Successfully competing in the deregulated trucking industry: a resource-based perspective.

A firm's initial size in 1980 may have had an impact upon its failure or survival during the deregulated period. However, Rakowski (1994) found that initial size in the LTL trucking industry was not a significant differentiating factor between successful and not so successful firms after deregulation. Further, Rakowski (1994) notes that "the fallen carriers of the pre-deregulation era have been replaced by a new breed of small, aggressive firms who started out in specialized regional markets." The result of this study (z statistic = .35) with respect to firm size is consistent with the Rakowski study that initial firm size is not a statistically significant factor between firms that survived and those that failed. Interviews with the industry experts identified how and why the five firms were able to achieve significant firm growth while most of the other firms in the industry failed.

The nature of the trucking industry changed radically as a result of the Motor Carrier Act of 1980 which deregulated interstate transportation. During the regulated period, carriers were permitted to operate only within specified geographic boundaries. After deregulation, constraints on operating authority were eliminated and carriers began to acquire other LTL trucking firms to increase scale of operations and establish a national operating network. The result of these same business acquisitions allowed carriers to establish national hub-and-spoke operating networks.

As this national network evolved, carriers realized that they could obtain economies of scope by utilizing the hub-and-spoke operating not only for the transportation of LTL trucking shipments, but also for the transportation of air freight, ocean, and rail shipments. Carriers began to emerge from trucking carriers into transportation firms by engaging in these related types of diversification decisions.

After these related diversification decisions were completed, firms began to change internally. Structurally, the carriers created separate business units for these related transportation services. New resources created as a result of the acquisitions permitted opportunities to increase scope of resource utilization. Planes began to carry LTL shipments where excess capacity existed; the same was true for rail, truck, and ocean resources. However, developing a totally integrated transportation network took a considerable amount of time. After this integration process was completed, these transportation carriers engaged in unrelated diversification in technology based ventures to provide their customer base value added services. The model below illustrates the evolution of the trucking industry over time.

CONCLUSION

This study has demonstrated that a specific sequencing of acquisition and internal development decisions is necessary to achieve transformations to provide for firm growth in a deregulated industry. These transformations allowed firms in the trucking industry to develop new resource positions for resource deepening and path breaking change. As Penrose 1959: 25) notes, "Exactly the same resource when used for different purposes or in different ways and in combination with different types or amounts of other resources provides a different service or set of services." This response-dependency agreement is very relevant to the U.S. LTL trucking industry. Firms initially expanded their scale of LTL trucking operations as a result of deregulation. After the operational infrastructure (e.g. national hub and spoke operating network) was in place, firms began to acquire other forms of transportation services through acquisition, such as air freight and small package, to increase scope of operations and emerge from trucking companies into total transportation carriers. This transition from trucking companies to total transportation carriers led to a period of internal development as firms fully developed their transportation infrastructures. Finally, firms made acquisitions to meet the technology-based needs of their customer base. The results of this study extend the findings of Karim and Mitchell (2000), in that acquisitions could be utilized for both resource deepening and path breaking change. This advantage is especially relevant when the resource configurations are combined into tightly woven, synergistic activities (Eisenhardt and Martin, 2000; Collis and Montgomery, 1995) such as the hub and spoke operating network.

APPENDIX Industry Experts Michael Jackson President, American Trucking Association

(ATA) John Terry LTL Trucking Acquisition Consultant Clyde Woodle Executive Director, ATA Trucking Research

Institute Jim Harkins President, Regular Common Carrier

Conference Board Bob Delaney Board of Directors, TNT Janice Dulzynski Former Head of ATA Research Division and

Current Head of Transportation Library

Northwestern University Bob Voltman Executive Director, National Industrial

Transportation League Glen Sella President, American Institute for Shippers

Association John Throckmorton Vice President, Mercer Consulting John Larkin Senior Analyst, Alex Brown & Company Joe Bryan Principal, Reebie & Associates RESULTS TABLE 1 PATTERNS DERIVED BY THE INDUSTRY EXPERTS Disposition International Direct Acquisition of Firms Development Invest- Patterns

ment

Single Unrelated Multi-

Business Stage Failures 26 6 9 5 0 Survivors 5 0 3 0 5 Total 31 6 12 5 5

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