Is Competitive Advantage a Necessary and Sufficient Antecedent of Superior Financial Performance?: Evidence From the Maritime Shipping Industry

1. Introduction

Strategic management, as an academic discipline, centers around explaining the reasons underpinning financial performance deviations among companies (Ceccagnoli, 2009; Nag et al., 2007). The leading hypothesis under all main theoretical perspectives in the field of strategic management is that superior, or above industry average, financial performance is the outcome of the development of competitive advantage (Sigalas & Pekka Economou, 2013). Based on the above, two questions are emerging for scholars and practicing managers.

The above two neuralgic questions are basically the same question. The first question is formulated in a more business-friendly jargon, whereas the second question is articulated in an academic parlance. Nevertheless, these two questions essentially boil down to the quest of above industry average financial performance that is tormenting business practitioners and academics alike. Academics are taken up with describing and theorizing the causes, or antecedents, or determinants of superior financial performance (Maury, 2018; Nag et al., 2007; Sigalas & Pekka Economou, 2013), whereas business practitioners are struggling to secure the actual effect, i.e., superior financial performance, for their companies (Sigalas, 2015).

Maritime shipping, especially dry bulk shipping segment, is a quite interesting industry from strategic management analysis point of view, for a number of reasons. First and foremost, there are thousands of cargo vessels, each owned by a special purpose entity or ship-owning company (UNCTAD, 2020). These ship-owning companies are the suppliers of transportation tonnage. In addition, there are many shippers in maritime shipping industry who charter ship-owning companies’ vessels to transport their cargoes (Alexandridis et al., 2018; UNCTAD, 2020). The charterers are the customers of the transportation tonnage. Furthermore, the transportation service is highly standardized, since the cargoes and the respective vessels to carry these cargoes are highly standardized (Andrikopoulos et al., 2021b). Moreover, there is prompt and thorough dissemination of information on all four shipping markets (i.e., freight, sales-and-purchase, newbuilding, and demolition market) (Andrikopoulos et al., 2021b; Stopford, 2009). Additionally, apart from the substantial capital required, there are no other significant entry barriers (Greve, 2009, 2010). Lastly, since the liquidity of the sales-and-purchase market is quite high (Andrikopoulos et al., 2021b), there are no significant exit barriers. Based on the above, the main shipping segments of maritime shipping, such as dry bulk, can be regarded as an industry that resembles the perfect competition, since “there are many small buyers [i.e. charterers] and sellers [i.e. ship-owning companies]”, “the product [i.e. transportation service] is standardized”, “there is free and easy entry and exit” to the industry and “there is complete and perfect knowledge” in the industry (see Martin, 1994, p. 15). In the perfect competition, the price in the market is shaped by the forces of supply and demand and no company has the ability to influence the price (Salvatore, 2004). Indeed, in maritime shipping industry, the freight, i.e., the price of the transportation service, is being determined by the supply of and demand for transportation tonnage, i.e., vessels (Karakitsos & Varnavides, 2014).