Pa hybrid org

Research in Transportation Business & Management xxx (2013) xxx–xxx

RTBM-00108; No of Pages 11

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Research in Transportation Business & Management

Strategy making by hybrid organizations: The case of the port authority

Larissa van der Lugt a,⁎, Michaël Dooms b, Francesco Parola c

a Department of Regional, Transport and Port Economics, Erasmus University Rotterdam, Rotterdam, The Netherlandsb Department of Business, Unit Management and Strategy, Vrije Universiteit Brussel, Belgiumc Department of Business Studies, University of Naples “Parthenope”, Naples, Italy

⁎ Corresponding author at: Erasmus University RotterTransport and Port Economics, 3000 DR Rotterdam,104081410.

E-mail address: [email protected] (L. van der Lu

2210-5395/$ – see front matter © 2013 Elsevier Ltd. Allhttp://dx.doi.org/10.1016/j.rtbm.2013.06.005

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Article history:Received 30 November 2012Received in revised form 6 June 2013Accepted 22 June 2013Available online xxxx

Keywords:Port authorityStrategy researchHybrid organizationShared value

Due to dynamic competition, the gain of autonomy through port devolution and the resulting evolution to-wards accountability in diverse fields of performance, port authorities (PAs) evolve from landlords that arestrongly embedded in the public domain to more autonomous acting organizations with stronger require-ments for ‘business like’ performance.This evolution implies a stronger need for proper strategic analysis and subsequent strategy formulation,evaluation and implementation. Based on the main current strategic challenges that PAs face, we defineand position the PA as an organization combining both public and private values and analyze the validityof the lenses of different theoretical perspectives from strategy and public management research for its stra-tegic analysis.We argue that the strategic challenges' PAs face in their current operating environment, also reflect the evo-lution in strategic management thinking, whereby more actor-related attributes are added to the various re-search frameworks, loosening the traditional strict conditions of profit maximization, rationality andtransparency and whereby more integrated concepts like co-evolution and network theory gain importance.We also conclude that PAs as shared value organizations are interesting domains for academic research basedin the strategy domain, as to strengthen the analytical base that is available for research into the strategy oforganizations.

© 2013 Elsevier Ltd. All rights reserved.

1. Introduction

Over the last decades, the strategic view/perspective of the portauthority (PA) has been approached from different analytical lenses.In fact, management discipline areas such as strategic management,human resources management (HRM), environmental managementand information and knowledge management appeared in the pictureof port research, having an important influence on theory transfer andapplication (Woo, Pettit, Kwak, & Beresford, 2011). There seeminglyis an increasing need to apply theories, concepts and research modelsused in business and management related disciplines to capture themore complicated and behavioral aspects of PAs such as collaboration,integration, internationalization, network management and clustermanagement. PAs are the entities that have the responsibility forthe development and management of seaports. Over the last two tothree decades PAs have undergone a reform from rather task orientedorganizations tomore autonomous and commercially acting organiza-tions (Brooks & Cullinane, 2007; Debrie, Lavaud-Letilleul, & Parola,2013; Ng & Pallis, 2010).

dam, Department of Regional,The Netherlands. Tel.: +31

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PAs are increasingly accountable for their performance both fromthe economic, financial and societal perspective (Verhoeven, 2010).Combined with changes in the port's environment, such as increasedcompetition, changing customers' requirements and environmentalpressures, this reform has forced the PAs to reconsider their role andposition and to develop strategies for their futures. PAs are facingstrategic decisions on investments within their port areas, withintheir foreland and hinterland and on their strategic positioning andacting towards the private companies located in the port. As a result,strategic thinking has gained a stronger foothold within PA manage-ment. This evolution is demonstrated by a quick scan of the annualreports from 2000 to 2011 from a major PA in Europe, Port ofRotterdam NV. Assuming that corporate communication reflects firmbehavior (Cahoon, 2007; Pando, Araujo, & Maqueda, 2005; Parola,Satta, Penco, & Profumo, 2013), the number of times that the words“strategy” and “strategic” are explicitly mentioned between 2000and 2011 has increased substantially over this period. It starts fromzero in 2000 and increases sharply after 2008 up to around 40 timesfor each of the two words in the annual report of 2011.

Although there have been quite some studies discussing thestrategies of PAs (Baltazar & Brooks, 2007; Bichou and Gray, 2005;Chlomoudis & Pallis, 2004; Comtois & Slack, 2003; Cullinan andSong, 2002; De Langen, 2004, 2008; Goss, 1990; Haugstetter &Cahoon, 2010; Heaver, Meersman, & Van de Voorde, 2001;

rganizations: The case of the port authority, Research in Transportation005

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Notteboom, 2007a; Notteboom & Rodrigue, 2005; Notteboom &Winkelmans, 2001; Verhoeven, 2010;Wang and Slack, 2004), a stronganalytical base supporting the significance of strategic managementfor PAs is still lacking. Within existing research on PA strategy, mainlydescriptive research has been executed, discussing and analyzingthe functions of a PA and the dynamic nature thereof. More specifical-ly, recent literature shows the increasing importance of new PA func-tions, such as the role of community or cluster managers, on top oftraditional functions such as infrastructure manager (also referred toas the landlord function), regulator and operator (De Langen, 2004;Verhoeven, 2010). Furthermore, besides the enlargement of thescope of activities, the geographic space within which these activitiestake place is also extended from the local level (the port area) to theregional and even the global level (as evidenced by e.g., PAs likeRotterdam and Antwerp taking financial participations in inlandplatforms in their hinterland or investing in port projects in emergingeconomies). These insights have led to the development of a so-called‘renaissance matrix’, linking the four functions of the PA with the dif-ferent geographical perspectives (Verhoeven, 2010). Starting fromthis matrix, three archetypes of strategic responses, i.e. conservator,facilitator and entrepreneur are put forward to provide answers tothe increasingly complex situation faced by PAs. Whereas the conser-vator response entails a rather passive and mechanistic responselimited to the local dimension, the entrepreneur engages in risk takingactivities in an enlarged geographic scope, with the facilitator adopt-ing a matchmaking/mediator stance engaging in so-called ‘strategicrelationships’ with stakeholders within and beyond the perimeter ofthe area it controls as a landlord (Verhoeven, 2010). The combinationof the new functions such as cluster or community manager, com-bined with an enlarged geographic area of activity, and the existenceof strategic response alternatives vis-à-vis this new situation, suggeststhat the strategicmanagement and strategy perspective of PAs requiremore attention from the research community.

The research discipline strategy and organization have seen astrong development over the last three decades. Valuable conceptsthat explain the various domains of strategy have been developedand operationalized. But this has primarily been focused at theprivate-for-profit firms. Their general applicability to the case ofthe PA is an interesting but not yet answered question: PAs are orga-nizations with both public and private characteristics (Verhoeven,2010; Chlomoudis, Karalis, & Pallis, 2003; Koppell, 2003), as suchrepresenting a growing segment of organizations in between publicand private (Porter & Kramer, 2011; Boston et al., 1996). Liberaliza-tion and commercialization programs in many countries, but alsothe growing attention for corporate social responsibility withinmany firms, have blurred the classic distinction between the publicand private domain. On one hand, conventional public organizations,e.g. in public services sectors as education, health care and watermanagement, increasingly combine a market orientation with theirtraditional task orientation (Box, 1999). These former non-profit or-ganizations continue to seek ways to adapt their existing businessmodels to generate more financial revenue to be less dependent ongovernmental funding (Billis, 2010). As a result, a reorientation offunctioning and financing has taken place, in turn asking forsupporting strategic analyses (Lelewellyn & Tappin, 2003; Newman& Clarke, 1994; Joldersma &Winter, 2010). On the other hand, tradi-tional for-profit organizations increasingly incorporate public valueswithin their mission and strategic vision formation. It is argued thatsocietal needs, not just conventional economic needs define markets(see Porter & Kramer, 2011, on the concept of shared value).

These fundamental changes at the organization level impact bothmanagers as academics. It will require leaders and managers to devel-op new skills and knowledge—such as a far deeper appreciation ofsocietal needs, a greater understanding of the true bases of companyproductivity, and the ability to collaborate across profit/nonprofitboundaries. Also, governments must learn how to regulate in ways

Please cite this article as: van der Lugt, L., et al., Strategymaking by hybrid oBusiness & Management (2013), http://dx.doi.org/10.1016/j.rtbm.2013.06.

that enable shared value rather than work against it (Porter &Kramer, 2011). From an academic perspective this calls for a deeperinquiry into the precise nature of organizations and a reconsiderationof its analytical concepts used for explanation.

This research on the strategy analysis of PAs is positioned at theintersection of society and corporate performance. From an institu-tional point of view, it characterizes the PA organization along keyaspects for the public–private distinction of organizations. It as-sesses the validity of theoretical lenses already available throughgeneral strategy research for analyzing PA strategies. The researchaddresses mainly a conceptual goal, by adding to the conceptual de-bate on the usefulness of theoretical notions primarily developed forthe private domain once considering an organization having bothpublic as private characteristics and combining both societal andeconomic objectives and values. It results in a set of interesting re-search questions related to the application of existing theoreticalconcepts in the light of a changed perspective on organizationsand their strategies.

The research is based on a review of descriptive literature on PAorganizational and managerial characteristics, descriptive literatureon PAmainstream strategic avenues, literature from strategy researchand on analytical literature on PA strategy making.

The paper will first, in Section 2, characterize the PA as an organi-zation, differing both from private sector companies as from purepublic companies. Section 3 gives an overview of the main actual stra-tegic issues for PAs. Section 4 assesses the main relevant conceptsfrom strategy research and their applicability to the case of the PA.Section 5 discusses the managerial relevance for the PA and the ave-nues for future research, before concluding.

2. Similarities and differences between port authorities andprivate sector companies

2.1. The public and private distinction

There have been different contributions to the debate onthe public and private distinction, based on different conceptualviews. From a property rights perspective (see Demsetz, 1967),ownership structure is traditionally seen as a major conceptual ‘di-vide’ between public and private (Bozeman & Bretschneider, 1994;Perry & Rainey, 1988). Public organizations are owned by the gov-ernment whereas private organizations are owned by private enti-ties, or listed at a stock exchange. But ownership as such is notalways a clear distinctive factor. Corporatised former public organi-zations might act in a private oriented way with commercial tar-gets, but are still owned by the government (f.e. corporatized,formerly railway undertakings like NS in The Netherlands andDeutsche Bahn in Germany).

Perry and Rainey (1988) applied a dimensional perspective anddeveloped a classifyingmodel, with three dimensions withwhich or-ganizations can be classified on their publicness: ownership, funding(governmental budgets and subsidies versus user charges) andmode of social control (via the market mechanism or by governmen-tal control) (see also Brandsen & Karre, 2011). The resulting taxono-my comprises rather theoretical classes of organizations rangingbetween public and private. More detailed contributions (Allison,1979; Benn & Gaus, 1983; Boyne, 2002; Froehlich, 2012; Wamsley &Zald, 1973; Rainey & Hall, 1996) have brought up other aspects includ-ing concrete measures for determining the public or private nature oforganizations.

In this research, we combine the different perspectives on thepublic–private distinction into a set of main aspects and related mea-sures, useful for a detailed characterization of an organization inbetween public and private. The aspects that we, in addition to owner-ship, funding and mode of social control, derive from literature aregoals/interests, environment, decision processes and structures,



1 This refers to the theoretical model of the landlord port, which is common to mostports. However, in practice, mixed models exist with more or less influence of the PA inoperations and service and on the other hand also private involvement in the port'snautical access or infrastructure operations.

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managerial values, and performancemeasurement. Goals and interestsrelate to the mission or overall strategic goal of the organization. Forprivate organizations the main strategic goal has an individual groundand bases in profit, market performance and survival. For publicorganizations goals are communal, are often less clearly specified, ora multitude of goals co-exist (Boyne, 2002; Dart, 2005; Wamsley &Zald, 1973; Brandsen & Karré, 2011). Public and private organizationsface different environments. Specific to more publicly oriented organi-zations is a higher level of complexity as many different interests haveto be taken into account. Public organizations have less freedom to actas they are restricted by political will and strict guidelines on respon-sibilities and mandates. Financial autonomy is restricted for public or-ganizations by budgeting procedures decided by the governmentsthey report to (local, regional or national). Public organizations oftenhave no or less access to private capital. Private companies have finan-cial freedom, to the extent that they can obtain finances from banks orthe financial markets and are profitable (Froehlich, 2012). Decisionprocesses and structures are another factor relevant to the public pri-vate distinction. It relates to the decisional autonomy of executiveswithin an organization both related to the own organizational struc-ture and to the interrelationship of the organization with externalstakeholders (Donaldson & Preston, 1995; Freeman, 1984; Friedman& Miles, 2006). In general, decision processes in public organizationsare subject to public scrutiny (Brignan & Modell, 2000). In addition,there is a strong interrelationship with other (semi)public or privateorganizations as public organizations in many cases are there toserve the interest of these companies and/or civilians, even by devel-oping lobby activities (see Comtois and Slack (2003) and Verhoeven(2010) advocating this role of PAs). This interrelationship, wherebycompanies and civilians have the ability to influence the decisionmaking process, via lobbying and via the political process, often neg-atively influences the efficiency and effectiveness of the decisionmaking process, and even the assessment of the competitive advan-tages of the port. The long time spans between initial plans and effec-tive implementation of port expansion projects, characterized bydelaying interactions between port management and the civil envi-ronment, illustrate this problem (f.e. it took about 30 years from ini-tial plan to final implementation for the large port expansion inRotterdam). Managerial values concern the level of commitment tothe organization; to its goals and to the conditions for operating.The values of managers in private organizations are mainly drivenby career prospects, income levels and business survival: i.e. thegoals of continuation of existence, and profit maximization (Rojas,2000). Within public organizations the more ‘commercial’ valuesare in general less developed (Froehlich, 2012). Levels of commit-ment can differ with the political level of the organization. Whilethe driver for persons to join a non-profit is often a societal, some-times even philantrophical one (Rojas, 2000), resulting in high levelsof commitment, in highly political non-profits that are subject toelections and as a result continuously changing managements, com-mitment might be less and personal drivers more career and statusdriven. Performance measurement is executed differently by publicorganizations compared to private firms as it relates strongly to itsgoals. Public organizations do have performance measurements re-lated to their public tasks but these are merely focused at registeringand disclosing what have been achieved (Brignan & Modell, 2000).They often lack more business oriented performance measurementssuch as customer satisfaction and operational efficiency, with the ul-timate aim to improve the organization and its performance (Kaplan,2001).

2.2. Characterizing the port authority on the public–private dimension

The PA is the organization that is responsible for a safe, sus-tainable and competitive development of the port (Chlomoudis &Pallis, 2004; De Langen, 2004, 2008; Notteboom & Winkelmans,


2001). Under the so-called landlord model that is common to mostports in western economies (except for the UK where most portsare completely privatized), the PA is, besides a regulator for porttariffs, concessions, spatial planning and the environment, as an op-erator responsible for the nautical access, the management and de-velopment of the land area and the basic infrastructure (WorldBank, 2007). The private sector is responsible for all port operationsand services.1

The PA can be further defined institutionally, along the more spe-cific aspects of institutional characterization, as derived in Section 2.1.

2.2.1. Ownership (and type of legal entity)In contrast to private firms, PAs in general are publicly owned ex-

cept for the ports in the UK (where the pure PA does not exist and PAfunctions are transferred to the private sector) and some other ex-ceptions worldwide, e.g., in New Zealand and Australia. There aredifferent models, implying different levels of autonomy (see for anoverview with examples, Verhoeven (2006)). PAs can be part of amunicipal, regional or national government department or can beautonomous bodies under the control of the government. Corporat-ized PAs (examples are in The Netherlands, Belgium, New Zealand,Australia, USA) act like limited liability companies, have executiveautonomy with a need to return to their public or private share-holders (The Port of Rotterdam in The Netherlands is a concrete ex-ample; see Ng & Pallis, 2010). These shareholders are in most caseslocal, regional or national governments. The main distinction resultingfrom the various public ownership models is the level of autonomy indecision-making, the incentives PAs are subject to and the financial pos-sibilities PAs have.

2.2.2. Funding/value capturePAs are partly privately funded. Their revenue drivers are port

dues paid by shipping lines, and concession fees and land rent paidby private port companies. These concession fees and land rentsare agreed upon with the port companies in long term contracts(20 to 50 years is quite common), restricting the possibilities forflexible value capturing strategies (Notteboom, 2007b). In manycases, investments in infrastructure are partly or completely fi-nanced by local, regional or supranational governments, sometimesin a public–private-partnership, sometimes using commercial loansto be covered by the PA's cash flow (De Langen, Van Den Berg, &Willeumier, 2012). Here, an important distinction is to be made be-tween corporatized PAs, which directly collect funds from privateoperators and that show a degree of financial autonomy, andnon-corporatized entities mostly receiving funds based on transfersfrom local of central government with less financial autonomy as aresult (World Bank, 2007).

2.2.3. Social controlWhere social control for private firms is enforced through themar-

ket mechanism, PAs, across the different ownership and institutionalmodels, are in a varying way subject to social control with involve-ment of a governing body (Baltazar & Brooks, 2007). The corporatizedPA of Rotterdam, for example, has to account for its performance to-wards a Board of Commissioners (with private background) and alsotowards representatives of its public shareholders in the annual share-holders meeting (Notteboom, Pallis, & Farrell, 2012). Both controlgroups will safeguard the achievement of the both public and privategoals. A PA like Antwerp has to account for its performance towards aBoard of Commissioners mainly consisting of elected members of the




AntwerpMunicipality. Also, its major strategic decisions are subject toapproval of this Board of locally elected politicians. In Spain, Ports ofGeneral Interest are coordinated and partly controlled by a nationalgovernment body, Puertos del Estado. Privately owned PAs are merelysocially controlled via the market (examples in UK and recently inAustralia). In other contexts, such as Italian ports, the Port Committee,which is the body entitled of takingmost relevant executive decisions,plays a hybrid role as it also acts as moderator of public–privateconflicts.

2.2.4. Goals/interestsPAs have goals related to the common (public) interest and also

to their own individual organization. A major strategic objective,i.e. expressed by amultitude of PAs at their websites or in their annualreports, is to “develop a competitive and sustainable port that contrib-utes to regional economic growth” (Verhoeven, 2010). Increasingly,PAs also address organization-centered goals such as financialself-sustainability (see annual reports 2010 of Tauranga, Port ofVancouver, Port of Halifax, Port of Charleston, Port of Sydney). Thoughdifferent in character, these two objectives of the PA are interrelated(Notteboom & Rodrigue, 2005). A competitive and sustainable devel-oping port results in more revenue for the PA also complying withtheir organization-level goals. However, the objectives might alsocause conflicts of interest. Investments made for the improvement ofthe port that cannot be earned back in the short term, might negative-ly influence the financial result of the PA. Investments made for thepurpose of generating more revenue for the own organization mightnot lead to an optimal contribution to the performance of the port asa whole (e.g., potential opportunity costs of international activities,such as the current trend towards overseas port management and in-vestment). The duality in the nature of the PA's objectives results in ahigher complexity and higher level of vagueness in their strategic set-ting than for private firms.

2.2.5. Environment/mandatesPAs, public or private, operate in a strong institutional environ-

ment, substantially influenced by the government (Ng & Pallis, 2010;Rodrigues, Child, & Tse, 2012). There is strong institutional pressure.Their strategic freedom is often limited by governmental acts that de-termine goals, jurisdiction, and financial possibilities. The level of sta-bility depends on the autonomy of the PA related to the local and/ornational government. Indeed, PAs with more financial and legal au-tonomy can potentially count on a higher level of stability, less subjectto political changes and interference (Verhoeven, 2010). Ng and Pallis(2010) point in this respect at the political culture of a country, e.g. aninterventionist state political culture versus a business-oriented cul-ture, as an underestimated environmental factor that could affect gov-ernance reform processes (Debrie et al., 2013). From a financialperspective, PAs are also restricted, depending on their institutionalstructure. Corporatized PAs might be able to enter the financial mar-kets to attract capital whereas PAs that depend solely on local or na-tional governments for their investment funding might be facedwith restrictions: these governments have to fit the financial expendi-ture on the creation of port assets into their overall budgets, as well asfit into the general government budget, which in times of economicslowdown is under pressure. Here, the ‘license to operate’ of the portand PA comes into play, as in fine these governments have to accountfor their budgets to their voters, the financial markets and in somecases even supranational entities such as the IMF or the EuropeanCommission.2

2 In 2012 the European Court of Auditors issued a report on the use of EU subsidiesby ports (ECA, 2012, Using structural and Cohesion Funds to co-finance transport infra-structures in seaports: an effective investment?, Special report, nr.4).


2.2.6. Decision processes and structuresThe decision processes of PAs in general are more likely to be

influenced by forces outside the organization, as compared to privatefirms. First, decision processes are continuously influenced by the in-stitutional environment, depending on the level of autonomy the PAhas (Ng & Pallis, 2010). PAs are subject to public scrutiny, by a varietyof governmental institutes or agencies. In designing their decision-making processes, especially for large infrastructure investmentprojects, they have to take this into account. The level of public scru-tiny to which PAs are subject to, and the potential negative effectsthereof such as red tape and administrative inefficiencies, differsvery much among PAs. Second, the decision-making processes ofPAs are bound to be influenced by private port companies. For theirperformance, PAs are very much dependent on the private companieslocated in or related to the port. PAs are rather facilitating or networkorganizations, restricted in their domain of direct influence. This alsomeans that PAs, when making strategic choices, cannot neglect thepositions and strategic actions of the private actors located in theport.

2.2.7. Managerial values/incentivesPAs have only recently changed into more commercially driven

organizations (mainly a development of the last 10 to 15 years). Intheir former public structure, they faced limited incentives to put sub-stantial effort in strategic thinking for their own organization (Parolaet al., 2013). Business plans were drawn up mainly for the purpose ofgaining approval of the relevant governmental boards over their per-formance and for future investment plans. Real business plans for in-ternal use with the aim to improve the organizations' position andperformance and based on cash flow generation are in general of rel-ative recent dates. As a consequence, ‘strategic thinking’, followed bythe development of ‘business cases’, is a relatively new phenomenonwithin PAs.

2.2.8. Performance measurementThe adoption of integrated performance measurement systems

by PAs, such as balanced scorecards, is relatively limited and non-standardized, as opposed to private firms. PAs publish the annual fi-nancial results of their organization and in general throughput fig-ures and modal split figures. At an individual basis, some PAs havedeveloped specific KPIs for measuring their performance from vari-ous perspectives (see Bunbury Port Authority for an example).Some PAs do customer satisfaction analysis at a regular basis (Portof Rotterdam NV is an example). However, methods within the dif-ferent perspectives of PA performance are not standardized. Despiteindividual cases, performance measurement still has to become asystematic activity in individual PA organizations, not only from anoperational viewpoint, but also from an economic and financial per-spective (i.e. management accounting). In this regard, the landscapeof the existing knowledge therefore appears very fragmented andheterogeneous.

Table 1 summarizes the derived characteristics for the public/private distinction, the concrete indicators and the situation andtrends as currently observed within PAs.

PAs, in fact, operate as public–private ‘interfaces’. They synchro-nize the interest and action of all public institutions (central govern-ment, municipality, etc.) with the behavior and the strategic intent ofprivate operators and, increasingly, their own strategic intent. On theone hand PAs, as task organizations, have to defend the public inter-est, by favoring the creation of employment, by generating revenuesfrom the use of public assets (i.e. port land, breakwaters, superstruc-tures, etc.), by reducing negative externalities, by attracting foreigndirect investments, etc. At the same time, PAs are growingly calledto be proactive and to take initiatives through a more market-oriented and managerial logic. In a few cases, PAs really act as



Table 1Themes characterizing an organization between public and private.

Characteristic Indicator Trends within PA case

Ownership Public/private share In general public, in limited cases private, increased corporatization

Funding Public/private resources Privately funded through direct user charges, decreasing use of additional subsidies.In some countries additional public funding through subsidies

Social control Via political way Partly via market (port users, stakeholders, etc)Board of Commissioners (public/private) Partly political, depending on institutional structure, public or private BoCMarket

Goals/interests Common/individual Both public as private goal, based on efficiency principle, relative high level ofcomplexity/vaguenessEquity/efficiency

Level of Complexity and Vagueness

Environment Level of complexity Complex environment (global companies, civilians, political institutes), still limitedbut increasing freedom to act, still limited but increasing financial autonomyFreedom to act

Financial autonomy

Decision processesand structures

Level of autonomy within the organizationand related to other organizations

Multi-level and multi-actor decision making with organization, Profound public–privateinteraction and need of mediating conflicting interest groups, Strong interdependencywith other companies, Subject to public scrutiny, decreasing level of bureaucracySubject of public scrutiny

Level of bureaucracy

Managerial values Level of organizational commitment Growing organizational commitment (due to decreasing political influence), Growingmanagerial nature of decision processes, Initial resort to Business Process Re-engineering(BPR) for boosting efficiency, Growing market performance orientation

Performance orientation

Performance measurement Standardized/non-standardized Limited standardized performance measurement, Initial adoption of forms/mechanismsof managerial control and performance measurement (ex-post)

Source: authors own elaboration on Allison, 1979; Benn & Gaus, 1983; Bower, 1983; Boyne, 2002; Perry & Rainey, 1988; Wamsley & Zald, 1973.


entrepreneurs and supply additional services within the port (real es-tate, operational services) or even in other ports (overseas port man-agement, consultancy). In other words, a modern PA pursues bothpublic and private goals and resembles the nature of a hybrid, sharedvalue organization.

3. Port authorities' strategic challenges

The strategic challenges of the PA are grounded within its twocommon strategic objectives of strengthening the port in a competi-tive and sustainable way and becoming a self-sustaining effectiveand efficient organization. These objectives can be structured alongthe three dimensions that are generally used for structuring an organi-zations strategic scope: functional, geographical and organizational(Collis & Montgomery, 1997). Verhoeven (2010) already applied acombination of a functional and geographical dimension to give astructured overview of potential activities of PAs within a set of PAtypologies. The organizational dimension is added to address theeconomics organization issues of vertical integration and use of coor-dination mechanisms for cluster and network management relatedissues. Along the two strategic objectives and the three dimensionsfor organization's scope, four general strategic challenges of PAs areidentified based on the assessment of available relevant literature, fre-quent discussions the researchers have had with the strategic depart-ments of the major ports in The Netherlands, Belgium and Italy, and abroader search through a set of annual reports and strategic docu-ments of PAs in other countries of Europe, in Australia, Canada andthe USA.

The first challenge, of internal nature, is related to businessobjectives for the PA organization: becoming a self sustaining andvalue generating organization. The reform of PAs from public organi-zations into more commercial, corporatized or sometimes privatizedorganizations has put a stronger pressure on the financial per-formance of the organization itself. Issued new Port Laws in Spain ofwhich the last one was in 2011 (Sixteenth Supplementary Provision ofRoyal Decree 2/2011 of 5 September) state that Spanish Ports “of Gen-eral Interests” need to be completely financially self-supporting. Ports


in The Netherlands are corporatized (Rotterdam, Flushing) or under-going this process (Amsterdam), causingmore emphasis on account-ability. As a result, PAs managing these ports need to focus on theirinternal organization to be cost efficient and effective. They are stim-ulated to look for opportunities to increase cash flows, as they needto finance infrastructural expansion largely on proper funds, giventhe pressure on public finance and the move towards an almostfull-fledged exit of governments when it comes to financing portbasic infrastructure (in particular docks, quays, and the relatedlandside infrastructure). Entering the market domain, sometimeseven in an entrepreneurial way, also puts a pressure on the imageof the organization. Corporate Social and Environmental Manage-ment and Corporate Governance gain stronger emphasis (e.g.Dooms & Verbeke, 2007; Lam & Notteboom, 2012). Questions centralto this strategic issue are: How to capture value from assets andinvestments? What additional activities can be developed that gen-erate positive cash flows? How to develop internationally? How togain and maintain as an organization the ‘license to operate’?Where to collaborate?

The second strategic issue is related to the objective of strengthen-ing the port and addresses the development of an efficient and effec-tive port cluster. The port cluster is formed by all organizationsengaging in port related activities and located in the relevant port re-gion (De Langen, 2004). The port cluster acts in a highly competitiveand rapidly changing environment. PAs aim to enhance cluster perfor-mance both in socio-economic (creation of sustainable added valueand employment) and environmental terms (Dooms, Verbeke, &Haezendonck, 2013). Here, the principle is that the private port sectorshould be involved both in financial as inmanagerial terms as they areleading in the port operations. PAs can influence the performance ofthe port cluster in various ways. They can develop an active conces-sion policy incorporating both economic as environmental require-ments (Notteboom & Verhoeven, 2010). They can act as facilitatorsand as catalysts (Bichou & Gray, 2005; Notteboom & Winkelmans,2001). They can develop activities through their role of clustermanag-er (De Langen, 2004), by organizing effective port marketing, marketintelligence, innovation, (sustainable) hinterland access and




education through own investments, by initiating partnerships or in-troducing incentives.

The third strategic issue is the development and positioning of theport complex in the long term: to effectively manage the port land toachieve goals like efficient port lay-out, efficient and sustainable landutilization, innovative port development, and ‘license to operate’, e.g.the integration of the port in its civil environment. This developmentand positioning are a continuous process. The sectors or industries towhich the clients of the port belong show dynamic developmentpaths. From a life cycle approach, it can be argued that port related in-dustries such as terminal operations, logistics, shipping, process in-dustries will go through various development stages and will finallyend or renew in a different form. The characteristics of these indus-tries and therewith their requirements for port facilities will not re-main the same (Ferrari, Parola, & Morchio, 2006). At the moment,there is little flexibility in land management due to standard fixedcontracts with very long time horizons. How to create mechanismsthat enhance efficient land utilization and innovative port develop-ment is a relevant question, receiving increasing attention, inter-aliain the field of terminal concessions (Notteboom et al., 2012). Anotherquestion relates to the quality levels of the facilities (assets) that areoffered to users. A choice can be made between standardized facilitieswith a fixed chosen level of quality, or adapted facilities to actualand expected market requirements on quality. A shift from productorientation to market orientation is needed in this respect. At thesame time the port has a place in its civil environment. Decisions onport development impact the local and regional contexts, both insocio-economic and environmental respect.

The fourth issue is how to act in the foreland and hinterland net-works that are relevant for the port. Under the pressure of an increasingcompetition among ports (hinterland contestability, competition forattracting ship calls, FDI, etc.) and the increasing network perspectiveof private actors (above all shipping lines and more recently steve-dores), PAs need to devote more attention taking strategic positions intransport networks for strengthening and defending their position.How to optimize this network, how to make it sustainable, how toconnect the port effectively to it and what role the PA has in that net-work, especially towards the other organizations, are major questionsexpressed by several PAs.

Table 2 summarizes the contemporary strategic challenges of PAsand the observed actions and strategies developed.

Table 2Overview of PA's strategic challenges and related strategic actions.

PA's strategic challenge Appropriate actions/strategies

Reform (integration of corporategovernance mechanisms andbusiness objectives into thePA organization)

Corporate governanceValue capturing from existing products/servicesProduct/service diversificationInternational expansion

Improve efficiency and effectivenesson the port cluster level

Concession policyFacilitating and catalyzing role as clustermanagerEnvironmental management/license tooperateEffective port marketing, marketintelligence, innovation, accessibility,education

Guarantee long-term developmentthrough positioning of the portcluster

Concession policy (e.g. flexible andsustainable land use)Total quality managementShift from product to market orientationPort-city interfaceCommunication strategy

Develop the port network Network optimization (both economics assustainability)Taking strategic positions in the hinterland(e.g. participations in inland platforms)International expansion?


4. Relevant concepts from strategy research and their applicabilityto PA's strategic challenges

The preceding sections have discussed the strategic issues facedby PAs, which relate to the question on the role and strategic scope ofthe PA. The analysis of the role and strategic scope of an organization pro-vides the link to a major relevant stream from strategy research: theso-called ‘Theory of the Firm’. Themain issues addressed by this researchstream are “the direction and scope of an organization over the long-term,creating competitive advantage, allocating resources within the relevant en-vironment, fulfilling markets' and stakeholders' needs” (Johnson, Scholes, &Whittington, 2008). The core concepts within this stream are transactioncosts economics or TCE, a concept rooted in seminal work of Coase, 1937,but firmly established in later strategy research by Oliver Williamson(Williamson, 1971, 1981, 1986), the Resource Based View, (Amit &Shoemaker, 1993; Barney, 1991; Foss, 1997; Rumelt, 1984; Wernerfelt,1984), and its related, rather evolution-based concept of dynamic capa-bilities (Eisenhardt &Martin, 2000; Teece & Pisano, 1994; Teece, Pisano,& Shuen, 1997) which are combined into the competence based per-spective (Foss, 1996), the relational view of the firm (Dyer & Singh,1998; Hakansson & Ford, 2002; Iansiti & Levien, 2004) and co-evolution (Lewin & Volberda, 1999). The next sections provide shortdiscussions of these concepts and, grounded in the underlying keyactor's attributes and constructs, their applicability to the case of the PA.

4.1. Transaction cost economics (TCE)

The contractual concept of TCE as developed byWilliamson (1985,1989) is a cornerstone of New Institutional Economics. Other con-cepts are property rights (Demsetz, 1967) and agency theory (Hart,1995; Jensen & Meckling, 1976). The central concern of managers ac-cording to Institutional Economics is to identify actions that minimizecosts of governance, thereby maximizing performance (Combs &Ketchen, 1999). The core argument of this theory is that transactingactors may show opportunistic behavior or bounded rationality, dueto incomplete information, depending on the nature of the transac-tion or interaction. The analysis of the characteristics of the transac-tion, characteristics that impact the potential for opportunisticbehavior and thus potentially raise transaction costs, guides the man-agements' decision on the governance mode: transaction via the mar-ket, vertical integration or some form in between such as contracts orincentives (Williamson, 1985). For PAs acting in complex transportnetworks, consisting of a multitude of nodes and links, under the con-trol of different market actors, TCE seems to be of explaining value forthe introduction of new governance mechanisms (van der Horst & DeLangen, 2008). However, the operationalization of TCE needs a goodunderstanding of the precise unit of analysis (which in standardTCE is the commercial transaction) and the key attributes of theunit of analysis, which can vary in function of explanatory purposes(Williamson, 2008) e.g., considering inter-terminal transport of con-tainers between deep-sea terminals, needed for the formation ofdaily block trains into the hinterland, the unit of analysis is the oper-ational coordination between different activities (vessel scheduling,terminal operations, train scheduling) and different actors (shippers,shipping lines, terminal operators, rail operators, rail infrastructuremanagers). Such a function is highly complex, needing high levels ofoperational coordination between different activities executed by amultitude of actors. The complexity in combination with the potentialdisturbances in the transactions, i.e. container volumes per terminaland per hinterland destination vary in time, might cause operationalcoordination costs to increase beyond acceptable levels for the actorsinvolved, requiring additional coordination mechanisms. As a conse-quence, PA's facing strategic challenges in strengthening intermodalhinterland transport networks have an incentive to reduce suchtransaction costs while increasing transactional value. Taking into ac-count the attributes of the operational transactions, i.e. complexity and




uncertainty, the PA can choose new governance mechanisms that go be-yond leaving it to themarket. Tentative options are enhanced contractingwith the actors involved, introducing a new organization for executingthe function at a neutral base or incorporating the function into theown organization. An illustrative example is the Port of Rotterdamwhere such discussions are taking place. Tentative potential outcomes,clearly changing the strategic scope of Port of Rotterdam, are establishingcooperative agreements between actors involved (including PoR) or theintroduction of a subsidiary company of PoR for inter-terminal transport.This example clearly shows that conceptually the applicability of TCE de-pends on the transaction principle taken (see Williamson, 2008, page15),which in port linked transport networks are generally not ownershiptransfer of goods but goods based transport operations with mutual de-pendency. Therefore, operational coordination costs and risks ratherthan real transaction costs count (see Gulati & Singh, 1998). An interest-ing methodological question is how exactly coordination costs can beexplained and estimated in the context of PA strategies.

4.2. Competence based perspective

The Resource Based View (RBV) argues that topmanagementmakesstrategic choices based on a firm's unique endowments of strategic re-sources.With their unique, valuable and hard to imitate resources or ca-pabilities (Barney, 1991, 2002), firms try to exploit imperfections infactor markets and gain economic rents. The primary goal of the firmaccording to this concept is to create competitive advantage and gaineconomic rents, as well as the ability to create and identify the uniqueand valuable resources or capabilities to achieve this goal. Although rec-ognized as a valuable construct within strategy research, the ResourceBased View is difficult to operationalize. It requires detailed informationon the variables of the construct, which is not readily available, such as:value (e.g., whether the resources provide competitive advantage),rareness (e.g. whether competitors possess it), imitability (e.g. whetherit is costly for competitors to imitate) and organization (e.g., whetherthe firm is organized to exploit the resource) (Barney, 1991). The con-struct of the RBV as such is valuable for PAs. It can for instance beused for explaining the internationalization strategy that some PAs(Rotterdam, Antwerp) are currently developing. Over the years, PAshave invested in the development of assets and competencies that con-tribute to the performance of their port (Coeck, Notteboom, Verbeke, &Winkelmans, 1996). PAs in their basic role try to cover these invest-ments with their two revenue drivers, land rent and port dues, generat-ed by the port area and infrastructure they create andmanage. Buildingan internationalization strategy on such developed resources and capa-bilities potentially expands their revenue base (Port of Rotterdam, an-nual report 2011), giving them a stronger financial position. To furtheroperationalize the Resource Based View as an analytical concept formaking strategic choices at the organizational level requires insight inthe value and uniqueness of the resources and capabilities within PAscontext. An interesting question here is how to define value in the con-text of the PA and to what extent this resembles the notion of valuewithin the traditional private firm domain for which the concept wasdeveloped. Where, in this latter context, value is related to economicvalue and competitive advantage, in the PA context – resemblingmore hybrid forms of organization – value might also incorporate soci-etal needs. Another aspect is that expanding outside the traditional do-main (f.e. by internationalizing) requires additional funds. As most PAsare under public ownership, financial risks are finally taken by thesepublic owners, which is not self-evident and not evenly accepted as inthe private domain (e.g. discussions in the case of the internationalizationstrategy of Rotterdam which raises questions in the political field on therisks and opportunity costs of investing abroad). Thus within a more hy-brid organizational domain the RBVmight need not only reconsiderationof the definition of the output value of its resources incorporating also so-cial values, but also of its input value, incorporating also risks. Clearly,


applying the RBV perspective on the strategic scope analysis of PAs re-quires embedding the analysis in the institutional context of the PA.

From a more evolutionary perspective, i.e. addressing the questionwhat resources and capabilities sustain and deliver real competitiveadvantage over time, the concept of dynamic capabilities providesa valuable analytical approach. The evolutionary perspective on re-sources and capabilities (Pablo, Reay, Dewald, & Casebeer, 2007; Teeceet al., 1997) roots in variation, selection and retention,meaning that com-petitive forces drive the successful exploitation of resources (and thusstrategy content). Capabilities become dynamic as they are developedand renewed to succeed in the competitive exploitation of resourceswithin a particular or changing environment. For a PA, this does notapply in the strict sense, i.e. that retention is achieved via a pure compet-itive process. PAs are subject to competitive pressure, but cannot be easilyreplaced nor could they change by themselves substantively the businesstheymanage (i.e. deploy or transfer their resources and capabilities in an-other industry). Port users can choose for other ports, but this choice willbe subject to other, perhaps stronger, factors than the performance of thePA. Within one single port there is usually no alternative to the PA. Thusthe evolutionary development of resources and capabilities is rather aprocess of developing and keeping what seems to be successful as valu-able resources and capabilities, requiring a stronger focus at the valuationof the organization's resources and capabilities.

4.3. Relational view/business ecosystems

The relational view suggests that the offering will not be the prod-uct of a single firm but be a joint product developed by the alliance orvalue network. Dyer and Singh (1998) argue that a firm's critical re-sources may span firm boundaries and may be embedded in inter-firm resources and routines. The relationship between firms is an in-creasingly important unit of analysis for understanding competitiveadvantage. From a strategy perspective, this same thought is devel-oped by Iansiti and Levien (2004), by drawing a parallel with biologi-cal ecosystems, resulting in the so-called Business Ecosystemsapproach. Central in this concept is the idea that strategy increasinglybecomes the art of managing assets that the one does not own. Firmscan improve the performance of the business ecosystem as a wholeand of the firms that belong to it. The overall goal of a business ecosys-tem is to sustain and prosper in the longer run. To achieve this Iansitiand Levien (2004) put three critical success factors forward. The firstone is productivity, which holds for merely every business. Second isthe robustness of the business network, whichmeans survival if exter-nal or internal shocks occur that seriously threatens the system. Thisdepends on the level of variety in value creating resources and theability to change and adapt. The third critical success factor is the abil-ity to create niches and opportunities for new firms, requiring achange of attitude from protectionist to cooperative. Strategies withinbusiness ecosystems depend on the position and control of strategicassets of the specific firm. Firms at hub positions can contribute posi-tively to a healthy development of the business network. Iansiti andLevien (2004) define this as a keystone strategy. Keystones providefor platforms based on which other firms in the network can build,manage and improve their operations. Keystones can also supportthe connection of network participants to one another.

Port clusters can be considered as business networks in analogywith business ecosystems (van der Lugt, De Langen, & Hagdorn,2007). Various definitions of ports (Bichou & Gray, 2005; De Langen,2004; Notteboom & Winkelmans, 2002; Robinson, 2003) show thatports can be considered as business networks in which the individualcompanies strongly depend on the development of the system as awhole. Second, the strategies that are identified in the business eco-systems approach are clearly relevant for PAs. Landlord PAs do not in-fluence port productivity self-handedly. Private companies providethe transport and logistics operations and supporting services. But,given their role as landlords, PAs are central to the ports business



4 This could also apply in TCE if transactional value is at stake.


network, providing essential assets such as port land, basic infrastruc-ture and nautical access and having a crucial role in the spatial develop-ment of the port. Both from a public as from a commercial perspective,PAs have an incentive to create value for the ports business network andto build their business model on this principle. Strategic questions forPAs from the perspective on this conceptual lens are: How to positivelyinfluence productivity of the port complex?What is the impact of vari-ety in the port complex and how can this be influenced by the PA? Howto stimulate niche creation? A complex issue for PAs is value capture.Any relational rents generated by inter-firm creation of competitive ad-vantage will need to be shared between the participants of the allianceor network. In terms of business ecosystems this suggests that not onlyvalue creation is sought but also value capture. A crucial element inbusiness ecosystems is the control over crucial assets. The main physi-cal3 assets of a PA are its port land and nautical access. The potentialfor developing pricing strategies for both their nautical access as theirland area is restricted by their institutional structure and also by the rel-ative inflexible nature of concession contracts with long durations(Notteboom, 2007b). The impact of the institutional structure withinthe port complex on the strategymaking of the PA from a relational per-spective is an important question.

4.4. Co-evolution

Co-evolutionary theory advanced the strategy research with theview that firms and environments co-evolve (Child, 2009; Lewin &Volberda, 1999). A co-evolutionary perspective focuses on the dy-namic interaction of forces in an organization's environment andthe manner and extent to which its leadership can respond to theseforces. The co-evolutionary theory relates the environment to the in-ternal organization by stating that the strategic renewal of an organi-zation is a result of a co-evolutionary process of managerial intentionand environmental selection (Volberda, 1996). From a network per-spective co-evolutionary theory also throws light into the conditionsof interdependence between actors. It offers the possibility of analyz-ing a given player as part of another's environment and thus to dem-onstrate how the players' interaction evolves over time and what arethe implications of this evolution for their strategic reorientations.Applied to the case of the PA two remarks concerning the actor's attri-butes can be given. In the first place PAs are appointed and to a limit-ed extent subject to market forces: they cannot easily go bankrupt,stressing the underlying principle of selection and retention. SecondPAs are strongly institutionally interrelated with the companies inthe port, but in many cases in different ways (shareholding relation-ship, concessionaire, management contracts). As a consequence, theco-evolutionary process of the joint actors will not follow a fixedroute, but will be influenced by the nature of and dynamics in the in-terrelationship. Illustration to this is the comparison of the interactiveaspect of the hinterland strategies of PA and terminal operator in thetwo ports of Rotterdam and Barcelona. The two cases have shownvery different development paths: Barcelona showing a rather con-vergent interaction process, and Rotterdam showing a more diver-gent interaction process, impacting informal relationships and trustlevels (see van der Lugt, Rodrigues, & van den Berg, 2012).

5. Managerial relevance and further research avenues

In Section 2, we have characterized the PA as an organization com-bining aspects fromprivate and public institutions, as such representinga shared value organization (Porter & Kramer, 2011). Analyzing the po-tential applicability of concepts from strategy research to the case of thePA has learned that there is certainly value in applying such notions, butthat there are a number of elements requiring careful consideration by

3 Other assets are rather non-physical, like regulatory power, knowledge, market in-telligence, human resources.


looking at PAs through the lenses of the various individual strategy re-search streams.

The actor-related attributes of the PA impact the applicability of thetheoretical concepts from strategy research. These concepts certainly doenable a better understanding of the possibility and value of the strate-gies that PAs might develop in dealing with the main strategic issuesthey face. However, the applicability inmost cases asks for a reconsider-ation of their premises. PAs explicitly combine broader societal withnarrow focused economic goals. This alters the notion of value as for ex-ample applied in the RBV.4 The fact that PAs practicallywill not easily gobankrupt (corporatized Port of RotterdamNV for example, has as share-holders the municipality and the state government, which will not eas-ily accept a disappearance of the organization through bankruptcy)impacts theoretical concepts built on the premises of evolutionary pro-cesses, like dynamic capabilities and co-evolution. Selection and reten-tion do not take place at the firm level, but rather at the level of theindividual resources, competencies and routines of the PA.5 To analyzesuch strategies requires specific operationalization of performancemet-rics at a level below the firm level, which in its turn requires the devel-opment of performance data within PAs. The relatively high politicalinfluence,whichmany PAs are still facing, undermines their rational be-havior, which is a core underlying premise ofmany concepts from strat-egy research. This asks for strong embeddedness of the particularstrategic analysis in the institutional context (see Debrie et al., 2013;Ng & Pallis, 2010). In many countries, in fact, especially where the PAis a public entity, the chairman and themain executive positions are di-rectly appointed by politicians. This strong ‘political bias’ often prevailson the technical knowledge and market experience, which should berequired in the selection of PA directors.

Along this line, we have to recognize that PAs act in a stronglynetworked environment with strong interdependence between thePA and the private companies in the port. Neglecting this elementin the analysis of the strategic challenges might provoke strategic de-cisions, leading to conflict situations that work counterproductive,e.g., a PA investing in inland links or inland terminals (Parola &Sciomachen, 2009) where private companies are already active,therewith influencing market positions. The recently formulated co-evolutionary and network approaches are certainly valuable in suchcases, especially when these concepts are combined with the moretraditional strategic concepts in a multidisciplinary way, such as posi-tioning, resources and capabilities, value chain approach and transac-tion costs economics. The limited value capturing possibilities ofPAs impacts the applicability of the business ecosystems approach,e.g., as the case of the Port of Antwerp shows, the role of the PA in in-land terminals is mainly restricted to the supply of human resources(knowhow) in the conception phase of new inland terminal projects(e.g. the Trilogiport project in Liège), or representation at the boardlevel as a representative (e.g. the inland rail terminal of Athus),which might limit value capturing from these strategic actions in thelong term. We also observe the importance of value capturing in theinternational strategies of PAs, where evidence from Antwerp andRotterdam shows that traditional consulting activities to a broadarray of ports are abandoned for more sophisticated arrangements ina limited number of ports, aimed at value capturing in the long term,through strengthening the home base (Dooms et al., in press). Assuch the ecosystems approach is quite valuable in understanding thelogic of an expanded role of the PA in the port similar to the keystonerole as defined in the concept. Pure landlord strategies might not re-sult in a prospering ecosystem as PAs possess the critical assets thatenables them to act as keystones and invest accordingly, e.g., in IT plat-forms or infrastructural platforms where other actors can operate—in a

5 For example, PoR invested together with the container terminal operator end 90'sin inland terminal capacity in Czech and Slovak Republic. This did not bring benefits asexpected, based on which at that time the inland investment activities were reduced.




conditionedway. Applying the concept, however, requires a slightly dif-ferent notion of value, not just related to income and revenues, but alsorelated to more qualitative metrics related to the PA's diverse goals.

Based on our analysis, the different concepts from strategy re-search taken under the perspective of the PA, and the synthesisabove, we can derive a set of interesting research questions for fur-ther research, both for academics as port managers.

First, what is the key transaction principle for PA's in their net-works that guide decisions on new governance mechanisms, e.g. dif-ferent contracts, establishing partnerships, vertical integration? Is it abuyer–seller transaction or rather an operational transaction withouttransfer of ownership (f.e. the transfer of a container from a terminaloperator to a rail operator)? Second, how can transaction value be de-termined incorporating also social values? In the traditional domaintransactional value is merely defined as economic value, neglectingsocietal values that can come with it. Taking a shared value perspec-tive on firms' strategic goals might ask for incorporating also socialvalues within the value analysis of transactions. Third, how can bothinput and output values of resources be determined in a hybrid orga-nizational context? Within the RBV it is valuable resources that arethe building blocks for strategy. If we loosen the premise that valu-able relates to competitive advantage, but place value more in thecontext of a shared value organization how should resources thenbe valued? Fourth, what additional framework is needed to assurethat only valuable competencies sustain over time while selectionand retention processes are limited in the case of a PA? Fifth, howcan the value attribute be further defined so it can be operationalizedfor the case of a shared value organizationwithin a business ecosystemsapproach? A business ecosystem should not only be economicallyhealthy but also from a societal and environmental perspective. Whatmechanisms can be developed to value social values in such a waythat it counts for the performance of the organization, enabling soundbusiness case approaches within the context of prospering a businessecosystem? Sixth, what impact has the specific institutional structureof the PA and its relationship with the port companies on theco-evolutionary process of the strategy of the PA and its environment?

From amanagerial perspective, there are some key characteristics ofPAs that need careful considerationwhile developing its strategic direc-tions. PAsmaintain inmost cases a public ownership structure and pos-sess a natural monopolistic position. Their reasons for existence lay intheir homeport, where their main role is facilitating the private compa-nies such that these companies can contribute most to a competitiveand sustainable development of the port. Their strong interdependencewith the private sector cannot be neglected in their strategy making.Due to their administrative heritage, competencies needed for a moreentrepreneurial behavior might not yet be developed to the full extent,potentially restricting entrepreneurial strategies. In light of the above aninteresting and actual issue is the logic of PAs developing international-ization strategies. Do they have clear and understandable drivers forthis and howdoes it fit their organizational and strategic characteristics,i.e. do they possess the right resources? And finally how do port man-agers formulate strategy? Do their managers think based on RBV, TCE,Business Ecosystems, Co-evolution, when designing strategies? Ordoes a clear gap exist between themanagerial cognition of PAmanagersand the knowledge development in the academic domain? More qual-itative, case-based research as well as quantitative research throughsurveys might provide answers to the above questions and further de-tail the thoughts about strategic management of PAs and port clusters.

6. Conclusion

The aim of this paper is to better understand the PA as an organiza-tion that needs strategic thinking, and to explore the value of existingtheoretical concepts from strategy research for its analysis. Althoughamongst them differing in institutional structure, PAs can be definedas value sharing organizations, combining both private and public


characteristics. PAs show public aspects like ownership and funding,but act in a competitive environment and are increasingly accountablefor their performance, both from an economic and a societal perspec-tive. As a result, they increasingly develop strategic intent. And assuch, they are interesting research entities for the analysis into the use-fulness of theoretical concepts that are developed for strategy analysisin the private towards the hybrid domain, e.g. in the context of theshared value concept as brought up by Porter and Kramer (2011).

Confronting the selected concepts with the strategic issues andthe specific attributes of PAs has learned that using the lenses of strat-egy research perspectives certainly can help in understanding thestrategic directions and positions that PAs choose (or neglect). It hasalso learned that the nature of the PA implies specific conditions oreven a reconsideration of the key premises of the theoretical lenses.

We suggest that the strategic challenges PAs face in their currentoperating environment, also reflect the evolution in strategic manage-ment thinking, whereby more actor-related attributes are added tothe various research frameworks. This evolution loosens the traditionalstrict conditions of profit maximization, rationality and transparency,whereby more integrated concepts like co-evolution and network the-ory gain importance. For the strategy research field in general, we canconclude that PAs as hybrid, shared value organizations are interestingdomain for research, to further develop the concepts that are already inplace for the private-for-profit firm and to strengthen the analyticalbase that is available for research into the strategy of organizations.From amanagerial PA perspective, we conclude that the specific natureof PAs conditions their strategymaking, especially from the perspectiveof the more private, for-profit domain.

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