Logistic innovation in global supply chains: an empirical test of dynamic transaction-cost theory

Abstract

Upgrading logistic services in the context of international supply chains is not a smooth process. Upgrading may require the development of co-operative relationships, or alliances, involving large logistic service firms and their customers: multinational enterprises. Both sides may be unwilling and/or unable to engage in upgrading strategies in an alliance context. Fourth-party logistics is an example of a logistic product innovation entailing research-based advice as well as the design and implementation of new supply-chain solutions. It has the potential of stimulating spatial shift in global production networks and regional distribution systems (Visser and Lambooy, Geographisches Zeitschrift 92(heft 1+2):5–20, 2005). Using dynamic transaction-cost theory (Nooteboom, Learning and innovation in organisations and economies, 2000), this paper theoretically specifies and empirically measures three risks associated with the development of fourth-party logistics: dependence, unwanted spillovers, and conservatism. Case-study evidence reveals that dynamic transaction-cost theory partially explains the slow development of new logistic services in an alliance setting. Some aspects of conservatism are found to be relevant, along with risks of dependence due to specific investments in human resources and information systems. Other, not predicted but important factors, however, are the lack of credibility of service innovation by asset-based logistic firms, and strategic considerations of customers regarding logistic organization and control. The first factor implies that firms specializing in fourth-party services are likely to remain (very) limited in number. The second factor implies that this type of service provision is more likely to develop in dynamic port clusters, as customers prefer to tap into a variety of ideas from many different suppliers. In local clusters, interactions between firms can be relatively frequent, casual, short-lived and open, so that the structure of local networks is relatively decentralized, dense and flexible. This stimulates (logistic) innovation (Nooteboom, in Hanusch and Pyka (eds.) Elgar companion to neo Schumpeterian economics, 2006). In global supply chains, interactions between logistic service firms and their customers tend to have the opposite characteristics, which do not stimulate innovation.

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