Understanding port performance: An examination of challenges in the contextualisation of performance in support of policy design in the port sector

Abstract

Owing to the prominence of maritime transport, the performance of ports as nodes in the maritime transport network is a critical enabler of a regions capability to trade internationally. Ensuring the performance of ports is therefore a frequent and prominent policy goal. Effective policy design requires an understanding of performance to evaluate and design policy interventions. A key challenge to evaluating port performance is the complexity of ports as infrastructure systems. Ports develop relative to the economic, physical and socio-political environments of the regions they serve. Understanding the performance of ports thus requires contextualisation of performance in respect of the port’s operating environment. In multi-port regions, this is particularly challenging, as the performance of an individual port is most likely to be impacted by the performance of related ports. The evaluation of performance must therefore be contextualised relative to the individual circumstances of a given port and those of related ports. This thesis aims to contribute to our understanding of how to evaluate port performance as it pertains to policy design. The thesis consists of a number of papers presented as chapters. Each chapter deals with a respective challenge to this process. The first paper presented in chapter 2, explores the dimensionality of performance and its implications for seaport performance evaluation. As entities, seaports produce a mix of private and public goods that have significant welfare implications for the regions they serve. In effect, performance in seaports can be viewed as multi-dimensional. The objective of this chapter is to conduct a systematic literature review of published studies on seaport performance measurement to identify, critically evaluate and integrate the various dimensions of seaport performance measurement. A review of the literature was thus carried out focusing on key questions in performance measurement system design, outlining what to measure and how to measure it. The study finds that the volume of studies has been expanding rapidly, leading to significant advancement in the development of methods to create different measures of port performance across an increasing number of dimensions. However, there has been less progress in advancing means to define what constitutes performance as a construct, particularly when performance is perceived as multidimensional. In this review, five dimensions of seaport performance were identified. In addition, a formative construct of performance was proposed, to be used in the design of performance measurement systems to address policy concerns when performance is of a multidimensional nature. Chapter 3 takes a temporal perspective, to examine the development of performance across ports in a port system over time in a case study approach. The paper examines performance change in the Irish state-owned port sector over the period 2000-2016. For analysis, qualitative sources are used to construct an explanatory account for quantitative measures of productivity, profitability and traffic shift-share change across the major ports within the system. The results show that overall change in performance largely follows that of the macro-economic performance of the region, characterised by pre-recession growth, decline during the recession and post-recession recovery. Across the ports, however, there was a notable divergence in performance post-recession. Identified factors affecting performance change across the period, include demand-side structural change, labour rationalisation, business model choice, and cargo mix choices. Chapter 4 investigates the effect of size on technical efficiency in peripheral port markets. In peripheral port markets, a limited volume of traffic creates challenges in sustaining multiple competing Port Authorities (PAs). With a limited size, smaller ports have difficulty in attracting the necessary traffic flows to leverage capital for development. In many European jurisdictions, recent policy reform has sought to concentrate resources in dominant ports or amalgamate smaller PAs to increase competitiveness and rationalize investments. This chapter formally examines the link between port size and achievable efficiencies through an efficiency analysis of Irish and Atlantic Spanish ports. To achieve this, the paper applies a two-step double bootstrap Data Envelopment Analysis (DEA) approach to examine the effect of relative size on technical efficiency across the two port systems in the period 2000-2015. The results indicate a positive relationship between size and technical efficiency amongst ports in peripheral regions. As the time-period covers the financial crisis, it is possible to further explore the effect of the recession and subsequent contraction in the market for port services on the relationship between size and technical efficiency. The findings indicate that the effect of size on technical efficiency becomes even stronger when market contraction is controlled for. Results also show that the efficiency gap between the larger and smaller ports increased considerably after the recession. Chapter 5 measures performance from a network demand perspective. In many regions, capacity for port services is provided by a network of gateway ports. These gateway ports act as entry and exit nodes for a region to the wider freight transport system. Understanding existing drivers of port choice and the substitutability between nodes within the network is important for informing policy decisions regarding the allocation of often scarce resources in developing capacity. The objective of this chapter is therefore to examine demand for and substitutability between nodes in the Irish port network. A random utility maximisation framework is employed to examine the probability of routing a vessel, conditional on having chosen to run a service, through a given node based on identifiable port attributes. Using the output of the modelling exercise, several policy scenarios are simulated to examine substitutability across the port network. The model of port demand is created using a full sample of port calls for the year 2016 using automatic identification system (AIS) data sourced from Marine Traffic. Finally, chapter 6 explores how port managers achieve performance in matching supply of port services with demand. For countries that rely on maritime trade, the timely and appropriate development of port capacity is of strategic national importance. To achieve this, an exploratory case study is carried out in the Irish state owned port sector, where the decision to develop capacity is examined with senior executives in Irish Port Authorities. To facilitate this enquiry, key concepts from the strategic management literature are evoked to reconceptualise the capacity planning process as a capabilities search problem. The purpose of this conceptualisation is to provide a strategic framework to comparatively analyse decision making regarding capacity planning across organisations. From the case study, five generic capabilities critical to supplying capacity for freight markets in the Irish context were identified. The findings of the case indicate that underlying strategic decisions to develop capacity are assumptions about future capabilities in each of the five categories, with categories highly interlinked. Additionally, it is clear that across port contexts, the strategic importance of various capabilities will remain contingent on contextual factors accruing to the ports operating environment. This leads to practical implications for how the long term capability to supply port services for freight markets is evaluated. It is argued that any assessment of future capacity development within a given port must be cognisant of all capabilities required to develop capacity. Furthermore, the relative strategic importance of given capabilities are highly contingent on the context in which capacity is being developed.