The internationalization of terminal operators : internationalization an incremental learning process or a rational choice approach?

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The

Internationalization

of Terminal

Operators

Internationalization an Incremental Learning Process or a Rational Choice Approach?

MSc. Business Studies – International Management Supervisor: Dr. Johan Lindeque

Second Reader: Drs. Erik Dirksen Student: Angenietje Temme Student ID: 10732128 Date: 31 August 2015

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Abstract

This thesis adds a contribution to the internationalization discussion, by investigating a highly competitive and global industry, terminal operators and if their internationalization resembles an incremental learning process or a rational choice approach. This thesis investigates the internationalization pattern of the three largest terminal operators by their equity throughput.

Applying a multiple-case study design, data on internationalization was collected from the terminal operators’ company websites and the company websites of the individual terminals as well newspaper articles from the LexisNexis database.

All terminal operators showed that their firm specific advantages where highly transferable and that they were able to recombine the location specific advantages with their firm specific advantages. And although the expansion of terminal operators did not manifest itself in a gradual expansion of FDIs into more distant location it does not preclude the experience effects. The nature of the business defines the feasible locations and therefore the internationalization of terminal operators resemble more a rational choice approach to internationalization.

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Acknowledgements

Writing this thesis learned me a lot. It was not only about the academic literature since the container terminal business is my working environment. This combination made it more interesting and also challenging since I had to combine a fulltime job with writing a thesis. I must admit that without the support from Johan Lindeque and his constructive feedback writing a thesis would have been an ongoing story. Thank you Johan for all that I have learned from you about doing research.

Next to that I want to thank Johan that he supported me in my choice for terminal operators. I can imagine that when you don’t know the business that well it sounds a little boring. I can assure every reader that working on a container terminal is very complex and a great environment to work in. This great working environment and the support of my managers and colleagues helped me a lot finishing my thesis.

Last but not least I want to thank my partner, parents and friends for their patience, help and support.

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1. Introduction

The internationalization of companies is a wide researched topic. Internationalization theories can provide a form of guidance to firms regarding what is important since companies are internationalizing in more different ways than ever before and often using combinations of entry and exit strategies (Axinn and Matthyssens, 2002). Leading theories on internationalization are generally based on linear conception of time. Consequently, several researcher hypothesize a logical sequential process of investment and expansion choices and identify various stages along the internalization sequences (Parola, Satta and Persico, 2013). In explaining the temporal and spatial constructs of the internationalization processes of MNEs, some scholars point out that institutional conditions have significant influence on the adoption of specific strategic decisions in any given context, so that firms sometimes undertake foreign ventures despite their lack of overseas experience (Forsgen, 2002; Rugman and Verbeke 2008). This could be argued that internationalization resembles a more rational approach as argued by Benito and Gripsrud (1992). Although there are also researchers that still hold on to the internationalization process model of Johanson and Vahlne (1977) like Shayer and Yeung (1992), Pedersen and Petersen (1998) Knight and Cavusgil, (2004), Ronen and Shenkar (1985), Erramilli (1991) and Hakanson and Ambos (2010). Although these reaserachers and others more researched the view of Johanson and Vahlne (1977) the view of Benito and Gripsrud is less issued. A few of their limitations were that they only used firms from one specific country and that their database did not include large multi-center firms. They argue that the emergence of such firms would make it even less likely that such data would support the process model of Johanson and Vahlne (1977). Next to that Benito and Gripsrud only used manufacturing and exporting firms where the arguments fits that making a foreign investment is mainly to take advantage of low labor cost and thus will not consider investments closely to Norway. Since it is argued that the expansion logic of service MNEs differs from that of manufacturing MNEs (O’Farrell, Moffat and Wood, 1995; Dicken, 1998) it could be that those differences could have inevitable implications on their internationalization. Therefore terminal operators are chosen since they are serve MNEs and have different home countries. Terminal operators are located in ports and the container port sector is an ideal setting for investigations in the service industry, due to past few decades where a profound restructuring of the port and stevedoring sector have been witnessed (Parola, Setta and Persica, 2013). This sector had a progressive international opening of local markets, a fast development of competitive paradigms, and an increase in the number of private stevedoring firms that exploit port reform opportunities what in particular

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2 transformed the container port industry (Slack, 1985; Hoyle and Charlier, 1995; Heaver, 1995). Despite of the intrinsic international scope of the container terminal business due to its role in the international seaborne trade, the sector’s liberalization, privatization and the globalization process didn’t start before the early 1990s (Peters, 2001). The transformation in the container terminal industry induced several container port operators to expand their business overseas. What made that lead players could arise who were capable of managing extensive portfolios of facilities across various nations (Cullinane and Song, 2002; Damas, 2002; Olivier, 2005). Next to the raised market leaders the transformation made it possible for these new MNEs to adopt diverse business models and growth strategies. This automatically had an impact on the temporal and spatial dimensions of the internationalization process of these new container port MNEs (Notteboom and Rodrigue, 2012; Olivier, 2005; Peters, 2001). Therefore it is interesting to study if these terminal operators internationalized though a rational choice approach or an incremental learning process, leading to the following research question:

“How well does the rational choice or learning process explain the internationalization of terminal operators?”

For this thesis longitudinal quantitative and qualitative data for the selected terminal operators has been collected. A multiple-case study approach was adopted in which quantitative data is collected to complement the qualitative data, like revenue, distance in kilometers and terminal capacity in twenty foot equivalent (TEUs), what is the standard of one container, through scrutinizing the annual reports of the selected cases and additional company websites and newspaper articles. Qualitative data is collected through newspaper articles and company websites for the start of their internationalization until 2014.

This research attempts to increase the knowledge of and insights of the internationalization pattern of MNEs and contributes to the scientific debate of internationalization. More specifically, this thesis examines the effect of the international transferability of firm specific advantages (FSAs), the ability of recombining the location advantage with the FSAs and the influence of experience on the internationalization of MNEs. The outcome could have managerial implications for firm strategist and governance within the industry to shape future ideas and management.

The findings indicate that terminal operators show that when there is a greater the degree of international transferable FSAs the terminal operator is more likely to use a rational approach for their internationalization. In all three cases their core FSA was highly transferable that resulted in large global portfolios. The availability of location specific advantages for recombining with the terminal operator FSAs was less clear. The internationalization pattern of the three terminal operators where slightly different and the institutional factors where far more

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3 important than expected. Interesting finding was that PSA and DPW, both companies from developing countries, made high commitment investments though acquiring terminals in the developed world. Making high commitment investments such as acquisitions in countries where there is no experience seems odd and against the argument that the lack of knowledge of foreign markets is a critical restriction to international expansion (Johanson and Vahlne, 1977). Due to the fact that both terminal operators are from developing countries they have no knowledge of developed countries. In developed countries the institutional environment has less market imperfections and thus less risk making a high commitment investment a suitable option.

The pattern revealed by the terminal operator did not show a gradual expansion of FDIs into more distant locations as Johanson and Vahlne (1977) argued. All findings of this thesis reflect a more rational choice approach to internationalization of terminal operators. Although there are small hints of an incremental learning process and this thesis does not preclude the experience effects. The argument of Benito and Gripsrud (1992) that it is the nature of the business that defines the feasible locations and that these locations are evaluated by the potential of these locations. Therefore the rational choice approach fits far more to the internationalization of terminal operators.

This thesis is structured as follows. The next section reviews the literature on the key dimensions of this thesis. Internationalization theory will be discussed elaborately, making a distinction between the internationalization process model of Johanson and Vahlne (1977) and the rational choice approach of Benito and Gripsrud (1992). Making it more specific by discussing the literature within the perspective of terminal operators and deriving working propositions from that discussion. Next, the methodology section describes the research philosophy, the research design, the quality criteria and the case selection of terminal operators and how the data has been collected and analysed. The validity of the working propositions is analysed in the results and discussion sections. Finally, the conclusion section addresses the key findings, scientific relevance and the managerial implications, closing this section with the limitations of this research and suggestions for future research.

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2. Literature Review

This literature review is twofold starting with a theoretical background reviewing the internationalization theory, with the focus on the internationalization process by Johansson and Vahlne (1977) and the discrete rational choice view of Benito and Griprud (1992). The second part is to make these two theories more specific by applying these views on the terminal operating business. First the terminal operators will be conceptualized to give a true understanding of the business. The conceptualization will be done by theorizing about the terminal operator’s Firms Specific Advantages (FSAs) and the transferability of these FSAs from this first working proposition will be derived. Next to the FSAs the location specific advantages will be discussed followed by the second working proposition. The theoretical background will be concluded with the international experience of the terminal operator and the last working proposition. This chapter then finishes with a summary.

2.1 Internationalization Theory

This section will serve as a theoretical background and will discuss the internationalization theory. The main theories that will be discussed are the internationalization process also called the Uppsala Model by Johansson and Vahlne (1977) and the Discrete Rational Choice by Benito and Gripsrud (1992). First the internationalization process will be discussed and the rational choice view will follow. The next purpose of this section is to apply these theories to the terminal operator internationalization. Out of this, a final theoretical discussion working propositions will follow.

2.1.2. Internationalization Process

Vernon (1966) suggested that firms internationalize according to a logical and incremental sequence of steps, through a decision making process based on the gradual acquisition of information about foreign markets. In 1977 the concept of knowledge acquisition and learning in internationalization theories was based on the assumption of foreign market uncertainty (Johanson and Vahlne, 1977). This view has had a profound impact on overseas investment decisions and implementations in the internationalization processes and was introduced via the Uppsala Model by Johanson and Vahlne (1977).

The Uppsala model suggests that there are stages of internationalization, whereby the potential benefits of exploiting Firm Specific Advantages (FSAs) (Rugman and Verbeke, 1992) abroad, need to be weighed against the risks of operating in unknown foreign environments and the costs of learning to do business there. In the view of Johanson and Vahlne (1977) the lack

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5 of knowledge of foreign markets is a critical restriction to international expansion. They argue that market-specific knowledge and general knowledge could deeply affect a firms’ internationalization. Quin (1980) adds that the Uppsala model is based on the assumption of instrumentalism and argues that the traditional internationalization path is to invest in just a few neighbouring countries, according to a sequential and cautious process based on a ‘learning-by-doing’ approach.

Later Johanson and Vahlne (1990) introduced the notion of an; “establishment chain” in their Uppsala model. In this case firms are likely to enter foreign markets with a progressively greater “psychic distance” (Davidson, 1980) and thus neighbouring markets seem to be preferred in the beginning, as geographical proximity is supposed to imply cultural proximity. Davidson (1980) found evidence that shows how firms prefer to invest in adjacent and comparable cultures predominantly in the initial stages of expansion. When the expansion is into countries that are related to the home country, the expansion is more easily manageable (Ronen and Shenkar, 1985). More recently this finding has also been confirmed by Hakanson and Ambos (2010). They suggest that managers try to reduce risk and uncertainty by investing in the markets they are linguistically, psychologically and culturally familiar with. Consequently the experience and the knowledge that comes with operating in a foreign country generates foreign venture opportunities since the company has learned from previous experiences (Johanson and Vahlne, 1990). Therefore the psychic distance has a stronger influence on firms during the early stages of international expansion.

After the introduction of the Uppsala model of internationalization, several authors developed the Uppsala model and challenged both the antecedent and the constraints of the international process, addressing knowledge and experience (e.g., Shayer and Yeung, 1992; Pedersen and Petersen, 1998; Knight and Cavusgil, 2004), psychic distance (Ronen and Shenkar, 1985; Erramilli, 1991; Hakanson and Ambos, 2010), and cultural factors (Barlett and Ghoshal, 1989; Shenkar and Nyaw, 1995; Gupta, Hanges and Dorman, 2002). What has been learnt from these studies? And what is your assessment of what we have learnt?

The process approach seeks to explain-and predict-two aspects of the internationalization of the firm. The first is the step-by-step fashion by which a firm's engagement in a specific country often develops. Although several stages are proposed in the literature, a typical establishment chain could begin with occasional exports, develop into regular exports through agents, followed by setting up sales subsidiaries, and end with fully-owned production facilities abroad. The second aspect is that firms are assumed to successively

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6 enter markets at an increasing "cultural distance" from the home country, as measured by differences in language, values, political systems, etc. Thus, firms are predicted to start their internationalization by moving into those markets they can most easily understand, entering more distant markets only at a later stage (Benito and Gripsrud, 1992).

Next to Johanson and Vahlne there are several authors who focus on the experience as a key determinant in explaining a firm’s internationalization strategy (e.g. Pedersen and Petersen, 1998; Forsgren, 2002; Knight and Cavusgil, 2004; Tuppura et al., 2008). Like in the study of Pedersen and Petersen (1998) where they conclude that a positive relationship exists between market knowledge and internationalization. Consequently, experience comes over time which gives another angle to internationalization. In the studies of Barkema, Bell and Pennings (1996) and later in that of Luo and Peng (1999), they argue that time-based experience is a major determinant because it impacts the organizational learning about the local background. There are also other considerations that suggest that the length of an operation in a host country influences corporate foreign growth because it mirrors the profoundness of organizational experience, which can refer to pace and path regularity should be positively correlated with time-based foreign experience (Stalk, 1988).

In the study of Lin et al. (2009) where they ask themselves the question ‘how do networks and learning drive mergers and acquisitions’, they assume that firms are bounded rational players who can rely on prior experiences to be able to acquire knowledge and to respond to the institutional environment. In this view experience becomes a primary source of learning.

When countries with diverse cultural and institutional environments are simultaneously entered, this can hinder the firm from gaining experience and knowledge in unfamiliar contexts. Qian et al. (2010) debates, regarding the appropriateness of a geographical diversification strategy closer to home. The studies of Rugman (2005) and Rugman and Verbeke (2008) show that there are more concentrated regional strategies rather than globally strategies and they argue that there are very few true global firms. Most of the firms are operating in the triad of Northern America, Europe and Asia. Next to the triad, Qian et al. (2010) developed a two-tier geographical diversification approach based on the notion of inter- and intra-regional diversification. The intra-regional diversification allows a firm to take advantage of the potential benefits derived from the home region similarities and spatial proximities and also the integration in regulations and policies. To elaborate on the regionalization theory goes beyond the purpose of this thesis.

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2.1.1 Discrete Rational Choice

Ronald Coase (1937) argued that the FDI will mainly occur in imperfect markets, because the investment decision is a make or buy decision. This means that if the market is imperfect, transactions are not able to be completed due to too high transaction cost and therefore this transaction will be internalized. Rugman (1981) adds that MNEs play an important role to overcome market imperfections and that internalization can lead to more efficiency. Hymer (1960) on the other hand recognizes that FDI is a firm-level strategy decision rather than a capital-market financial decision. Benito and Gripsrud (1992) make it a little more specific and argue that one of the reasons for internationalization is due to the cost leadership strategy firms have, meaning that the firm will move their production facilities (and thus a big part of their labour) to countries that have lower cost than in their home country. In other words firms that make a foreign investment mainly do this to take advantage of low resource costs and therefore will probably not consider countries culturally close to the home country as viable alternatives. Here a note is necessary. In times of these early studies the rise of emerging market MNEs was not yet the case and these theories from the perspective of the developed market MNEs. And thus the first investments of such firms are likely to be in distant markets.

Another factor is that the institutional conditions have a significant influence on the adoption of specific strategic decisions in any given context, therefore there are firms that undertake foreign ventures despite their lack of overseas experience (Forsgren, 2002; Rugman and Verbeke, 2008). Salancik and Meindl (1984) argued that contingent and external factors could be responsible for the decision to go overseas without experience simply due to the need to react to new institutional conditions.

Benito and Gripsrud (1992) base their view of the rational decision of internationalization on mainstream economic theory that is basically static and treats individual investment decisions as discrete phenomena. They use the argument of Hirsch (1976) to explain that the use of experience in economic theory is used as a cost component in terms of the cost of controlling foreign operations. Salinacik and Meindl (1984) argue that undertaking overseas investments are beneficial despite the lack of foreign experience and that this is beneficial when there are changes in the domestic or foreign market conditions is an argument of Rugman and Verbeke (2008) but also to be able to catch up with first-movers or to be the first mover (Li, 2003). Benito and Gripsrud (1992) therefore argue that the probability of investing in a particular country may not be independent of earlier location decisions due to the experience effect. The reason for that is, if this effect would be present, it should cause the next investment

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8 to be undertaken in the same country as the previous one or in a nearby country in terms of culture. According to Benito and Gripsrud (1992) there is no general tendency to move into more distant countries as gained experience grows, since each decision is made separately. In other words if experience would be the case the internationalization of the company would only be in small steps. Benito and Gripsrud (1992) found that firms entering these distant markets are likely to invest to a larger extent via greenfield investments than for FDIs undertaken in culturally closer countries. Their explanation is that culturally distant countries, tend to be less developed countries where fewer opportunities exist to buy established companies.

Mariotti et al. (2010) extend this and argue that MNEs will not agglomerate with domestic companies if they think there is a negative balance between potential inflows and outflows, this effect can be undone when the domestic company enjoys some comparative advantages. Mariotti et al. (2014) adds that the influence of core cities and industrial districts reduce an MNE’s need to maintain a local partner, although these two types of areas substitute for different aspects of a target firm’s competences. This argument also illustrates a finding of Benito and Gripsrud (1992) that the impact of distance will vary along different parts of the value chain and this distance may also create new learning opportunities for the MNE and also the importance of networks to be able to access CSAs.

The agglomerative view of Mariotti (2010; 2014) can also been seen as a form of mimicking. DiMaggio and Powell (1983) argue, based on the basic assumption of the institutional theory that the adoption of mimetic behaviour is to reduce uncertainty. Lewitt and March (1988) add that firms tend to imitate the critical decisions by leading companies in the hope that such strategies will be successful or simply because they are widely legitimized. In this type of environmental context, internationalization patterns will not stop because of the lack of experience due to the pursuing and widespread dogmas aiming that firms adopt less incremental and more risky and irregular paths (Forsgren, 2002). This could be the case for the ‘late comer’ MNE who could mimic the first-movers or use another strategy of ‘jumping’ or ‘leap frogging’ the established chain to catch up. This type of catch up internationalization strategy could come in forms like inward internationalization, stage overlap, stage jump, stage repeat, stage reverse and stage compression (Li, 2003). In other words if this is the company’s strategy there will not be a ‘step by step’ learning path and the path will go wherever the company thinks is worthwhile to do business. The outward FDI of the investing company could be country specific. Dunning’s (1998) data suggest that many of the factors which explain the location of FDI, and thus the host location, may not be unique to the home country, which is

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9 quite similar to the findings of Benito and Gripsrud (1992).

Relating all of the points, this part of the review shows that the internationalization of the MNE does not manifest itself in a gradual expansion of FDIs into culturally more distant locations because it is a choice based on a cost benefit balance. Thus supporting the view that the location choice of the MNE can be seen as a discrete rational choice.

2.2 Firm Specific Advantages of Global Terminal Operators

In the previous section two opposite theories of internationalization were discussed. In this section the global terminal operators will be conceptualized using the Firm Specific Advantages (FSAs) and how they affect the internationalization of these global terminal operators. After a theoretical discussion of what FSAs are and how they reflect MNE internationalization, the FSAs of the terminal operators will be conceptualized. The port operator conceptualization and the internationalization theory sections have then been integrated to allow the development of working propositions regarding the expected internationalization patterns of different types of port operators.

2.2.1 Firm Specific Advantages

The early thoughts regarding Firm Specific Advantages were derived from a resource based view, with scholars like Wernerfelt, Barney and Collins. Their view is that firms consider competitive advantages as a result of a unique set of tangible and intangible resources and capabilities (Wernerfelt, 1984; Collins, 1991), to be able to create sustainable competitive advantages these resources and capabilities should be valuable, rare and inimitable (Barney, 1991). These tangible and intangible resources and capabilities could be seen as FSAs since they reflect on a firm’s capability of economizing on transaction costs as a result of the multinational coordination and control of assets (Buckly and Casson 1975; Dunning and Rugman 1985). This includes as well as the transaction costs/advantages, proprietary know-how, that are the unique assets of the firm (Rugman and Verbeke, 1992). The research of Hennart (1991) takes the costs and benefits into account when studying the corporate capabilities to develop optimal internal coordination and control mechanisms. Later, the research of Verbeke (2013) adds that the created FSAs can be either stand-alone resources and routines or a combination of activities. This can then be separated in Location Bound (LB) and Non-Location Bound (NLB) FSAs.

NLB FSAs can be more easily adapted to the exploitation potential at a host location, whereas the LB FSAs should be amplified to be deployed within an entire region (Rugman and

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10 Verbeke, 2007). To be able to benefit from the strategy, the MNE needs to be able to align their FSAs with a location-specific environment (Verbeke, 2013). The strategy also needs to take the Country-Specific Advantages (CSAs) into account. When the MNE wants to transfer its FSAs they need to be able to interact with the CSAs of the host country. These CSAs are e.g. economic, political, institutional and cultural factors or more practical labour and natural resources and will have an exogenous influence on the MNEs strategy (Rugman and Verbeke, 1992; Rugman, 2005).

The benefits from a specific location may arise due to structural market imperfections raised for example by government regulations (Rugman et al. 1985) and benefits of the local opportunities that enhances the potential to economize on transaction costs by a reduction of risks (Rugman, 1990). And if the MNE makes an investment in a particular country the CSAs could be one of the pull factors to move into that country. Rugman, Verbeke and Nguyen (2011) argue that some of these CSAs that lead to international expansion are not always freely accessible by the MNE. The access to this advantage is sometimes controlled by host country actors. These host country actors can have close distribution networks preventing sales to customers or local monopolies on natural resources ownership and exploitation preventing purchasing these resources as examples for closing this access. In that case the challenge for the MNE is developing relationships with national or local governments or through networks in a form of LB FSAs with powerful local actors to open up access to the desired CSAs.

2.2.2 Firm Specific Advantages of a Terminal Operator

A terminal operator is always located in a port and the importance of the port is due to the source of value creation it has for firms involved in a supply chain, like the container terminal. More generally, the impact of port activities lies on the social, environmental and economic development of the region in which the port is located (Tongzon, Chang, and Lee, 2009). Ports in this sense are of major economic and strategic importance for countries and are examples of strategic assets (Porter, 1990). They serve where the aggregation of services and activities generates benefits and socio-economic wealth as well as they facilitate imports and exports due to their ability to connect the geographical locations. Ports are a source of value creation for the firm’s involved in the process of service production and can boost the firm’s competitiveness along the entire global supply chain (Panayides and Song, 2009; Song and Parola, 2015).

The first step in exploiting the firm specific advantages of a terminal operator is to categorize the different types of terminal operators. Notteboom and Rodrigue (2012) argue that a strict categorization of these terminal operators is hard to establish since many scholars have

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11 different views on classifying terminal operators like Bichou and Bell (2007) who propose four types, Parola and Musso (2007) define three groups and Olivier et al. (2007) only make a distinction between two types just like Slack and Frémont (2005). The study of Notteboom and Rodrigue (2012) combine the insights of these scholars and proposes three typologies.

The first typology are the Stevedores or port terminal operators that expand to diversify their revenue geographically and consider port operations as their core business. Stevedoring operations require simultaneous production and consumption that leads to the concept of “Location-Boundedness” (Parola, Satta and Persico, 2012). This unique feature is a significant determinant effecting the choice of entry strategy by the container port MNE since the production and consumption cannot be separated it means that the service cannot be exported unlike other soft-services (Mariotti and Mutinelli, 2004; Blomstermo, Sharma and Sallis, 2006). Although the terminals themselves are quite standard in their infrastructure, equipment, and operation that makes them effectively replicable in a variety of markets. Therefore stevedores expand into new markets by replicating their expertise in terminal operations via mergers and acquisitions of existing terminals or expansion by building new terminal facilities. These stevedores pursue a strategy based on organic growth, which is, at the same time the most common strategy available to container terminal operations (Notteboom and Rodrigue (2012). The second typology are the Financial holdings that own terminal operators because they are seen as an asset class and for revenue generation potential by financial interests ranging from investment banks, retirement funds to sovereign wealth funds. These terminals assets can be managed directly through a parent company but the majority of them have an indirect management approach; acquiring an asset stake and leaving the existing operator to take care of the operations. The terminal in this view has the advantage of generating economic rent and is tradable through buying and selling operations (Notteboom and Rodrigue, 2012). Notteboom and Rodrigue (2012) argue that the advantages of these type of terminals adds three values, first the intrinsic value, mostly related to real estate, infrastructure and equipment and directly relating the traffic the terminal handles to the value of the land that supports terminal operations. The thought of potential monopolistic profits, financial institutions are particularly attracted to places where a local monopoly positon is available, what is seen as the operational value. Last is the risk mitigation value. This implies that the terminals are quite standard in their infrastructure, equipment, and operation which makes them effectively replicable in a variety of markets. Also terminal assets located in different regional markets helps mitigate risks, like traffic demand fluctuations and the pricing and capacity strategies of rivals. Having a global

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12 portfolio could also reduce the financial and political risks that are associated with it if there is only focus on one market.

Lastly, are the Maritime shipping companies that are in many cases hybrid structures, formed with separate business units or sister companies that are active in liner shipping or terminal operations. These maritime shipping companies invest in port terminal facilities as a support for their business. These terminal facilities can be operated as a dedicated terminal or can be open to third shipping lines. The biggest advantage for the shipping company as well as for the terminal is that it is much easier to deal with the vessel schedule integrity (Notteboom, 2006; Vernimmen, Dullaert and Engelen, 2007). The terminal operator plays the role of being able to prioritize and synchronize the handling of vessels in terms of berthing and crane density with the shipping line services and therefore makes its berthing schedule more reliable. Another advantage is that their ‘sister(s)’ will still be their client even when other customers can reorganize their service networks or can engage in new partnerships with other carriers and that will minimize the risk of losing important clients (Slack, Comtois and Sletmo, 1996). It is even possible that because the ‘sister’ company partners up with another carrier the number of clients can even grow.

2.3 Transferability of a Terminal Operator’s Firm Specific Advantages

The Uppsala model suggests that there are stages of internationalization, whereby the potential benefits of exploiting Firm Specific Advantages (FSAs) abroad, need to be weighed against the risks of operating in unknown foreign environments and the costs of learning to do business there (Johanson and Vahlne, 2006). Therefore, the global expansion of the biggest terminal operators try to sustain competitive advantages by building barriers to prevent competitors entering their domains (Notteboom and Rodrigue, 2012). These barriers increase the costs to do business at that specific location.

As argued, the core of a terminal operator is easy to transfer in the way that there needs to be a port, a quay, quay cranes (not always necessary due to cranes on board the vessels) and enough water depth to host the (biggest) ships. Although this seems quite easy, the supply of investment opportunities are not endless and is constrained by institutional factors facing investors to enter in to foreign markets (Olivier et al. 2007). The differences in local institutional factors and the degree of openness of the local terminal markets might imply that some terminal operators are very visible in one market and lagging behind in another (Notteboom and Rodrigue, 2012). Because the container terminal operations require simultaneous production and consumption which is a unique feature (Parola, Satta and Persico, 2012) and affects the

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13 choice of entry strategy by the container operator. Since the production and consumption cannot be separated it means that the service cannot be exported unlike other soft-services (Mariotti and Mutinelli, 2004; Blomstermo, Sharma and Sallis, 2006) and is thus a location bound FSA. Since there are three types of terminal operators that lean on horizontal or vertical integration processes or a diversification strategy, the internationalization strategy could therefore also differ per category as a result of their FSAs transferability. Therefore the following working propositions are proposed:

WP 1a: The greater the degree of international transferability of terminal operators FSAs, the more likely the internationalisation will reflect a rational choice approach.

WP 1b: The lower the degree of international transferability of terminal operators FSAs, the more likely investments will resemble an incremental learning process to internationalisation.

2.4 Location Specific Advantages of a Terminal Operator

For terminal operators the country is not a specific target but the port is and thus the location of the port. One of the risks is that the Country-Specific Advantages (CSAs) are associated with locating certain activities in particular countries. For ports, their advantage is that they are a very important link in the global supply chain, so the impact of port activities lies on the social, environmental and economic development of the region in which the port is located (Tongzon, Chang, and Lee, 2009). If the importance of the port drops this has an influence on the container terminals. An important factor is the potential increase in the valuation of the terminal asset, because it is strongly related to the demand and supply profile in the region. Terminal assets are typically valuated higher when located in markets with a high growth potential and high terminal capacity utilization (Notteboom and Rodrigue, 2012). For example, this can lead to, maritime shipping lines reorganizing their service networks and engage in new partnerships (Slack, Comtois and Sletmo, 1996). Vanelslander (2008) argues that legislation often makes it impossible to enter a foreign market without establishing links with one or more local partners. Quin (1980) adds that the Uppsala model is based on the assumption of instrumentalism and argues that the traditional internationalization path is to invest in just a few neighbouring countries, according to a sequential and cautious process based on a ‘learning-by-doing’ approach. If there is an investment in a particular country the Country Specific Advantages (CSAs) could be one of the pull factors to move into that country. Rugman, Verbeke and Nguyen (2011) argue that some of these CSAs who lead to international expansion are not always freely

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14 accessible by the MNE. The access to this advantage is sometimes controlled by the host country actors. Host country actors often have closed distribution networks preventing sales to customers or local monopolies on natural resources ownership and exploitation preventing purchasing these resources, this is an example of how this access is closed. In the global expansion of the biggest terminal operators, they try to sustain a competitive advantage by building barriers to prevent competitors entering their domains (Notteboom and Rodrigue, 2012). Therefore the attraction to places where a local monopoly position is available, is seen as an operational value. The following working propositions are derived from the above:

WP 2a: The greater the degree of location specific advantages available for recombining with terminal operator FSAs, the more likely investments will resemble a rational choice approach to internationalisation.

WP 2b: The lower the degree of location specific advantages available for recombining with terminal operator FSAs, the more likely investments will resemble an incremental learning process to internationalisation.

2.5 International Experience of a Terminal Operator

In the view of Johanson and Vahlne (1977) the lack of knowledge of foreign markets is a critical restriction to international expansion. They argue that market-specific and general knowledge could deeply affect firms’ internationalization. Consequently the experience and the knowledge that comes with operating in a foreign country generates foreign venture opportunities since the company has learned from previous experiences (Johanson and Vahlne, 1990). The psychic distance would have therefore a stronger influence on firms during the early stages of international expansion.

Since there are three types of terminal operators who pursue different strategies the background of their experiences also differs. The stevedore is the only one who cannot rely on the experience of the global strategy of their mother company or in the case of the maritime shipping type lean on the experience of their sister company. Although if there was a lack of foreign experience in the beginning Salinacik and Meindl (1984) argue that undertaking overseas investments are beneficial and that this is beneficial when there are changes in domestic or foreign market conditions (Rugman and Verbeke, 2008). Benito and Gripsrud (1992) argue that there is no general tendency to move into more distant countries as gained experience grows, since each decision is made separately. Therefore they argue that the probability of investing in a particular country may not be independent of earlier location

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15 decisions due to the experience effect.

WP3: The greater the international experience of a port operator, the more likely investments will resemble a rational choice approach to internationalisation.

This literature review has aimed to give insights regarding the two opposite theories of firm internationalization, namely internationalization as an incremental learning process or better known as the Uppsala model or that internationalization is based on a rational choice approach. The Uppsala model is found by Johanson and Valhne in 1977 and is critiqued by Benito and Gripsrud (1992). The foundation of the Uppsala model is that the lack of knowledge of foreign markets is a critical restriction to international expansion. Johanson and Vahlne (1977, 1990) argue that market-specific and general knowledge could deeply affect a firms’ internationalization. The Uppsala model suggests that there are stages of internationalization, whereby the potential benefits of exploiting Firm Specific Advantages (FSAs) abroad (Rugman and Verbeke, 1992), need to be weighed against the risks of operating in unknown foreign environments and the costs of learning to do business there. Whereas the rational choice approach is based on economic theories.

Benito and Gipsrud (1992) argue that one of the reasons for internationalization is due to the cost leadership strategy firms have, meaning that the firm will move their production facilities (and thus a big part of their labour) to countries that have lower cost than in their home country. In other words firms that make a foreign investment mainly do this to take advantage of low resource costs and therefore will probably not consider countries culturally close to the home country as viable alternatives. Here a note is necessary. In times of these early studies the rise of emerging market MNEs was not yet the case and these theories from the perspective of the developed market MNEs. And thus the first investments of such firms are likely to be in distant markets.

To get a better understanding about these two theories they are viewed from a terminal operator perspective. Terminal operators can be divided in three categories. The first are the stevedores who have port operations as their core business and invest in container terminals for expansion and diversification. The second are the maritime shipping companies who invest in container terminals as a support function of their business. The last are the financial corporations (maritime shipping companies) who have container terminals for valuation and revenue generation.

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16 The terminal operator conceptualization and the internationalization theory sections are integrated to allow the development of working propositions regarding the expected internationalization patterns of different types of terminal operators. These working propositions are based on how the terminal operator is expected to cope with internationalizing their Firm Specific Advantages (FSAs), their ability to recombine their FSAs with the Location Specific Advantages (LSAs) and if the experience of the terminal operator will show a incremental learning process or a rational choice approach for its internationalization. In the next chapter, the methodology chapter, the research method will be explained, what the cases are and how these three variables (FSAs, LSAs and experience) can be measured.

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3. Methodology

This chapter will give a description of the study’s methodology. The arguments for using this methodology will be reflected in four sections. First, the research philosophy will be discussed. Second, the research design will be viewed based on the quality criteria and the case selection. Next a description of the cases in this thesis will be given and this chapter ends with a discussion of the types of data collected in this study, the sources of the data and the analytical strategy used to analyse the data.

3.1 Epistemological and Ontological Considerations

Each research design rests on the epistemological and ontological foundations (Brannick and Coghlan, 2007). The epistemology concerns the question of what is (or should be) regarded as acceptable knowledge in a discipline (Bryman and Bell, 2011). One of the core thoughts is that of the post-positivist epistemology that reinforces the idea that the reality cannot be known in its totality, but only probalistically (Gephart, 2004). Post-positivists focus on the creation of new knowledge and extension of established theories (Ryan, 2006). Bryman and Bell (2011) argue that this positivism orientation is fundamental for quantitative studies and for a qualitative study like a case study the interpretivism is more suitable. This strategy is predicated upon the view that a strategy is required to respect the differences between people and the objects of the natural sciences and therefore requires the social scientist to grasp the subjective meaning of social action (Bryman and Bell, 2011). In contrary a case study can be post-positivist in nature due to the fact that the researcher seeks for generalization of the results to existing theory to understand the phenomenon studied (Einsenhardt, 1989; Yin, 2003). In this thesis the literature review has drawn on existing theoretical concepts of the two theories and their supporters from which proposition have been developed that will be linked to the qualitative results, reflecting the post-positivist philosophy (Eisenhardt, 1989)

Questions of social ontology are concerned with the nature of social entities. According to Bryman and Bell (2011) the central point of orientation is that social entities can and should be considered objective entities that have a reality external to social actors, or whether they can and should be considered social constructions built up from the perceptions an actions of social actors. In their view the first part should refer to objectivism and the second to constructionism or subjectivism. The objective ontology argues that an independent researcher examines the reality as it is, without altering it (Brannick & Coghlan, 2007). It implies that social phenomena studied, confront us as external facts that are beyond our reach or influence (Bryman and Bell, 2011). Whereas the counterpart is argued that the reality is an output of a human cognitive

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18 process (Branninck & Coglan, 2007). Bryman and Bell (2011) called this constructionism and see this type of ontology in relation to the nature of knowledge of the social world that is being incorporated into notions of constructionism. Therefore is this type related to social objects and categories and thus can be viewed as socially constructed and are in a constant state of revision.

Derived from the above, it comes down that there is an objective reality which is observable by the researcher (Saunders et al., 2011), and the aim of this thesis is to seek for generalization of the results to existing theory. Therefore this thesis takes a post-positivist approach.

3.2 Research Design: Qualitative Multiple Case Study

For this thesis a case study design has been applied, this is a research strategy which focuses on understanding the dynamics present within single settings (Eisenhardt, 1989). A case study can be based on either a single or multiple cases, and on numerous levels of analysis (Yin, 1984). In this thesis multiple case studies have been used to examine a contemporary phenomenon within a real life context (Yin, 1994; Yin, 2003). Since the research question is a “how” question, next to the case study design also an experiment could be considered (Yin, 2003), because the question reflects a container terminal as the contemporary phenomenon. Therefore the case study design is far more suited to this study. As a qualitative case study has a more explanatory nature and therefore allows a better understanding of the realities and complexities that surround the object of study (Bryman, 2012). Another argument is that of Eisenhardt (1989) who argues that case studies allow the researcher to discover patterns and to generate new theory. Before explaining the selected cases, the foundation from where these cases have been built on need to be explained via the quality criteria for this research design. The next sections will give an additional insight into why the qualitative multiple case study is most suited for the research question:

“How well does the rational choice or learning process explain the internationalization of terminal operators?”

3.2.1 Quality Criteria

To make a study with high quality is has to be reliable, replicable and valid. In the next sections this thesis will be viewed by these criteria.

Construct Validity

Construct validity also referred to measurement validity is essentially about if the measure that is devised of a concept really does reflect the concept that it is supposed to be

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19 denoting (Bryman and Bell, 2011). In other words it refers to the accurate measurement of the objects of the study. This is achieved via the use of data triangulation. Data triangulation addresses multiple sources of evidence and thus essentially provides multiple measures of the same phenomenon, it is an option to overcome problems of construct validity. Consequently when using multiple sources of evidence it has been found that analysis rates more highly in terms of overall quality (Yin, 2003). In this thesis multiple sources like, annual reports, webpages, newspaper articles, articles of scholars and sector reports have been used, what can be characterized as data triangulation. Moreover, the data has been collected in a structured way that makes it possible for external observers to trace the steps in all the decisions made and thus will increase the overall quality of the case (Yin, 2003). Another important aspect of construct validity, according to Bryman and Bell (2011), is that the hypotheses or working propositions are derived from theory that is relevant to the concept. They argue as well that qualititative research is inductive and thus will generate theory principal orientation to the role of theory in relation to the research. This is also the case in this thesis.

Internal and External Validity

Internal validity refers to the match, or the lack of, between the researchers’ observations and the theoretical ideas developed, whereas the external validity refers to the degree to which the findings can be generalized (Bryman and Bell, 2011). Internal validity has been covered since the propositions reflect the existing literature on the topic under study and there is a detailed explanation, including contrary explanations, of the studied relationships. All within-case analyses have been conducted following the theoretical framework and the results have been analyzed in a cross-case analysis (Yin, 2009).

The external validity in the form of a case study represents a problem for a qualitative researcher because case studies are just small samples (LeCompte and Goetz, 1982; Bryman and Bell, 2011). This is covered due to the specification of this research. The focus are container terminals and the findings of this thesis have therefore a higher theoretical generalizability. Yin (2009) argues that through replication logic, the theory is tested by comparing the results of each case. In this study two theories of well cited researchers are tested in a field with case studies where they were not have been tested.

Reliability

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20 possible that later investigators can repeat the same steps. Bryman and Bell (2011) see two kinds of reliability, the external and internal reliability. External reliability means the degree to which a study can be replicated, like the definition of Yin (2009). In the case of this thesis the study can be replicated as it is based solely on evidence that is readily available for any researcher. The data collection process was rigorous in which all cases are stored in a case study database and all steps have been described. These steps are explained in the data collection and data analysis section of this chapter. The internal reliability refers to whether or not multiple researchers agree on the findings of the researched material. This is also covered during the time of writing this thesis there have been multiple feedback sessions with the thesis supervisor and the end results also been viewed by a second researcher.

3.2.2 Case Selection

The purpose of this research is to evaluate the internationalization of terminal operators. Therefore the selected cases in this thesis need to be relevant for studying terminal operator internationalization and thus terminal operators are the focal units of analysis. As explained in the literature review there are three types of terminal operators. Stevedores, maritime shipping companies and financial holdings. Since they have different backgrounds the firm specific advantages (FSAs) of these firms will differ and this could influence their internationalization pattern.

Due to the large amount of container terminals worldwide and the limited time for this research, it is not realistic to investigate all terminal operators worldwide. Therefore this thesis will analyze of each category the biggest terminal operator based on the equity based throughput during 2009. Based on that criteria and the categorization of terminal operators, the Port of Singapore Authority International (PSA) is the largest stevedore, APM Terminals (APMT) the largest maritime shipping company and Dubai Port World (DPW) the largest financial holding. In table 1 these units of analysis have been further specified. Here a note has to be made, concerning APMT, since this operator was difficult to position due to fact that it was formed to become an independent terminal operator from its sister carrier Maersk Line. The argument that APMT manages some facilities that are Maersk Line dedicated and other that are multi-user terminals (Slack and Frémont, 2007) made them a maritime shipping company. Based on these arguments APMT is seen as a maritime shipping company in this thesis.

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Table 1: Case selection

Case Company HQ Location Expansion First Number of Terminals Number of Countries Description

Case 1

Stevedores PSA International

Singapore 1996 28 15 The Port of Singapore Authority is publicly hold and has port operations as their core business. Investing in container terminals for expansion and diversification. Their business model is horizontal integration and their dominant expansion strategy is through direct investment. Case 2 Financial Holdings Dubai Ports World Dubai 1999 46 (including new developments)

31 Dubai Ports World is a branch of the Dubai World sovereign wealth fund and is publicly owned. Financial assets management is the main business therefore the investment in container terminals are for valuation and revenue generation. Their business model is portfolio diversification and their dominant expansion strategy is through acquisitions, mergers and reorganization of assets. Case 3 Maritime Shipping Companies APM Terminals The Netherlands 1975/ 2001 62 (including new developments)

38 APM Terminals is a sister company of Maersk Line, both are part of the APM Moller Maersk Group. APM Terminals is privately owned. Their business model is vertical integration. The holding has maritime shipping as their main business and APM Terminals started as a support function. The dominant expansion strategy is through direct investment.

Source: Angenietje Temme (2015)

Note 1: In the case of APM Terminals their sister company Maersk-Line already started with a container terminal division that later in 2001 became an own company. That is the reason two dates are shown for their first expansion.

Note 2: The Dubai Ports World website gave the number of 65 marine terminals, these terminals are not all container terminals or not located in sea-ports. Therefore the number of terminals is only 46.

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3.2 Data Collection

The defined propositions give clear directions and are the foundations of the systematic analysis of the content. To be able to do so, the process of collecting data has a number of phases: first, data is collected to establish an orientation on the international transferability of terminal operators firm specific advantages (FSAs); second an overview of available location specific advantages (LSAs) that could be recombined with the terminal operators FSAs where collected and lastly representation of the terminal operators international experience through the collection of their internationalization pattern. In the case of terminal investments of the three terminal operators their company websites are used, see table 2 for the used number of investments researched.

Table 2: The Terminal Operators and the available expansion data

Company

Company Website Investment _Studied Investments

Total Studied

PSA International 28 23 23

Dubai Ports World 46 37 37

APM Terminals 58 49 49

Source: Angenietje Temme (2015)

Note: In some cases new terminal project where scheduled therefore these terminals are not included although they were mentioned on their website.

As already mentioned to generate high construct validity it was important to use data from multiple sources. Therefore the data for these phases was gathered via newspaper articles, industry reports, industry magazines, annual reports, company websites and previous research that reflect these topics. These sources, amongst others, are identified as being appropriate data sources for multiple-case studies (Yin, 2003). To find newspaper articles like from the ‘Financial Times’, and other (financial) newspapers, to analyze the internationalization by container terminals, the LexisNexis database has been used. As a key search term the firm’s name and the name of the terminal was used as a first step. As a result the database gave a broad range of articles, which were then systematically reviewed to identify articles providing significant commentary on the internationalization of the focal firms.

Next to the data triangulation all of the data was put in a database. This makes it possible to replicate this study. Subsequently, longitudinal data of the selected cases was collected individually on the three terminal operators via de different sources mentioned above. The collected data was carried out over different periods starting from the moment the company started to

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23 internationalize until 2014. The reason for the different starting dates and thus the different time in number of years of these companies is because they started their businesses in other time frames although when all companies got there present form they started internationalize around the same period. DPW started as a local port operator in Dubai in 1991 after Port Rashid and Jebel Ali port were combined. DWP became a regional port operator in 1999 and since 2005 they claim to be a global port operator. APM Terminals had already started in 1975 when Maersk made its first acquisition in Tacoma, US. Only in 2001 it became an own company under the A.P. Møller-Maersk Group and thus a sister company of Maersk-Line. For PSA their first internationalization step was in 1996 by an acquiring an 49 per cent stake in the Dalian Container Terminals to form a minority joint venture with the local government of Dalian.

3.3 Data Analysis

The gathered data was managed and analyzed using NVivo. NVivo is a software for qualitative data analysis and is used because it facilitates an accurate and transparent data process which provides a reliable, general picture of the data (Welsh, 2002). On the analysis part the next paragraph will give an in-depth view.

The themes of this thesis have been divided into code categories, in the NVivo program referred to as nodes, which are then associated to codes. This is done by thematic coding. NVivo is used to associate the data. This data (i.e. words, sentences or paragraphs) and the codes, allows later analysis and interpretation of outcomes (Payne 2004). These pieces of newspaper text, as well as similar pieces text are manually evaluated and thus it is important to understand that this can suffer from subjective interpretation.

The technique of deductive formulation of an “a priori template of codes” (Fereday and Muir-Cochrane, 2006, p. 83) is used in this thesis. The categories and codes used in the analysis process are derived from the key themes discussed in the literature review and reflect the propositions. The coded texts where then analyzed to identify support (or lack of support) for the propositions and thus the displayed data identifies patterns and subsequently draws conclusions.

The concepts of this thesis derived from the literature via the working propositions are the firm specific advantages (FSAs) of a terminal operator, the location specific advantages (LSAs) for a terminal operator and the experience a terminal operator has in internationalization. These concepts (FSAs, LSAs and experience) are all accepted as measures of internationalization (e.g.

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24 Wernerfelt, 1984; Johanson and Vahlne, 1990; Rugman, Verbeke and Nguyen, 2011; Verbeke, 2013). Therefore they are seen as the highest level of quotes and thus the code category.

Table 3: Coding scheme

Code Category Code Description Working Proposition

Firm Specific Advantages

Location Bound FSAs

All information regarding the boundedness of the FSAs to the home location of the terminal operator.

WP 1a, 1b Non-Location

Bound FSAs

All information regarding the transferability of the FSAs into the host location of the terminal operator.

WP 1a, 1b Location Specific

Advantages

Attractiveness of the Host Location

All information regarding the attractiveness of the host location (e.g. capacity of the terminal, port and hinterland infrastructure) entered by the terminal operator.

WP 2a, 2b

Accessibility of the Host Location

All information regarding the accessibility of the host location (e.g. entry barriers) entered by the terminal operator.

WP 2a, 2b

Experience Market

commitment

All information regarding to the tangible and intangible commitments (e.g. the chosen entry mode) the terminal operator made at the host location.

WP3

Physic Distance The geographical distance between de home location and the host location

WP 1a, 1b, WP 2a, 2b, WP 3 Source: Angenietje Temme (2015)

Consequently these and other articles sub codes were reviewed to cover all of the dimension within the data. These code categories and their sub codes are presented in table 2.

The analysis of the data, as mentioned in the previous paragraph, is a synthesis of articles, annual reports and other sources over the period that covers the existence of the different companies of the case studies. To give an analytical overview of the findings for each case there is a table presented containing quotes from the data, illustrating the concepts of table 2. The used quotes in these analytical tables are all directly taken from their source even though they are not referenced as such. These quotes are cited individually when used directly in-text in all of the following chapters.

The unit of analysis is the terminal operator and its container terminals around the globe. Since the selected terminal operators PSA International, Dubai World Port and APM Terminals are the market leaders their terminal portfolio is, like it has been described earlier large but most of all

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25 very complex. Figure 1 gives an example of the inter-firm relations of the Rhine-Scheldt Delta.

Figure 1: Inter-firm relationships in selected container ports of the Rhine-Scheldt Delta – situation early 2010

Source: Notteboom and Rodrigue (2012).

This data is from the early 2010 and only shows the complexity. Due to this complexity is was not possible to find the relevant information from each of the terminals. Therefore the analysis, although all terminals were studied, the within-case analysis will only make assumption about the terminals where there was enough information to do so. This decision is made to not jeopardize the reliability of this thesis.

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4. Results

This chapter provides an overview of the results retrieved and analysed from the data collected. The chapter is divided in two parts the within-case analysis and the cross-case analysis. In the within-case analysis PSA International, Dubai Ports World and APM Terminals will be analysed. The cross-case analysis will view the three cases together to assess the similarity and differences of patterns from the within-case analysis. The method of analysing is described in the methodology chapter.

4.1 Within-Case Analysis

This section will analyse the cases of PSA International, Dubai World Ports and APM Terminals separately. The analysis will be done though a review of the collected data and comparing this data with the literature. The companies will be viewed in terms of the transferability of their FSA, the ability of recombining the location specific advantages with their FSAs and their experience as an unique FSA. Second they will be assessed by their year of entry, the type of entry mode, the type of commitment, the host location attractiveness and the accessibility of the host location. The data is collected from the time they start internationalizing. To give an overview of the collected date an overview of each terminal operator is done through an analytical table.

4.1.1 Stevedores: the case of the PSA International

The largest stevedore is PSA International (PSA). Their home location is Singapore and this is also where its headquarters is located. The data has been collected from the first internationalization in 1996 until 2014. The most valuable firm specific advantage (FSA) is that PSA created an international benchmark for their service level. This service level is based on their successful residence of maritime-related community in the Port of Singapore and that this community strives to provide word-class and competitive products and service standards to meet the stringent requirements of port users. To be able to transfer this FSA PSA had to learn how to deal with the differences in various host countries or like the global head of corporate affairs and human resources Caroline Lim (2007) explained, “as the company began to expand overseas, it also had

to learn how to deal with foreign governments, port authorities, unions and communities.” The

first expansion, shown in table 3, was through a joint venture with the Port Authority of Dalian and the second was an acquisition in Italy. After Italy PSA took a step further in to Europe with their concession in Sines, Portugal. After that they shifted back to China again for a joint venture to and