Hypothesis Testing

This section searches for the elements that determine the LSPs’ attitudes towards the three factors that emerged from the above factor analysis. Empirical investigations on the opportunities of horizontal cooperation and on the choice of a suitable partner have been undertaken in a broader context (e.g. Geringer, 1991; Nielsen, 2003; Beckman et al., 2004). These studies have identified a number of company criteria that may influence an LSP’s attitude towards cooperation. While most of these studies address vertical cooperation in an international context, a number of criteria that are applicable to both the national and the international context seem to recur. Financial status of the potential partner and its size appeared as two of the most important criteria for partner selection (Nielsen, 2003). Studies focusing on the search for economies of scale and access to technology or markets (Inkpen and Crossan, 1995), the comparison of the firm’s market power compared to industry leaders (Hamel et al., 1989) and the initial strengths and weaknesses of the partners (Bleeke and Ernst, 1995) confirm that financial status and size of the partners is relevant. The NaceBel database (E.R. 18) contains information on both characteristics, enabling the use of these data to assess their relation with the evaluations of the three factors by the respondents.

In addition, whether firms already cooperate and how long they have been working with each other is also stressed as an influential factor in the literature (e.g. Heide and John, 1990). Consequently, the effect of existing cooperation on the respondents’ assessment of opportunities, partner selection impediments and other impediments is examined.

For the value added and gross return on assets, the most recent year (2002) for which all respondents deposited their annual reports was used. In order to find significant relations between the developed factors and the company characteristics, three regression equations were constructed. In these equations, the three factors have been regressed on the explanatory variables cooperation, size and profitability:

Opportunities = _{β11Cooperation+β12Size+β13Profitability} (5.1)

Partner Selection Impediments = β₂₁Cooperation+β₂₂Size+β₂₃Profitability (5.2)

Other Impediments = _{β31Cooperation+β32Size+β33Profitability} (5.3)

The remainder of this section discusses hypotheses for each coefficient in the above regression equations. Table 5-6 summarises the formulation of these hypotheses and provides the corresponding results. All hypotheses are tested at the 5% significance level.

Horizontal Cooperation in Transport and Logistics 82 Standar- dised coef. Signifi- cance Result Opportunities Hypotheses

H1 EQ1 Cooperation does not influence the attitude of respondents towards opportunities.

β11 0.108 0.193 Supported

H2 Size does not influence the attitude of respondents towards opportunities.

β12 0.084 0.308 Supported

H3 Profitability does not influence the attitude of respondents towards opportunities.

β13 -0.237 0.004 Rejected

Partner Selection Impediments Hypotheses

H4 EQ2 Cooperation does not influence the attitude of respondents towards partner selection impediments.

β21 -0.138 0.103 Supported

H5 Size does not influence the attitude of respondents towards partner selection impediments.

β22 -0.052 0.532 Supported

H6 Profitability does not influence the attitude of respondents towards partner selection impediments.

β23 -0.216 0.010 Rejected

Other Impediments Hypotheses

H7 EQ3 Cooperation does not influence the attitude of respondents towards other impediments.

β31 -0.067 0.437 Supported H8 Size does not influence the attitude of

respondents towards other impediments.

β32 -0.115 0.182 Supported H9 Profitability does not influence the attitude of

respondents towards other impediments.

β33 -0.011 0.898 Supported

Table 5-6: Overview of hypotheses and results

Opportunities Hypotheses

Hypothesis (H1) states that cooperation does not influence the attitude of the respondents towards opportunities, or in other words: cooperators and non-cooperators value the opportunities offered by horizontal cooperation equally. This hypothesis is supported by the data (β11: 0.108, significance: 0.193), which indicates that the opportunities expected by the non-cooperators seem to be experienced in practice by the cooperators. This, together with the high average scores of the propositions about opportunities, illustrates the strong potential of horizontal cooperation for LSPs.

The hypothesis stating that size does not influence opportunities (H2) was supported (β12: 0.084, significance: 0.308). Prior to the analysis, size was expected to affect opportunities in two ways. Since smaller companies have smaller economies of scale and can thus operate less efficiently individually, they could benefit from forming a coalition in order to compete more effectively with larger companies. Therefore size would have a negative relation with opportunities. On the other hand, small companies are likely to operate on market niches where cooperation with other LSPs is not possible or desirable. In contrast to these smaller companies, larger LSPs generally offer a broader service range and have a larger customer base so that they can more easily select suitable activities on which cooperation might be profitable. This argument

Chapter 5: Opportunities and Impediments 83

would in turn predict a positive relation between size and opportunities. Testing the hypothesis shows that these opposite effects might cancel out to result in an insignificant coefficient.

H3 states that profitability does not influence the attitude of firms towards opportunities. This hypothesis is rejected by the survey data (β13: -0.237, significance: 0.004). A possible explanation of the observed negative relation is that the more profitable an individual company is, the less inclined he is to cooperate with competitors. At the other end of the spectrum, for low- profit or unprofitable LSPs, cooperation can be a surviving strategy to increase efficiency and improve financial results.

Partner Selection Impediments Hypotheses

H4 states that cooperation does not influence partner selection impediments. This hypothesis was supported (β21: -0.138, significance: 0.103). In other words, there is no evidence that cooperators perceive the problems with finding partners differently than non-cooperators do. A priori, the expectation was that cooperators would encounter fewer problems in finding partners than non-cooperators do. This expectation is however not supported by the data. In the survey, respondents were also asked whether it would be better to have an independent third party coordinating the partnership. Table 5-7 shows that the majority of the respondents do not consider independent parties the most adequate candidates to lead and coordinate a cooperation. This suggests that there is little demand for non-asset based Fourth Party Logistics parties or consultants to start up or coordinate horizontal cooperation.

“YES” “NO”

Frequency 17 50

Additional remarks

Provided that the coordinator carries responsibility.

A third party can be useful in bringing parties together and exploring the possibilities of a cooperation.

It is preferable to remain in complete control. The third party introduces extra costs. One of the participants should coordinate the cooperation.

Table 5-7: Is it preferable that a third independent party coordinates the cooperation?

H5 states that size does not influence the way LSPs think of impediments related to partner selection. This hypothesis was supported (β22: -0.052, significance: 0.532). In advance, it was expected that large LSPs would not be favoured partners for smaller LSPs, because larger firms could misuse their greater economic strength.

H6 states that profitability does not influence partner selection impediments. This hypothesis is rejected at the 5% level (β23: -0.216, significance: 0.010). The interpretation of the observed negative relation is that very profitable companies experience fewer difficulties in finding partners than less profitable LSPs. An explanation might be that profitable LSPs have more to offer in terms of learning effects and stability of the relationship. Moreover, they generally have a financial buffer

Horizontal Cooperation in Transport and Logistics 84

to overcome the required initial investment of time and money to start an intensive cooperation. This increases the probability that the cooperation will last and investments are not in vain.

Other Impediments Hypotheses

H7 states that cooperation does not influence the view of LSPs on other impediments. This hypothesis was supported by the data (β31: -0.067, significance: 0.437), suggesting that cooperators and non-cooperators evaluate the other (i.e., non-partner selection) impediments alike. Stated differently, this seems to suggest that the impediments expected by the non-cooperators are in fact experienced by the cooperators. In the questionnaire, respondents were asked to report on additional impediments encountered in practice for structural, long-term cooperation. The answers - as well as the number of respondents providing this answer - are given in Table 5-8. The fact that 14 respondents consider the small size of their company to be an impediment for cooperation puts the conclusions under hypothesis 5 into perspective. These small-sized LSPs (one or two full time equivalent employees) indicate that they either lack the business connections to set up a cooperation or have a small number of customers that fill their capacity entirely.

Explanation Frequency

Our company is too small. 14

Incidental cooperation is OK, but structural cooperation is not desirable because of competition considerations.

6

Agreements are not complied with in a cooperation. 5

Competition prohibits cooperation. 4

We are interested in joining a cooperation, but the Flemish logistics sector lacks the broad vision that is necessary to start such initiatives.

4

Our company offers services that are too specialised. 4

We do not yet cooperate horizontally, but we are looking for partners. 2 Cooperation is impossible in the Flemish logistics sector. 2

We have not thought about it yet. 2

Other (lack of top-level and government support, strict customer requirements) 5 Table 5-8: Additional impediments to cooperation

H8 states that company size does not impact other impediments. This hypothesis was supported (β32: -0.115, significance: 0.182), indicating that there are no significant differences in the way cooperators and non-cooperators evaluate the proposed impediments.

H9 states that profitability does not influence other impediments. This hypothesis was supported (β33: -0.011, significance: 0.898), which suggests that profitability of an LSP does not help to avoid or overcome the other impediments for cooperation.

Chapter 5: Opportunities and Impediments 85

5.5 CONCLUDING REMARKS

To assess potential benefits of horizontal cooperation between LSPs and the main impediments to its implementation, 1,537 LSPs were contacted in Flanders, Belgium. Together with the Netherlands, Flanders is the centre of gravity of logistics services in Europe, hosting the vast majority of European Distribution Centres. Although this study is exploratory in nature, the survey results provide the logistics sector with some important insights into horizontal cooperation.

The opportunities of horizontal cooperation, introduced in Chapter 2 and further developed into specific propositions in Section 5.2, are widely supported across the Flemish logistics sector. The evaluations show a positive agree/disagree balance for all seven proposed opportunities. O1 (“Horizontal cooperation increases the company’s productivity for core activities”) receives the strongest support. In particular, it receives more approval than O2 (“Horizontal cooperation reduces the costs of non-core activities”). It can be concluded that cooperation on core activities, although it involves the exchange of customer information, is considered to be more desirable than cooperation on non-core activities because of the higher cost savings potential. Apart from cost and productivity opportunities, the strong support for O4 (“LSPs can specialise while at the same time broadening their services”) leads to the conclusion that respondents consider horizontal cooperation to be an interesting possibility for increasing their customer service. The broad support by all respondents for the propositions on opportunities is however negatively related to the profitability of the respondents (Hypothesis 3).

The factor analysis in Section 5.4 subdivided the proposed impediments for horizontal cooperations into two sets: Partner Selection Impediments and Other Impediments. The first set (Partner Selection Impediments) consists of two propositions that are strongly supported by the respondents. Partner choice is vital for the success or failure of cooperations and is well-studied in the organizational science literature, (e.g. Geringer, 1991; Nielsen, 2003; Beckman et al., 2004). The problems with finding suitable partners are less severe for the more profitable respondents (Hypothesis 6). Concerning the other impediments, respondents expect most difficulties from issues relating to bargaining power: I4 (“Partners find it hard to ensure a fair allocation of the shared workload in advance”), I5 (“A fair allocation of benefits to all the partners is essential for a successful cooperation”), I7 (“Over time smaller companies in the cooperation may lose customers or get pushed out of the market completely”), and I8 (“When benefits cannot be shared in a perceived fair way, the larger players will always benefit most”). Potential partners must therefore explicitly take these impediments into account and take actions to overcome them before cooperation starts. Unfortunately, the literature on the distribution of both costs and benefits arising from horizontal cooperation is scarce. To start filling this gap, the gain sharing issue will be revisited in Chapter 9 and Chapter 10.

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