The theory of the fi rm from an organizational perspective
5. CONCLUDING REMARKS AND DISCUSSION
This chapter presents a contractual perspective of the fi rm that highlights the function of the fi rm as a common contracting partner to suppliers, customers, labor, capital and fi nanciers. The nature of contracts concluded is in our model dependent on the degree of mutual dependency. A high degree of mutual dependency requires safeguards that can be provided in the form of long-term contracts, an employment relation or joint owner- ship of assets in diff erent stages of a value added chain.
The maritime industry is analyzed from a contractual perspective with special focus on the link between the carrier and the shipper. We present a synthesis of diff erent contractual perspectives on the fi rm as a coordinating institution. The maritime industry is interesting due to the wide variation of contracts used, ranging from spot contracts, forward contracts and time charters to vertical integration. It is also interesting that in comparing dif- ferent freight markets there is a large variation going from one extreme to another. The tramp market is characterized by (almost) perfect competi- tion whereas the liner market is characterized by cartels.
In general there are three types of freight contracts, the spot contract, the time-voyager and the contract of aff reightment (COA). The choice of contract depends not only on the position of the commodities in the value added chain but also on the existence of temporal specifi cities. The spot contract is used on tramp markets mainly for raw material such as oil and
A contractual perspective of the fi rm 79 grain where no temporal specifi cities prevail. Commodities higher up in
the value added chain are most often transported with forward contracts or time charters. In addition, these markets are characterized by temporal specifi cities due to political and economic changes in the contract practices over time, such as in the shipping of oil. This example highlights the fact that fi rm specifi cities can create temporal specifi cities which induce the use of forward contracts and time charters in an industry that due to its char- acteristics normally should apply spot contracts.
The existence of third-party ship management in the maritime industry is also an interesting phenomenon. It sheds light on complete separation of ownership and control. In this case the relation between physical and human capital is regulated by a contract. This in turn indicates that there is a relatively low degree of asset specifi city regarding capital and labor in the maritime sector. When third-party management is applied, the allocation of resources is replaced by a contract.
There is also a strong relation between commodity specialization and fi rm structure. For example, fi rms operating mainly on the spot market are usually smaller whereas fi rms on the liner and ferry markets usually are relatively large. The existence of temporal specifi cities therefore aff ects both the fi rm structure and the design of the freight contract.
NOTES
* Corresponding author.
1. However, it is a plain vanilla theory of markets. No attention is paid to diff ering con- tractual aspects of markets (see Williamson, Chapter 2 in this volume).
2. The report has benefi ted from excellent comments and branch-specifi c knowledge sup- plied by P.A. Sjöberger, Swedish Shipowners’ Association.
3. In many cases CEO, chairman and largest shareholder can be one and the same person. 4. Value added chains can be used to show the diff erent stages in shipping. For example the Swedish shipping companies Broström AB and Wallenius AB use comprehensive freight contracts that include several steps in the supply chain. Instead of buying these serv- ices from other logistic fi rms the ship-owners develop them internally in the company (Johansson et al., 2006).
5. Williamson (1985, 1996 and Chapter 2 in this volume) uses the term ‘asset specifi city’ in his description of such a dependency.
6. Klein et al. (1978) make a distinction between use and user when defi ning an appropri- able quasi-rent. While the concept quasi-rent according to them refers to how much the value of an asset in current use exceeds the value of an asset in its best alternative use, appropriable quasi-rent denotes the diff erence in value in relation to what the next highest valuing user is prepared to pay for the service of the asset.
7. According to Williamson (1975, 1985, 1996) bounded rationality refers to the limited capacity of the human mind to conceive and evaluate all alternatives pertinent to a decision. Opportunistic behavior in turn means to give false or self-disbelieved prom- ises about the future or self-interest seeking with guile; to include calculated eff orts to mislead, deceive, obfuscate, and otherwise confuse.
8. According to Williamson (1996, p. 105) dedicated assets are ‘discrete investments in general purpose plant that are made at the behest of a particular customer’.
9. By hybrid one means ‘Long-term contractual relations that preserve autonomy but provide added transaction-specifi c safeguards, compared with the market’ (Williamson, 1996, p. 378).
10. Section 3 is based on Johansson et al. (2006).
11. See for example the Swedish companies Wallenius Wilhelmsen Line and SCA. 12. The following discussion is based on Pirrong (1993).
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