Governing competition: Market governance and the social structure of competition in the container shipping industry

The goal of this dissertation is to develop a socio-economic theory of joint governance as a means of mediating competition between firms under different market conditions. Using elements of institutional economics and economic sociology, this dissertation proposes a model of joint governance in which competitive firms participate in formal alliances as a means of reducing interaction costs. From this model two sets of hypotheses are introduced and tested. The first set considers the relationship between the degree of formalization in the alliance as a result of the economic behavior it controls and attributes of member firms. A second set of hypotheses examines alliance participation as an outcome of firm-level and market-level characteristics, including firm size and market power, and market concentration and market crowding.; The research setting for this dissertation is the international container shipping industry. Data come from several sources, including (1) twenty (20) alliance contracts from the Federal Maritime Commission (FMC), (2) a database of summary information on all alliances currently in force on U.S. shipping routes, also from the Federal Maritime Commission, and (3) the 1994 Global Container Report, published by PIERS/Journal of Commerce.; The twenty (20) alliance contracts, chosen from among all contracts currently on file with the FMC, are used as the basis for a qualitative analysis on the degree of formalization in alliance structure. Formalization is defined and studied along four (4) separate dimensions: (1) authority, (2) autonomy, (3) rules, and (4) sanctions. The qualitative analysis includes an examination of one shipping alliance: the North-Europe/USA Rate Agreement. The results of this analysis indicate that alliances are more formal when they control core economic behavior(s) and at intermediate participation levels. However, alliances among competitive firms are, regardless of type, informal in terms of sanctioning power provided to the group authority.; A second, quantitative, analysis considers the differential probabilities that firms will be members of a shipping alliance based on characteristics of the market and the individual firm. General findings are that the probability of alliance participation increases as market-localized firm size and market share grows, and as market concentration decreases. Market crowding has no effect on the probability of alliance participation, either alone or in conjunction with firm-specific attributes.