The Time Scale of Internationalisation: The Case of The Container Port Industry

Maritime Economics & Logistics, 2007, 9, (1–34)
r 2007 Palgrave Macmillan Ltd All rights reserved. 1479-2931/07 $30.00

www.palgrave-journals.com/mel
The Time Scale of Internationalisation: The

Case of the Container Port Industry
D A N I E L O L I V I E R 1 , F R A N C E S C O PA R O L A 2 , B R I A N S L A C K 3
& J A M E S J WA N G 4
1
Tr a n s p o r t C a n a d a , S t r a t e g i c P o l i c y, 3 3 0 S p a r k s S t r e e t , O t t a w a , O N
K1A 0N5, Canada. E-mail: [email protected] 2Department of Business
Studies and Italian Centre of Excellence for Integrated Logistics,
U n i v e r s i t y o f G e n o a , V i a V i v a l d i 5 , 1 61 2 6 , G e n o a , I t a l y. E - m a i l :
p a r o l a @ e c o n o m i a . u n i g e . i t 3 D e p a r t m e n t o f G e o g r a p h y, C o n c o r d i a
U n i v e r s i t y, 1 4 0 0 d e M a i s o n n e u v e W. , M o n t r e a l , Q C H 3 G 1 M 8 C a n a d a .
E-mail: [email protected] 4University of Hong Kong,
D e p a r t m e n t o f G e o g r a p h y, P o k f u l a m R o a d , H o n g K o n g S A R ,
E-mail: [email protected]
Institutional change of the 1990s in port sectors worldwide has been followed by
the emergence of port investing/operating transnational corporations (TNCs).
Yet the supply of investment opportunities may be diminishing and evidence
suggests the investment time window is closing. Timing thus becomes a critical
component of the internationalisation process of firms. This paper focuses on
temporal aspects of internationalisation. It puts immediate emphasis on Asian
TNCs since – as latecomers – they have grown to dominate the industry. We
perform a longitudinal analysis of TNC behaviour in relation to changes in
domestic and foreign market conditions. Constraints of an institutional nature
facing TNC entry in foreign markets are forcing firms to ‘leapfrog’ some of the
logical sequential phases of internationalisation often assumed by mainstream
theory. The degree of openness of foreign markets still largely dictates both
opportunities and modalities of private entry. Findings suggest that institu-
tional conditions determine to a large extent what strategic choices may be
possible in any given context.
Maritime Economics & Logistics (2007) 9, 1–34.
doi:10.1057/palgrave.mel.9100169
Keywords: Internationalisation; transnational corporations; Asian companies;

international terminal operators; ocean carriers.
D Olivier et al
Time Scale of Internationalisation
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INTRODUCTION
The wave of neo-liberal reforms spreading across the globe has not spared the
port industry. This once geopolitically sensitive resource is now increasingly in
the hands of a rapidly emerging breed of transnational corporations (TNCs).
Indeed, institutional change of the 1990s in port sectors worldwide has been
accompanied by the emergence of port operating TNCs: firms operating
container terminals across various regions, countries or continents. It is difficult
to conceive of an industry that has internationalised as rapidly as the container
terminal industry. The World Bank (2004) reported 209 port projects involving
private participation in developing countries (only) for the period 1990–2003.
That is an average of 1.5 terminal projects opening every month to potential
foreign/private investors.
The rate at which spatial and temporal dynamics of change have occurred
in fact requires a whole new conceptual toolbox to approach this traditional
industry (Olivier and Slack, 2006). Unlike many other industries that now enjoy
advanced stages of internationalisation, worldwide deregulation of the port
sector is still a relatively recent phenomenon. While port studies have to date
tended to be of an inward-looking nature (Olivier and Slack, 2006), a
comparison of how this industry is internationalising becomes imperative in
light of new empirical developments. Are port service TNCs any different from
other breeds of TNCs? When and how have they proceeded to expand their
scope internationally? The paper seeks to confront empirical developments
affecting the global container port industry against mainstream internationa-
lisation theories. It emphasises two components of this process: (1) the
temporal component of internationalisation and its spatial corollaries and (2)
the Asian TNC as a powerful force spearheading the internationalisation drive.
More specifically, we seek to explain how Asian TNCs, as ‘latecomers’, have
come to dominate the global scene.
The paper primarily adopts a binary analytical lens by investigating
institutional conditions of both domestic and foreign markets in which these
new TNCs are evolving. It begins by making an empirical statement about the
recent rise of port-related TNCs and the institutional context behind their ascent.
It then follows with a synoptic review of the internationalisation literature with
particular emphasis on theoretical weaknesses in temporal constructs relating to
firms’ overseas expansion. The remaining analysis confronts theoretical claims in
TNC literature against evidence from the port industry by considering key firm-
specific advantages in their quest for international expansion. It ultimately argues
that constraints of an institutional nature facing TNC entry in foreign markets are
the main obstacle forcing firms to ‘leapfrog’ some of the logical sequential phases
of internationalisation often assumed by mainstream theory.
Maritime Economics & Logistics
D Olivier et al
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T H E E M E R G E N C E O F T H E T E R M I N A L - O P E R AT I N G T N C : T H E
INSTITUTIONAL CONTEXT
Institutional context: temporal aspects of reforms

Ports worldwide have undertaken comprehensive institutional reforms only
relatively recently. In the span of 20 years, the institutional context has shifted
dramatically (Figure 1). Liberalisation schemes under various guises have
translated into a variety of entry opportunities for once local terminal operators
wishing to expand their scope (Olivier, 2005). But the latest waves of port
reforms do not present geographical uniformity. As Figure 2 shows, reform
efforts have been fiercest among developing countries seeing their booming
economies facing severe port capacity constraints and as such these countries
have been most successful in attracting the lion’s share of FDI. Large-scale
privatisation schemes have largely afforded entry possibilities to TNCs by
defining a window of opportunities that opened in the early 1990s and that now
has begun to narrow down (Figure 2). In effect, private participation peaked in
the mid-to-late 1990s. While institutional change is clearly a global trend,
countries may still stand at varying phases of reform, however. Therefore, while
in theory reforms are opening doors for private participation worldwide, in
practice there may still be a wide gap between markets where TNCs wish to
enter and where they actually can do so. But generally speaking, global reforms
are consistent with empirical evidence on the timing of TNC entry in the port
industry.
Therefore, this suggests that the late emergence of TNCs in the port sector is
largely underpinned by shifts in institutional contexts. As such, entry
opportunities for port-related TNCs have remained institutionally defined to a
much greater extent. This is consistent with findings recognising that service
TNCs tend to be submitted to greater regulatory constraints than production
TNCs have until now (O’Farrell et al, 1995; Aharoni and Nachum, 2000). As
such, we argue that institutional change is key to understanding the
internationalisation process and the rise of the port TNC.
Empirical evidence collected over the period 1960–2004 among leading
private operators suggests two general waves of private entry (see Figure 3).
A first wave of early entrants in international terminal operations emerged at
the outset of containerisation and was spearheaded by leading ocean carriers
(ie Sealand, Maersk, APL, P&O Containers), especially those operating the
transpacific routes. This first wave of entry generally occurred under
arrangements known as ‘dedicated terminals’ (Haralambides et al, 2002).
Typically, carriers secured terminal facilities at home ports before investing
overseas. A second and more intense wave begun in the early 1990s following
massive entry opportunities allowed by synchronised port reforms worldwide.

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HK
Taiwan
1980
Private (mainly) container terminal operations.

State port model with a few exceptions (some domestic carriers operated berths in key ports).
Anseatic landlord port model. Leadership of domestic stevedores.
State port model in container terminal operations.
HK
2004
Private investments in container terminals - developing countries (1986-2003: < 1 USD billion).
Private investments in container terminals-eveloping countries(1986-2003: > 1 USD billion).
Early stage of port reform in developed countries.
Advanced stage of port reforin developed countries.
State port model in container terminal operations.
Figure 1: Global changes in the institutional environment of container ports 1980, 2004.
This wave also coincides with the rise of private international terminal
operators (ITOs). In pure chronological terms, entry of ocean carriers in
container terminal business largely predates that of ITOs. Although the earliest
ITOs to invest overseas were not of East Asian origins (eg Eurokai into Lisbon in
D Olivier et al
5
2.500
2.000
1.500
USD million
1.000
500
0
1986 1987 1988 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
East Asia and pacific Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa South Asia Sub-Saharan Africa
Figure 2: Container terminal projects involving private participation, developing countries 1986–2004.
Source: compiled from World Bank PPI database, 2003.
1984, P&OP in Kelang in 1986), yet the latter have rapidly caught up to lead the
global scene.
The rise of transnational operators

Two types of TNCs have emerged in the provision of container terminal
services: the ITOs and the ocean carriers. Together these TNCs controlled 54%
of global container port throughput in 2001 and their market share is expected
to reach 63% by 2007 (Drewry, 2002). It is important to emphasise, however,
that their stakes in terminal operations is qualitatively different in three ways.
First, as Table 1 shows, they enter port operations from different strategic angles
since their core activities are different. Ocean carriers’ recent drive to become
‘total logistics service’ providers means they control a longer segment of the
logistics chain compared to the ITOs and that terminal entry generally serves a
vertical integration strategy. They have thus built their terminal portfolio to
serve a broader, overarching logistical agenda aimed at providing door-to-door
services. The operators on the other hand have expanded in a more horizontal
fashion, through the reproduction of core services at various geographical
locations where investments became possible or lucrative. Entry is typically in
the form of concession and through competitive bidding. Firms as Hutchison
D Olivier et al
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NYK
Leading Asian Carriers
MOL
K Line
Hanjin
HMM
EMC
NOL (APL)
Yang Ming
OOCL
MTL
Leading Asian ITOs
HPH
PSA
NWSP
CMHI
Dubai Ports W.
Sealand Maersk bid in '99

Non-Asian Leading Carriers
Maersk APMT created

APM Terminals
APL taken over by NOL
P&O Ports*
MSC
P&O Nedlloyd
CMA-CGM
No. of projects inaugurated in a single year Location of investment
:1 :2 :3 :>3 :Domestic :Overseas
Figure 3: TNCs’ terminal entry timeline 1960–2004 by year of commencement of operations.

Notes: data from OOCL (5), NYK (2), EMC (1), MTL (1), HPH (2), COSCO (3), CMHI (2), Maersk (1), SeaLand
(2), P&OP (6) missing. * until 1994 P&O port activities were managed by P&O Containers (1960s–1970s
data about Australian and UK ports missing).
Source: compiled by authors from various sources.
Table 1: The logistical extent of ocean carriers versus terminal operators
Entry layer TNC asy Ocean carriers Terminal operators
Transactional entry Port user/customer Yes No

Operational entry Port operator Yes Yes
Equity entry Port investor Yes Yes
Source: Olivier, 2005.
Port Holdings (HPH), PSA Corp., APM Terminals, and P&O Ports have become
leading names. Second, the two types of TNCs have different organisational
features. Often, ocean carriers have terminal operating subsidiaries that operate
D Olivier et al
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select terminals serving their shipping networks. Although in recent years many
carriers have separated their terminal operating arms to create self-standing
companies, such companies usually retain some form of ownership and/or
operational ties to their carriers. By contrast, ITOs tend to provide multi-user
port services. Third, their involvement in port operations and finance dates back
to different periods. Carriers’ entry into terminal operations dates back to the late
1960s as a way to secure trade routes, notably the transpacific. Contrastingly, the
emergence of ITOs is far more recent, essentially unfolding from the early 1990s.
Although both types are considered here as service TNCs, these qualitative
differences should be borne in mind throughout the analysis that follows.
Beyond their qualitative differences, the emergence of port TNCs is
characterised by the strength of East Asian companies. A striking feature of the
contemporary industry is the prevalence of Asian TNCs from Hong Kong,
Singapore, Taiwan and Japan, firms that have emerged to challenge the former
leaders traditionally based in Europe and North America. Early entrants in
container terminal operations were US, Japanese and European ocean carriers
seeking to secure facilities on the trade routes they served. SeaLand, the firm
that pioneered containerisation, became the first carrier to operate its own
container facility in Port Elisabeth in 1962. Since then, the carrier went on to
build one of the world’s largest network of terminals when in 1999 it was
acquired by Danish carrier Maersk to become the carrier with the largest
terminal portfolio. Major Japanese carriers were also early entrants. In 1969,
Japan’s Mitsui O.S.K. Lines and K Line were awarded their first container
facilities at the port of Osaka. Meanwhile, in Europe Danish carrier Maersk was
awarded its first terminal in 1975 in Newark as a gateway to its transatlantic
trade (see also Figure 3).
The Far East is today at the heart of this phenomenon as both prime origin
and destination of port-directed private capital. It is currently host to the world’s
largest container ports and its future capital requirements are estimated to be
three times as large as those of North America, and twice those of Western
Europe (World Bank (2004)). The Far East has thus been a potent breeding
ground for the emergence of TNCs in the port sector and Asian TNCs have come
to prevail (Olivier and Slack, 2006). Table 2 presents a synopsis of the industry’s
leading TNCs and affirms the prevalence of Asian firms. A notable feature of
these Asian TNCs is that all of them belong to recognised organisational forms
proper to Asia: the Japanese keiretsu, the Korean chaebol, the ethnic Chinese
conglomerate, and the state-owned corporation form. Thus, individual firms
entering the port industry often belong to powerful conglomerates with broader
maritime and logistics interests (Olivier, 2005). Their prominence in reshaping
the global port industry provides a rich empirical platform from which to
further our understanding of the Asian TNC.
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Table 2: Leading 20 TNCs in the container terminal industry, 2005
Country of Number of terminal Million

TNC origina projects in operation TEU 2005
1* Hutchison Port Holdingsb Hong Kong 44 51.8

2* APM Terminalsc Denmark 47 42.9
3* PSA Internationalb Singapore 25 40.3
4* China Merchants Holdings Int. Hong Kong 12 24.5
5* P&O Portsd UK 30 23.8
6* COSCO Pacific Hong Kong 20 14.7
7* Dubai Ports Worldc UAE 14 12.9
8* Eurogate/Eurokai Group Germany 12 12.1
9# Evergreen Marine Corp. Taiwan 13 8.7
10# Mediterranean Shipping Co. Switzerland 13 7.8
11* SSA Marine US 11 7.3
12* New World Holdingse Hong Kong 6 5.4
13* Hamburger Hafen LA Germany 7 6.0
14# NOL/APL Singapore 9 5.7
15* Modern Terminals Ltd. Hong Kong 5 5.0
16# Hanjin Shipping South Korea 11 4.9
17# OOCLf Hong Kong 6 4.3
18# NYK Line Japan 11 4.2
19* Dragados Spain 10 3.6
20# CMA-CGM France 7 3.4
a
Hong Kong, Taiwan and China are considered separate political entities.
b
PSA International acquired 20% of Hutchison Port Holdings (HPH) in 2006.
c
APM Terminals figures include former P&O Nedlloyd port network.
d
Dubai Ports World acquired P&O Ports in March 2006. But, in December 2006, the former P&O Ports North
America division (six terminal facilities in the US) was sold by DPW to a US corporation, AIG Global
Investment Group.
e
Data is for 2003.
f
In November 2006 OOIL, parent company of OOCL, sold four of its North American terminals (except the
facility in Long Beach) to the Ontaorio Teachers Pension Fund.
* ¼ ITOs # ¼ Ocean carriers.
Source: Drewry, 2006; company annual reports; authors own database.
T E M P O R A L C O N S T R U C T S I N M A I N S T R E A M I N T E R N AT I O N A L I S AT I O N
THEORIES AND MARITIME STUDIES
Before entering into interpretations of the rapid ascension of TNCs in the

container port industry, a brief overview of TNC literature with particular focus
on temporal aspects of internationalisation is useful. The review is by no means
complete and exhaustive but will nevertheless familiarise the reader with
common temporal constructs in mainstream theory of the TNC.
Leading theories of internationalisation of the firm have generally assumed
linear conceptions of time. The literature has long been dominated by ‘stage’
theories of internationalisation that postulate a logical sequential process of
investment/expansion. The idea of a rationally motivated evolutionary

D Olivier et al
9
sequence was particularly strong among early theories of the 1960s, such as
that of Vernon’s product-life cycle. Some years later, in their influential work,
Johanson and Vahlne (1977) coined the term ‘establishment chain’. Surpris-
ingly, this sequential approach to firm growth has been little challenged for
decades (Bell and Young, 1998). Table 3 illustrates how classical theories of the
TNC assume highly linear constructs of time and space, naturalising ideal-
typical evolutionary pathways of expansion.
While credits for a full-fledge theory of the TNC are usually awarded to
Stephen Hymer (1960), the seminal contribution behind evolutionary phase
theories of international expansion was no doubt that of Raymond Vernon
(1966). The product-life cycle implied that firms internationalise following a
logical sequence based on structural transformations in (1) a given product’s
demand and (2) home versus foreign market conditions. Vernon’s influential
model and its linear temporal assumptions rose to become an enduring
theoretical template (Dicken, 1998).
Such a strong tradition in conceptualising time as a logical and linear
construct feeds on shared assumptions of time and space common to such
models:
(1) Since most of the early TNC theories of international expansion drew on US
manufacturing firms, particular assumptions about US domestic market
structures found their way in the models. Internationalisation systematically
begins through one form or another of overseas export.
(2) A second and related assumption is that domestic production precedes
exporting. It is here that the ‘embeddedness’ argument takes its roots as
through such a sequence TNCs are likely to carry signs of national imprint
as they globalise.
(3) Another common assertion based on Johanson and Vahlne’s (1977)
behavioural concept of ‘psychic distance’ is that firms are likely to engage
in transnational activities closest to their domestic markets. The reason is
that geographical proximity was assumed to imply cultural proximity.
Managers are more likely to succeed in those markets they are linguistically,
psychologically and culturally familiar with.
Surprisingly, linear time constructs of internationalisation have been left

unchallenged for many years and have only been seriously contested based on
emerging empirical evidence (Bell and Young, 1998). An early line of
reconceptualisation came from the very theorists who proposed such linear
constructs. For instance, Johanson and Mattson (1988) proposed a relative
timeframe based on two axes: (1) firm capacity and (2) foreign market structure
(Table 4). Such efforts, by attributing learning curves to both the firm and its
10
Table 3: Various evolutionary models of the internationalisation of firms
Author(s) Model (type) Sequential phases

D Olivier et al
and year
I II III IV V VI
Chandler, NA (evolutionary) Small firms Smaller national Large national Global corporations F F
1962 business business
organisations organisations
KK. Akamatsu, Flying Geese Closely associated KProcess: Import KProcess: Export-led F F
1960s Theory of with product-life substitution production KProcess: reverse
KK. Kojima, Development cycle where KSpace: Japan KSpace: Japan to production where
1970s (1) (evolutionary) products migrate KTime: early 1960s Asia. Production leader begins to
to an innovative relocation to NIEs import from
core (leading begins export-driven
countries) to KTime: late followers
peripheries 1960s–1970s KSpace: Japan’s
(followers). Japan’s industrial structure
‘sunset’ industries upscaling to higher
become Asia’s value goods. Further
‘sunrise’ stages of relocation:
industries. ASEAN, China,
Stage I: Vietnam/India, etc.
KProcess: foreign KTime: 1980s and
import 1990s
KSpace: Japan
KTime: 1950s
postwar
Vernon, Product life-cycle US home-base Locational shift in Europe exports Europe exports LDCs export F
1966 (2) (evolutionary) production exported production sites to LDCs. back to US. back to US
from US to Europe.
US exports to LDCs
Perlmutter The Ethno-Centric ‘Ethno-centric’: ‘Geo-centric’: ‘Poly-centric’: F F F
1969 (3) Firm highly nationalistic de-centralised with highly cosmopolitan,
and increasing degree pluralistic and
centralised of localisation, multi-cultural
controlled locals head approach.
by home HQ. subsidiaries.
Table 3: Continued

and year
I II III IV V VI
Taylor NA (evolutionary) Single plant, single Multi-plant, single Establishment of Inter-regional F F

1975 (4) region enterprise region enterprise inter-regionl sales warehousing and
office production
Johanson and The Inter- Domestic market Export via overseas Establishment of Overseas production F F
Vahlne, 1977 nationalisation focus agents an overseas manufacturing
model (a.k.a. the subsidiary
Uppsala model)
(behavioural)
Håkanson, NA (evolutionary) Single plant firm Penetration of the Overseas sales agent Foreign sales Foreign Concentric
1979 (3) national market (plus horizontal subsidiariy (plus production and con-
diversification in horizontal glomerate
home country) diversification diversification
in home country)
Dunning, OLI eclectic paradigm Low level of Inward investment Inward investment Inward o outward Convergence of F
1979 (evolutionary) development, little increases, export declines while investment, inward and
inward and outward substitution outward increases, production is outward invest-
investment principles labour- transnationalised ment flows from
implemented intensive industries factor endowment

attracted advantages and
internalising
markets
Bartlett and The ‘transnational Multinational firm: Global firm: International firm: Transnational firm: F F
Ghoshal, 1989 solution’ (1) Decentralised (1) Centralised (1) Sources of core (1) dispersed,
(typological) and nationally and globally scaled, competencies interdependent,
self-sufficient, (2) implementing centralised, others and specialised;
D Olivier et al
(2) sensing and parent company decentralised, (2) differentiated
exploiting local strategies, (3) (2) adapting and contributions by
opportunities, knowledge developed leveraging parent national units to
(3) knowledge and retained at the company com- integrated
developed and center petencies, worldwide
retained within (3) knowledge operations;
each unit developed at the (3) knowledge
11
12
Table 3: Continued

D Olivier et al
and year
I II III IV V VI
centre and developed jointly

transferred and shared worldwide
to overseas units
Ohmae, 1990 5-stage globalisation Export orientated Establish overseas Relocating ‘Insiderisation’: Complete global F
model company (develop branches production transferring corporate company:
(evolutionary) strong product base base to key functions from parent establishing
in home market) markets firm HQ to new local global branding
environment
KDiMaggio Organisational Gradual process F F F F F
and Powell, isomorphism/ of homogenisation
1983 Convergence theory of firms as firms
KOrrù et al, (evolutionary) follow leading
1997 ‘best practices’ and
KMarkusen as transnational
and Venables, institutional
1998 environments
converge
(eg the global
trade environ-
ment standardises)
Notes: (1) in Korhonen (1994); (2) from Dicken (1998); (3) in Warner et al. (2004); (4) in Taylor and Thrift (1982).
D Olivier et al
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Table 4: Johanson and Mattson’s space-time frame
Degree of internationalisation of the market
Low High
Degree of internationalisation of the firm

Low The early starter The late starter
High The lonely international The international
Source: Johanson and Mattson (1988).
target markets, have introduced more complex conceptualisations of time–

space components of international expansion.
A more substantial theoretical turn has come from the recent convergence–
divergence debate (Table 3). Leader/follower models of the late 1970s raised
deeper questions of possible convergence among corporate practices, gravitat-
ing around a model of ‘best practice’. The debate surrounding evolution of firms
towards standard ‘optimal’ forms was originally framed within an institutional
context by American sociologists in the late 1970s and early 1980s, but was
revived more recently in geographical economics circles. For instance, Orrù et al
(1997) discussed the notion of corporate ‘isomorphism’ in sociological context,
to depict organisational traits shared by those TNCs of similar institutional
backgrounds. Meanwhile, economists have preferred anchoring convergence
themes in international trade theory and the effects of global trade deregulation
(Markusen and Venables, 1998). It is suggested that TNCs over time adjust their
strategies and governance structures based on institutional requirements that in
the medium to long term would result in TNCs converging in organisational
forms. It may be noted, the convergence hypothesis only reaffirms linear-
sequential narratives of TNC activity.
A further stream of studies that contest the time–space rigidities of
positivist theories of internationalisation are those drawing on the rise of TNCs
from emerging economies. Such studies are particularly relevant given (1) the
phenomenal rise of Asian TNCs and (2) their status as relative latecomers in
several industries. Yeung (1999) and Dicken and Yeung (1999) argued that
Asian TNCs internationalise following a logic of their own. Unlike their Western
counterparts their scope has remained to date largely regional. Li (2003) argues
that as latecomers, Asian TNCs have developed an unsurpassed capacity to
‘leapfrog’ traditional phases of internationalisation in order to remain
competitive. It is further argued that since Asian TNCs (except Japan) have
not followed the same time horizon as their Western counterparts in their
penetration of foreign markets, this resulted in different patterns of spatial
outreach. More importantly, the idea that firms may reach success at varying
D Olivier et al
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stages of the evolutionary/growth curve has much merit as an alternative to

sequential-linear temporal logics. Warner et al (2004) have made a similar
argument in a plea to acknowledge the ‘late development’ status of emerging
PRC firms. They give examples of PRC firms adopting non-sequential pathways
of internationalisation, notably in their geographical spread, managerial
reforms and technology transfers. PRC firms have increasingly resorted to
M&As as means of ‘leapfrogging’. Given a lack of systematic empirical evidence
stretching across a variety of industries, such approaches provide a compelling
argument for embedding spatial strategy in a more explicit temporal argument.
Finally, another important factor to consider in timing of internationalisa-
tion refers to the nature of the firm’s activity per se. The rapid rise of service
TNCs has given rise to an enlargement of the debate on the spatiality of TNCs.
Some scholars have gone to great length to argue that the expansion logic of
service TNCs differs from those of manufacturing TNCs, upon which a great
deal of classical theory is based (Dicken, 1998). For example, O’Farrell et al
(1995) have made a strong case for differentiation between service and
manufacturing TNCs with implications on expansion strategy: service TNCs
must be more responsive to their host environment, service customisation
requires greater local commitment, and service TNCs usually have a wider
range of entry modes in foreign markets. The port-operating TNC may be
conceived as of the service type.
In the ports industry literature, attempts to account for the spatio-temporal
evolution of global terminal networks remain superficial. Peters (2001, p. 18)
first identified three ‘waves’ of international private investment supported by
examples:
(1) The first operators to expand operations on a geographical basis: for
example P&O Ports, HPH.
(2) A second wave of operators to expand internationally: for example PSA
Corp., Eurogate, CSXWT.
(3) Major ocean carriers as terminal investors: for example Maersk.
A similar typology was described by Midoro et al (2005). By placing ocean
carriers as a last wave, Peters’ typology is somewhat confusing in its
chronology. In fact, ocean carriers’ entry into international container terminal
operations (wave 3) considerably predated those of ‘pure’ terminal operators
(waves 1 and 2). Indeed, while ocean carriers’ very first carrier-operated
terminal/berths (COT/Bs) date as far back as the 1960s, operators’ first foray
into overseas ventures only appeared in the mid-1980s (see Figure 3).
The leader/follower dichotomy has been a more common way to present
the time component of internationalisation among maritime economists. Ferrari
and Benacchio (2000) have proposed a similar yet simpler approach based on
D Olivier et al
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Stackelberg’s model of oligopolistic equilibrium, which assumes a dichotomist

leader/follower distinction in strategy. Hawkins and Gray (2001) also embrace
the leader/follower dichotomy in discussing Asian ocean carriers’ global
strategies (of which terminal strategy is systematically neglected throughout,
however). While these approaches may have been useful in the very early
stages of internationalisation, their rather simple dichotomist formulations fall
short of providing a satisfactory picture of spatio-temporal horizons of TNCs.
They lack an explicitly dynamic character. For instance, they are of little use to
explain why ‘latecomers’ (ie followers) may eventually rise to become global
market leaders.
In sum, most interesting is how such stage theories of expansion set the
scene for the problem of latecomers: if internationalisation proceeds through
logical sequences, then how have latecomers managed to catch up with early
entrants? Four key points have remained constant throughout the years in the
internationalisation literature and may hold the answer: (1) locational aspects,
particularly the role of home markets in relation to firms’ internationalisation
drive, (2) organisational aspects of expansion, (3) financial viability of business
strategies and (4) the timing of overseas investment. Each of these four aspects
shall be treated independently in the following sections, based on empirical
evidence from the port industry.
F I R M - S P E C I F I C A D VA N TA G E S A N D T H E T I M I N G O F
I N T E R N AT I O N A L I S AT I O N
Spatial aspects of internationalisation: the home market factor

Concerning the locational logic of overseas expansion, the port-entering TNC
may be considered a service TNC on grounds that transport demand is
essentially an integrated demand: transport services have become an inherent
part of global production systems. For example, speaking of the company’s
latest investments into neighbouring Shenzhen ports, Hong Kong’s HPH MD
stated: ‘in line with the forces of a free market, Hong Kong operators have
followed the migration of manufacturers into China. We simply follow the
market. The factories are now in southern China and shippers naturally want to
move their goods the shortest distance possible. (y) The manufacturers have
left Hong Kong and it is only natural that port operators follow them.’ (Shippers
Today, 2004, p. 20)
More specifically, the locational logic of TNCs will depend on the role
terminals play within their general business strategy. Since carriers do not
have terminal operations as core competence, their geographical entry is
more subservient to their shipping networks. Indeed, while the above
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‘follow-the-market’ spatial logic generally holds true, recent trends in the last
decade in transhipment are blurring the picture. Ocean carriers have in recent
years increased their interests over terminal operations in order to stabilise their
stevedoring costs and to preserve schedule reliability (Midoro et al, 2005).
While in the past, ports relied on a tight relation with their hinterlands as their
traditional sources of cargo, growth in transhipment activity has tended to
spatially dislocate port facilities from their cargo sources. New generation
transhipment hubs have arisen as intermediary cargo transfer points of global
outreach: privately invested ports of massive proportions have emerged in the
oddest of locations. This is because transhipment platforms are increasingly the
result of decisions of individual carriers’ network architecture. From an ITO’s
standpoint, transhipment traffic represents a higher risk investment since the
cargo is transient and can be relocated to competing ports as a result of
decisions made by carriers.
The role of home markets has been decisive within both ITOs and ocean
carriers’ internationalisation drive, albeit in different respects. All Asian
carriers1 except OOCL (Hong Kong) and Hanjin (Korea) have invested in
domestic terminals as their first and original terminal projects (Figure 3). Hanjin
has invested in overseas projects before turning to domestic terminals due to
belated reforms in South Korea’s port sector. In fact, OOCL is the only Asian
carrier to date with a 100% foreign terminal portfolio due to restrictive policies
in Hong Kong, disallowing carrier-operated facilities. Developmental state
maritime policies in East Asian countries have generally backed the emergence
of young national carriers in support of their booming export trades. One of
such policy was to allow national carriers to operate their own marine facilities
at key domestic ports. Originally, such policies enabled carriers to secure
market share on key trade routes and later to become a central instrument
serving door-to-door logistics ambitions. The notion of home port here
takes its meaning as a base from which carriers devised their service networks.
Home ports also play a structural role as logistics poles around which
complementary activities are organised, such as inland container depots (ICDs),
warehousing, trucking, container flow management and other value-adding
services.
However, the home market argument becomes more interesting in the case
of ITOs. The drive for globalisation among the TNCs has arguably been
strongest among the two city-states of Hong Kong and Singapore, both small
and contained markets. The question of home markets has been recently
discussed (albeit indirectly) in relation to Hayuth’s (1981) famous port
periphery challenge whereby local private operators have crossed borders
and invested in nearby facilities (Airriess, 2001; Slack and Wang, 2003). It
is no coincidence that the top two global leaders have their origins in small
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Table 5: Domestic throughput as share of total throughput of leading Asian ITOs, 2004
International terminal Domestic throughput Domestic as

operator 2004 (M TEU) share of total (%)
Hutchison port holdings 7.5 16

PSA Corp. 20.6 62
Cosco Pacifica 1.8 8
China Merchants Holdings Intla 4.4 34
New World Holdings 1.1 39
Modern Terminals Ltd. 4.4 56
CSX World Terminalsb n/a n/a
a
Figures for the two companies can be misleading since they are ‘red chip’ companies: mainland-
originating companies incorporated and listed in Hong Kong with controlling Chinese shareholders. Most
of their operations are located in the mainland though they are headquartered in Hong Kong.
b
CSXWT was headquartered in the US although most of its business is generated in the Far East and South
America until in December 2004 it was acquired by UAE’s DPW and underwent a change in ownership.
Source: company annual reports.
island-state markets. Leading operators have heavily invested in ‘backyard’

markets of the Pearl River Delta (Hong Kong) and Laem Chabang (Singapore).
Quantitatively, home ports still play a considerable role in firms’ overall
portfolio. Table 5 shows home operations accounted for an average of 36% of
total portfolio in 2004 among ITOs. Striking are the differences between the two
world leaders, HPH and PSA. In spite of its dominant market share at home,
HPH’s domestic share stands at 16%, evidence of a truly international portfolio.
By contrast that of PSA stood at 62%. Qualitatively, such figures conceal
oligarchic market structures at home. HPH enjoys a duopolistic position in
Hong Kong, while PSA is a virtual monopoly in Singapore, a situation that
somewhat distorts the figures. Indeed, domestic market saturation is a prime
factor behind internationalisation in both city-states. Both Hong Kong and
Singapore have operated at near-capacity levels for some time, especially in
Hong Kong following delays in additional facilities since the early 1990s which
have forced local operators to look to technology to boost capacity (Giron-
Urquiola, 2004). Internationalisation is to be understood as a risk-reducing
approach to limit over-reliance on domestic operations but also as a means to
weather global economic instability. After all, ports and container shipping are
highly sensitive to global trade. This is particularly true in the case of firms
specialising in the highly transient transhipment business, as PSA’s Vincent Lim
(deputy president IBD) in the aftermath of the Asian financial crisis was quoted
as saying: ‘We now have a global portfolio of ports in different countries and
regions. This diversity is very helpful, especially given the recession situation in
the South East Asia region right now’ (Woodbridge, 2002, p. 87).
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In strategic terms, leveraging on a strong home base, the leading operators

have established sound performance records at home, which establishes
credibility and further facilitates foreign penetration. Also, they have erected
global marketing campaigns around long lists of prestigious performance
awards received at home ports. International operators rely heavily on proven
domestic track records to regulate their contacts/contracts with international
customers and enhance their bargaining power. Home ports have also acted as a
platform for R&D and technology implementation in the case of Asian ITOs.
Leading ITOs have developed, tried and tested such IT-based tools as electronic
data interface (EDI) and sophisticated yard management systems at their home
port before exporting them to their foreign operations. Hutchison’s LINE is an
example of how TNCs first devise home-grown technologies before exporting
them to foreign markets (Olivier, 2005).
On the other hand, increasing M&A activity and geographical complexity of
TNCs makes a straightforward interpretation of the notions of geographical and
psychic distances, as posited by early internationalisation theories, uneasy.
While theoretically valid, the psychic distance factor is in reality far more
complex to address. Today’s TNCs spatial complexity means many cases fall
into a ‘grey area’ when it comes to defining TNCs geographical and cultural
identity.
A notorious example is Hong Kong’s red chip firms: mainland-based
conglomerates establishing self-standing listed firms on the Hong Kong stock
exchange from where they manage their international operations. Several of
their ‘overseas’ projects actually consist in reinvestments into the mainland!
Another example relates to hybrid management structures, a case in point being
world leader HPH. HPH’s first overseas investment was UK’s Felixstowe (1991–
1992), followed by Zhuhai (1992–1993) and Shanghai (1992–1993). Since
Hutchison is the result of a British hong acquired by indigenous Chinese
interests in the 1970s, it has a hybrid management composition: while the
group’s ethnic Chinese chairman and his unmatched business acumen for
penetrating China has been a strong firm-specific advantage, port activities are
still managed by a pre-takeover British management. Evidence from the port
industry suggests neither temporal nor spatial constructs of internationalisation
processes follow a clear-cut pattern of linear outwards investment from the
home base. In this case, both the UK and China may be considered familiar
markets in terms of psychic distance.
Organisational aspects of internationalisation

While ocean carriers have been quickest to seize investment opportunities in
container terminals, their entry precedes deeper organisational change. It was
only in the early 1990s that carriers reorganised their structure to reflect deeper
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commitments to terminal operations and logistics. This reorganisation period

coincided with the rise of ITOs, thereby entering into a new era of competition
over terminal resources. Thus, carriers’ structural changes should be
interpreted as a competitive response to a general shift in the global
marketplace. Mega-carriers began establishing ‘port divisions’ to oversee a
growing number of terminal-operating subsidiaries. General entry into
terminals and inland services soon gave way to self-standing logistics branches.
APL was among the first carriers to establish a fully separate logistics entity in
1997. Other carriers such as P&O Containers (in 1994), COSCO (in 1994), China
Shipping Container Lines (in 1998) and Maersk SeaLand (in 2001) have
followed a different path by separating their terminal activities into discreet
business units to sharpen business focus (Olivier, 2005).
But it is essentially those TNCs which have created structures optimising a
chain consisting of identifying entry opportunities, researching their feasibility,
devising tenders and negotiating entry that have most successfully outpaced
their rivals, something at which leading ITOs excel. The case of Hutchison
Whampoa Ltd.’s (HWL) Hutchison Port Holdings (HPH) illustrates this point.
The company has displayed the most intensive rate of internationalisation
among all the firms (Table 2 and Figure 3). Hutchison’s commitment to
internationalisation has been accompanied by substantial organisational
changes (Table 6). In recent years, its commitment to IT becomes clear (Olivier,
2005).
But more importantly, HPH’s success lies in its capacity to maintain lean
structures and rapid decision-making channels. The ‘flat’ management
structure favoured by ethnic Chinese firms is famous for yielding time-sensitive
response to market opportunities by such means as centralising decision power
around its patriarch (and heir), rapid access to capital, and minimalist
accounting (Redding, 1990; EAAU, 1995; Ahlstrom et al, 2004). Moreover,
unlike other ethnic Chinese competitors, HPH has a simpler and more
Table 6: The process of transformation: Hutchison Port Holdings
Year Organisational adjustment
1866 Hong Kong and Whampoa Dock Co. founded as a British hong
1971 Hutchison International Terminals established and begins operation at Kwai Chung in 1976
1979 Takeover of HWL by Li Ka-shing’s Cheung Kong Holdings
1991 Internationalisation begins : first overseas terminal project in Felixstowe
1991/2 Hutchison Westports Ltd. Established
1992/3 Close to home: first terminal projects in mainland China (Zhuhai, Shanghai)
1994 Hutchison Port Holdings established to oversee all HWL’s port business
1994 Hutchison Delta Ports established as one of HPH’s leading subsidiary
2000 Creation of IT subsidiary LINE (exportable EDI platform)

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centralised shareholding and decision-making structure allowing swift entry

decisions. This form of organisation has enabled HPH to seize opportunities, as
its MD reports: ‘Our chairman works extremely fast. All our acquisitions can be
fast-tracked in a matter of minutes. We have very little bureaucracy at HPH.
That is the advantage of having a single, strong shareholder. There are some
groups which are pretty bureaucratic and so unable to react as quickly’ (Ion,
2002, p. 13). Even rival firms have acknowledged HPH’s organisational
strength. In the beginning of HPH’s international drive in the early 1990s, Mark
Leese, then Modern Terminals’ MD, was quoted as saying: ‘What drives HIT is
very different to the philosophy at MTL. To start with they have one corporate
parent (Hutchison Whampoa) whereas we are a group of several stockholders.
Our management tends to be more conservative’ (Fossey, 1993, p. 93).
Corporate governance is clearly at work in a firm’s decision to go international.
Organisational architectures also carry financial implications, for instance
in the way of conglomeration. In the first half of 2000, AsiaWeek2 ranked HWL
as the world’s most profitable company, with more available cashflow for large-
scale investments than firms like Microsoft or Intel. In addition to high levels of
cashflow, rapid external capital sourcing is also guaranteed by the chairman’s
position in key financial institutions. Li also chairs HWL’s parent (50%) Cheung
Kong Holdings, sits as board member of Hong Kong’s HSBC, and long owned a
15% stake in Canada’s CIBC.3 Another reason why HWL can fast-track projects
relates to the chairman’s political contacts with Beijing (Hiscock, 1997; Kraar,
1999; Polin, 2000), an important firm-specific advantage given 40% of HPH’s
terminal portfolio is in China.
Overcoming latecomer status: financial strength of TNCs

Financial dispositions of firms became critical in their ability to seize overseas
opportunities as they open, especially when openings are highly time-sensitive.
Financial capabilities is a powerful explanatory factor in understanding (1)
financial strength as a key resource necessary for building terminal networks
and (2) how operators devise their networks versus carriers. Table 7 exposes
financial performance of the TNCs: a sharp contrast exists between operators
and carriers in profitability and overall financial sustainability.
First, the magnitude of sunk costs in terminal projects is such that original
capital investments easily reach hundreds of millions of dollars per single firm
per year. Second, the financial requirements of R&D provides a competitive
advantage to the largest and most financially sound firms in winning
competitive bids for project entry. A single project bid alone may cost as much
as US$ 300,000 (Drewry, 1998) with no guarantees of winning, which makes it
very difficult for smaller or less financially able firms to compete in the entry
process. Market leaders like HPH and PSA Corp. are concurrently considering as
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Table 7: Financial sustainability among leading Asian TNCs, 2000–2004
Average yearly profit

Industry TNC margin 2000–2004 (%)
Operatorsa HPH 32.8

PSA Corp. 34.7
COSCO Pacific 48.3
CMHI 22.3
NWSHb 17.1
MTL 54.9
CSXWTc 30.5
Average operators 34.4
Carriersd NYK 4.7

MOL 3.8
K Line 3.2
HMM 0.7
Hanjin 4.7
NOL/APL 7.5
OOCLe 9.4
Evergreen 3.4
Yang Ming 5.0
Average carriers 4.7
a
Data is for fiscal year 2004 only.
b
Revenue data available for the group only, including service, infrastructure and ports; disaggregated
terminals data unavailable.
c
Data is for 2003 since the company was taken over at the end of 2004.
d
Carriers figures are for the company as a whole and not just terminal operations.
e
Data is for Orient Overseas International Ltd. Group of which OOCL is the majority revenue earner.
Source: company annual reports.
many as 20 individual projects at any given time (Woodbridge, 2002). Third,

many carriers still perceive terminal activities as cost centres against profit
centres in the case of operators. Excessive investments in newbuilds by carriers
in the past have led to chronic over-capacity in the shipping industry. While
most mega-carriers still manage terminals internally, lack of financial resources
may be an important reason why more carriers are eager to separate logistics
and port divisions from core activity. International operators’ financial
resources on the other hand are more easily redirected into horizontal
expansion (ie assets and supporting functions as IT and R&D), given their
greater business focus or lesser involvement into other vertical segments of the
transport chain.
Fourth, M&As have been a common form of terminal entry, allowing firms
to instantaneously leapfrog progressive entry. This point deserves attention as
M&As have been prolific in the maritime industry in recent years and they have
been led overwhelmingly by Asian firms (Table 8). Notable examples include
Singapore’s NOL taking over established US carrier APL and its terminal
22
Table 8: Major M&As marking the container port industry, 1997–2004
Acquirer/firm A Acquired/firm B Type Resulting firm Date of Sum involved No. of terminal

D Olivier et al
M/A ($US million) projects involved
Neptune Orient American A APL 1997 825 8

Lines President Lines
Eurokai Bremen Lagerhaus M Eurogate 1999 Undisclosed 10
Gesellschaft (BLG)
Eurogate Holding Contship Italia Eurogate 34% Acquirer’s subsidiary 1999 Undisclosed 6
Eurokai 66%
Maersk Line SeaLand A Maersk SeaLand, CSX 1999 800 29 of which 13
Lines, CSX Intermodal under CSXWT
and CSX World
Terminals
P&O Ports International A Acquirer’s subsidiary 1999 93 17
Terminal Operat-
ing Co. (US)
Hesse Natie Noord Natie M Hesse Noord Natie 2001 Undisclosed 22
Hutchison Port Europe Combined A Acquirer’s subsidiary 2001 Undisclosed 4
Holdings Terminals B.V.
Hutchison Port International A Absorbed into 2001 Undisclosed 8
Holdings business division HPH’s portfolio
of ICTSI
PSA Corp. Hesse Noord Natie A Acquirer’s subsidiary May 2002 717 22
Nippon Yusen Ceres Terminals A Acquirer’s subsidiary October 9
Kaisha 2002
CMA-CGM and EGIS Ports S.A. A Portsynergy France S.A. July 2003 Undisclosed 3
P&O Ports
P&O Ports Canadian A Acquirer’s subsidiary January 80.5 17
Stevedoring 2003
Dubai Ports World CSXWT A Acquirer’s subsidiary December 1,150 12
2004
Total 171
Source: compiled from various sources.
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portfolio, NYK’s acquisition of Ceres Terminals in 2002; and Dubai Ports

World’s acquisition of CSXWT in late 2004. Such acquisitions have allowed
these firms to make tremendous leaps in the global operators league. When
DPW acquired CSXWT’s portfolio in late 2004, it jumped from 9th to 6th largest
global operator. Much controversy has been stirred over M&A activities
stemming from East Asian leaders’ financial strength. In the early 2000s, Hong
Kong’s HPH acquired Europe’s largest operator: Rotterdam-based ECT. The case
became high profiled and was even taken to the European Commission. The
same year, Singapore’s PSA acquired established Belgian operator HNN.
Interestingly, these ethnic Chinese firms have reverted to more ‘hostile’ (ie
acquisition) forms of entry to consolidate their horizontal expansion in the
highly competitive and mature European market.
Fifth and more closely relating to temporal aspects of investments, the
institutionally defined window of investment opportunities has tended to
favour those firms well poised financially, as highlighted by one of the carriers’
terminal division manager interviewed:
ywe may have lost our timing but we will do our best to make some
partnership, or invest our independent capital to secure terminal facilities.
This is our goal right now. Hutchison, PSA and other global terminal
operators are gathering every terminal right now. They do not care – or I do
not know whether they care or not – regardless of some demands of
terminal volume, they are gathering more facilities worldwide [sic] [they are
securing terminal space for the future]. Even Ensenada in Mexico.
Ensenada is very.[laughs]ythere is only sand (corporate interviews, 2004).
Reference is made here to HPH’s acquisition in 2001 of Ensenada’s Terminal
de Usos Múltiples, a small border port serving Western Mexico. At the time,
Ensenada was little more than a small resort outpost and the deal seemed a
priori senseless to many analysts. It is only a few years later, early 2005, that
HPH announced it would pour US$ 1.2 billion into the facility to build-up the
terminal as an alternative to bottlenecked Los Angeles-Long Beach. The long
term aim is to transform Ensenada into a North American West Coast Asia-
Pacific gateway (Flynn, 2005). This makes a strong point in relation to timing of
investments as fractions of a company’s portfolio may be dormant: opportunity-
seizing investments may conceal latent strategies.
On the other hand, limited investment opportunities conjugated with strong
financial positions have also led to adverse effects of over-investment. Portfolio
risk followed for firms having over-invested in the face of limited opportunity
windows to secure overseas ventures. While the leading powerful firms were
the quickest to seize the top opportunities, the resulting investment sprint did
not benefit all as some firms have over-invested and built-up portfolios beyond

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their management competence. Philippines’ International Container Terminal

Services Inc.’s (ICTSI) is a case in point. The company began building its
portfolio in the late 1980s at a frenetic pace only to become financially troubled
in the late 1990s. The sale of its IBD to HPH in 2001 is the result of a portfolio
having reached beyond the firm’s managerial capacity combined with failure at
key projects in South America.
Leapfrogging and logistical strategies

It has already been mentioned how leading ITOs have turned to M&As to
‘leapfrog’ an otherwise linear and sequential logic of international expansion.
Ocean carriers have also undertaken investments suggesting some form of
leapfrogging, albeit within the logic of logistics chains. The linear-sequential
logic of internationalisation would suggest firms expand or diversify from their
core specialty outwards. Ocean carriers’ core operation is the provision of
shipping services. In their pursuit of door-to-door logistics, ocean carriers have
generally followed a landward motion from blue water operations to agencies,
to terminals, to warehousing and trucking. This has been a landmark of
intermodal developments on the USWC, for instance. However, while in theory
this logical succession of investments has been observed and is consistent with
sequential theories of internationalisation reviewed above, in practice many
carriers face institutional barriers to the realisation of such idealised logistical
sequences.
The case of China illustrates this point. China is a key market which several
foreign operators have been long keen on penetrating but have been facing a
number of obstacles to entry that have forced strategic adjustments. In fact, as
reforms are still ongoing and selective, only a handful of foreign firms have
entered China’s container terminal business (Wang et al, 2004). In principle,
foreign ocean carriers wishing to engage in intermodal or logistics activities in
China are required to do so under the joint venture (JV) format with local firms
by law. In practice, however, foreign carriers are yet to be allowed operational
rights to marine terminals. Being denied marine terminal space, other TNCs
have had to resort to other means to establish logistical connections in order to
serve this market and connect with local shippers. This peculiar setting has
resulted in the fact that firms like OOCL, Evergreen and Hanjin have managed to
elaborate networks of ICDs, trucking and various other intermodal services
while having no marine terminal base to work from, unlike their other foreign
ventures.
Hanjin Shipping is a case in point. Table 9 presents the chronology of the
company’s terminal portfolio. First, a striking feature is that Hanjin heavily
invested overseas before investing at home. It first invested in the US and had to
wait some 12 years before its first domestic terminal. Owing to investment
Table 9: Chronology of Hanjin Shipping’s international terminal portfolio
Marine Terminal (MT) or Domestic (D) Year started

Country/port Terminal project Inland Container Depot (ICD) or overseas (O) operation/invested
1 USA/Seattle Terminal 46: Total Terminals International LLC MT O 1986

2 USA/Long Beach Pier T: Total Terminals International LLC MT O 1991
3 Japan/Osaka Terminal C-1: Tatsumi Shokai Co. MT O 1992
4 Japan/Tokyo Aomi A-3: Mitsui Soko & Nippon Express Co. MT O 1994
5 PRC/Tianjin Huahan (Tianjin) Container Co. Ltd. ICD O 1994
6 PRC/Dalian Dalian Hantong Logistics Co. Ltd. ICD O 1995
7 PRC/Qingdao Shandong Hanjin Logistics Co. ICD O 1995
8 PRC/Shanghai Shanghai Hanjin Freight & Transport Co. ICD O 1997
9 South Korea/Busan Busan Gamcheon CT: Hanjin Shipping MT D 1998
10 South Korea/Busan Hanjin Shipping Gamman CT: Hanjin Shipping MT D 1998
11 Kaohsiung/Taiwan T5 berth 78: Hanjin Taiwan Logistics Co. Ltd. MT O 1998
12 Germany/Hamburg Berth 6: through Eurogate MT O 1998

13 Thailand/Lat Krabang Lat Krabang inland depot (Module 5E) ICD O 1998
14 South Korea/Busan Busan Gupyeong CT: Hanjin Shipping MT D 2000
15 Malaysia/Port Klang Hasrat Mas Sdn Bhd. ICD O 2000
16 USA/Oakland Berths 55–56 MT O 2001
17 USA/Chicago Hanjin Logistics Co. ICD and others O 2001

18 South Korea/Kwangyang Phase II & III: Korea International Terminals Inc. MT D Phase II: 2002
Phase III: 2007
D Olivier et al
Source: www.hanjin.com; corporate interviews.
25
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constraints at home, the company sidestepped its domestic market to seize

overseas opportunities. In other words, the carrier lacked a true operational
home base for over a decade. Second, Hanjin’s investments in China illustrate
institutional constraints to linear expansion. Despite absence of marine terminal
operations in the PRC, Hanjin invested heavily in the mid-1990s in ICDs,
thereby ‘leapfrogging’ marine terminal entry. Its current logistical presence
makes it well poised for potential openings however. Hanjin’s ICD presence in
Northern China is particularly impressive and more broadly reflects Korean
companies’ commitment to the region.
The case of Evergreen Marine Corp. (EMC) is similar but differs in that
being a Taiwanese carrier it is additionally facing political obstructions to entry.
The carrier currently operates 13 marine terminals worldwide, none of them in
the PRC. However, the company operates a variety of logistical facilities in the
mainland, which it invested from offshore holdings carrying a different
corporate identity. Through its offshore holdings, it has managed to establish
container repair and manufacturing plants and inland trucking services in
Shanghai, Ningbo, Qingdao, and Shenzhen as well as an ICD in Shanghai in the
mid-1990s. All of the above are under JV format with local state-owned
enterprises. A breakthrough occurred in late 2004 when EMC’s Italy-based
subsidiary Lloyd-Triestino signed an MOU with Ningbo Port Authority to enter
Phase IV of Ningbo Beilun port. Evergreen’s China entry follows a similar
process as that of Hanjin: a chaotic set of opportunity-seizing investments.
Current evidence suggests that while carriers are keen to extend their
logistical capabilities across the chain, they are likely to invest in those
segments of the chain that offer institutionally defined investment openings.
The case of China illustrates how institutional constraints to foreign entry may
incur strategic adjustments and rupture a linear-sequential logic of entry. Other
carriers such as OOCL (Fossey, 2000) have replicated a similar chaotic entry
path: they have invested in upstream activities without securing key marine
terminal facilities.
DISCUSSION
The institutional approach posited in this paper suggests an alternative to overly

rationalistic constructs of ‘corporate strategy’. Empirical evidence presented
here suggests international strategy rests as much on an explicit grand meta-
strategy as on an implicit strategy of highly time-sensitive ‘opportunity
snatching’. The port industry as a service industry may a priori share features
of other service industries in the way of internationalisation processes and
outcomes. But a posteriori, the idiosyncratic nature of this industry makes for a
D Olivier et al
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unique scenario of internationalisation. Institutional context was isolated as the

most critical variable explaining spatial and temporal variegations, both in
terms of domestic and foreign contexts.
Simple longitudinal analysis methods revealed heuristic. The study reveals
that a variety of business strategies exist among Asia’s leading firms in terms of
how and when they enter key markets (Table 10), beyond simple leader/follower
patterns. To summarise, two waves of entrants have characterised the
internationalisation process under two distinct regulatory regimes. First, a select
group of leading carriers from triad countries entered terminal activities as early
entrants to substantiate the container revolution and, later, intermodality. At that
stage, ports remained mainly a public affair yet allowed for selective entry of
leading players. A second stage saw worldwide privatisation schemes in the
1990s allowing geographical expansion of an entirely new breed of firms: the
ITOs. The industry entered large-scale deregulation at a period when Asian ports
and their local operators dominated the global league. Their domestic strength
became a powerful springboard to cross borders.
The two phases are marked by distinct spatial and temporal regimes. In the
first pre-1990 phase, private entry was progressive and served a specific trade
route logic based on a strict geography of cargo sources. By contrast, in the post-
1990 era private entry was tremendously accelerated to reach frenetic rhythms
of expansion. The locational logic of expansion also shifted from traditional port
hinterlands to intermediate or ‘artificial’ cargo transfer points through the
widespread advent of transhipment. Mega-transhipment hubs are now found in
every port range serving the globe. It is during the second phase when entry
opportunities became so temporally condensed that empirical evidence allows
one to challenge classical linear-sequential constructs of spatial expansion of
firms. Entry was performed in those sectors where regulatory contexts allowed
for rather than following a linear sequence along the transport chain.
Concerning the notions of geographical and psychic distances relative to
the internationalisation process, a carrier–ITO distinction is also visible. The
ocean carriers’ early terminal investments were actually realised in far away
locations since they were founded in a trade route rationale. For instance,
Japanese carriers jumped directly into the USWC market to secure their
transpacific interests before investing in neighbouring Asian partners. The same
is observed among non-Asian early entering carriers (eg Maersk, SeaLand, APL,
P&O Containers). For the Asian ITOs, the picture is somewhat different. Since
leading ITOs are of ethnic Chinese origin, the China factor has favoured early
entry into China. Both HPH and PSA’s early overseas investments were
explicitly directed at China in the early-to-mid 1990s. The spectacular ascent of
Chinese ports combined to their knowledge of this emerging market has been
largely responsible for their successful early overseas drive.
28
Table 10: Models of internationalisation among Asian TNCs in the container port industry

D Olivier et al
ITOs Ocean carriers
Themes Characteristics
Model 1: the Model 2: the Model 3: the Model 4: the Model 5: de-
global leaders opportunists frontrunners leapfroggers internationalisation
Domestic market KHome port factor Very strong: Weak: hybrid Strong: Weak Weak
KPush factor national KSecuring access to
KR&D development and identities, national cargo and key
experimentation ground disembedded trade routes
KMarket structure oligarchic Hybrid identities, Pro-COT/B policy Institutional Late port reforms
‘boomerang’ constraints to
strategy1 COT/B or late
reforms
Strategy and KScope of portfolio Continental-global Niche national Route-specific Route-specific Route-specific
portfolio [global hub network
characteristics for EMC]
KPortfolio risk factor Medium to high medium Lowest Low Low
KOrganisation of KPredominantly KEntered port Vertical Vertical Vertical
terminal activities horizontal strategy investment as
+ IT and VAL non-core
leadership KConglomerate-based
KDeep organisational synergies
reforms accompanying
internationalisation
Timeframe of KPace and timing Fast track interna- Institutionally-defined Early starters Fast-track followers Downsizing of
internationa- of expansion tionalisation; fastest opportunity takers with deferred entry international
lisation rates of expansion into terminal terminal network
markets in
key markets
Table 10: Continued
ITOs Ocean carriers

Themes Characteristics
Model 1: the Model 2: the Model 3: the Model 4: the Model 5: de-
global leaders opportunists frontrunners leapfroggers internationalisation
Foreign market KEntry path & Wide-ranging: flexible Predominantly JVs WOS favoured Predominantly WOS WOS favoured
control and adapted to local with some JVs
institutional
requirements
KLocational Follow-the-cargo China growth focus To serve trade To serve trade To serve trade
rationale approach2 routes routes routes
Examples F COSCO Pacific/Coscon K Line YML

Hutchison PH Modern Terminals Ltd. NYK EMC Hyundai MM
PSA Corp. China Merchants HI MOL OOCL
Dubai Ports World New World Holdings Hanjin
Intl
NOL/APL
Notes: (1) By ‘boomerang strategy’, we mean a company from country A setting up HQ in country B only to re-invest indirectly in its home country A (eg red
chips in Hong Kong).

(2) HPH is known for its strict pro-centrality approach and its deliberate avoidance of pure transhipment ports, whereas PSA’s core specialty is transhipment
cargo. As such they are significantly different.
D Olivier et al
29
D Olivier et al
30
Four factors were identified to interpret the rapid ascension of Asian firms
on the global scene. Domestic market factors were identified as critical in ITO
strategies. Many have built up their portfolio on the original strength of home
ports. Both HPH and PSA have also crossed boundaries to invest in
neighbouring ports to extend their clout into ‘backyard markets’. It was also
shown how both leading ITOs and carriers in East Asia belong to larger forms of
conglomerated organisations that, as a group, harbour broader logistics
aspirations. Structural effects in financial capacity was also earmarked as a
distinguishing feature between carriers and ITOs, which allowed the rapid
propulsion of the latter by seizing prime lucrative opportunities. ‘Leapfrogging’
takes place under different forms and for different reasons among ITOs and
ocean carriers: for ITOs it serves horizontal strategies by allowing them entry
into closed markets while for carriers it serves primarily vertical strategies
seeking maximum control of the logistics chain in promising markets. The
leapfrogging phenomenon identified here carries important theoretical implica-
tions. With increasing financial powers, Asian TNCs have been at the forefront
of M&A activity in recent years. It has been a favoured entry mode to penetrate
mature markets. Many carriers have also sidestepped terminal operations to
invest in other segments of the logistics chain in countries disallowing direct
terminal operation rights.
The findings concerning timing and a lack of systematic patterns in the
general logic of overseas investments carry important implications for supply
chain management too. Indeed, while ocean carriers seek to gain increasing
control over the entire logistics chain, barriers of an institutional nature
constraining complete ownership means the logistics chain remains populated
by an array of governance arrangements, from direct ownership to arms-length
mechanisms via network forms of arrangements including: licensing, sub-
contracting, JVs, strategic alliances, etc. (see also Hall and Olivier, 2005). The
case of China clearly illustrates how JVs have long been the de facto entry mode
while carriers have clearly preferred direct ownership over terminal facilities
elsewhere. The degree of openness of foreign markets still largely dictates both
opportunities and modalities of private entry, as supported in this paper.
Institutional conditions determine what strategic choices may be possible in any
given context.
CONCLUSION
The central question in this paper was: why have Asian latecomers come to
dominate the container terminal industry? The position of Asian ports within
league tables is confirmed by the ascent of Asian TNCs in the maritime industry.
D Olivier et al
31
On the one hand, Asian carriers, besides Japanese frontrunners, started their
expansion in port activities relatively later but have shown aggressive strategies
in recent years to catch up with early entrants. On the other hand, the rise of
ITOs is a phenomenon of the 1990s originally spearheaded by Western firms but
rapidly dominated by Asian TNCs.
The role of domestic markets was intended to make such a link
between Asia, as both origin and destination of port-related FDI. Asian
TNCs have been very late to penetrate mature markets like Western Europe,
yet in a sweeping manner the have attained controlling positions due
primarily to their financial status. Many of such TNCs belong to ‘cash rich’
conglomerates whose logistical ambitions reach beyond terminal operations.
This paper singled out the primacy of Asian TNCs and related management
models.
It should be noted, however, that the term ‘internationalisation’
was preferred here to ‘globalisation’ throughout to reflect the dynamic
state of the industry, which is yet to reach maturity. What the management
literature generally refers to as ‘truly global firms’ are those firms having
reached a level of unequalled organisational complexity, including high rates of
localisation. While some port service TNCs have reached impressive
geographical coverage, they are yet to achieve this level of sophistication.
Corporate restructuring among the industry is as intense as ever, especially
through M&As, and will continue to redefine the industry for some time to
come. To be complete, research would require comparative analysis of
corporate governance on a global scale in relation to internationalisation
strategy. For instance, several European maritime firms remain family
controlled: do they present similar characteristics as those found among their
Asian counterparts? Also, while Asian TNCs dominate the global terminal
business, European carriers have taken the lead in the delivery of total logistics
packages. Why is it so and can their Asian rivals ‘catch up’? Further research is
warranted in those fields.
This paper sought to generate its originality by placing recent empirical
evidence of the rise of TNCs in the port industry against existing theories
of the TNC. TNC analysis of this sort remains new and admittedly explora-
tory in maritime fields, yet it has proven to carry broader theoretical
implications. The above clearly suggests how longitudinal analyses of TNC
behaviour remain a desideratum and it is hoped this article may lead the way
forward.
Acknowledgements
This research was partially supported by the Social Sciences and Humanities
Research Council of Canada, The Québec Fonds de recherche sur la nature et les
D Olivier et al
32
technologies (NATEC) and the University of Hong Kong. Usual disclaimers

apply. The views, and remaining errors, expressed in this article are the sole
responsibility of the authors and do not necessarily reflect those of Transport
Canada or any institutions with which they are associated.
ENDNOTES
1
NOL-APL represents a special case since US APL was taken over by Singaporean NOL. Yet, APL had
a strong home base presence within its portfolio. Until 1997 NOL did not have any involvement in
port activities.
2
AsiaWeek special Issue Power 50, vol.26 no.9 March 2000.
3
He later sold his shares in 2005 for HK$ 7.8 billion for charity.
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Maritime Economics & Logistics, 2007, 9, (1–34)

r 2007 Palgrave Macmillan Ltd All rights reserved. 1479-2931/07 $30.00

The Time Scale of Internationalisation: The

Keywords: Internationalisation; transnational corporations; Asian companies;

Institutional context: temporal aspects of reforms

Maritime Economics & Logistics

Private (mainly) container terminal operations.

The rise of transnational operators

Sealand Maersk bid in '99

Maersk APMT created

No. of projects inaugurated in a single year Location of investment

:1 :2 :3 :>3 :Domestic :Overseas

Figure 3: TNCs’ terminal entry timeline 1960–2004 by year of commencement of operations.

Table 1: The logistical extent of ocean carriers versus terminal operators

Entry layer TNC asy Ocean carriers Terminal operators

Transactional entry Port user/customer Yes No

Table 2: Leading 20 TNCs in the container terminal industry, 2005

Country of Number of terminal Million

1* Hutchison Port Holdingsb Hong Kong 44 51.8

Before entering into interpretations of the rapid ascension of TNCs in the

Maritime Economics & Logistics

Surprisingly, linear time constructs of internationalisation have been left

Author(s) Model (type) Sequential phases

Time Scale of Internationalisation

Author(s) Model (type) Sequential phases

Taylor NA (evolutionary) Single plant, single Multi-plant, single Establishment of Inter-regional F F

Time Scale of Internationalisation

Author(s) Model (type) Sequential phases

Time Scale of Internationalisation

centre and developed jointly

Table 4: Johanson and Mattson’s space-time frame

Degree of internationalisation of the market

Degree of internationalisation of the firm

target markets, have introduced more complex conceptualisations of time–

stages of the evolutionary/growth curve has much merit as an alternative to

Stackelberg’s model of oligopolistic equilibrium, which assumes a dichotomist

Spatial aspects of internationalisation: the home market factor

International terminal Domestic throughput Domestic as

Hutchison port holdings 7.5 16

island-state markets. Leading operators have heavily invested in ‘backyard’

In strategic terms, leveraging on a strong home base, the leading operators

Organisational aspects of internationalisation

commitments to terminal operations and logistics. This reorganisation period

Table 6: The process of transformation: Hutchison Port Holdings

Year Organisational adjustment

Maritime Economics & Logistics

centralised shareholding and decision-making structure allowing swift entry

Overcoming latecomer status: financial strength of TNCs

Table 7: Financial sustainability among leading Asian TNCs, 2000–2004

Average yearly profit

Operatorsa HPH 32.8

Carriersd NYK 4.7

many as 20 individual projects at any given time (Woodbridge, 2002). Third,

Time Scale of Internationalisation

Neptune Orient American A APL 1997 825 8

portfolio, NYK’s acquisition of Ceres Terminals in 2002; and Dubai Ports

Maritime Economics & Logistics

their management competence. Philippines’ International Container Terminal