Document [original]

Horizontal cooperations between

logistics service providers:

motives, structure, performance

Christina Schmoltzi

WHU – Otto Beisheim School of Management,

Kuehne-Center for Logistics Management, Vallendar, Germany, and

Carl Marcus Wallenburg

Technische Universita

¨t Berlin, Berlin, Germany

Abstract

Purpose – This paper aims to provide a comprehensive overview of the motives, structure and

performance attributes of horizontal cooperations between logistics service providers (LSPs). Based on

an analytical classification model, distinctive types of logistics cooperation that characterize the

logistics landscape are identified.

Design/methodology/approach – Empirical data were collected on horizontal LSP cooperations

from managers of German LSPs. Different uni- and multi-variate statistical methods including

ANOVA and cluster analysis were applied to the dataset of 226 cooperations for a total of 6,081

involved parties.

Findings – Horizontal cooperations with other LSPs are an organizational form used by 57 percent

of LSPs. Cooperation decisions are substantially driven by external market objectives. Six distinctive

types of cooperation are identified. They reveal the dominance of multi-lateral and international

networks that are mainly based on contractual agreements. There is a clear preference for partners with

similar market competencies and for strong functional integration. Despite its inherent complexity,

performance of these cooperations is high – its less than 19 percent failure rate makes these cooperations

substantially more stable than cooperations within manufacturing industries.

Research limitations/implications – This study is limited to an exploratory, descriptive

approach in providing a sound understanding of the cooperation landscape.

Practical implications – The findings contribute transparency to horizontal LSP cooperations and

a common understanding of their idiosyncrasies. The conclusions help logistics managers to position

themselves better within the cooperation landscape. Further, the analyses offer managers a conceptual

classification of horizontal LSP cooperations and some guidance on how to structure their individual

LSP cooperations more successfully.

Originality/value – This paper is the first empirical study that defines the types of cooperation that

comprise the logistics cooperation landscape. The analysis integrates a holistic perspective of their

contractual, organizational, functional, geographical, service and resource scope and matches them

with underlying motives and performance attributes.

Keywords Horizontal cooperation, Logistics service provider, Cooperation types, Service delivery,

Germany

Paper type Research paper

1. Introduction

The rise of complex and global supply chains and the growing intensity of competition

continuously increase the challenges for logistics service providers (LSPs). A viable

way of reaction is to cooperate – either vertically with customers or horizontally

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0960-0035.htm

IJPDLM

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Received 9 March 2010

Reviewed 2 July 2010

Revised 13 September 2010

Accepted 23 September 2010

International Journal of Physical

Distribution & Logistics Management

Vol. 41 No. 6, 2011

pp. 552-576

qEmerald Group Publishing Limited

0960-0035

DOI 10.1108/09600031111147817

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with other LSPs that are proximate or distant competitors. Over the last decade,

horizontal cooperation has vastly increased and become an important organizational

form for LSPs. The trade press can only provide a glimpse of this dynamic development,

when it reports that FedEx just established a partnership with an LSP from Israel to offer

expanded international freight forwarding services (The Wall Street Journal, 2010) that

APL Logistics announced a cooperation with an LSP from Japan to market global supply

chain services (Transportweekly, 2010), and that US Postal Service just entered into an

international agreement with an LSP from China to improve service quality for

American consumers ordering from merchants in China (Bloomberg, 2010). Our study

shows that today almost 60 percent of LSPs engage in at least one horizontal

partnership. Despite this fact, researchers and managers of LSPs have only limited

insights into the diverse patterns and opportunities of such cooperation.

While vertical cooperations between LSPs and shippers have already been covered by

an abundant body of literature that investigates, for instance, the typology of partners

and their relationships (Stefansson, 2006; Knemeyer et al., 2003; Lambert et al., 1996),

success factors of vertical logistics cooperations (Deepen et al., 2008; Lambert et al., 1999;

Moore, 1998; Tate, 1996), or attributes of partnership performance (Stank et al., 2003;

Gibson et al., 2002), research on horizontal cooperations between LSPs is still at an early

stage and hasmainly been limited to case studies that focus on specific modes of transport

(e.g. road: Lemoine and Dagnæs, 2003; Ludvigsen, 2000/rail: Ohnell and Woxenius, 2003;

Nijkamp, 1995/sea: Slack et al., 2002; Midoro and Pitto, 2000/air: Oum et al., 2004; Fan etal.,

2001; Glisson and Cunningham, 1996). As a notable exception, the latest work in this

research area by Cruijssen et al. provides an extensive literature review (Cruijssen et al.,

2007a) and first survey-based findings on opportunities and impediments for horizontal

cooperations in logistics (Cruijssen et al., 2007b).

Following Kale et al. (2000), there have been three research streams on strategic

cooperation management. The first investigates motives that drive cooperation

formation decisions; the second focuses on underlying governance structures; and the

third stresses the performance outcomes of cooperation activities. This paper extends

this body of knowledge on horizontal LSP cooperations in all three domains.

First, we analyze the motives of LSPs to establish a horizontal cooperation. Second,

we explore the structure of these cooperations. For this purpose, we develop a specific

framework based on the analytical model of Klint and Sjo

¨berg (2003). Our findings on

the cooperation structure allow us to identify distinct cooperation types that characterize

the logistics landscape. Third, we investigate cooperation outcomes based on

established performance measures provided by Pangarkar (2009), Schreiner et al.

(2009) and Saxton (1997). By doing so, we explicitly address the research gap outlined by

Cruijssen et al. (2007b, p. 36) who indicate the lack of “a general conceptual classification”

for horizontal LSP cooperations and advance knowledge on how cooperations are

structured and operated. These are important aspects of cooperation management that

still merit further empirical insights (Mayer and Teece, 2008).

The next sections begin with an overview of our research framework and the research

methodology. Subsequently, the empirical results are presented and discussed in order

to derive research and management implications and give directions for further research.

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2. Conceptual framework

In this paper, we focus on horizontal cooperations between two or more LSPs who

strive for mutual benefits and positive relational rents (Dyer and Singh, 1998;

Lavie, 2006; Taylor, 2005). The parties jointly contribute resources in a certain area for a

potentially limited time, while preserving their strategic autonomy (Dussauge and

Garrette, 1997; Glaister and Buckley, 1996). This definition incorporates the dichotomy

of cooperation and competition (Bengtsson and Kock, 2000) and explicitly excludes

sub-contracting partnerships.

2.1 Cooperation motives

Firms establish horizontal cooperations for several reasons. These reasons depend on

individual resource endowments and industries (Glaister and Buckley, 1996; Tsang,

1998). For the logistics service industry, Cruijssen et al. (2007a) conducted in-depth

interviews and survey research to identify idiosyncratic cooperation opportunities.

They show that LSPs mainly associate productivity increase, service portfolio extension

and cost reduction with horizontal LSP cooperations. Further opportunities can arise

from better market positioning and improvements in service quality (Cruijssen et al.,

2007a). In addition, horizontal cooperations provide access to additional knowledge,

financial resources (Sakakibara, 1997; Deeds and Hill, 1996) or new markets (Glaister

and Buckley, 1996; Gulati and Singh, 1998).

2.2 Cooperation structure

Besides motives, the structural design of strategic cooperations has attracted

researchers’ interest for a long time. Starting in the early 1990s, scholars have

attempted to develop typologies and classify the extensive variety of cooperations.

Three prominent typologies with a rather narrow focus are the two-level typology of

Parkhe (1991), which builds on the similarity of resource endowments, the three-

category typology of Dussauge and Garrette (1997), which uses partnership-specific

attributes like geographic coverage and functional scope, and the 13-level typology of

Todeva and Knoke (2005), which is based on the cooperative governance structure.

Further, a comprehensive model was introduced by Klint and Sjo

¨berg (2003) for a more

holistic analysis. This model focuses on the eight most relevant factors for the structural

design of cooperations in general.

In order to derive an idiosyncratic framework for the analysis of horizontal LSP

cooperations, these eight factors were aggregated and translated into six distinctive

dimensions (Table I), each of which will be outlined by the following section:

(1) Our first dimension, “contractual scope”, refers to the factor “formality” of the

Klint and Sjo

¨berg (2003) model. While most studies of inter-firm cooperations

only distinguish equity-based and non-equity-based setups (Garcı

´a-Canal et al.,

2003; Dussauge and Garrette, 1997; Lunnan and Haugland, 2008), there is a

consensus that the full range from near arm’s-length agreements to joint venture

contracts is used in practice (Gulati and Singh, 1998; Todeva and Knoke,

2005). Within this range, four types of agreement can be distinguished: verbal

arrangements, written contracts without equity involvement, minority stake

agreements and joint venture agreements (Frankel et al., 1996; Teng and

Das, 2008).

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(2) “Organizational scope” reflects the “number of companies” involved in the

cooperation. In this respect, a relevant distinction exists between bilateral

cooperations with two parties and multi-lateral ones with three or more

(Rubin de Celis and Lipinski, 2007). Several studies have demonstrated that

the organizational scope of a partnership has a strong impact on its effectiveness

(Griffith et al., 1998; Park and Russo, 1996). From a resource-based perspective, an

increased number of partners offer the opportunity to pool more resources and to

benefit from greater resource complementarity (Gong et al., 2007; Garcı

´a-Canal et al.,

2003). From a transaction cost perspective, however, more parties lead to higher

coordination and communication efforts (Gulati and Singh, 1998; Parkhe, 1993).

(3) “Functional scope”, a third dimension, reflects the factor “area of cooperation”

from Klint and Sjo

¨berg (2003) and specifies the functional focus of a cooperation

in terms of value creation. Following the concept of Porter (1985), value-creating

areas can be divided into primary and secondary activities. In providing value to

partnering companies, cooperations may address both primary and secondary

activities and may either be focused on one specific function or rather be broadly

organized by addressing several functions (Dussauge and Garrette, 1997).

Despite many analytical approaches to the functional scope of partnerships

(Hoang and Rothaermel, 2005; Anand and Khanna, 2000; Murray et al., 2005),

so far no empirical study exists that reveals the relative role of each functional

area in the overall value creation.

(4) “Service scope” and (5) “geographical scope” both reflect “product complexity”.

We transfer the notion of “product complexity” into two dimensions to capture

the complexity of logistics services:

.the type of logistics services offered; and

.the geographical coverage underlying these service offerings. Both

dimensions are undeniably interrelated – not only because services

are characterized by the simultaneity of production and use of the services

Structural dimensions of idiosyncratic analytical

framework

Corresponding factors in the general cooperation

model of Klint and Sjo

¨berg (2003)

Contractual scope (type of agreements used) Formality (focuses on type of agreement the

cooperation is based on)

Organizational scope (number of partners

involved)

Number of companies (focuses on number of

companies involved in the cooperation)

Functional scope (value contribution by functional

areas)

Area of cooperation (focuses on functional area

the cooperation takes place in)

Geographical scope (market coverage)

Service scope (services provided)

Product complexity (focuses on complexity of the

products/services the cooperation offers)

Resource scope (degree of resource overlaps/

similarity in three categories: MC, MP and CS)

Complementarity (focuses on competences of

partners)

Importance of the region/district (focuses on

geographical proximity of partners)

Company size (focuses on relative size of partners)

Social structure (focuses on social cultures and

habits of partners)

Table I.

Analytical framework for

horizontal LSP

cooperations

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(Wagner, 2008), but also because LSPs belong to a network industry

where geographical presence is an important aspect of a firm’s competitive

edge (Oum et al., 2004). Therefore, both aspects induce the service

complexity that cooperating LSPs have to handle (Colombo, 2003;

Garcı

´a-Canal et al., 2003).

(6) “Resource scope”, the sixth and last dimension of our framework, integrates the

remaining structural factors of Klint and Sjo

¨berg (“complementarity”,

“importance of the region/district”, “company size”, and “social structure”),

all of which draw on the complementarity or similarity of resources that

determine the partnership setup. A first category of resource scope refers to the

“market competence (MC) profile” of cooperations by capturing overlapping

business activities and core competencies (Kale et al., 2000; Van de Ven and

Walker, 1984). The second category refers to the “market penetration (MP)

profile” of cooperations by capturing the degree of overlapping geographical

coverage and customer portfolios (Saxton, 1997; Oxley and Sampson, 2004;

Van de Ven and Walker, 1984). The third and last category of the

resource scope refers to the “corporate structure (CS) profile” and analyzes the

similarity of company size and social structure (Murray and Kotabe, 2005;

Kale et al., 2000).

2.3 Performance

Not all cooperations have lived up to their expectations. In many industries, the failure

rate of horizontal cooperations is alarming and ranges from 50 to 70 percent (Das and

Teng, 2000; Kogut, 1989; Park and Russo, 1996; Porter, 1987; Park and Ungson, 2001).

Therefore, it is not surprising that cooperation performance has gained much attention

from researchers (Saxton, 1997; Arin

˜o, 2003; Lunnan and Haugland, 2008).

In the search for a valid cooperation performance assessment, various measures – both

objective and subjective – have been developed. Arin

˜o (2003) classifies them as follows:

financial performance measures that either rely on accounting data (e.g. return on

investment: Luo, 2002) or on financial data (e.g. abnormal stock market gains: Anand and

Khanna, 2000), operational measures (e.g. cooperation membership duration: Harrigan,

1988), and subjective effectiveness measures based on perceptual performance evaluation.

Still today, there is no consensus on the optimal measurement of cooperation performance

(Das and Teng, 2003; Lunnan and Haugland, 2008).

3. Methodology

To identify characteristics and patterns of LSP cooperations, we applied an empirical

approach that consisted of both qualitative and quantitative elements. In a first

research phase, 12 in-depth interviews with logistics practitioners and researchers

were conducted to explore the general domain of horizontal LSP cooperations. Based

on these findings and extensive literature review, a survey instrument for large-scale

data collection was designed in the German language. To ensure reliability and

validity, we used – wherever possible – established constructs and measurement

scales stemming from the strategic management literature. With respect to face

validity, the final questionnaire was pre-tested with logistics researchers and nine

CEOs of LSPs who were asked to identify ambiguities in structure and wording.

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3.1 Sample

For our sampling we used the Hoppenstedt database, which contains corporate

information on German firms with an annual turnover of more than e1 million. Based on

27 logistics-specific NACE codes (i.e. “Nomenclature Statistique des Activite

´s

´conomiques dans la Communaute

´Europe

´enne”) we identified 6,641 LSPs with legal

entities in Germany as potential respondents. Drawing on the key informant approach

(Kumar et al., 1993), managers at the executive level were targeted which were supposed

to be the most knowledgeable with respect to firm-specific cooperation activities. Valid

e-mail addresses for invitations to our online survey could be attained for 3,686 LSPs.

In order to increase the response rate, we followed the recommendation of Larson

and Poist (2004) and used incentives and reminder e-mails. Finally, we received

426 responses, providing a satisfactory response rate of 11.6 percent. Of these, 26 had to

be deleted because of missing data. The remaining 400 responses consisted of two

groups: 226 (56.5 percent) responses originate from LSPs that at that time belonged to at

least one horizontal LSP cooperation, while 174 responses originate from LSPs that did

not cooperate horizontally. Corresponding to our research aim, our analyses focus on the

226 cooperating LSPs. These 226 respondents were invited to select one horizontal

partnership as a reference point when answering our questions. Most respondents

(72 percent) referred their answers to the strategically most important one.

Descriptive statistics on our final dataset reveal that 53 percent of the respondents

were CEOs, 9 percent other members of the executive board and 36 percent held other

leading management positions. In addition, the statistics show that respondents have

an average professional experience within their company of more than 16 years which

indicates their familiarity with firm-specific strategies and processes. Additional

descriptive statistics are presented in Table II.

We used a variety of methods to test for potential non-response bias. It was assessed

by comparing:

.early and late respondents with respect to survey variables (Armstrong and

Overton, 1977); and

.respondents and non-respondents with respect to available company

demographics from the company database.

Further, we conducted a follow-up study with 250 randomly selected companies from

the initial sample for investigating cooperation propensity and company demographics

and compared these responses to those of our 226 respondents. Neither method

indicated significant differences between sampled and target population.

3.2 Measurement

3.2.1 Cooperation motivation. To identify the main motives behind the formation of

horizontal cooperations, respondents were presented a list of motives and asked to

indicate on a seven-point scale the importance of each of them for making the

cooperation decision. The list included six cooperation opportunities suggested by

Cruijssen et al. (2007a) and was complemented by three additional motives often

discussed in literature: access to financial resources, access to new markets (Deeds and

Hill, 1996; Glaister and Buckley, 1996; Gulati and Singh, 1998) and access to additional

knowledge (Sakakibara, 1997).

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3.2.2 Cooperation structure. The architecture of the cooperation landscape was examined

via the six dimensions of our cooperation structure framework. To capture “contractual

scope”, we used a categorical variable that distinguishes four types of contract

(Frankel et al., 1996; Teng and Das, 2008; Reuer and Arin

˜o, 2007): verbal agreements,

contractual agreements that involve no equity stakes, minority equity agreements and

joint venture agreements. “Organizational scope” was measured through the total number

of LSPs involved in the cooperation (Gong et al., 2007; Colombo, 2003). “Functional scope”

was operationalized by asking the respondents to distribute a total of 100 points to a list of

seven functional areas according to the importance each functional area accounts for

value creation. The functions were selected following Porter and Fuller (1986) and

comprise production, marketing and sales, procurement, human resources, research and

product development, IT and administration and finance and accounting. “Geographical

scope” was measured via a categorical variable which distinguishes a national scope,

subsuming regional and nationwide reach, and an international scope, subsuming

continental and intercontinental reach (Glaister and Buckley, 1996). For the “service

scope” we used a categorical variable that denotes the mode of transport (road, rail, sea, air

and intermodal transport as well value-added services) with which the cooperation

generates most revenue. “Resource scope” describes the extent to which the cooperating

parties contribute either complementary or similar resources in terms of type and amount

(Das and Teng, 2003). Respondents were asked to indicate the degree of resource overlap

characterizing their partnership concerning business activities and core competencies

(MC), geographical network and customer portfolio (MP), financial strength, managerial

strength, management style and corporate culture (CS). All eight resource items were

Sales revenue (e)

1-5 million 38 16.9

.5-25 million 89 39.6

.25-100 million 48 21.3

.100-500 million 30 13.3

.500 million-5 billion 15 6.7

.5 billion 5 2.2

Total 225 100

Number of employees

1-50 76 34.1

51-100 40 17.9

101-500 64 28.7

501-1,000 15 6.7

.1,000 28 12.6

Total 223 100

Mode of transport that is generating most revenue

Road-based logistics segment 138 62.7

Sea-based logistics segment 14 6.4

Rail-based logistics segment 10 4.5

Air-based logistics segment 8 3.6

Intermodal logistics segment 32 14.5

Value-added segment 18 8.2

Total 220 100

Table II.

Characteristics

of respondents

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measured on a seven-point scale, ranging from full complementarity (1) to full similarity

(7). Since MC, MP and CS represent indices of items that were drawn from the Klint and

Sjo

¨berg model and from extensive literature review (Van de Ven and Walker, 1984; Oxley

and Sampson, 2004; Kale et al., 2000; Murray and Kotabe, 2005; Mitsuhashi and Greve,

2009), they were calculated as average scores of the corresponding items.

3.3 Cooperation performance

To provide a valid overview of cooperation performance, we followed the approach of

Lunnan and Haugland (2008) and relied on a combination of established scales. We

employed the failure rate to assess performance at the industry level and used

relationship duration and cooperation effectiveness to assess performance at the

individual cooperation level.

“Failure rate” serves as an overall measure of performance. In order to calculate a

reliable failure rate, we first identified the total number of horizontal cooperations each

respondent had already terminated due to failure. We explicitly excluded past

cooperations that were terminated for other reasons like goal achievement. Second, we

identified the total number of cooperations in which each respondent was engaged

when the survey was conducted, and calculated the failure rate by dividing the number

of failed cooperations by the sum of cooperations that were still running and those that

failed. This measurement approach follows Pangarkar (2009) and Park and Russo

(1996). It assumes that experience with cooperation failure can be counted and set in

relation to the overall cooperation experience. Since we neglected past cooperations

that had been terminated for other reasons than failure, our measurement presents an

upper bound of the industry-specific failure rate[1].

“Relationship duration” is regarded a reasonable proxy for cooperation success and

stability (Pangarkar, 2003; Harrigan, 1988). To capture relationship duration, we followed

Schreiner et al. (2009) and employed a single item asking for the number of consecutive

years the company had been maintaining the cooperation.

Given the fact that executive managers establish inter-firm partnerships for specific

reasons, their individual perception of “cooperation effectiveness” has shown to be an

accurate means to evaluate cooperation performance (Kale et al., 2002; Lin and Germain,

1998; Geringer and Herbert, 1991). For its measurement we used the well-established

performance scale of Saxton (1997). It captures whether the partnership has achieved its

primary goals, whether it has given a boost to the competitive advantage and core

competencies of the parent firm, and whether the parent firm is satisfied with the

cooperation’s overall performance.

4. Empirical results

4.1 Cooperation motives

The empirical data show that the three most important motives for cooperation formation

(displayed in Table III and assessed via mean scores on a seven-point scale) are the

opportunity to improve service quality (5.86), the opportunity to accrue positive market

share benefits (5.78) and – with a significant decline – the opportunity to specialize while

extending service offerings (5.20). Motives that are related to increased productivity of core

activities only rank fourth place (5.07), to reduce costs of non-core activities only eighth place

(3.14) and to gain access to financial resourcesevententhplace(2.15).Thisshowsthatin

general external, market-oriented motives outweigh internal, cost-oriented motives.

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However, with increasing strategic importance of cooperations the productivity motive

gains in relevance. In the group of strategically most important cooperations, this

motive obtains the third rank with a mean score of 5.23, while it only ranks fifth at 4.67

in the group of other cooperations. The latter group of cooperations instead put more

emphasis on broadening their service profile (third rank at 5.39) and on gaining access

to new markets (fourth rank at 4.91).

Our results contribute new insights to cooperation motives and thus extend the

findings of Cruijssen et al. (2007a), who assessed the opportunities with which LSPs

associate horizontal partnerships. They found that significant cost reductions and

productivity increases are seen as the most important opportunities. In comparison, we

investigated the motivational factors driving the actual cooperation decision and found

that service quality improvement and market share enhancement are the most

important decision-driving motives. Thus, we assert that when it comes to actual

decision making, the relevance of cost-oriented motives decreases, while that of

market-oriented motives increases.

4.2 Cooperation structure

Referring to the “contractual scope”, our results reveal that horizontal LSP cooperations

are predominantly based on written agreements. Of the cases, 49 percent use contractual

agreements, 32 percent of the cases employ written contracts with minority stakes and

6 percent joint ventures agreements. Only the remaining 13 percent of cooperations use

verbal agreements.

In the context of strategic cooperations, equity involvement serves as a valuable

mechanism to control for opportunism and align partners’ interests (Gulati and Singh,

1998). Although equity involvement is not the most prevalent governance mechanism

Rank Strategic cooperation motive Mean SD

Missing

(%)

Cooperations of

highest strategic

importance

(n¼162)

Other

cooperations

(n¼64)

1 To improve service quality (e.g. speed,

delivery reliability, geographical

coverage) 5.86 1.49 0.9 5.94 (1) 5.66 (2)

2 To protect or enhance market share 5.78 1.40 1.3 5.81 (2) 5.71 (1)

3 To specialize while broadening service

offerings 5.20 1.79 1.3 5.13 (4) 5.39 (3)

4 To increase productivity of core

activities 5.07 1.91 0.9 5.23 (3) 4.67 (5)

5 To gain access to new markets 4.96 1.82 0.4 4.99 (6) 4.91 (4)

6 To tender with large shippers or on

larger contracts 4.90 1.91 1.3 5.08 (5) 4.45 (6)

7 To gain access to additional

knowledge 4.33 1.82 2.2 4.33 (7) 4.35 (7)

8 To reduce costs of non-core activities 3.14 1.86 1.8 3.02 (8) 3.45 (8)

9 Other motives 2.87 1.93 30.5 2.67 (9) 3.37 (9)

10 To gain access to financial resources 2.15 1.58 2.2 2.19 (10) 2.06 (10)

Note: Group-specific rank order is shown in parentheses

Table III.

Overview of cooperation

motives

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for horizontal LSP cooperations, its relevance significantly grows with increased strategic

importance ( p,0.05). Of the strategically most important cooperations, 43 percent are

based on equity stakes, while the share is only 25 percent for other cooperations.

In terms of organizational scope, 31 percent of the cooperations are bilateral, while

69 percent are multi-lateral and span a wide range of constellations: 28 percent of the

cooperations involve three to ten LSPs, 24 percent involve 11-50 LSPs, 12 percent

include 51-100 LSPs and 5 percent consist of more than 100 independent LSPs. On

average logistics, cooperations involve 27.0 LSPs with a median of five[2]. These

numbers are substantially higher than in other industries (Friese, 1998). For example,

Park and Russo (1996) and Gong et al. (2007) identify joint ventures of manufacturing

companies to have on average 2.3 parent companies in the USA and 2.4 in China, while

the corresponding figure in our study is 10.5. Further, Li et al. (2010) analyzed

secondary data on marketing cooperations in 48 industries across 164 countries

between 1992 and 2008 and found that most cooperations only involved two parties,

while marketing and sales cooperations in our study include a minimum number of

five parties and an average of 25.2 parties.

Based on the findings of Cruijssen et al. (2007a), we expected the “functional scope” of

logistics cooperations to focus on primary activities – in particular service production.

This was confirmed by our empirical results. On average, 39.9 percent of the

cooperation’s value creation is contributed by production, 25.4 percent by marketing and

sales. Concerning the secondary activities, procurement attributes most with

13.1 percent, while the other functions contribute the remaining 21.6 percent: IT and

administration account for 6.6 percent, human resources for 6.2 percent, research and

development for 5.6 percent and finance and accounting for 3.2 percent.

To deepen the understanding and possibly identify patterns of functional scope,

we also conducted an agglomerative hierarchical cluster analysis. Based on the

average linkage algorithm with squared Euclidean distance, four functional clusters

were identified. Three of them have an idiosyncratic functional focus, while one

exhibits broad functional integration. Table IV shows the average value creation by

function for each cluster identified:

.Functional Cluster 1 has a production focus where, on average, the production

function contributes 70 percent of the cooperation’s value creation. This functional

cluster is common, representing 88 of the 226 cooperations (39 percent).

Functional cluster

Cluster 1 Cluster 2 Cluster 3 Cluster 4

n(%) 88 (39) 25 (11) 11 (5) 102 (45)

Relative contribution to the cooperation’s value creation by function (%)

Production 70.3 9.0 7.1 23.5

Marketing and sales 8.8 74.2 8.1 29.9

Procurement 4.4 3.4 80.5 16.3

Human resources 4.6 6.0 0.0 8.5

Research and development 3.7 3.5 0.0 8.4

IT and administration 5.6 2.5 3.4 8.9

Finance and accounting 2.6 1.3 0.9 4.5

Table IV.

Value creation by

function for identified

functional clusters

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.Functional Cluster 2 is focused on marketing and sales activities. These functions

account for 74 percent of the cooperation’s value creation. Of cooperations,

11 percent belong to this cluster.

.Functional Cluster 3 has a procurement focus. Here on average, 81 percent of the

cooperation’s value creation is attributed to procurement. This cluster is rare and

represents only 5 percent of the cooperations.

.Functional Cluster 4 is characterized by broad functional integration. Marketing

and sales (30 percent), production (24 percent) and procurement (16 percent) are

the main value-creating areas. Still, the remaining functions contribute over

30 percent of the cooperation’s value in nearly equal parts. This cluster is most

common and comprises 45 percent of all horizontal LSP cooperations.

Our findings relate to the typology presented by Dussauge and Garrette (1997) who

distinguish between cooperations of “shared marketing and sales” (corresponds to

Functional Cluster 2), “shared supply” (corresponds to Functional Cluster 3) and

“quasi-concentration” (corresponds to Functional Cluster 4). In comparison to their

classification, the logistics service industry exhibits one additional cooperation type,

which is “shared production” (Functional Cluster 1).

It is interesting to note that the most prevalent cooperation type (Functional

Cluster 4 – quasi-concentration) involves multiple important functions and

consequently has to build on high levels of functional integration. The more functions

are involved, the more processes have to be integrated and aligned, and the more

resources of a focal partner are affected by the partnership. Thus, we propose that broad

functional integration adds a substantial level of complexity to LSP cooperations that

requires special coordination efforts.

With regards to the “geographical scope”, our results show that 33 percent of

logistics cooperations operate nationally, with either a regional (9 percent) or a

nationwide reach (24 percent), while the majority (67 percent) of cooperations has an

international scope, with either continental (53 percent) or intercontinental (14 percent)

coverage. Geographic coverage seems to be an important aspect of sustainable

competitiveness for horizontal LSP cooperations regardless of strategic relevance.

Results concerning “service scope” point out that the majority of cooperations

(69 percent) are active in the road-based service segment, while only 4 percent focus on

air freight, 7 percent on rail freight, 4 percent on water transport and 12 percent on

intermodal logistics services. The remaining 5 percent jointly offer value-added

services. The dominance of the road-based segment is not surprising due to the large

number of truckload firms that shape the logistics industry.

Our findings provide further evidence that the “resource scope” of cooperating LSPs

is not per se symmetrical or complementary. Cooperations, rather, build on a viable

resource similarity-complementarity mix. Mean scores of the resource indices indicate

that horizontal LSP partnerships are characterized by rather similar MC profiles (4.46),

rather complementary MP profiles (3.25) and highly complementary CS profiles (2.81).

Interestingly, the strategically most important cooperations build on even more

similar MC profiles (4.70) and even more complementary MP profiles (3.17) than other

cooperations ( p,0.05 for both resource indices). These findings emphasize the

strategic importance of overlapping business competencies in horizontal LSP

cooperations.

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Since horizontal partnerships must cope with the phenomenon of coopetition, direct

competition is best avoided by some degree of complementarity (Bengtsson and Kock,

2000). Further analyses show that those LSP partnerships with highly similar MC

profiles (MC index .5.0; n¼93) unify partners with highly complementary MP

profiles (3.12). In contrast, those with highly similar MP profiles (MP index .5.0;

n¼25) unify partners with complementary MC profiles (3.68).

In order to provide an aggregated overview of the cooperation architecture,

Figure 1 shows the prevailing characteristics along all six dimensions of our structural

framework. The dark-shaded areas refer to the most dominant characteristics, while

the light-shaded areas refer to the second most dominant characteristics.

4.3 Performance

This study indicates that horizontal LSP cooperations are rather stable and successful

partnerships. More than 50 percent of respondents have had no experience with any kind

of cooperation failure. In addition, the upper bound for the industry-specific failure rate is a

low 18.9 percent. This can be inferred from the fact that our respondents were engaged in

1,602 horizontal LSP cooperations when the survey was conducted (i.e. an average

of 7.1 cooperations per LSP), while having experienced 373 failed partnerships

(i.e. 1.7 cooperation failures per LSP). We used our follow-up study with 250 randomly

selected LSPs for validation. Since this study reported an even lower failure ratio (just

14.7 percent), our assumption is supported that the initial result of 18.9 percent represents

an upper bound. The true value can be expected to be even lower – probably around

15 percent. Comparing these failure rates to those reported for manufacturing industries

that range from 50 to 70 percent (Park and Ungson, 2001; Bleeke and Ernst, 1991),

cooperations in the logistics industry can be assessed as both stable and successful.

In line with these findings, our study shows that most horizontal LSP cooperations

are long term with an average cooperation duration of 7.6 years and with 15 percent of

LSPs that were participating for 15 years or more. In addition, the average cooperation

effectiveness is high with a score of 5.45 on a seven-point scale and with a standard

deviation of 1.08. This latter aspect reflects that very few cooperations exhibit truly

poor performance.

Figure 1.

Overview of dominating

structural characteristics

of logistics cooperation

landscape

Contractual

scope Unwritten

agreement Contractual

agreement Minority stake

agreement Joint venture

agreement

Organizational

scope Bilateral Multilateral

Functional

scope Shared production Shared

marketing and sales Shared supply Quasi-concentration

Geographical

scope Regional Nationwide Continental Intercontinental

Service

scope Road

services Rail

services Sea

services Air services Intermodal

services Value-added

services

Resource

scope

No resource

similarity Similar market

competence Similar market

penetration

Similar

corporate

structure

Extended

resource

similarity

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4.4 Cooperation types

Following previous research (Dussauge and Garrette, 1997), we used cluster analysis to

identify distinctive cooperation types based on their structural characteristics. For this

purpose, we translated the structural dimensions into categorical variables and integrated

them as binary data into hierarchical cluster analysis. Based on the agglomerative

algorithm of average linkage and the squared Euclidean distance, results suggested that

a six-cluster solution best suits thedata.TableV showsthe major characteristics of the six

types of cooperation, and Figure 2 shows a graphical representation.

Cooperation Type 1: dense road-based networks with shared production focus.

Cooperation Type 1 (n¼67; 30 percent) provides road-based transport services in large

international route networks. For this purpose, Type 1 cooperations integrate up to

130 members that share highly complementary MP profiles. The aim is to improve

service quality and protect market share, while also increasing productivity of core

activities. As a consequence, cooperation partners have highly similar MC profiles

which facilitate the realization of economies of scale. Given the high degree of

competence similarity and a high strategic importance characterizing Type 1

cooperations, it is not surprising that agreements with equity involvement are the

preferred type of contract. This helps to avoid opportunistic interest seeking, fosters

stability (Teng and Das, 2008), and leads to an average duration of 12.1 years and an

above average cooperation effectiveness score of 5.59[3].

Cooperation Type 2: customized road transport networks with broad functional

integration. Cooperation Type 2 (n¼104; 46 percent) can be considered as a counterpart

to Type 1 since it is characterized by comparable service concepts, resource profiles and

organizational structures. It also focuses on road transport services – but to a lesser

extent – integrates partners with similar MC profiles and tries to establish international

route networks by involving multiple partners. However, the median number of parties

is just five and, thus, considerably smaller than with Type 1. Further, Cooperation Type

2 is distinguished by a certain degree of customization and by a higher degree of

functional integration that provides idiosyncratic market strengths. While some of the

Type 2 cooperations try to differentiate by providing intermodal services in combining

road transport with other modes of transport (e.g. rail and sea freight), others limit their

geographical focus to smaller areas. The idiosyncratic combination of structural factors

results in average performance with a cooperation effectiveness score of 5.38 and a

relationship duration of 6.0 years.

Cooperation Type 3: situational road transport networks with shared production

focus. Cooperation Type 3 (n¼21; 9 percent) is also specialized in road-based transport,

but with a distinctive focus on shared production. In comparison to the first two clusters,

Cooperation Type 3 differs by including a small number of parties and by a stronger

national focus. Further, this partnership type relies only on verbal agreements, where

trust and integrity replace formal authorities (Frankel et al., 1996). We assume that trust

and integrity are grounded on personal relationships that probably evolved more easily

since LSPs of this type not only have similar market competencies, and similar MP

capabilities, but even have similar company cultures (4.33). The similarity between

company cultures is intended to serve as a necessary foundation for cooperations that

are based on verbal arrangements.

Our initial expert interviews indicate that this cooperation type follows situational

business patterns. They are, for instance, activated when one partner is facing demand

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Type Motives

Structure

Performance

1: (n¼67; 30%) Improve service quality: 6.16 *(5.73)

Protect/enhance market share: 6.06 (5.67)

Increase productivity of core activities:

5.46 *(4.90)

93% equity-based agreements

Partners – avg.: 39/median: 16

Production focus: 46% by production function

66% international scope

96% road services (66% LTL/LCL)

MC: 5.20 ***

, MP: 2.58 ***

, CS: 2.90

Duration: 12.1 years

Effectiveness: 5.59

2: (n¼104; 46%) Improve service quality: 5.87 (5.85)

Protect/enhance market share: 5.72 (5.84)

Specialize and extend service portfolio: 5.28

(5.13)

89% contractual agreements

Partners: avg.: 31/median: 5

Broad functional integration: 35% by production

function, 24% by marketing and sales, 17% by

procurement

74% international scope

65% road services; 16% intermodal services

including road (47% LTL/LCL, 32% FTL/FCL)

MC: 4.30, MP: 3.23, CS: 2.65

Duration: 6.0 years

Effectiveness: 5.38

3: (n¼21; 9%) Improve service quality: 5.62 (5.89)

Protect/enhance market share: 5.50 (5.81)

Specialize and extend service portfolio: 4.95

(5.23)

Partners: avg.: 5/median: 2

Production focus: 45% by production function

52% international scope

76% road; 19% intermodal: mainly road and rail

(40% LTL/LCL, 52% FTL/FCL)

MC: 4.26, MP: 4.36 **

, CS: 3.49 *

Duration: 6.0 years: maximum 20

years

Effectiveness: 5.05

4: (n¼11; 5%) Protect/enhance market share: 6.09 (5.77)

Improve service quality: 5.55 (5.88)

Specialize and extend service portfolio: 5.10

(5.21)

82% non-equity based agreements

Partners: avg.: 9/median: 2

Marketing and sales focus: 74% by marketing and

sales function

91% international scope

27% sea; 27% air; 27% intermodal: mainly sea and

air (42% LTL/LCL, 25% FTL/FCL)

MC: 4.45, MP: 4.23 *, CS: 3.57 *

Duration: 4.2 years

Effectiveness: 5.58

(continued)

Table V.

Cooperation types and

their key characteristics

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Type Motives

Structure

Performance

5: (n¼11; 5%) Access additional knowledge 5.00 (4.30)

Specialize and extend service portfolio:

5.00 (5.21)

Improve service quality: 4.73 ** (5.92)

73% equity-based agreements

Partners: avg.: 3/median: 2

Broad functional integration: 31% by production

function, 21% by marketing and sales, 26% by

procurement

91% national scope

55% value-added services, 27% intermodal

MC: 3.68, MP: 3.73, CS: 2.68

Duration: 3.5 years

Effectiveness: 5.21

6: (n¼12; 5%) Protect/enhance market share: 6.08 (5.77)

Specialize and extend service portfolio:

6.00 (5.16)

Improve service quality: 5.83 (5.86)

75% contractual agreements

Partners: avg.: 2/median: 2

Production focus: 74% by production function

58% international scope

50% rail; 33% value-added services (17% LTL/LCL,

58% FTL/FCL)

MC: 3.17 **

, MP: 4.25 *, CS: 2.19

Duration: 5.8 years

Effectiveness: 6.06 *

Notes: Significance of difference from overall sample mean (t-test), *p,0.05; **

p,0.01; ***

p,0.001;

mean scores for the three most important

cooperation motives (mean scores for rest of sample);

mean scores are presented if not stated otherwise;

mean scores for performance measures

(mean scores for rest of sample)

Table V.

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fluctuations and needs additional haulage or warehouse capacity. Consequently,

Cooperation Type 3 resembles neighborly help activities and is, thus, assumed to be

the oldest form of horizontal partnering between LSPs. The occasional nature of these

cooperations explains their somewhat limited overall performance impact and the

lowest effectiveness scores of all six types (5.05 compared to an average of 5.49 for all

other cooperation types).

Cooperation Type 4: sea and air freight cooperations with marketing and sales focus.

In contrast to the first three cooperation types, the fourth one (n¼11; 5 percent) is made

up of sea and air freight carriers. They established bilateral partnerships with an

international market coverage to promote products and services. In contrast to joint

production networks, shared marketing and sales networks can reduce interdependencies

and coordination efforts. This might explain why Type 4 cooperations rely on the use of

non-equity agreements.

If partners decide to market products and services, these offerings should be

compatible and comply with identical quality standards. This requires some partner

similarity. Type 4 partnerships are characterized by a significantly higher ( p,0.05)

similarity of management style (4.60), financial strength (3.70) and customers portfolio

(5.09) than other cooperation types, where the corresponding values are only 3.33, 2.31

and 3.59. Therefore, we assume that the similarity of these resources allows the

establishment of a common understanding about service quality and thus helps to

promote products and services on behalf of the other partner. Based on this structural

set up, Type 4 cooperations exhibit high cooperation effectiveness (5.58).

Cooperation Type 5: national value-added service cooperations with broad functional

integration. In contrast to most of the other cooperation types, Type 5 (n¼11; 5 percent)

does not focus on traditional freight business. Instead, it is specialized in value-added,

non-transport services like packaging, warehousing, contract logistics or reverse logistics

and determined by a broad functional integration across service production, marketing

Figure 2.

Key findings on

cooperation clusters

Bilateral Multilateral

National

International

Verbal

agreement Contractual

agreement Equity-based

agreement

Shared marketing and sales

Shared production

Quasi-concentration

Shared production

Shared supply

Shared marketing and sales

Road

5% 30%

Market competence

Market penetration

Corporate structure

Similarities (based

on mean scores): Cluster 2

Cluster1

Cluster 5

Cluster 3

Cluster 4

Cluster 6

Value-added

services

Road Road

Rail

Sea/Air

Verbal

agreement Contractual

agreement Equity-based

agreement

Shared supply

Quasi-concentration

46%

Horizontal

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and sales and procurement. Further, this cooperation type is the only one with a very

strong national focus. Based on these aspects, it can be inferred that transport-oriented

cooperations utilize international networks to enhance competitiveness, while

non-transport-oriented cooperations profit less from internationalizing.

Moreover, Type 5 partnerships are unique in that they are driven by the intention to

gain additional knowledge and extend service offerings, while access to additional

markets (4.09) or increase of profitability in core activities (3.55) are only of minor

importance. In line with the motivation to foster knowledge exchange – mainly on a

bilateral level – Type 5 cooperations are formed between highly complementary

partners, with low resource similarity in all three resource categories (MC ¼3.68,

MP ¼3.73, CS ¼2.68). To cope with both, resource complementarity and functional

quasi-concentration, these cooperations mostly employ equity-based contracts. This

helps to align diversified cooperation incentives of heterogeneous partners and

counteract exchange hazards. We suppose Type 5 to be at an early stage of

development since the average duration is just 3.5 years. This might also explain why

the cooperation effectiveness score is below average (5.21).

Cooperation Type 6: bilateral hinterland cooperations with shared production focus.

Cooperations of type 6 (n¼12; 5 percent) represent hinterland logistics partnerships

that focus on shared production and often are confined to very specific regions. They

specialize in rail transport that is combined with value-added services like warehousing,

terminal operations and customs clearance or with other modes of transport. Since rail

logistics require a considerable amount of assets, the LSPs involved tend to be rather

large. Companies that are active in these partnerships focus on core competencies and

complement them by establishing bilateral cooperations, especially with LSPs that can

contribute complementary MC profiles (3.17). Owing to the focus on a particular

hinterland region, it is not surprising that these cooperations, more so than others, have

highly similar MP profiles (4.25). This allows them to offer the full range of services

required for efficient hinterland logistics. For governance, they employ

contractual agreements. From a performance standpoint, they can be considered as

very successful – not only because of the highest average effectiveness score (6.06)

of all clusters, but also because of their very narrow performance spread (SD ¼0.47).

5. Conclusion

Given the market relevance of horizontal LSP cooperations, a thorough understanding

of their major characteristics and of the cooperation landscape is crucial. In this regard,

our paper contributes the first comprehensive overview of cooperation motives,

structures and performance outcomes while capturing the full diversity of the logistics

service industry. Our analysis thus extends previous work that was more focused on

individual elements and facets of the picture.

Academic implications

Our study is the first to provide an explicit ranking of motives for LSPs to engage in

horizontal cooperations. This not only helps to understand the dynamics that shape the

industry. It also shows that opportunities generally associated with these cooperations

(as identified by Cruijssen et al., 2007a) differ from the motives for the actual decision.

Empirical evidence is found that cooperation decisions are primarily driven by an

external market perspective rather than an internal productivity and cost perspective.

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In fact, a special focus is on the improvement of service quality and market share

protection which is consistent with the fact that in mature industries it is very often

service quality and not costs that “makes the difference” between market participants

(Bell et al., 2005).

Based on an analytical framework derived from Klint and Sjo

¨berg (2003), this study

systematically captured the full range of structural characteristics that determines the

architecture of LSP cooperations. Consistent with the structure-conduct-performance

paradigm (Klint and Sjo

¨berg, 2003), each of these structural dimensions shapes cooperative

behavior and the partnership outcome. Thus, a profound understanding of the cooperation

structure adds substance to the interpretations of cooperation performance. With respect to

the functional focus of the cooperations, we were able to confirm the three basic functional

patterns identified by Dussauge and Garrette (1997) and extend their classification by

adding shared production as a fourth functional pattern. Overall, we identified six distinct

cooperation types that describe today’s logistics cooperation landscape.

Further, our study contributes new insights to the discussion of cooperation success.

Many researchers (Park and Ungson, 2001; Kale et al., 2002; Hoang and Rothaermel,

2005) refer to cooperation failure rates of 50-70 percent that initially have been reported

by scholars like Porter (1987), Kogut (1989) or Bleeke and Ernst (1991). In contrast to

these results, we found that horizontal LSP cooperations are substantially more stable.

Their failure rate is well below 19 percent, along with an average partnership duration of

eight years and high scores in performance effectiveness. These findings highlight that

success rates can vary enormously between industries and that industry-specific

success evaluations are more appropriate than industry-independent ones.

Managerial implications

The cooperation landscape that has been derived from our empirical results

contributes transparency and a common understanding of market characteristics.

This transparency will help logistics managers to position themselves better within the

cooperation landscape. It also facilitates the identification and development of

innovative cooperation concepts which in turn can foster differentiation from industry

peers. In this respect, our work responds to the call by Cruijssen et al. (2007b) to develop a

conceptual framework that allows the classification of horizontal LSP cooperations and

supports practitioners in setting up such partnerships.

Moreover, the transparency on the facets of structural complexities – for instance

driven by the very large number of partners or by the broad geographical scope –

helps to direct management attention to the setup of appropriate governance structures

and management capabilities. In order to keep cooperation structures manageable over

the lifecycle of the partnership, logistics managers are recommended to pay special

attention to the structural aspects outlined. In particular, the high complexity driven by

strong functional integrations and complementary resource setups requires logistics

managers to strike the right balance between the independence of their individual

company and the interdependence within the cooperation.

Although many LSPs already cooperate, our initial expert interviews confirmed that

a common understanding about the scope and market potential of horizontal LSP

cooperations is still missing and that misconceptions about its actual predominance

prevail. Therefore, our study helps to establish more profound cooperation knowledge.

Our findings show that horizontal cooperations are not only used for highly

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standardized services like road-based transport, but also for more complex or

individualized services (e.g. intermodal transport, contract logistics and value-added

service offerings). Further, our results bring to attention that production cooperations

with joint operations in interlinked physical networks do not dominate the landscape. In

fact, cooperations with highly integrated functions along the continuum of primary and

secondary functions play an even bigger role, while cooperations in the fields of

marketing and sales and procurement should not be neglected.

Finally, the study outlines a substantial potential for future partnerships referring to

the number of LSPs that are still preserving an independent market position (43 percent)

or that are just involved in one partnership (18 percent). Since our findings reveal that

LSP cooperations are highly stable and successful, these industry participants might be

encouraged to be more receptive to this organizational form. Others are already very

confident about horizontal partnerships. This can be inferred from the fact that only

3.1 percent of the LSPs interviewed in the follow-up study of 250 LSPs indicated that

they plan to reduce their cooperation activities, while 27.6 percent expect to expand

them, recognizing globalization as a major driver. We, therefore, conclude that

globalizing fortifies the relevance of external, customer-oriented market motives within

the logistics industry and that LSPs continue using horizontal partnerships to

strengthen competitiveness and resist market consolidation tendencies.

Limitations and further research

This research is marked by certain limitations. First, we have focused on cooperations

that were running when we conducted our study and excluded those that had already

been terminated. However, in our view, it would be valuable to extend the scope of

analysis by also investigating terminated horizontal LSP cooperations. In particular,

investigations of key characteristics that distinguish cooperations that failed from

those that had been terminated for other reasons in addition to investigations of key

antecedents for cooperation failure would be quite valuable.

Second, our results only refer to LSPs with legal entities in Germany. Although

Germany is Europe’s largest economy, we recommend that future work extend the

scope of research to other regions and analyze whether or not cooperation motives,

architectural structure and performance attributes differ by geographical setting.

Despite these limitations, our analyses provide some important insights to

horizontal LSP cooperations. We consider our work as part of an emerging research

stream that will refine our understanding of these highly relevant partnerships. In this

respect, it would be worthwhile to complement this explorative study as a basis for the

analysis of causal relationships. We encourage future studies to examine the question

how the complexity dimensions that have been outlined by our study affect

cooperation governance, management capabilities and thus cooperation performance.

The complexity dimensions will most likely also impact the effectiveness of crucial

partnership characteristics like communication behaviour and conflict resolution

techniques that Mohr and Spekman (1994) have investigated. Including these aspects

in future studies will be of great value.

Notes

1. The actual failure rate is the number of failed cooperations dived by the sum of cooperations

still running, cooperations failed, and cooperations terminated for other reasons.

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2. The largest numbers of partners are typical for international cooperations in the “less than

truck load” segment, where many LSPs are required to provide full coverage of large

geographic areas.

3. Failure rates were calculated with relations to LSPs. As each LSP on average is engaged in

seven cooperations it is most likely that not all of them are of the same type. Therefore,

no failure rate can be concluded for specific cooperation types.

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