MDPI, vol. 5(2), pages 1-26, June.
    13. Guo, Liquan & Ng, Adolf K.Y. & Jiang, Changmin & Long, Jiancheng, 2021. "Stepwise capacity integration in port cluster under uncertainty and congestion," Transport Policy, Elsevier, vol. 112(C), pages 94-113.
    14. Xiaomeng Zhang & Qilan Zhao & Jianjun Zhang & Xiongping Yue, 2023. "Logistics Service Supply Chain Vertical Integration Decisions under Service Efficiency Competition," Sustainability, MDPI, vol. 15(5), pages 1-23, February.
    15. Eleftherios Sdoukopoulos & Maria Boile, 2021. "Strengthening the Collaborative Environment in Port-Hinterland Corridor Management Initiatives: A Value System Approach," Sustainability, MDPI, vol. 13(16), pages 1-18, August.
    16. Wang, Jian & Zhu, Wenbo, 2023. "Analyzing the development of competition and cooperation among ocean carriers considering the impact of carbon tax policy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).

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