A study of resource dependency: the coal supply strategy of the Japanese steel mills – 1960‐2010

Abstract

PurposeThe development of the Pacific seaborne coal trade since 1960 has been central to East Asia's economic expansion. In exploring the growth of this trade this paper seeks to understand why Japanese steel mills (JSMs), the world's largest coal importers, used few of the strategies that one would expect in the light of resource dependency theory, relying instead on market exchanges.Design/methodology/approachThis study relies primarily on archival sources, held by the Departments of Mines and Natural Resources in Victoria (British Columbia) and Brisbane (Australia) to reconstruct changing patterns of supply and price in the Pacific coal trade.FindingsIt is found that by relying on a strategy that amounted to “vertical quasi‐integration” JSMs were able to use their combined power to dictate the terms of market exchanges with buyers during the 1980 and 1990s. By 2000, however, this strategy had become counter‐productive, as low prices fostered the emergence of a powerful Australian‐based selling oligopoly.Research limitations/implicationsThe study contributes towards the growing study of transnational events, experiences and institutions in management history, filling a noticeable gap in resource dependency theory, which has not previously explored the long‐term consequences of strategies aimed at reducing dependency.Practical implicationsEast Asia has become the major engine for world economic growth and manufacturing output since the 1970s, and this study explores for the first time the genesis and development of the Pacific coal trade that has underpinned this growth.Social implicationsThe study demonstrates the long‐term adverse consequences of attempts to manipulate buyer‐supplier relationships to minimise cost inputs. By creating a low‐cost environment, coal buyers ensured the emergence of a sellers' cartel that eventually forced up world coal prices to the detriment of consumers.Originality/valueNo previous study has attempted a study of a major international commodity trade over such an extensive timeframe. It is likely that similar attempts to manipulate supply and price in other commodity trades will, over time, result in similar outcomes.

Editorial and note on the writing of management history

“…When, several years ago, I co-authored with Andrea Insch (Bowden and Insch, 2013) an article in this journal, "A Study of Resource Dependency: the Coal Supply Strategies of the Japanese Steel Mills, 1960 -2010", it was done with a goal in mind: demonstrating how a buying cartel had had the unintended consequence of fostering a de facto selling cartel among producers, which then drove a spike in commodity prices. The ensuing price bubble, and its subsequent bursting, had detrimental consequences for broad swathes of the global economy.…”

Board interlocks and corporate performance among firms listed abroad

“…For three important reasons, we argue that the emergence of mainland Chinese firms in Hong Kong represents a rare window of opportunity through which we can probe into the crucial link between interlocks and performance. First, an institutional perspective suggests that in emerging economies such as mainland China and Hong Kong, whereby formal, market-supporting institutions are relatively lacking, interpersonal ties such as interlocks are likely to be especially important (Bowden and Insch, 2013;Peng, 2003). In a developed economy whereby the rules of competition are better known and alternative sources of information are widely available, managers may not have to exclusively rely on interpersonal ties such as interlocks (Haunschild and Beckman, 1998).…”

“…The first implication for future research is to focus on contexts in which the network effect is likely to be especially strong (Rowley et al, 2000). In emerging economies, because of the relatively under-developed formal institutional infrastructure, firms may rely especially heavily on informal institutional mechanisms such as interlocks (Bowden and Insch, 2013;Khanna and Palepu, 1997;Peng, 2003). Initial entry into new markets may also be fertile grounds to investigate the impact of strategic networks on performance (Baum et al, 2000;Guillen, 2002).…”

How Supply Chain Integration Affects Innovation in a Digital Age: Moderating Effects of Sustainable Policy

“…To a certain extent, the foregoing arguments echo the perspective of the transaction cost theory (TCT) [11], which has been used to explain how the focal/leading company of the supply chain, based on the associated transaction costs, decides whether a specific activity (e.g., design, manufacture, and logistics) as an economic exchange should be managed internally within the organization or contracted out to its external strategic partner (i.e., outsourcing) [12]. The literature also indicates that the resource dependence theory (RDT) [11] can be employed to address why some focal firms of the supply chain decided not to increase dependence on external strategic partners for expense saving but to invest in keeping key resources in their own hands to create distinctive competitive advantages [13][14][15]. Due to the popularity of digitalized SCI coupled with rising ecological considerations, when engaging in innovation, leading firms of the supply chain have to confront new challenges about how to achieve a better trade-off between reducing transaction costs and gaining more critical resources over rivals.…”