Scale diseconomies and efficiencies of liner shipping

Abstract

In the context of liner shipping, carrying capacity can be seen as a key resource to strive for better firm performance. The liner shipping market nowadays has entered a phase in which liner shipping companies (LSCs) reap economies of scale. The concept of economies of scale has led the industry to grow by enlarging its capacity and firms allocate more ships to offer shipping services in the worldwide market. However, the results of enlarged capacity may be uncertain. By examining empirical data (from 1997 to 2008), this paper investigates the relationship between capacity and firm performance in the liner shipping industry and attempts to use an S-curve to describe their relationship. The findings suggest that the S-curve is robust. Furthermore, this study attempts to provide theoretical basis for shipping lines to determine the optimal carrying capacity.