Transport Companies Strategies Towards Increased Competition



Transport Companies Strategies Towards Increased Competition

Authors

T Mathisen, G Solvoll, Bodø Graduate School of Business, NO

Description

The paper review changes in ownership structure in Norwegian transport companies after competitive tendering was introduced in 1994. It also discusses which implications the structural changes have for the transport authorities? regulation policy.

Abstract

In Norway, as in many other European countries, transport companies operating services on sea, air, road and rail are receiving substantial subsidies from the authorities. When tendering was introduced in Norway in 1994 the transport companies met an entirely new form of competition. Today about 15 % of the bus services in Norway have been set out for tendering. There is a strong belief among some political parties in Norway that use of tenders is an appropriate way to reduce the subsidy level without reducing transport quality. The transport companies are meeting this new regulatory regime by takeovers and increased cross-ownership. Transport companies with foreign owners (e.g. Connex) have also entered the Norwegian transport market. Generally, a lower number of real participants in a market reduce competition and increases the risk for co-operations between transport companies. If this happens, the transport authorities will have problems reaching their goal concerning efficient provision of local transport services.

The aim of our paper is first to review the changes in the ownership structure in the transport companies in Norway after the authorities introduced competitive tendering in 1994. Secondly we will investigate how these structural changes influences the behaviour of the transport companies and finally discuss central implications for the transport authorities? regulation policy as a result of the structural and behaviour changes.

A central assumption in our study is that the ownership structure, through the transport companies objectives and utility functions, influences the companies market strategies, or ?behaviour?. The term behaviour is operationalised by factors like quality of service, fare level and scale of production. Earlier studies indicate that two main dimensions influence owner objectives. The first dimension is the geographical location of the shareholders. Shareholders outside the area where the company operate are assumed to maximise their profit to a greater extent than local owners. The second dimension is whether shareholders are public enterprises or private firms. Public owners are assumed to maximise ?welfare? to a greater extent than private owners. This implicate that private foreign owners are more focused on profit maximisation while local public owners are more oriented towards welfare maximisation.

Our applied research design consists of both a descriptive longitudinal study of ownership structure and a cross-sectional study of the involved parts behaviour and attitudes. Quantitative data on shareholders equity interest is retrieved from a national firm index where accounting information about Norwegian transport companies, including ownership, has been registered from annual reports in a database from 1993 to present date. Our population is companies that provide passenger transport on road and sea in Norway. Telephone interviews with the director, the leader of the board of directors in a selection of transport companies and interview with the transport authorities in 10 county councils will be carried out.

With the quantitative data we intend to carry out statistical analysis to investigate change in ownership structure. Interpretations of interviews will accompany the statistical findings explaining the underlying reasons for the behaviour. Findings regarding the transport companies behaviour will be used to discuss short run policy implications for the local transport authorities regarding the use of tendering, design of contracts and also the possible long run effects of further structural changes among the transport companies.

Publisher

Association for European Transport