Ports versus Portals: International Connectivity and the Bundling of Tangibles and Intangibles

Scholars have analyzed the role of advances in information and communication technology as a driver of dramatic changes in business processes and organization (Alcacer et al., 2016; Brynjolfsson & McAfee, 2014; Leamer & Storper, 2001). The emergence of global value chains and the resulting co-evolution of firms and locations may be seen as a particular case of this wide-ranging megatrend (Cano-Kollmann et al., 2016; Turkina & Van Assche, 2018). An exponential growth in computing power combined with an equally impressive expansion in the network capacity have dramatically reduced both the costs and risks of transmitting codified knowledge across borders. These trends have facilitated MNEs’ ability to tap into previously non- accessible knowledge pockets, allowing them to build key complementarities between intangible assets from different locations (Bathelt et al., 2004; Zhao, 2006).

However, long before information technology began to play a significant role in international business, another type of network undergirded the global economy: transportation networks. While it is well-known that modern international business dates to the dawn of the industrial revolution in the 18th century (Hummels, 2007), the role of the transportation infrastructure, beginning with the clipper ships that carried tea from ports in China and India to the pool of London, has long been “taken for granted”. Driven by technological innovations, the user cost of this transportation network has fallen over the centuries, with some discontinuous sharp drops. These include major advances in the mid-20th century like containerization and the invention of the jet engine (Bernhofen, et al. 2016; Hummels 2007). The transportation network continues to service international business to this day, ensuring the delivery of its tangible component. This more traditional backbone of international business corresponds in many ways to the Internet backbone laid down at the end of the 20th century (and expanded thereafter).

Transportation networks, originally made up of ports and sea lanes, but increasingly supplemented with airports and aviation routes are not only important for the transmission of bulky commodity products like wheat, but are also crucial for knowledge-intensive industries. This is because many knowledge-creating activities need to be bundled with tangible assets for them to be developed, transferred, and often even for them to have meaning. For instance, R&D centers consistently require tangible inputs for the development of new ideas and products (Hannigan & Mudambi, 2015; Pisano & Shih, 2009). Furthermore, MNEs often embed new knowledge that is transferred to foreign partners within the tangible goods that they export (Keller, 2004). A MNE’s ability to develop a global knowledge network should therefore not only be a function of the availability of electronic connectivity, but also on its access to the global network of maritime ports and airports.

Data suggest that there is wide heterogeneity in seaport and airport performance around the world (Arvis et al., 2018). These performance gaps matter for trade, especially within global supply chains. Superior logistics performance is associated with bilateral trade growth (Hoekman & Nicita, 2011). A location’s ability to export is at least as important a source of comparative advantage as the costs of labor, capital and other inputs (Gamberoni et al., 2010; Ma & Van Assche, 2016). Thus, good logistics performance is a necessary, but often overlooked condition for setting up well-functioning global supply chains (Schotter & Beamish, 2013).

Recent studies add that physical port heterogeneity is taking a new turn. Rather than serving as vertically integrated hubs that compete with one another, but differ in quality and price, seaports are increasingly specializing in particular horizontal niches (Jacobs & Lagendijk, 2014). They are collaborating with each other to offer complementary regional logistics solutions, resulting in increased efficiency. Other studies point out that the cost of moving tangibles is not only a function of infrastructure, but also by industrial organization forces. The ownership of multiple ports by multinational entities that implement regional rationalization strategies reinforces the process of port complementarity (Hall & Jacobs, 2010). At the same time, a high proportion of maritime liner shipping is priced by conferences, facilitating collusion and anti-competitive pricing (Hummels et al., 2009). This is a response to persistent over-capacity and repeated Bertrand-type “race-to-the-bottom” experiences of the major industry players (Wu, 2012). There is similar evidence of anti-competitive behavior in air transport (Micco & Serebrisky, 2006).

Nonetheless, few studies have jointly analyzed the physical and digital infrastructural networks and their link with global knowledge and value creation, even though we have established that co- terminus nature of these networks. Our reading of the current literatures leads us to conclude that this lacuna may be the result of the disciplinary focus of most research. Hence we would like to expect inter-, multi-, and cross-disciplinary approaches to yield important new insights. The foundational disciplines of iBEGIN (international business, economic geography and innovation studies) form the starting point, but we expect that this exercise will also be informed by many others like international economics and supply chain management.

There are a number of crucial questions that we believe are important for both theory and policy:

  • How dependent are intangibles on tangibles for their value creation? Are these tangibles disproportionately sourced locally or imported?
  • How important is goods trade for inter-firm knowledge transfer?
  • How does a location’s maritime and air connectivity matter for its innovation performance and international innovation partnerships?
  • How has the structure of the maritime and air transport network evolved, and why?
  • Have maritime ports and clusters changed their international connectivity strategies in the era of global value chains?
  • What are the internationalization strategies of multinational port operators, shipping lines and air cargo companies?
  • What policies should governments adopt to strengthen their locations’ logistics performance in the era of global value chains? The research avenues mentioned above are of course only a few of the many possible investigations. In addition to the conference theme, all papers that address the more general iBEGIN research agenda, both theoretical and empirical, are welcome.

Submission format: extended abstracts (“SMS-style” submissions – 5-7 pages)

Submit extended abstracts to: 2019ibeginconference@gmail.com

FURTHER INFORMATION:
Program Chair: Ari Van Assche (ari.van-assche@hec.ca)
Local Conference Chair: Henrik Sornn-Friese (hs.si@cbs.dk)
iBEGIN Convener: Ram Mudambi (ram.mudambi@temple.edu)

The best papers from the conference will be considered for a special issue of the Journal of Economic Geography.