port authority strategy: beyond the landlord

PORT AUTHORITY STRATEGY: BEYOND THE LANDLORD A CONCEPTUAL APPROACH Drs. Larissa M. VAN DER LUGT Erasmus University Rotterdam, Department of Port, Transport and Regional Economics Burg. Oudlaan 50 3062 PA ROTTERDAM, The Netherlands Tel: +31-104081410, Fax: +31-104081953 e-mail: [email protected] Dr. Peter W. DE LANGEN Erasmus University Rotterdam, Department of Port, Transport and Regional Economics Burg. Oudlaan 50 3062 PA ROTTERDAM, The Netherlands Tel: +31-104081678, Fax: +31-104081953 e-mail: [email protected] Abstract The political, technological and commercial environment of ports is changing. Partly as a consequence, the institutional structure in ports and port authorities are changing as well. Port authorities face new challenges and develop new capabilities. In this paper we analyse port authorities that act predominantly as landlord ports, but increasingly act beyond their pure landlord function. Such port authorities reconsider their core activities in order to reach their goals, both internal ones (e.g. profitability) and external ones (e.g. strengthening port performance). The question we address is what activities are developed by port authorities beyond their landlord function and can we find explanations for why they are doing this? In the first part of the paper we assess the existing literature on the position and role of port authorities and give the main trends that influence the work in this field. This is followed by a structured identification of strategic activities that can be developed on top of the basic landlord activities, illustrated with empirical examples. We then try to find theoretical explanations from strategy research for the engagement of port authorities in these activities. A concluding section finalises the paper.

Keywords: port authority, strategy, coordination, interdependence, resources, capabilities

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PORT AUTHORITY STRATEGY: BEYOND THE LANDLORD A CONCEPTUAL APPROACH

1. INTRODUCTION The fast changing port environment, economically, socially, technologically and institutionally, has put a lot of pressure on port authorities. Port authorities are increasingly redefining their way of acting, the goals that they have to achieve and the – sustainable- way in which they have to do that. Port authorities, just like for-profit organizations develop strategic intent and face a lot of strategic questions. In the academic world not so much research has been done with the port authority as central entity of research. Substantial work has been done on port governance with the role of the port authority resulting from it. Some fragmented contributions specifically reasoning out of the port authority organization are made. In our study we focus on port authorities as organizations acting in a competitive environment, with missions and goals and with a need for strategy making. In order to meet their goals port authorities face the strategic question of what activities to incorporate into the own organization and what activities to leave to other market actors. Some port authorities are engaging in barge or rail terminals within the port, some port authorities are developing and operating real estate in the port, some port authorities provide for port management services in ports abroad. In this paper we elaborate on the fundamental strategic question organizations can have and that also apply to port authorities: what is the strategic scope of activities? We relate this question to the goals that port authorities have. We will come up with a framework for the assessment of the different possibilities that port authorities have in their development of activities beyond their landlord function. The structure of the paper is as follows. We first define the terms port, port authority, landlord port and strategic scope. We then look at what research has already been done related to the strategy of port authorities. Chapter four describes the main trends that influence the strategy making of port authorities. In Chapter four we distinct different types of strategic activities that port authorities might develop, resulting in a framework. For each of the types of activities we give theoretical explanations why port authorities should or should not get involved. We then elaborate shortly on the way in which port authorities can get involved in activities beyond their landlord function. We end with concluding remarks.

2. DEFINITIONS Before we go into the research field of strategy for port authorities we first define the terms port, port authority, landlord port and strategic scope. Port authorities cannot be analysed in isolation. The strategic choices and strategic management options for port authorities are co-determined by port characteristics, such as location, infrastructure both natural as created-, activities, and competitive environment. The definition of the term ‘port’ that is used in this research is derived from Notteboom (2000) and is sufficiently broad to incorporate a wide range of possible strategic issues of PA’s: "The port is a land area with maritime and hinterland access that has developed into a logistics and industrial centre, playing an important role in global industrial and logistics networks". While Notteboom in his definition focuses on the role of a port in logistics networks we extend the definition with the role of ports in industrial networks (see De

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Langen, 2003). The port defined as such is a collection of a diverse set of economic activities. We define the port authority as a landmanager with responsibility for a safe, sustainable and competitive development of the port. The landlord function of a port authority is defined in line with literature on port governance models (Goss, 1990a, Baird, 1999, Worldbank, 2000, Bichou and Gray, 2005, Brooks and Cullinane, 2007) . The landlord function comprises the development, management and control of the port area, including nautical access and port infrastructure, taking into account safety and environmental issues. With strategic scope we mean the set of strategic activities that an organization determines as core activities. Activities can be fully incorporated in the organization or done in some kind of network form.

3. STRATEGIES OF PORT AUTHORITIES: REVIEW OF LITERATURE In literature on port studies not so much can be found on the specific strategy making of port authorities for their own organization. A vast amount of literature focuses on port governance, putting central the question how responsibilities in the port are coordinated: by the market mechanism (private companies) or by some kind of public organization (Goss, 1990, Baird, 1995, 1999, 2000, Worldbank 2000, Baltazar and Brooks, 2001). Resulting models have helped structuring thinking about governance in ports, however they do not cover the complete field that can be found in practice (Brooks and Cullinane, 2007). Although the port authority plays a central role in these port governance models, their functioning is rather a resulting factor. Additional remark that we have on the port governance modeling work is that the responsibilities in the port are analysed individually. The responsibility for integration and coordination of the different functions is left aside. Making use of theories from strategy research, Baltazar and Brooks have developed a matching framework that optimizes the fit between the port’s operating environment, the strategy and the structure of the port, together leading to an optimal performance of the port (Baltazar and Brooks, 2007). It is a conceptual approach, based on configuration theory that tries to incorporate the differing environments of different ports into the approach on port governance (structure and strategy relationship). The framework focuses more at the port level than at the port authority level. In his serial article “Strategies for Port Authorities” Goss (1990d) comes up with four strategies that port authorities can follow. This typology of strategy is actually mainly focused on the way in which port authorities should deal with the involvement of the private sector in the cargo handling function in the port. Strategies are: 1) being a minimalist port authority and letting the private sector be in control of all cargo handling functions, 2) imposing some ad hoc control on the private sector, 3) actively introduce competition by means of well thought concessioning policies, 4) keep everything in public hands. These strategies are a starting point for our work, but need further detail to do justice to the complex question of the strategic scope of port authorities. De Langen (2004) focuses at the governance of the whole port cluster and describes a potential role for a port authority as cluster manager. This role is based on the existence of collective action problems in the port cluster. Analysis shows that the port authority is in the right position to help solving the collective action problems by acting as a cluster manager, and thus developing activities beyond the landlord function. Also at port authority level, Notteboom en Winkelmans (2001) focus on port authorities facing changes in the logistics environment of ports. Their conclusion is that port authorities should adapt in a fast and flexible way and that networking will become a

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central competency in their functioning. Chlomoudis and Pallis (2004) also address the port authority and come up with a ‘smart port authority concept’, in which the port authority takes responsibility for improving interconnectivity and interoperability between private actors in the port. Related to this and in line with Notteboom and Winkelmans they argue that networking should be a key activity of the port authority. Both contributions contain interesting reasoning on the role and activities of port authorities. What is missing is a sound theoretical underpinning or empirical evidence. Besides, how this ‘networking’ can be put in practice is left aside. In another paper, Notteboom (2007) focuses on concession agreements as important port governance tools. The involvement of the private sector into ports has led to concessioning becoming a common practice. Through concession policy port authorities can retain some control on the organization and structure of the supply side of the port market and can encourage port service providers to optimize the use of scarce resources. Notteboom concludes with saying that “the economic analysis and implementation of dynamic terminal concession contracts in ports remains an unexplored study field for maritime economists…” We can say that in the last three decades academics have made valuable contributions to the field of port governance and thereby touching the role of the port authority. Our research adds to the existing research by putting the port authority central and by focusing on its strategic intent and related strategic choices, taking into account that port authorities increasingly are developing into organizations with awareness that they need a clear strategic vision on their own organization.

4. TRENDS AFFECTING PORT AUTHORITY STRATEGIES Before presenting an approach to analyse the strategic scope of port authorities, we first describe the main trends that influence the role of port authorities. The first trend is the ongoing port reform. With the development of ports into landlord ports markets have entered the port era and hierarchical control is reduced strongly. Nowadays, most ports can be classified as landlord ports (Baird, 1999) where a port authority - in most cases with some kind of public character - is responsible for the management and development of the port land and (nautical) infrastructure. Private companies are involved in operational activities in the port such as transport activities (including transshipment), logistics activities and industrial activities. Port reform is still going on, with more ports transforming into landlord ports and with ports transforming into private service ports (Goteborg e.g.). Furthermore, reforms are sometimes under reconsideration: whether to keep or to change again (UK, e.g.). The transformation of ports has not been limited to the restructuring of division of responsibilities between public and private entities. The institutional position of the port authority organization itself has changed in many ports and is expected to change in others. This port authority reform can be classified into three forms: privatisation, corporatisation and commercialization (Verhoeven, 2006). Where privatization of the port authority has only occurred in a few cases (UK), corporatisation is ongoing and commercialization is mentioned in a substantial amount of annual reports of port authorities. This trend means at least that port authorities have increasing awareness of their performance, also from a more commercial perspective. A second relevant development is the extension of port competition towards the hinterland. Both among academics and port practitioners there is increasing awareness that ports do not compete as individual entities, but that it is the performance of the whole port related chain that determines the port choice of the port user (Robinson 2002, Notteboom, 2001, De Langen, 2004). The performance of the port

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is strongly related to the performance of the port related transport and logistics system. Port companies increasingly develop this insight and allocate resources that focus on the improvement of the inland chain. The last trend that we mention that is affecting the strategic behaviour of port authorities is the increasing importance of the so-called ‘licence to operate’. Ports with needs for new developments and expansions are often facing scarcity of land, scarcity of environmental space and also scarcity of public finances. Ports are in a setting that they increasingly have to prove the value of their contribution to the society both in economic as in more social terms. They must operate in an efficient and sustainable way, delivering clear value to the society. Port authorities face questions on how their ports are performing, how they contribute to an optimal performing of the port and how they perform themselves.

5. PA STRATEGIES FOR ACTIVITIES BEYOND THE LANDLORD FUCNTION Before we give explanations for the development of activities beyond the landlord function by port authorities we develop a framework with different types for the strategic activities that port authorities can choose to develop. We first characterize the landlord function. Then we describe the strategic goals that port authorities have, as it is the goals of a firm that forms the base for the strategy. 5.1 The landlord function The primary asset of the ‘landlord’ port authority is the land it owns, with both maritime and hinterland access. Port authorities in most cases are owner of the land inside the borders of the port area (Bichou & Gray, 2005). They rent the land to companies for which a port is an attractive location, i.e. container terminals, dry and liquid bulk terminals, oil refining companies, energy companies. Income flows of port authorities are land rent and port dues. Port authorities aim to maximize land rents and accommodate as much firms on their land as possible. This function is common for most port authorities and is related to its landlord function. What we see now is that quite some port authorities reconsider engaging in activities beyond their landlord function and develop or consider developing more commercial activities, thereby entering the domain of private companies and markets. 5.2 Corporate goals of port authorities As strategy is in the first place related to the corporate goals that a firm has we first define the goals that port authorities have. Based on analysis of about 60 annual reports of port authorities from relatively large multipurpose ports, we derived two main goals that are common to most port authorities: • ‘to facilitate a sustainable 1 economic development of the port as a whole’ ‘to become an efficient and effective organization that generates income to cover • costs, to make investments and -in some cases- to return to shareholders’ investment’. We distinguish these goals as one port (cluster) level goal and one firm level goal (generating income). Both goals are related, but also clearly different. Depending on the governance structure, different PA’s may attach different weights to these two goals: commercialized PA’s may be more interested in the firm level goal, while publicly governed PA’s may focus on the port cluster level goal. Empirical research of Brooks and 1

Sustainable implies that the port should develop in a competitive mode, with minimal negative environmental impact and well integrated with the urban environment. Achieving a sustainable development of the port implicitly means a positive contribution to the regional economy (labour, income, knowledge development, infrastructure development)

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Cullinane (2007) into the strategic intent of ports among 42 ports showed 19 ports having a pure port level goal of, 11 a pure port authority level goal of profit maximization or maximization of return on investment and 11 ports a mixture of these two. Although the sample might be a somewhat small, this illustrates well the existence of the different goals and the different intent of port authorities. The distinction of these two goals is the start for our explanation of the strategic scope of port authorities. As is in line with the concept of corporate strategy, strategic goals in general aim at value creation. Port authorities thus need to create value at two different levels: at the port level and at the port authority level. The logical set of strategic activities needed for the optimal creation of value at port level differs from the logical set of strategic activities needed for creation of value at port authority level. 5.3 Framework for the development of activities beyond the landlord function Port authorities can adopt different strategies to develop activities beyond the landlord. We structure the potential strategic activities along three dimensions. The first dimension is ‘own-port related versus non-own-port related. A port related activity is directly related to the port authority’s own port. Examples are terminal operations, warehousing, inland transport services. If an activity is not port related it means that executing the activity does not directly affect the performance of the own port. Examples are the management of a world trade center building, the provision of international port management services or provision of airport management services. The second dimension is the distinction between ‘primary activities and supporting activities’ of firms. This dimension is based on Porters value chain approach. Firms are not holistic entities but are collections of a set of value adding activities. These activities can be divided into primary activities, e.g. operations, purchasing, logistics, sales and supporting activities, e.g. human resource development, education, technology development/innovation, communication and ICTinfrastructure (Porter, 1985). Port authorities can choose to be actively involved in the provision of the primary activities of these firms, in the supporting activities of the firms or in both. The third dimension is ‘within port borders versus extending to the port’s hinterland’. Port authorities can choose to only be directly involved in activities within their port boundaries or to actively be involved in the hinterland. Table 1 gives the complete overview of directions for the development of the strategic scope.

Table 1 framework of activities beyond the PA’s landlord function Landlord

Management and development of port area including nautical access

Non-own port related activities Beyond the Landlord

Own port related activities

Operational activities

Within port boundaries

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Extending to hinterland

Supporting activities

5.4 Activities beyond the landlord function in practice In practice we see port authorities develop activities on top of their landlord function. Table 2 gives some examples of ports in different parts of the world. The list is certainly not exhaustive, but illustrates the fact that port authorities are developing activities beyond their landlord function and that the developed framework can be used to structure them into different strategic options. Table 2 Empirical examples of PA’s activities beyond their landlord function Activities beyond the landlord

Non-own port related

Own port related

Operational activities

Ports Port of New York and New Jersey

Airport management WTC transportation hub Public transport

Port of Amsterdam Port of Rotterdam Port of Barcelona

Extending to hinterland

Real estate Container barge operations

Port Inland Distribution (terminal) Network Container barge operations California Maritime Studies Centre

Intermodal facilities LA export terminal

Port of LA

Port of Singapore

Within port boundaries

Port Management Consultancy Port consultancy services International port management Sohar World Trade Center building Port Consultancy Services

Supporting activities

Uniform truck driver identification system

California Maritime Studies Centre

Singapore Port Institute Singapore Maritime Academy PortNed (ICT system) Container barge concept Barge planning system

Barge terminals Rail freight connection (Betuweroute) Inland rail terminals/ logistical sites

Port Infolink, Academic centre for TransPORTs Port Promotion council Port Promotion missions Maritime Documentation Centre PortIC (ICT )

6. EXPLANATIONS FROM THEORY We clearly see that port authorities are developing core activities beyond their landlord function and that these activities can be of different nature. What we are looking for in this paper is to give - in a normative way - theory based arguments for these strategies. We structure the explanation for the strategic scope of the port authority along the three dimensions that we used in the framework for the classification of the potential strategic activities.

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Own port related versus non-own port related The first dimension is own port related versus non-own port related. Why would port authorities develop activities that not directly influence the performance of the port for which they are responsible? We find the first argument in the port authorities’ goal of developing into an efficient and effective organization that generates income, to cover costs, make investments and return to shareholders. The reform of port authorities from public organizations into corporatised or sometimes privatized organizations put a stronger pressure on the financial performance of the organization itself. Port authorities on one hand need to focus on their internal organization to be cost efficient and effective, on the other hand to look for opportunities for generating income. These opportunities can be found both from within the organization as outside the organization. Arguing from within the organization brings us at the vast research stream of resources and capabilities. Core of this research stream is that it is the resources and capabilities of an organisation that guides the strategic choice on the entrepreneurial scope of the organization as introduced by penrose in 1957 and further developed by many other scholars (among others, Barney 1999, 2001, Rumelt, 1991 Wernerfelt 1984, Teece, 1997). From this work we derive three perspectives on the relationship between the resources and capabilities: • It is the firm’s valuable, unique and hard to imitate resources that create opportunities for developing markets and achieving positive results. • It is the need for getting available and strengthening resources and capabilities that drives a firm in the development of new activities of new markets. • It is the lack of opportunities, resulting form path dependent developments within, a firm that limits the firm in the development of new core activities. If we relate these three perspectives to the case of the port authority we come to the following arguments for the development of activities outside the own port: Port authorities have over the years invested in the development of assets and competencies that contribute to the performance of the port. Port authorities try to cover these investments with the revenues from land rent and port dues in their aim to result in a financially healthy business. Actively selling their competencies in other potential markets provides port authorities with two potential benefits: • Ex-post: port authorities can generate additional revenue on the investments that they make for the development of the assets and competencies. • Ex-ante: port authorities might develop higher potential to invest because they can increase potential revenues by re-selling the developed assets and competencies. The general globalization trend and the more openness of countries for letting in services of firms from other countries create opportunities also for port authorities to sell their services abroad. An example of this “market development” is provided by the case of PSA. After the division into the Port of Singapore Maritime Board, which is the catual landlord in the port of Singapore and PSA, which is the global commercial terminal operator, PSA also looked at the possibility of exporting its developed capabilities. (Pillai, 2005). Capabilities that were selected are engineering and technical service, management consultancy and construction (supervision process), education and information technology services. The essence of PSA’s service technology is its ability to manage complex port and container development, to provide services of relative high quality and to do this within time frame and budget, according to the joint venture agreements. Concrete products that were developed for export are The second perspective is that port authorities increasingly have the need to develop capabilities and resources within their own organization to face the requirements from the dynamic, globalizing and highly competitive environment in which they operate. They

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can develop their existing capabilities or create new ones by actively develop activities in new places, either by themselves or by teaming up. Research into the relationship between internationalization and performance has showed a positive relationship between these variables, mainly through learning and the development of skills 2. The third perspective is that in their strategic intent port authorities should critically look to the competencies that they have. Port authorities have a history of having been a public organization, embedded in administrative and more bureaucratic procedures. As the development of competencies show path dependency (Teece, 1997) their competencies will be influenced by this former public character of the organization. This constraints the ability to engage in activities for which there is already a competitive market available. Existing firms in such markets already have learned to operate in competitive dynamic environments that continuously require adaptation and development of skills and products or services. Primary activities versus supporting activities Landlord port authorities leave port related commercial activities to the private sector. Port reforms have in general focused at the introduction of private investment in ports and scholars have emphasized that this lead to more efficient and effective ports (..). We however stress the complete withdrawal of port authorities from all port related commercial activities. Our argument is in the need for coordination that exists between the activities of firms related to the port. Coordination is concerned with managing dependencies between activities (Malone and Crowston, 1994). If organizations do not coordinate well, they pay a price in wasted resources (Thompson, 1967). These coordination costs result in higher logistics costs for port users and have a negative impact on the competitive position of the port. The perspective of coordination costs induced by interdependence is empirically researched by Gulati and Singh in their analysis of the different needs for hierarchical control in various forms of alliances (Gulati and Singh, 1998). The authors of the article provide for empirical evidence by analysing a set of alliances. Main finding of their study was that the greater the anticipated coordination costs arising from interdependence associated with a strategic alliance at the time of formation, the more hierarchical the governance structure is needed to be to make it a success. Based on these findings they state that the extent of coordination costs in an alliance partly explains to a large extent the use of particular governance structures. Different sets of coordination mechanisms can be used for effectively and efficiently regulating different types of interdependence between units or activity clusters (Thompson, 1967, Grandori, 1997, Sandller, 1991). Two main types of interdependency can be distinguished: resource dependency and transaction dependency. (Grandori, 1997). Resource or pooled dependency concern situations in which “each partner renders a discrete contribution to the whole and each is supported by the whole” (Gulati and Singh, 1998). It exists when organisations pool their resources to achieve a shared strategic goal, the common benefits arise from combining resources into a shared pool, and each partner uses resources from the shared pool. Firms in a cluster or network show potential resource dependency in their supporting activities. By putting together resources for example for marketing, technology developments, human resource development, firms might find economic benefits. However this ‘collective action’ - even when the collective benefits of co-operation clearly exceed collective costs - in many cases does not arise spontaneously. 2

From work done on the relation between internationalisation and performance it can be concluded that there are positive effects of internationalization on performance, mainly trough the effect of learning and development of capabilities.

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The reasons for this are the risks of free-rider behaviour (Olsen, 2002) or uneven division of benefits related to costs among the participants. Also within ports these collective action problems occur, related to the supporting activities of firms in the port cluster. And it is thus needed that collective action is stimulated or initiated in order to result in positive common benefits. Port authorities are in the right institutional position to create and stimulate collective action (De Langen, 2004). Port authorities can do this by creating platforms that facilitate collective action, or by joint-investment in collective action activities. If activities show real-time mutual dependency, e.g. if firms are linked by various interdependencies and their business is the achievement of an integrated output of a certain quality within a certain time-frame we speak of reciprocal dependency. It occurs when units come together to exchange outputs with each other simultaneously. Each unit must continually anticipate the others output stream and communicate its own production or service schedule to the other. In this case there is a need for coordination mechanisms as interfirm planning, mutual control systems, incentives and penalty systems to deal with failures (Grandori, 1997). The network might look for a contractual form in which a central organisation is assigned both monitoring and some decision making rights. Firm ownership remains independent. If we consider the port related firms, we observe that the primary activities of firms in the port related transport and logistics chains, i.e. terminal handling, transportation, cargo handling and storage, show real time mutual dependency. Service A depends on the output of service B and vice versa: the services need to be connected with each other and a lot of information must be exchanged in real time. Because of this mutual dependency coordination costs arise in port based transport and logistics chains, requiring some kind of hierarchical control to prevail this. Port authorities, with their interest in efficient and effective port related transport and logistics chains are logical actors to put effort in the establishment of coordination mechanisms.

Within port borders or extending to the hinterland Why should a port authority get involved in the hinterland? The answers is in the fact that ports are not competing as sole entities but as parts of complete transport and logistics chains (Notteboom 2005, Notteboom, 2007, Robinson, 2002). Port users are increasingly looking at the performance of the whole chain if they select their port of use. If port authorities express their responsibility for strengthening the performance of the port they cannot neglect the hinterland that is related to the port. A smooth working inland transport system contributes to the performance of the port and is therefore in the interest of the port authority. In addition to this, for their revenue (port dues) port authorities are dependent on the performance of the port and thus also of the port’s inland transport system. For both goals, at port level and at port authority level, port authorities have an interest in the ports’ hinterland. The coordination costs that arise between port related transport and logistics activities do also arise in the hinterland. The different links in the chain, inland transport services, inland terminals, warehouses and other logistics facilities, show mutual dependencies in their operations but have full autonomy and own specific interests. Coordination costs do arise here also. Investments of port authorities in bringing down coordination costs between port related transport and logistics activities by introducing more hierarchical control, should not be limited to port borders.

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7. WAYS OF INVOLVEMENT In the former paragraphs we have developed stylized directions for the strategic scope of port authorities beyond the landlord, comprising different kind of strategic activities and we have tried to give theory based arguments for the involvement of port authorities in these strategic activities. Organisations get the highest hierarchical control over activities by bringing them within the boundaries of their organisation. But besides “ownership”, which we call “change in scope”, for organisations there are other ways of involvement in specific activities. De Langen and Van der Horst (2006) come up with three ways of involvement of organisations in activities that are not completely integrated in the own organisation: • Introduction of incentives; • Alliances/joint ventures; • Creation of collective action. These mechanisms merely build on literature on governance, with work on transaction costs (Williamson, 1996), on agency theory (Jensen and Mecklin, 1976), on collective action theory (Olson, ) and on interfirm alliances (Nooteboom, 1999). But, though derived from theory, these mechanisms are not only theoretical mechanism but are already used in practice. In Table 3 we match these ways of involvement with the different types of core activities that port authorities might develop beyond their landlord function. For each type of core activity we indicate which ways of involvement apply.

Table 3 Strategic scope of port authorities beyond the landlord function Strategic activities

Non-own port related

Own port related

Within port boundaries Ways of involvement Integration Joint venture Alliance/stake Incentives Collective action

Extending to hinterland

Operational activities

Supporting activities

Operational activities

Supporting activities

X X

X X X

X X

X X X

X X

8. CONCLUSIONS In this paper we focused at the fundamental strategic question of port authorities on their strategic scope of activities. Port authorities have goals at two different levels. At port level the goal is mainly to strengthen the sustainable performance of the port. At port authority level the goal is to develop an efficient organization that generates sufficient income to cover costs, to make investments and in some cases to return to shareholders.

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Port authorities do not all have these two goals and besides port authorities give different weights to each of these goals. The existence of the two goals at two different levels complicates the port authority’s decision making on the strategic scope of activities The strategic activities that port authorities can develop beyond their landlord function can be structured along three dimensions. The first dimension is own-port related versus non-own port related, the second dimension is within the port borders versus activities in the port’s hinterland and the third dimension is primary activities versus supporting activities. From a resource and capabilities perspective the involvement of port authorities in activities that not directly relate to their own port can be explained. In the first place, port authorities might have developed valuable resources or competencies that can be exploited or “sold” in the global market, like overall port management, port planning, ICT facilities. Secondly port authorities can strengthen their capabilities by developing activities in other markets. And thirdly, port authorities might face a lack of specific capabilities, due to their background of a public organization and the fact that capabilities develop in a path dependent way, that constraint their possibility for successful development of new activities. The involvement of port authorities in activities that are merely done by the private port industry, e.g. transport, handling, transhipment, storage, industrial activities can be explained from the need for coordination, because of interdependence of the activities. Supporting activities like marketing, human resource development, technology development, communication infrastructure, show resource based interdependence and can benefit from collective action. This collective action does not arise spontaneously and need some kind of coordination mechanism. Port authorities can be involved in establishing these coordination mechanisms thereby enabling collective action to occur. Primary activities like transport, transhipment, handling, storage, show real-rime mutual dependency that without proper coordination result in unnecessary coordination costs, having a negative impact on the competitive position of the port. In bringing coordination costs down by introducing new coordination mechanisms and/or establishing hierarchical control port authorities can play an important role. Port authorities have the incentive to do so and the independent position that is required. Examples are stimulating deep-sea terminal operators to get more involved in the port’s inland chains, creating platforms or independent organisations that focus on getting better coordination in the chain, and introducing incentive-structures for firms in the port’s hinterland transport and logistics systems. The view on the role of port authorities as developed in this paper is still a conceptual one. By applying insights from relevant theoretical streams an explanation is given for the development of activities by port authorities beyond their landlord function. Further empirical analysis on what port authorities are actually doing, what their intent is on their strategic scope of activities and how performances relate to the various strategies that port authorities follow is a next step in getting a better view on the logic behind the role and strategic scope of the modern port authority.

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