Ultimate eng pa hybrid org

RTBM-00108; No of Pages 11 Research in Transportation Business & Management xxx (2013) xxx–xxx

Contents lists available at SciVerse ScienceDirect

Research in Transportation Business & Management

Strategy making by hybrid organizations: The case of the port authority Larissa van der Lugt a,⁎, Michaël Dooms b, Francesco Parola c a b c

Department of Regional, Transport and Port Economics, Erasmus University Rotterdam, Rotterdam, The Netherlands Department of Business, Unit Management and Strategy, Vrije Universiteit Brussel, Belgium Department of Business Studies, University of Naples “Parthenope”, Naples, Italy

a r t i c l e

i n f o

Article history: Received 30 November 2012 Received in revised form 6 June 2013 Accepted 22 June 2013 Available online xxxx Keywords: Port authority Strategy research Hybrid organization Shared value

a b s t r a c t Due to dynamic competition, the gain of autonomy through port devolution and the resulting evolution towards accountability in diverse fields of performance, port authorities (PAs) evolve from landlords that are strongly embedded in the public domain to more autonomous acting organizations with stronger requirements for ‘business like’ performance.

This evolution implies a stronger need for proper strategic analysis and subsequent strategy formulation, evaluation and implementation. Based on the main current strategic challenges that PAs face, we define and position the PA as an organization combining both public and private values and analyze the validity of the lenses of different theoretical perspectives from strategy and public management research for its strategic analysis.

We argue that the strategic challenges' PAs face in their current operating environment, also reflect the evolution in strategic management thinking, whereby more actor-related attributes are added to the various research frameworks, loosening the traditional strict conditions of profit maximization, rationality and transparency and whereby more integrated concepts like co-evolution and network theory gain importance.

We also conclude that PAs as shared value organizations are interesting domains for academic research based in the strategy domain, as to strengthen the analytical base that is available for research into the strategy of organizations. © 2013 Elsevier Ltd. All rights reserved.

1. Introduction Over the last decades, the strategic view/perspective of the port authority (PA) has been approached from different analytical lenses.

In fact, management discipline areas such as strategic management, human resources management (HRM), environmental management and information and knowledge management appeared in the picture of port research, having an important influence on theory transfer and application (Woo, Pettit, Kwak, & Beresford, 2011). There seemingly is an increasing need to apply theories, concepts and research models used in business and management related disciplines to capture the more complicated and behavioral aspects of PAs such as collaboration, integration, internationalization, network management and cluster management. PAs are the entities that have the responsibility for the development and management of seaports. Over the last two to three decades PAs have undergone a reform from rather task oriented organizations to more autonomous and commercially acting organizations (Brooks & Cullinane, 2007; Debrie, Lavaud-Letilleul, & Parola, 2013; Ng & Pallis, 2010). ⁎ Corresponding author at: Erasmus University Rotterdam, Department of Regional, Transport and Port Economics, 3000 DR Rotterdam, The Netherlands. Tel.: +31 104081410.

E-mail address: vanderlugt@ese.eur.nl (L. van der Lugt).

PAs are increasingly accountable for their performance both from the economic, financial and societal perspective (Verhoeven, 2010).

Combined with changes in the port's environment, such as increased competition, changing customers' requirements and environmental pressures, this reform has forced the PAs to reconsider their role and position and to develop strategies for their futures. PAs are facing strategic decisions on investments within their port areas, within their foreland and hinterland and on their strategic positioning and acting towards the private companies located in the port. As a result, strategic thinking has gained a stronger foothold within PA management. This evolution is demonstrated by a quick scan of the annual reports from 2000 to 2011 from a major PA in Europe, Port of Rotterdam NV. Assuming that corporate communication reflects firm behavior (Cahoon, 2007; Pando, Araujo, & Maqueda, 2005; Parola, Satta, Penco, & Profumo, 2013), the number of times that the words “strategy” and “strategic” are explicitly mentioned between 2000 and 2011 has increased substantially over this period. It starts from zero in 2000 and increases sharply after 2008 up to around 40 times for each of the two words in the annual report of 2011.

Although there have been quite some studies discussing the strategies of PAs (Baltazar & Brooks, 2007; Bichou and Gray, 2005; Chlomoudis & Pallis, 2004; Comtois & Slack, 2003; Cullinan and Song, 2002; De Langen, 2004, 2008; Goss, 1990; Haugstetter & Cahoon, 2010; Heaver, Meersman, & Van de Voorde, 2001;

2210-5395/$ – see front matter © 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.rtbm.2013.06.005

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

2

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

Notteboom, 2007a; Notteboom & Rodrigue, 2005; Notteboom & Winkelmans, 2001; Verhoeven, 2010; Wang and Slack, 2004), a strong analytical base supporting the significance of strategic management for PAs is still lacking. Within existing research on PA strategy, mainly descriptive research has been executed, discussing and analyzing the functions of a PA and the dynamic nature thereof. More specifically, recent literature shows the increasing importance of new PA functions, such as the role of community or cluster managers, on top of traditional functions such as infrastructure manager (also referred to as the landlord function), regulator and operator (De Langen, 2004; Verhoeven, 2010). Furthermore, besides the enlargement of the scope of activities, the geographic space within which these activities take place is also extended from the local level (the port area) to the regional and even the global level (as evidenced by e.g., PAs like Rotterdam and Antwerp taking financial participations in inland platforms in their hinterland or investing in port projects in emerging economies). These insights have led to the development of a so-called ‘renaissance matrix’, linking the four functions of the PA with the different geographical perspectives (Verhoeven, 2010). Starting from this matrix, three archetypes of strategic responses, i.e. conservator, facilitator and entrepreneur are put forward to provide answers to the increasingly complex situation faced by PAs. Whereas the conservator response entails a rather passive and mechanistic response limited to the local dimension, the entrepreneur engages in risk taking activities in an enlarged geographic scope, with the facilitator adopting a matchmaking/mediator stance engaging in so-called ‘strategic relationships’ with stakeholders within and beyond the perimeter of the area it controls as a landlord (Verhoeven, 2010). The combination of the new functions such as cluster or community manager, combined with an enlarged geographic area of activity, and the existence of strategic response alternatives vis-à-vis this new situation, suggests that the strategic management and strategy perspective of PAs require more attention from the research community.

The research discipline strategy and organization have seen a strong development over the last three decades. Valuable concepts that explain the various domains of strategy have been developed and operationalized. But this has primarily been focused at the private-for-profit firms. Their general applicability to the case of the PA is an interesting but not yet answered question: PAs are organizations with both public and private characteristics (Verhoeven, 2010; Chlomoudis, Karalis, & Pallis, 2003; Koppell, 2003), as such representing a growing segment of organizations in between public and private (Porter & Kramer, 2011; Boston et al., 1996). Liberalization and commercialization programs in many countries, but also the growing attention for corporate social responsibility within many firms, have blurred the classic distinction between the public and private domain. On one hand, conventional public organizations, e.g. in public services sectors as education, health care and water management, increasingly combine a market orientation with their traditional task orientation (Box, 1999). These former non-profit organizations continue to seek ways to adapt their existing business models to generate more financial revenue to be less dependent on governmental funding (Billis, 2010). As a result, a reorientation of functioning and financing has taken place, in turn asking for supporting strategic analyses (Lelewellyn & Tappin, 2003; Newman & Clarke, 1994; Joldersma & Winter, 2010). On the other hand, traditional for-profit organizations increasingly incorporate public values within their mission and strategic vision formation. It is argued that societal needs, not just conventional economic needs define markets (see Porter & Kramer, 2011, on the concept of shared value).

These fundamental changes at the organization level impact both managers as academics. It will require leaders and managers to develop new skills and knowledge—such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries. Also, governments must learn how to regulate in ways

that enable shared value rather than work against it (Porter & Kramer, 2011). From an academic perspective this calls for a deeper inquiry into the precise nature of organizations and a reconsideration of its analytical concepts used for explanation.

This research on the strategy analysis of PAs is positioned at the intersection of society and corporate performance. From an institutional point of view, it characterizes the PA organization along key aspects for the public–private distinction of organizations. It assesses the validity of theoretical lenses already available through general strategy research for analyzing PA strategies. The research addresses mainly a conceptual goal, by adding to the conceptual debate on the usefulness of theoretical notions primarily developed for the private domain once considering an organization having both public as private characteristics and combining both societal and economic objectives and values. It results in a set of interesting research questions related to the application of existing theoretical concepts in the light of a changed perspective on organizations and their strategies.

The research is based on a review of descriptive literature on PA organizational and managerial characteristics, descriptive literature on PA mainstream strategic avenues, literature from strategy research and on analytical literature on PA strategy making.

The paper will first, in Section 2, characterize the PA as an organization, differing both from private sector companies as from pure public companies. Section 3 gives an overview of the main actual strategic issues for PAs. Section 4 assesses the main relevant concepts from strategy research and their applicability to the case of the PA. Section 5 discusses the managerial relevance for the PA and the avenues for future research, before concluding.

2. Similarities and differences between port authorities and private sector companies 2.1. The public and private distinction There have been different contributions to the debate on the public and private distinction, based on different conceptual views. From a property rights perspective (see Demsetz, 1967), ownership structure is traditionally seen as a major conceptual ‘divide’ between public and private (Bozeman & Bretschneider, 1994; Perry & Rainey, 1988). Public organizations are owned by the government whereas private organizations are owned by private entities, or listed at a stock exchange. But ownership as such is not always a clear distinctive factor. Corporatised former public organizations might act in a private oriented way with commercial targets, but are still owned by the government (f.e. corporatized, formerly railway undertakings like NS in The Netherlands and Deutsche Bahn in Germany).

Perry and Rainey (1988) applied a dimensional perspective and developed a classifying model, with three dimensions with which organizations can be classified on their publicness: ownership, funding (governmental budgets and subsidies versus user charges) and mode of social control (via the market mechanism or by governmental control) (see also Brandsen & Karre, 2011). The resulting taxonomy comprises rather theoretical classes of organizations ranging between public and private. More detailed contributions (Allison, 1979; Benn & Gaus, 1983; Boyne, 2002; Froehlich, 2012; Wamsley & Zald, 1973; Rainey & Hall, 1996) have brought up other aspects including concrete measures for determining the public or private nature of organizations.

In this research, we combine the different perspectives on the public–private distinction into a set of main aspects and related measures, useful for a detailed characterization of an organization in between public and private. The aspects that we, in addition to ownership, funding and mode of social control, derive from literature are goals/interests, environment, decision processes and structures,

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

managerial values, and performance measurement. Goals and interests relate to the mission or overall strategic goal of the organization. For private organizations the main strategic goal has an individual ground and bases in profit, market performance and survival. For public organizations goals are communal, are often less clearly specified, or a multitude of goals co-exist (Boyne, 2002; Dart, 2005; Wamsley & Zald, 1973; Brandsen & Karré, 2011). Public and private organizations face different environments. Specific to more publicly oriented organizations is a higher level of complexity as many different interests have to be taken into account. Public organizations have less freedom to act as they are restricted by political will and strict guidelines on responsibilities and mandates. Financial autonomy is restricted for public organizations by budgeting procedures decided by the governments they report to (local, regional or national). Public organizations often have no or less access to private capital. Private companies have financial freedom, to the extent that they can obtain finances from banks or the financial markets and are profitable (Froehlich, 2012). Decision processes and structures are another factor relevant to the public private distinction. It relates to the decisional autonomy of executives within an organization both related to the own organizational structure and to the interrelationship of the organization with external stakeholders (Donaldson & Preston, 1995; Freeman, 1984; Friedman & Miles, 2006). In general, decision processes in public organizations are subject to public scrutiny (Brignan & Modell, 2000). In addition, there is a strong interrelationship with other (semi)public or private organizations as public organizations in many cases are there to serve the interest of these companies and/or civilians, even by developing lobby activities (see Comtois and Slack (2003) and Verhoeven (2010) advocating this role of PAs). This interrelationship, whereby companies and civilians have the ability to influence the decision making process, via lobbying and via the political process, often negatively influences the efficiency and effectiveness of the decision making process, and even the assessment of the competitive advantages of the port. The long time spans between initial plans and effective implementation of port expansion projects, characterized by delaying interactions between port management and the civil environment, illustrate this problem (f.e. it took about 30 years from initial plan to final implementation for the large port expansion in Rotterdam). Managerial values concern the level of commitment to the organization; to its goals and to the conditions for operating.

The values of managers in private organizations are mainly driven by career prospects, income levels and business survival: i.e. the goals of continuation of existence, and profit maximization (Rojas, 2000). Within public organizations the more ‘commercial’ values are in general less developed (Froehlich, 2012). Levels of commitment can differ with the political level of the organization. While the driver for persons to join a non-profit is often a societal, sometimes even philantrophical one (Rojas, 2000), resulting in high levels of commitment, in highly political non-profits that are subject to elections and as a result continuously changing managements, commitment might be less and personal drivers more career and status driven. Performance measurement is executed differently by public organizations compared to private firms as it relates strongly to its goals. Public organizations do have performance measurements related to their public tasks but these are merely focused at registering and disclosing what have been achieved (Brignan & Modell, 2000).

They often lack more business oriented performance measurements such as customer satisfaction and operational efficiency, with the ultimate aim to improve the organization and its performance (Kaplan, 2001).

3

2001). Under the so-called landlord model that is common to most ports in western economies (except for the UK where most ports are completely privatized), the PA is, besides a regulator for port tariffs, concessions, spatial planning and the environment, as an operator responsible for the nautical access, the management and development of the land area and the basic infrastructure (World Bank, 2007). The private sector is responsible for all port operations and services.1 The PA can be further defined institutionally, along the more specific aspects of institutional characterization, as derived in Section 2.1.

2.2.1. Ownership (and type of legal entity) In contrast to private firms, PAs in general are publicly owned except for the ports in the UK (where the pure PA does not exist and PA functions are transferred to the private sector) and some other exceptions worldwide, e.g., in New Zealand and Australia. There are different models, implying different levels of autonomy (see for an overview with examples, Verhoeven (2006)). PAs can be part of a municipal, regional or national government department or can be autonomous bodies under the control of the government. Corporatized PAs (examples are in The Netherlands, Belgium, New Zealand, Australia, USA) act like limited liability companies, have executive autonomy with a need to return to their public or private shareholders (The Port of Rotterdam in The Netherlands is a concrete example; see Ng & Pallis, 2010). These shareholders are in most cases local, regional or national governments. The main distinction resulting from the various public ownership models is the level of autonomy in decision-making, the incentives PAs are subject to and the financial possibilities PAs have.

2.2.2. Funding/value capture PAs are partly privately funded. Their revenue drivers are port dues paid by shipping lines, and concession fees and land rent paid by private port companies. These concession fees and land rents are agreed upon with the port companies in long term contracts (20 to 50 years is quite common), restricting the possibilities for flexible value capturing strategies (Notteboom, 2007b). In many cases, investments in infrastructure are partly or completely financed by local, regional or supranational governments, sometimes in a public–private-partnership, sometimes using commercial loans to be covered by the PA's cash flow (De Langen, Van Den Berg, & Willeumier, 2012). Here, an important distinction is to be made between corporatized PAs, which directly collect funds from private operators and that show a degree of financial autonomy, and non-corporatized entities mostly receiving funds based on transfers from local of central government with less financial autonomy as a result (World Bank, 2007).

2.2.3. Social control Where social control for private firms is enforced through the market mechanism, PAs, across the different ownership and institutional models, are in a varying way subject to social control with involvement of a governing body (Baltazar & Brooks, 2007). The corporatized PA of Rotterdam, for example, has to account for its performance towards a Board of Commissioners (with private background) and also towards representatives of its public shareholders in the annual shareholders meeting (Notteboom, Pallis, & Farrell, 2012). Both control groups will safeguard the achievement of the both public and private goals. A PA like Antwerp has to account for its performance towards a Board of Commissioners mainly consisting of elected members of the

2.2. Characterizing the port authority on the public–private dimension The PA is the organization that is responsible for a safe, sustainable and competitive development of the port (Chlomoudis & Pallis, 2004; De Langen, 2004, 2008; Notteboom & Winkelmans,

1 This refers to the theoretical model of the landlord port, which is common to most ports. However, in practice, mixed models exist with more or less influence of the PA in operations and service and on the other hand also private involvement in the port's nautical access or infrastructure operations.

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

4

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

Antwerp Municipality. Also, its major strategic decisions are subject to approval of this Board of locally elected politicians. In Spain, Ports of General Interest are coordinated and partly controlled by a national government body, Puertos del Estado. Privately owned PAs are merely socially controlled via the market (examples in UK and recently in Australia). In other contexts, such as Italian ports, the Port Committee, which is the body entitled of taking most relevant executive decisions, plays a hybrid role as it also acts as moderator of public–private conflicts.

2.2.4. Goals/interests PAs have goals related to the common (public) interest and also to their own individual organization. A major strategic objective, i.e. expressed by a multitude of PAs at their websites or in their annual reports, is to “develop a competitive and sustainable port that contributes to regional economic growth” (Verhoeven, 2010). Increasingly, PAs also address organization-centered goals such as financial self-sustainability (see annual reports 2010 of Tauranga, Port of Vancouver, Port of Halifax, Port of Charleston, Port of Sydney). Though different in character, these two objectives of the PA are interrelated (Notteboom & Rodrigue, 2005). A competitive and sustainable developing port results in more revenue for the PA also complying with their organization-level goals. However, the objectives might also cause conflicts of interest. Investments made for the improvement of the port that cannot be earned back in the short term, might negatively influence the financial result of the PA. Investments made for the purpose of generating more revenue for the own organization might not lead to an optimal contribution to the performance of the port as a whole (e.g., potential opportunity costs of international activities, such as the current trend towards overseas port management and investment). The duality in the nature of the PA's objectives results in a higher complexity and higher level of vagueness in their strategic setting than for private firms.

2.2.5. Environment/mandates PAs, public or private, operate in a strong institutional environment, substantially influenced by the government (Ng & Pallis, 2010; Rodrigues, Child, & Tse, 2012). There is strong institutional pressure.

Their strategic freedom is often limited by governmental acts that determine goals, jurisdiction, and financial possibilities. The level of stability depends on the autonomy of the PA related to the local and/or national government. Indeed, PAs with more financial and legal autonomy can potentially count on a higher level of stability, less subject to political changes and interference (Verhoeven, 2010). Ng and Pallis (2010) point in this respect at the political culture of a country, e.g. an interventionist state political culture versus a business-oriented culture, as an underestimated environmental factor that could affect governance reform processes (Debrie et al., 2013). From a financial perspective, PAs are also restricted, depending on their institutional structure. Corporatized PAs might be able to enter the financial markets to attract capital whereas PAs that depend solely on local or national governments for their investment funding might be faced with restrictions: these governments have to fit the financial expenditure on the creation of port assets into their overall budgets, as well as fit into the general government budget, which in times of economic slowdown is under pressure. Here, the ‘license to operate’ of the port and PA comes into play, as in fine these governments have to account for their budgets to their voters, the financial markets and in some cases even supranational entities such as the IMF or the European Commission.2

2 In 2012 the European Court of Auditors issued a report on the use of EU subsidies by ports (ECA, 2012, Using structural and Cohesion Funds to co-finance transport infrastructures in seaports: an effective investment?, Special report, nr.4).

2.2.6. Decision processes and structures The decision processes of PAs in general are more likely to be influenced by forces outside the organization, as compared to private firms. First, decision processes are continuously influenced by the institutional environment, depending on the level of autonomy the PA has (Ng & Pallis, 2010). PAs are subject to public scrutiny, by a variety of governmental institutes or agencies. In designing their decisionmaking processes, especially for large infrastructure investment projects, they have to take this into account. The level of public scrutiny to which PAs are subject to, and the potential negative effects thereof such as red tape and administrative inefficiencies, differs very much among PAs. Second, the decision-making processes of PAs are bound to be influenced by private port companies. For their performance, PAs are very much dependent on the private companies located in or related to the port. PAs are rather facilitating or network organizations, restricted in their domain of direct influence. This also means that PAs, when making strategic choices, cannot neglect the positions and strategic actions of the private actors located in the port.

2.2.7. Managerial values/incentives PAs have only recently changed into more commercially driven organizations (mainly a development of the last 10 to 15 years). In their former public structure, they faced limited incentives to put substantial effort in strategic thinking for their own organization (Parola et al., 2013). Business plans were drawn up mainly for the purpose of gaining approval of the relevant governmental boards over their performance and for future investment plans. Real business plans for internal use with the aim to improve the organizations' position and performance and based on cash flow generation are in general of relative recent dates. As a consequence, ‘strategic thinking’, followed by the development of ‘business cases’, is a relatively new phenomenon within PAs. 2.2.8. Performance measurement The adoption of integrated performance measurement systems

by PAs, such as balanced scorecards, is relatively limited and nonstandardized, as opposed to private firms. PAs publish the annual financial results of their organization and in general throughput figures and modal split figures. At an individual basis, some PAs have developed specific KPIs for measuring their performance from various perspectives (see Bunbury Port Authority for an example).

Some PAs do customer satisfaction analysis at a regular basis (Port of Rotterdam NV is an example). However, methods within the different perspectives of PA performance are not standardized. Despite individual cases, performance measurement still has to become a systematic activity in individual PA organizations, not only from an operational viewpoint, but also from an economic and financial perspective (i.e. management accounting). In this regard, the landscape of the existing knowledge therefore appears very fragmented and heterogeneous.

Table 1 summarizes the derived characteristics for the public/ private distinction, the concrete indicators and the situation and trends as currently observed within PAs. PAs, in fact, operate as public–private ‘interfaces’. They synchronize the interest and action of all public institutions (central government, municipality, etc.) with the behavior and the strategic intent of private operators and, increasingly, their own strategic intent. On the one hand PAs, as task organizations, have to defend the public interest, by favoring the creation of employment, by generating revenues from the use of public assets (i.e. port land, breakwaters, superstructures, etc.), by reducing negative externalities, by attracting foreign direct investments, etc. At the same time, PAs are growingly called to be proactive and to take initiatives through a more marketoriented and managerial logic. In a few cases, PAs really act as

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

5

Table 1 Themes characterizing an organization between public and private.

Characteristic

Indicator

Trends within PA case

Ownership

Public/private share

In general public, in limited cases private, increased corporatization

Funding

Public/private resources

Privately funded through direct user charges, decreasing use of additional subsidies.

In some countries additional public funding through subsidies

Social control

Via political way Board of Commissioners (public/private) Market

Partly via market (port users, stakeholders, etc) Partly political, depending on institutional structure, public or private BoC

Goals/interests

Common/individual Equity/efficiency Level of Complexity and Vagueness

Both public as private goal, based on efficiency principle, relative high level of complexity/vagueness

Environment

Level of complexity Freedom to act Financial autonomy

Complex environment (global companies, civilians, political institutes), still limited but increasing freedom to act, still limited but increasing financial autonomy

Decision processes and structures

Level of autonomy within the organization and related to other organizations Subject of public scrutiny Level of bureaucracy

Multi-level and multi-actor decision making with organization, Profound public–private interaction and need of mediating conflicting interest groups, Strong interdependency with other companies, Subject to public scrutiny, decreasing level of bureaucracy

Managerial values

Level of organizational commitment Performance orientation

Growing organizational commitment (due to decreasing political influence), Growing managerial nature of decision processes, Initial resort to Business Process Re-engineering (BPR) for boosting efficiency, Growing market performance orientation

Performance measurement

Standardized/non-standardized

Limited standardized performance measurement, Initial adoption of forms/mechanisms of managerial control and performance measurement (ex-post)

Source: authors own elaboration on Allison, 1979; Benn & Gaus, 1983; Bower, 1983; Boyne, 2002; Perry & Rainey, 1988; Wamsley & Zald, 1973.

entrepreneurs and supply additional services within the port (real estate, operational services) or even in other ports (overseas port management, consultancy). In other words, a modern PA pursues both public and private goals and resembles the nature of a hybrid, shared value organization.

3. Port authorities' strategic challenges The strategic challenges of the PA are grounded within its two common strategic objectives of strengthening the port in a competitive and sustainable way and becoming a self-sustaining effective and efficient organization. These objectives can be structured along the three dimensions that are generally used for structuring an organizations strategic scope: functional, geographical and organizational (Collis & Montgomery, 1997). Verhoeven (2010) already applied a combination of a functional and geographical dimension to give a structured overview of potential activities of PAs within a set of PA typologies. The organizational dimension is added to address the economics organization issues of vertical integration and use of coordination mechanisms for cluster and network management related issues. Along the two strategic objectives and the three dimensions for organization's scope, four general strategic challenges of PAs are identified based on the assessment of available relevant literature, frequent discussions the researchers have had with the strategic departments of the major ports in The Netherlands, Belgium and Italy, and a broader search through a set of annual reports and strategic documents of PAs in other countries of Europe, in Australia, Canada and the USA. The first challenge, of internal nature, is related to business objectives for the PA organization: becoming a self sustaining and value generating organization. The reform of PAs from public organizations into more commercial, corporatized or sometimes privatized organizations has put a stronger pressure on the financial performance of the organization itself. Issued new Port Laws in Spain of which the last one was in 2011 (Sixteenth Supplementary Provision of Royal Decree 2/2011 of 5 September) state that Spanish Ports “of General Interests” need to be completely financially self-supporting. Ports

in The Netherlands are corporatized (Rotterdam, Flushing) or undergoing this process (Amsterdam), causing more emphasis on accountability. As a result, PAs managing these ports need to focus on their internal organization to be cost efficient and effective. They are stimulated to look for opportunities to increase cash flows, as they need to finance infrastructural expansion largely on proper funds, given the pressure on public finance and the move towards an almost full-fledged exit of governments when it comes to financing port basic infrastructure (in particular docks, quays, and the related landside infrastructure). Entering the market domain, sometimes even in an entrepreneurial way, also puts a pressure on the image of the organization. Corporate Social and Environmental Management and Corporate Governance gain stronger emphasis (e.g.

Dooms & Verbeke, 2007; Lam & Notteboom, 2012). Questions central to this strategic issue are: How to capture value from assets and investments? What additional activities can be developed that generate positive cash flows? How to develop internationally? How to gain and maintain as an organization the ‘license to operate’?

Where to collaborate?

The second strategic issue is related to the objective of strengthening the port and addresses the development of an efficient and effective port cluster. The port cluster is formed by all organizations engaging in port related activities and located in the relevant port region (De Langen, 2004). The port cluster acts in a highly competitive and rapidly changing environment. PAs aim to enhance cluster performance both in socio-economic (creation of sustainable added value and employment) and environmental terms (Dooms, Verbeke, & Haezendonck, 2013). Here, the principle is that the private port sector should be involved both in financial as in managerial terms as they are leading in the port operations. PAs can influence the performance of the port cluster in various ways. They can develop an active concession policy incorporating both economic as environmental requirements (Notteboom & Verhoeven, 2010). They can act as facilitators and as catalysts (Bichou & Gray, 2005; Notteboom & Winkelmans, 2001). They can develop activities through their role of cluster manager (De Langen, 2004), by organizing effective port marketing, market intelligence, innovation, (sustainable) hinterland access and

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

6

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

education through own investments, by initiating partnerships or introducing incentives.

The third strategic issue is the development and positioning of the port complex in the long term: to effectively manage the port land to achieve goals like efficient port lay-out, efficient and sustainable land utilization, innovative port development, and ‘license to operate’, e.g. the integration of the port in its civil environment. This development and positioning are a continuous process. The sectors or industries to which the clients of the port belong show dynamic development paths. From a life cycle approach, it can be argued that port related industries such as terminal operations, logistics, shipping, process industries will go through various development stages and will finally end or renew in a different form. The characteristics of these industries and therewith their requirements for port facilities will not remain the same (Ferrari, Parola, & Morchio, 2006). At the moment, there is little flexibility in land management due to standard fixed contracts with very long time horizons. How to create mechanisms that enhance efficient land utilization and innovative port development is a relevant question, receiving increasing attention, inter-alia in the field of terminal concessions (Notteboom et al., 2012). Another question relates to the quality levels of the facilities (assets) that are offered to users. A choice can be made between standardized facilities with a fixed chosen level of quality, or adapted facilities to actual and expected market requirements on quality. A shift from product orientation to market orientation is needed in this respect. At the same time the port has a place in its civil environment. Decisions on port development impact the local and regional contexts, both in socio-economic and environmental respect.

The fourth issue is how to act in the foreland and hinterland networks that are relevant for the port. Under the pressure of an increasing competition among ports (hinterland contestability, competition for attracting ship calls, FDI, etc.) and the increasing network perspective of private actors (above all shipping lines and more recently stevedores), PAs need to devote more attention taking strategic positions in transport networks for strengthening and defending their position.

How to optimize this network, how to make it sustainable, how to connect the port effectively to it and what role the PA has in that network, especially towards the other organizations, are major questions expressed by several PAs. Table 2 summarizes the contemporary strategic challenges of PAs and the observed actions and strategies developed.

Table 2 Overview of PA's strategic challenges and related strategic actions.

PA's strategic challenge

Appropriate actions/strategies

Reform (integration of corporate governance mechanisms and business objectives into the PA organization)

Corporate governance Value capturing from existing products/ services Product/service diversification International expansion Concession policy Facilitating and catalyzing role as cluster manager Environmental management/license to operate Effective port marketing, market intelligence, innovation, accessibility, education Concession policy (e.g. flexible and sustainable land use) Total quality management Shift from product to market orientation Port-city interface Communication strategy Network optimization (both economics as sustainability) Taking strategic positions in the hinterland (e.g. participations in inland platforms) International expansion?

Improve efficiency and effectiveness on the port cluster level

Guarantee long-term development through positioning of the port cluster

Develop the port network

4. Relevant concepts from strategy research and their applicability to PA's strategic challenges The preceding sections have discussed the strategic issues faced

by PAs, which relate to the question on the role and strategic scope of the PA. The analysis of the role and strategic scope of an organization provides the link to a major relevant stream from strategy research: the so-called ‘Theory of the Firm’. The main issues addressed by this research stream are “the direction and scope of an organization over the long-term, creating competitive advantage, allocating resources within the relevant environment, fulfilling markets' and stakeholders' needs” (Johnson, Scholes, & Whittington, 2008). The core concepts within this stream are transaction costs economics or TCE, a concept rooted in seminal work of Coase, 1937, but firmly established in later strategy research by Oliver Williamson (Williamson, 1971, 1981, 1986), the Resource Based View, (Amit & Shoemaker, 1993; Barney, 1991; Foss, 1997; Rumelt, 1984; Wernerfelt, 1984), and its related, rather evolution-based concept of dynamic capabilities (Eisenhardt & Martin, 2000; Teece & Pisano, 1994; Teece, Pisano, & Shuen, 1997) which are combined into the competence based perspective (Foss, 1996), the relational view of the firm (Dyer & Singh, 1998; Hakansson & Ford, 2002; Iansiti & Levien, 2004) and coevolution (Lewin & Volberda, 1999). The next sections provide short discussions of these concepts and, grounded in the underlying key actor's attributes and constructs, their applicability to the case of the PA. 4.1. Transaction cost economics (TCE) The contractual concept of TCE as developed by Williamson (1985, 1989) is a cornerstone of New Institutional Economics. Other concepts are property rights (Demsetz, 1967) and agency theory (Hart, 1995; Jensen & Meckling, 1976). The central concern of managers according to Institutional Economics is to identify actions that minimize costs of governance, thereby maximizing performance (Combs & Ketchen, 1999). The core argument of this theory is that transacting actors may show opportunistic behavior or bounded rationality, due to incomplete information, depending on the nature of the transaction or interaction. The analysis of the characteristics of the transaction, characteristics that impact the potential for opportunistic behavior and thus potentially raise transaction costs, guides the managements' decision on the governance mode: transaction via the market, vertical integration or some form in between such as contracts or incentives (Williamson, 1985). For PAs acting in complex transport networks, consisting of a multitude of nodes and links, under the control of different market actors, TCE seems to be of explaining value for the introduction of new governance mechanisms (van der Horst & De Langen, 2008). However, the operationalization of TCE needs a good understanding of the precise unit of analysis (which in standard TCE is the commercial transaction) and the key attributes of the unit of analysis, which can vary in function of explanatory purposes (Williamson, 2008) e.g., considering inter-terminal transport of containers between deep-sea terminals, needed for the formation of daily block trains into the hinterland, the unit of analysis is the operational coordination between different activities (vessel scheduling, terminal operations, train scheduling) and different actors (shippers, shipping lines, terminal operators, rail operators, rail infrastructure managers). Such a function is highly complex, needing high levels of operational coordination between different activities executed by a multitude of actors. The complexity in combination with the potential disturbances in the transactions, i.e. container volumes per terminal and per hinterland destination vary in time, might cause operational coordination costs to increase beyond acceptable levels for the actors involved, requiring additional coordination mechanisms. As a consequence, PA's facing strategic challenges in strengthening intermodal hinterland transport networks have an incentive to reduce such transaction costs while increasing transactional value. Taking into account the attributes of the operational transactions, i.e. complexity and

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

uncertainty, the PA can choose new governance mechanisms that go beyond leaving it to the market. Tentative options are enhanced contracting with the actors involved, introducing a new organization for executing the function at a neutral base or incorporating the function into the own organization. An illustrative example is the Port of Rotterdam where such discussions are taking place. Tentative potential outcomes, clearly changing the strategic scope of Port of Rotterdam, are establishing cooperative agreements between actors involved (including PoR) or the introduction of a subsidiary company of PoR for inter-terminal transport.

This example clearly shows that conceptually the applicability of TCE depends on the transaction principle taken (see Williamson, 2008, page 15), which in port linked transport networks are generally not ownership transfer of goods but goods based transport operations with mutual dependency. Therefore, operational coordination costs and risks rather than real transaction costs count (see Gulati & Singh, 1998). An interesting methodological question is how exactly coordination costs can be explained and estimated in the context of PA strategies.

4.2. Competence based perspective The Resource Based View (RBV) argues that top management makes strategic choices based on a firm's unique endowments of strategic resources. With their unique, valuable and hard to imitate resources or capabilities (Barney, 1991, 2002), firms try to exploit imperfections in factor markets and gain economic rents. The primary goal of the firm according to this concept is to create competitive advantage and gain economic rents, as well as the ability to create and identify the unique and valuable resources or capabilities to achieve this goal. Although recognized as a valuable construct within strategy research, the Resource Based View is difficult to operationalize. It requires detailed information on the variables of the construct, which is not readily available, such as: value (e.g., whether the resources provide competitive advantage), rareness (e.g. whether competitors possess it), imitability (e.g. whether it is costly for competitors to imitate) and organization (e.g., whether the firm is organized to exploit the resource) (Barney, 1991). The construct of the RBV as such is valuable for PAs. It can for instance be used for explaining the internationalization strategy that some PAs (Rotterdam, Antwerp) are currently developing. Over the years, PAs have invested in the development of assets and competencies that contribute to the performance of their port (Coeck, Notteboom, Verbeke, & Winkelmans, 1996). PAs in their basic role try to cover these investments with their two revenue drivers, land rent and port dues, generated by the port area and infrastructure they create and manage. Building an internationalization strategy on such developed resources and capabilities potentially expands their revenue base (Port of Rotterdam, annual report 2011), giving them a stronger financial position. To further operationalize the Resource Based View as an analytical concept for making strategic choices at the organizational level requires insight in the value and uniqueness of the resources and capabilities within PAs context. An interesting question here is how to define value in the context of the PA and to what extent this resembles the notion of value within the traditional private firm domain for which the concept was developed. Where, in this latter context, value is related to economic value and competitive advantage, in the PA context – resembling more hybrid forms of organization – value might also incorporate societal needs. Another aspect is that expanding outside the traditional domain (f.e. by internationalizing) requires additional funds. As most PAs are under public ownership, financial risks are finally taken by these public owners, which is not self-evident and not evenly accepted as in the private domain (e.g. discussions in the case of the internationalization strategy of Rotterdam which raises questions in the political field on the risks and opportunity costs of investing abroad). Thus within a more hybrid organizational domain the RBV might need not only reconsideration of the definition of the output value of its resources incorporating also social values, but also of its input value, incorporating also risks. Clearly,

7

applying the RBV perspective on the strategic scope analysis of PAs requires embedding the analysis in the institutional context of the PA. From a more evolutionary perspective, i.e. addressing the question what resources and capabilities sustain and deliver real competitive advantage over time, the concept of dynamic capabilities provides a valuable analytical approach. The evolutionary perspective on resources and capabilities (Pablo, Reay, Dewald, & Casebeer, 2007; Teece et al., 1997) roots in variation, selection and retention, meaning that competitive forces drive the successful exploitation of resources (and thus strategy content). Capabilities become dynamic as they are developed and renewed to succeed in the competitive exploitation of resources within a particular or changing environment. For a PA, this does not apply in the strict sense, i.e. that retention is achieved via a pure competitive process. PAs are subject to competitive pressure, but cannot be easily replaced nor could they change by themselves substantively the business they manage (i.e. deploy or transfer their resources and capabilities in another industry). Port users can choose for other ports, but this choice will be subject to other, perhaps stronger, factors than the performance of the PA. Within one single port there is usually no alternative to the PA. Thus the evolutionary development of resources and capabilities is rather a process of developing and keeping what seems to be successful as valuable resources and capabilities, requiring a stronger focus at the valuation of the organization's resources and capabilities.

4.3. Relational view/business ecosystems The relational view suggests that the offering will not be the product of a single firm but be a joint product developed by the alliance or value network. Dyer and Singh (1998) argue that a firm's critical resources may span firm boundaries and may be embedded in interfirm resources and routines. The relationship between firms is an increasingly important unit of analysis for understanding competitive advantage. From a strategy perspective, this same thought is developed by Iansiti and Levien (2004), by drawing a parallel with biological ecosystems, resulting in the so-called Business Ecosystems approach. Central in this concept is the idea that strategy increasingly becomes the art of managing assets that the one does not own. Firms can improve the performance of the business ecosystem as a whole and of the firms that belong to it. The overall goal of a business ecosystem is to sustain and prosper in the longer run. To achieve this Iansiti and Levien (2004) put three critical success factors forward. The first one is productivity, which holds for merely every business. Second is the robustness of the business network, which means survival if external or internal shocks occur that seriously threatens the system. This depends on the level of variety in value creating resources and the ability to change and adapt. The third critical success factor is the ability to create niches and opportunities for new firms, requiring a change of attitude from protectionist to cooperative. Strategies within business ecosystems depend on the position and control of strategic assets of the specific firm. Firms at hub positions can contribute positively to a healthy development of the business network. Iansiti and Levien (2004) define this as a keystone strategy. Keystones provide for platforms based on which other firms in the network can build, manage and improve their operations. Keystones can also support the connection of network participants to one another.

Port clusters can be considered as business networks in analogy with business ecosystems (van der Lugt, De Langen, & Hagdorn, 2007). Various definitions of ports (Bichou & Gray, 2005; De Langen, 2004; Notteboom & Winkelmans, 2002; Robinson, 2003) show that ports can be considered as business networks in which the individual companies strongly depend on the development of the system as a whole. Second, the strategies that are identified in the business ecosystems approach are clearly relevant for PAs. Landlord PAs do not influence port productivity self-handedly. Private companies provide the transport and logistics operations and supporting services. But, given their role as landlords, PAs are central to the ports business

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

8

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

network, providing essential assets such as port land, basic infrastructure and nautical access and having a crucial role in the spatial development of the port. Both from a public as from a commercial perspective, PAs have an incentive to create value for the ports business network and to build their business model on this principle. Strategic questions for PAs from the perspective on this conceptual lens are: How to positively influence productivity of the port complex? What is the impact of variety in the port complex and how can this be influenced by the PA? How to stimulate niche creation? A complex issue for PAs is value capture.

Any relational rents generated by inter-firm creation of competitive advantage will need to be shared between the participants of the alliance or network. In terms of business ecosystems this suggests that not only value creation is sought but also value capture. A crucial element in business ecosystems is the control over crucial assets. The main physical3 assets of a PA are its port land and nautical access. The potential for developing pricing strategies for both their nautical access as their land area is restricted by their institutional structure and also by the relative inflexible nature of concession contracts with long durations (Notteboom, 2007b). The impact of the institutional structure within the port complex on the strategy making of the PA from a relational perspective is an important question.

4.4. Co-evolution Co-evolutionary theory advanced the strategy research with the view that firms and environments co-evolve (Child, 2009; Lewin & Volberda, 1999). A co-evolutionary perspective focuses on the dynamic interaction of forces in an organization's environment and the manner and extent to which its leadership can respond to these forces. The co-evolutionary theory relates the environment to the internal organization by stating that the strategic renewal of an organization is a result of a co-evolutionary process of managerial intention and environmental selection (Volberda, 1996). From a network perspective co-evolutionary theory also throws light into the conditions of interdependence between actors. It offers the possibility of analyzing a given player as part of another's environment and thus to demonstrate how the players' interaction evolves over time and what are the implications of this evolution for their strategic reorientations.

Applied to the case of the PA two remarks concerning the actor's attributes can be given. In the first place PAs are appointed and to a limited extent subject to market forces: they cannot easily go bankrupt, stressing the underlying principle of selection and retention. Second PAs are strongly institutionally interrelated with the companies in the port, but in many cases in different ways (shareholding relationship, concessionaire, management contracts). As a consequence, the co-evolutionary process of the joint actors will not follow a fixed route, but will be influenced by the nature of and dynamics in the interrelationship. Illustration to this is the comparison of the interactive aspect of the hinterland strategies of PA and terminal operator in the two ports of Rotterdam and Barcelona. The two cases have shown very different development paths: Barcelona showing a rather convergent interaction process, and Rotterdam showing a more divergent interaction process, impacting informal relationships and trust levels (see van der Lugt, Rodrigues, & van den Berg, 2012).

5. Managerial relevance and further research avenues In Section 2, we have characterized the PA as an organization combining aspects from private and public institutions, as such representing a shared value organization (Porter & Kramer, 2011). Analyzing the potential applicability of concepts from strategy research to the case of the PA has learned that there is certainly value in applying such notions, but that there are a number of elements requiring careful consideration by

looking at PAs through the lenses of the various individual strategy research streams.

The actor-related attributes of the PA impact the applicability of the theoretical concepts from strategy research. These concepts certainly do enable a better understanding of the possibility and value of the strategies that PAs might develop in dealing with the main strategic issues they face. However, the applicability in most cases asks for a reconsideration of their premises. PAs explicitly combine broader societal with narrow focused economic goals. This alters the notion of value as for example applied in the RBV.4 The fact that PAs practically will not easily go bankrupt (corporatized Port of Rotterdam NV for example, has as shareholders the municipality and the state government, which will not easily accept a disappearance of the organization through bankruptcy) impacts theoretical concepts built on the premises of evolutionary processes, like dynamic capabilities and co-evolution. Selection and retention do not take place at the firm level, but rather at the level of the individual resources, competencies and routines of the PA.5 To analyze such strategies requires specific operationalization of performance metrics at a level below the firm level, which in its turn requires the development of performance data within PAs. The relatively high political influence, which many PAs are still facing, undermines their rational behavior, which is a core underlying premise of many concepts from strategy research. This asks for strong embeddedness of the particular strategic analysis in the institutional context (see Debrie et al., 2013; Ng & Pallis, 2010). In many countries, in fact, especially where the PA is a public entity, the chairman and the main executive positions are directly appointed by politicians. This strong ‘political bias’ often prevails on the technical knowledge and market experience, which should be required in the selection of PA directors.

Along this line, we have to recognize that PAs act in a strongly networked environment with strong interdependence between the PA and the private companies in the port. Neglecting this element in the analysis of the strategic challenges might provoke strategic decisions, leading to conflict situations that work counterproductive, e.g., a PA investing in inland links or inland terminals (Parola & Sciomachen, 2009) where private companies are already active, therewith influencing market positions. The recently formulated coevolutionary and network approaches are certainly valuable in such cases, especially when these concepts are combined with the more traditional strategic concepts in a multidisciplinary way, such as positioning, resources and capabilities, value chain approach and transaction costs economics. The limited value capturing possibilities of PAs impacts the applicability of the business ecosystems approach, e.g., as the case of the Port of Antwerp shows, the role of the PA in inland terminals is mainly restricted to the supply of human resources (knowhow) in the conception phase of new inland terminal projects (e.g. the Trilogiport project in Liège), or representation at the board level as a representative (e.g. the inland rail terminal of Athus), which might limit value capturing from these strategic actions in the long term. We also observe the importance of value capturing in the international strategies of PAs, where evidence from Antwerp and Rotterdam shows that traditional consulting activities to a broad array of ports are abandoned for more sophisticated arrangements in a limited number of ports, aimed at value capturing in the long term, through strengthening the home base (Dooms et al., in press). As such the ecosystems approach is quite valuable in understanding the logic of an expanded role of the PA in the port similar to the keystone role as defined in the concept. Pure landlord strategies might not result in a prospering ecosystem as PAs possess the critical assets that enables them to act as keystones and invest accordingly, e.g., in IT platforms or infrastructural platforms where other actors can operate—in a 4

This could also apply in TCE if transactional value is at stake.

For example, PoR invested together with the container terminal operator end 90's in inland terminal capacity in Czech and Slovak Republic. This did not bring benefits as expected, based on which at that time the inland investment activities were reduced.

5

3 Other assets are rather non-physical, like regulatory power, knowledge, market intelligence, human resources.

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

conditioned way. Applying the concept, however, requires a slightly different notion of value, not just related to income and revenues, but also related to more qualitative metrics related to the PA's diverse goals.

Based on our analysis, the different concepts from strategy research taken under the perspective of the PA, and the synthesis above, we can derive a set of interesting research questions for further research, both for academics as port managers.

First, what is the key transaction principle for PA's in their networks that guide decisions on new governance mechanisms, e.g. different contracts, establishing partnerships, vertical integration? Is it a buyer–seller transaction or rather an operational transaction without transfer of ownership (f.e. the transfer of a container from a terminal operator to a rail operator)? Second, how can transaction value be determined incorporating also social values? In the traditional domain transactional value is merely defined as economic value, neglecting societal values that can come with it. Taking a shared value perspective on firms' strategic goals might ask for incorporating also social values within the value analysis of transactions. Third, how can both input and output values of resources be determined in a hybrid organizational context? Within the RBV it is valuable resources that are the building blocks for strategy. If we loosen the premise that valuable relates to competitive advantage, but place value more in the context of a shared value organization how should resources then be valued? Fourth, what additional framework is needed to assure that only valuable competencies sustain over time while selection and retention processes are limited in the case of a PA? Fifth, how can the value attribute be further defined so it can be operationalized for the case of a shared value organization within a business ecosystems approach? A business ecosystem should not only be economically healthy but also from a societal and environmental perspective. What mechanisms can be developed to value social values in such a way that it counts for the performance of the organization, enabling sound business case approaches within the context of prospering a business ecosystem? Sixth, what impact has the specific institutional structure of the PA and its relationship with the port companies on the co-evolutionary process of the strategy of the PA and its environment?

From a managerial perspective, there are some key characteristics of PAs that need careful consideration while developing its strategic directions. PAs maintain in most cases a public ownership structure and possess a natural monopolistic position. Their reasons for existence lay in their homeport, where their main role is facilitating the private companies such that these companies can contribute most to a competitive and sustainable development of the port. Their strong interdependence with the private sector cannot be neglected in their strategy making.

Due to their administrative heritage, competencies needed for a more entrepreneurial behavior might not yet be developed to the full extent, potentially restricting entrepreneurial strategies. In light of the above an interesting and actual issue is the logic of PAs developing internationalization strategies. Do they have clear and understandable drivers for this and how does it fit their organizational and strategic characteristics, i.e. do they possess the right resources? And finally how do port managers formulate strategy? Do their managers think based on RBV, TCE, Business Ecosystems, Co-evolution, when designing strategies? Or does a clear gap exist between the managerial cognition of PA managers and the knowledge development in the academic domain? More qualitative, case-based research as well as quantitative research through surveys might provide answers to the above questions and further detail the thoughts about strategic management of PAs and port clusters.

6. Conclusion The aim of this paper is to better understand the PA as an organization that needs strategic thinking, and to explore the value of existing theoretical concepts from strategy research for its analysis. Although amongst them differing in institutional structure, PAs can be defined as value sharing organizations, combining both private and public

9

characteristics. PAs show public aspects like ownership and funding, but act in a competitive environment and are increasingly accountable for their performance, both from an economic and a societal perspective. As a result, they increasingly develop strategic intent. And as such, they are interesting research entities for the analysis into the usefulness of theoretical concepts that are developed for strategy analysis in the private towards the hybrid domain, e.g. in the context of the shared value concept as brought up by Porter and Kramer (2011).

Confronting the selected concepts with the strategic issues and the specific attributes of PAs has learned that using the lenses of strategy research perspectives certainly can help in understanding the strategic directions and positions that PAs choose (or neglect). It has also learned that the nature of the PA implies specific conditions or even a reconsideration of the key premises of the theoretical lenses.

We suggest that the strategic challenges PAs face in their current operating environment, also reflect the evolution in strategic management thinking, whereby more actor-related attributes are added to the various research frameworks. This evolution loosens the traditional strict conditions of profit maximization, rationality and transparency, whereby more integrated concepts like co-evolution and network theory gain importance. For the strategy research field in general, we can conclude that PAs as hybrid, shared value organizations are interesting domain for research, to further develop the concepts that are already in place for the private-for-profit firm and to strengthen the analytical base that is available for research into the strategy of organizations.

From a managerial PA perspective, we conclude that the specific nature of PAs conditions their strategy making, especially from the perspective of the more private, for-profit domain.

References Allison, G. (1979). Public and private management: Are they fundamentally alike in all unimportant respects? In J. Shafritz & A. Hyde (Eds.), Classics of public administration. Belmont: Wadsworth (1992).

Amit, R., & Shoemaker, P. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14, 33–46.

Baltazar, R., & Brooks, M. R. (2007). Port governance, devolution, and the matching framework: A configuration theory approach. In M. R. Brooks & K. Cullinane (Eds.), Devolution, port governance and port performance (pp. 379–403). London: Elsevier.

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.

Barney, J. B. (2002). Gaining and sustaining competitive advantage. Reading, MA: Addison-Wesley.

Benn, S. I., & Gaus, G. F. (1983). Public and private in social life. New York: St. Martin's Press.

Bichou, K., & Gray, R. (2005). A critical review of conventional terminology for classifying seaports. Transportation Research Part A: Policy and Practice, 39(1), 75–92.

Billis, D. (2010). Hybrid organizations and the third sector. Palgrave Macmillan.

Boston, J., Martin, J., Pallot, J., & Walsh, P. (1996). Public management, the New Zealand model. : Oxford University Press.

Box, R. (1999). Running government like a business: Implications for public administration theory and research. American Review of Public Administration, 29, 19–43.

Boyne, G. (2002). Public and private management: What's the difference? Journal of Management Studies, 39(1), 97–122.

Bozeman, B., & Bretschneider, S. (1994). The publicness puzzle in organization theory: A test of alternative explanations of differences between public and private organizations. Journal of Public Administration Research and Theory: J-PART, 4(2), 197–223.

Brandsen, T., & Karré, P. M. (2011). Hybrid organizations: No cause for concern? International Journal of Public Administration, 34, 827–836.

Brignan, S., & Modell, S. (2000). An institutional perspective on performance measurement and management in the ‘new public sector’. Management Accounting Research, 11, 281–306.

Brooks, M. R., & Cullinane, K. (2007). Governance models defined, in devolution, port governance and port performance. Research in Transportation Economics, 17, 405–436.

Cahoon, S. (2007). Marketing communications for seaports: A matter of survival and growth. Maritime Policy & Management, 34(2), 151–168.

Child, J. (2009). Context, comparison, and methodology in Chinese management research. Management and Organization Review, 5, 57–73.

Chlomoudis, C., Karalis, A., & Pallis, A. (2003). Port reorganisations and the worlds of production theory. European Journal of Transport and Infrastructure Research, 3(1), 77–94.

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

10

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx

Chlomoudis, C. I., & Pallis, A. A. (2004). Port governance and the smart port authority: Key issues for the reinforcement of quality services in European ports. Proceedings of the 10th World Conference on Transport Research, (CD-Rom), Istanbul, June 2004.

Coase, R. H. (1937). The nature of the firm. Economica, 4(16), 386–405.

Coeck, C., Notteboom, T., Verbeke, A., & Winkelmans, W. (1996). A resource-based perspective on strategic port planning. In Smitz, & Thues (Eds.), Proceedings of the 11th Harbour Congress, The Royal Flemish Society of Engineers, Antwerp, June 17–21 1996 (pp. 29–41).

Collis, D. J., & Montgomery, C. A. (1997). Corporate strategy: Resources & the scope of the firm. : McGrawhill.

Combs, J. G., & Ketchen, D. J. (1999). Explaining interfirm cooperation and performance: Toward a reconciliation of predictions from the resource-based view and organizational economics. Strategic Management Journal, 20(9), 867–888.

Comtois, C., & Slack, B. (2003). Innover l'autorité portuaire au 21e siècle: un nouvel agenda de gouvernance. Les Cahiers Scientifiques du Transport, 44, 11–24.

Cullinan, K., & Song, D. -W. (2002). Port privatization and Practice. Transport Reviews, 21(1), 55–75.

Dart, R. (2005). Being ‘business-like’ in a nonprofit organization: A grounded and inductive typology. Nonprofit and Voluntary Sector Quarterly, 33(2), 290–310.

De Langen, P. W. (2004). The performance of seaport clusters. (PhD dissertation). ERIM, Erasmus Research Institute of Management.

De Langen, P. W. (2008). Ensuring hinterland access: The role of PAs. Discussion Paper of OECD International Transport Forum, Paris, France, October.

De Langen, P. W., Van Den Berg, R., & Willeumier, A. (2012). A new approach to granting terminal concessions: The case of the Rotterdam World Gateway terminal. Maritime Policy & Management, 39(1), 79–90.

Debrie, J., Lavaud-Letilleul, V., & Parola, F. (2013). Shaping port governance: The territorial trajectories of reform. Journal of Transport Geography, 27, 56–65.

Demsetz, H. (1967). Toward a theory of property rights. The American Economic Review, 57(2), 347–359.

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20, 65–91.

Dooms, M., & Verbeke, A. (2007). Stakeholder management in ports: A conceptual framework integrating insights from research in strategy, corporate social responsibility and port management. Conference proceedings of the Annual Conference of the International Association of Maritime Economists (IAME), Athens, Greece.

Dooms, M., Verbeke, A., & Haezendonck, E. (2013). Stakeholder management and path dependence in large-scale transport infrastructure development: The port of Antwerp case (1960–2010). Journal of Transport Geography, 27, 14–25.

Dooms, M., Van der Lugt, L. M., & De Langen, P. W. (2013). International strategies of port authorities: the case of the Port of Rotterdam Authority. Research in Transportation Business & Management (in press).

Dyer, J., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.

ECA (2012). Using structural and Cohesion Funds to co-finance transport infrastructures in seaports: an effective investment? (Special report, nr.4). http://eca.europa.eu/portal/ page/portal/eca_main_pages/home.

Eisenhardt, K., & Martin, J. A. (2000). Dynamic capabilities, what are they? Strategic Management Journal, 21, 1105–1121.

Ferrari, C., Parola, F., & Morchio, E. (2006). Southern European ports and the spatial distribution of EDCs. Maritime Economics & Logistics, 8(1), 60–81.

Foss, N. J. (1996). The emerging competence perspective. In N. J. Foss, & Knudsen (Eds.), Towards a competence based Theory of the Firm (pp. 1–13). Routeledge: Taylor & Francis.

Foss, N. J. (1997). Toward a strategic theory of the firm: Governance, capabilities or both? Management Report, 16 (13), Rotterdam: Erasmus University, Faculteit.

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Marshfield: Pitman Publishing.

Friedman, A. L., & Miles, S. (2006). Stakeholders: Theory and practice. Oxford: Oxford University Press.

Froehlich, K. (2012). A nonprofit's response to for-profit competition. Nonprofit Management and Leadership, 23(2), 237–257.

Goss, R. O. (1990). Economic policies and seaports: Strategies for PAs. Maritime Policy and Management, 17(4), 273–287.

Gulati, R., & Singh, H. (1998). The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances. Administrative Science Quarterly, 43, 781–814.

Hakansson, H., & Ford, D. (2002). How should companies interact in business networks? Journal of Business Research, 55, 133–139.

Hart, O. (1995). Corporate governance: Some theory and implications. The Economic Journal, 105(430), 678–689.

Haugstetter, H., & Cahoon, S. (2010). Strategic intent: Guiding port authorities to their new world. Research in Transportation Economics, 27, 30–36.

Heaver, T., Meersman, H., & Van de Voorde, E. (2001). Co-operation and competition in international container transport: Strategies for ports. Maritime Policy & Management, 28(3), 293–305.

Iansiti, M., & Levien, R. (2004). The keystone advantage, what the new dynamics of business ecosystems mean for strategy, innovation and sustainability. : Harvard Business School Press.

Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3, 305–360.

Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy (8th ed.)

London, UK: Prentice Hall.

Joldersma, C., & Winter, V. (2010). Strategic management in hybrid organizations. Public Management Review, 4(1), 83–99.

Kaplan, R. S. (2001). Strategic performance measurement and management in nonprofit organizations. Nonprofit Management & Leadership, 11(3), 353–370.

Koppell, J. G. M. (2003). The politics of quasi-government, hybrid organizations and the dynamics of bureaucratic control. New York: Cambridge University Press.

Lam, J. S. L., & Notteboom, T. (2012). The green port toolbox: a comparison of port management tools used by leading ports in Asia and Europe. International Association of Maritime Economists (IAME) Conference, Taipei, Taiwan, September 2012.

Lelewellyn, S., & Tappin, E. (2003). Strategy in the public sector: Management in the wilderness. Journal of Management Studies, 40(2), 955–982.

Lewin, A. Y., & Volberda, H. W. (1999). Prolegomena on coevolution: A framework for research on strategy and new organisational forms. Organization Science, 10(5), 519–534.

Newman, J., & Clarke, J. (1994). Going about our business: The managerialization of public services. In J. Clarke, A. Copchran, & E. McLaughlin (Eds.), Managing Social Policy. London: Sage.

Ng, A. K. -Y., & Pallis, A. A. (2010). Port governance reforms in diversified institutional frameworks: Generic solutions, implementation asymmetries. Environment and Planning A, 42(9), 2147–2167.

Notteboom, T. (2007a). Strategic challenges to container ports, in devolution, port governance and port performance. Research in Transportation Economics, 17, 29–52.

Notteboom, T. (2007b). Concession agreements as port governance tools, in devolution, port governance and port performance. Research in Transportation Economics, 17, 437–456.

Notteboom, T., Pallis, A. A., & Farrell, S. (2012). Terminal concessions in ports revisited.

Maritime Policy and Management, 39(1), 1–5.

Notteboom, T., & Rodrigue, J. -P. (2005). Port regionalization: Towards a new phase in port development. Maritime Policy and Management, 32(3), 297–313.

Notteboom, T., & Verhoeven, P. (2010). The awarding of seaport terminals to private operators: European practices and policy implications. European Transport/Trasporti Europei, 45, 83–101.

Notteboom, T., & Winkelmans, W. (2001). Structural changes in Logistics: How will PAs face the challenge? Maritime Policy and Management, 28(1), 71–89.

Notteboom, T., & Winkelmans, W. (2002). Stakeholder relations management in ports: Dealing with the interplay of forces among stakeholders in a changing competitive environment. Paper presented at IAME Panama 2002: Maritime Economics: setting the foundations for port and shipping policies. Panama City, Panama, 13–15 November 2002.

Pablo, A. L., Reay, T., Dewald, J. R., & Casebeer, A. L. (2007). Identifying, enabling and managing dynamic capabilities in the public sector. Journal of Management Studies, 44(5), 688–708.

Pando, J., Araujo, A., & Maqueda, F. J. (2005). Marketing management at the world's major ports. Maritime Policy & Management, 32(2), 67–87.

Parola, F., Satta, G., Penco, L., & Profumo, G. (2013). Emerging port authority communication strategies: Assessing the determinants of disclosure in the annual report. Research in Transportation Business & Management, http://dx.doi.org/10.1016/j.rtbm.2013.04.005.

Parola, F., & Sciomachen, A. (2009). Modal split evaluation of a maritime container terminal. Maritime Economics & Logistics, 11(1), 77–97.

Perry, J. L., & Rainey, H. G. (1988). The public–private distinction in organization theory: A critique and research strategy. The Academy of Management Review, 13(2), 182–201.

Porter, M. E., & Kramer, M. R. (2011). Creating shared value, how to reinvent capitalism— and unleash a wave of innovation and growth. Harvard Business Review, 1–17 (January–February).

Rainey, & Hal, G. (1996). Understanding and managing public organisations. Jossey-Bass.

Robinson, R. (2003). Ports as elements in value-driven supply chain systems: The new paradigm. Maritime Policy & Management, 29(3), 241–255.

Rodrigues, S. B., Child, J., & Tse, K. (2012). The dynamics of influence in corporate co-evolution. Journal of Management Studies, 49(7), 1246–1273.

Rojas, R. R. (2000). A review of models for measuring organizational effectiveness among for-profit and nonprofit organizations. Nonprofit Management and Leadership, 11(1), 97–103.

Rumelt, R. (1984). Towards a strategic theory of the firm. In R. B. Lamb (Ed.), Competitive Strategic Management (pp. 556–570). Englewood Cliffs, New York: Prentice Hall.

Teece, D. J., & Pisano, G. (1994). The dynamic capabilities of firms: An introduction. Industrial and Corporate Change, 3(3), 537–556.

Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533. van der Horst, M. R., & De Langen, P. W. (2008). Coordination in Hinterland transport chains: A major challenge for the seaport community. Maritime Economics & Logistics, 10, 108–129. van der Lugt, L. M., De Langen, P. W., & Hagdorn, L. (2007). Value capture and value creation in the ports ‘business ecosystem’. IAME 2007 Conference Proceedings. van der Lugt, L. M., Rodrigues, S. B., & van den Berg, R. (2012). Strategic interaction between interdependent actors. A Framework to analyse European Hinterland Network Strategies, paper presented at EURAM, 2012, Rotterdam.

Verhoeven, P. (2006). Port management reform in Europe, in ports are more than piers.

In Th. Notteboom (Ed.), Liber Amicorum presented to Prof. Dr. W. Winkelmans, DeLloyd NV. Verhoeven, P. (2010). A review of port authority functions: Towards a renaissance?

Maritime Policy & Management, 37(3), 247–270.

Volberda, H. W. (1996). Towards the flexible form: How to remain vital in hypercompetitive environments. Organization Science, 7(4), 359–374.

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005

L. van der Lugt et al. / Research in Transportation Business & Management xxx (2013) xxx–xxx Wamsley, G. L., & Zald, M. N. (1973). The political economy of public organizations.

Public Administration Review, 33(1), 62–73.

Wang, J. J., & Slack, B. (2004). Regional governance of port development in China: A case study of Shanghai International Shipping Center. Maritime Policy and Management, 31(4), 357–373.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5, 171–180.

Williamson, O. E. (1971). The vertical integration of production: Market failure considerations. American Economic Review, 61(2), 112–123.

Williamson, O. E. (1981). The modern corporation: Origins, evolution, attributes. Journal of Economic Literature, 19, 1537–1568.

11

Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York: The Free Press.

Williamson, O. E. (1986). Economic organization. New York: New York University Press.

Williamson, O. E. (1989). Transaction cost economics. In R. Schmalensee & R. Willig (Eds.), Handbook of industrial organization. Amsterdam: North Holland.

Williamson, O. E. (2008). Outsourcing: Transaction cost economics and supply chain management. Journal of Supply Chain Management, 44, 5–16.

Woo, S. -H., Pettit, S. J., Kwak, D. -W., & Beresford, A. (2011). Seaport research: A structured literature review on methodological issues since the 1980s. Transportation Research Part A: Policy and Practice, 45, 665–687.

World Bank (2007). Port reform toolkit (2nd ed.)Washington DC: World Bank.

Please cite this article as: van der Lugt, L., et al., Strategy making by hybrid organizations: The case of the port authority, Research in Transportation Business & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.005