Fragmentation and maritime industry : a theoretical framework

Abstract

In the last half-century we have observed dramatic growth in international trade, but equally dramatic changes have occurred in the nature of the world trade. Among recent trends in the world trade is the process of fragmentation characterized by geographical dispersion of the production activity. Such an environment creates a strong need for efficient coordination mechanisms connecting separate blocks of the fragmented production process where transportation is one of such mechanisms. This thesis focuses on transport sector and more specifically, maritime transport. The objective is to provide a theoretical framework aimed at determining how changes brought about by fragmentation affect shipping firms that serve transport needs of the fragmented industries. The problem is approached by identifying the key variables in the profit function of the shipping firm and describing central relationships between them. The first part presents the phenomenon of fragmentation in order to provide an overview over changing patterns of institutional organization and structural shifts in the nature of the world economic order. Then, requirements to transportation systems stemming from the needs of the fragmented chains of production are defined. The second part is devoted to transport economics. It introduces the main variables in the profit function of the shipping firms distinguishing between bulk and liner segments. The final part synthesizes preceding parts and studies the effect of fragmentation on the revenue and costs of the maritime companies.