Perspectives from New Institutional Economics
Edited by Claude Ménard
Chapter 20: Quasi-integration in less-than-truckload trucking
Alberto Fernández, Benito Arruñada and Manuel González* INTRODUCTION The traditional analysis of the European trucking industry shows a very fragmented sector, with a large percentage of tiny ﬁrms and owner–operators with just one truck (see Table 20.1, below). Several studies of the industry consider such fragmentation to be a problem (specially in Spain, a country with one of the highest degrees of fragmentation), arguing that when ﬁrms are so small they cannot achieve economies of scale and density. 1 In Spain, this view of the activity is actually leading to norms that reward vertical integration.2 Economies of scale and density are important: it is necessary to seek and contract customers (shippers) and to coordinate hauls to optimize the use of vehicles and drivers. Coordination can be improved using advanced computer network models that give information about the capacity within the system and the probability of ﬁnding subsequent loads, as well as information on costs and prices (Corsi and Grimm 1987, p. 13). In a similar vein, high trafﬁc density allows direct routes and more concentrated trafﬁc ﬂows, generating ‘economies of density’ or ‘network economies’ (Wang Chiang and Friedlaender 1984, p. 276), leading to a reduction in empty backhauls.3 Finally, truckers’ brand name and reputation constitute a costly and valuable contractual safeguard in their relationships with customers and suppliers. Building and preserving a reputation requires investing in advertising, as well as training and monitoring the labor force, activities also subject to scale economies.4 However, economies...
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