Strategic investments in catch capacity and quotas: How costly is a mismatch for a firm?

Bertheussen, Bernt Arne; Xie, Jinghua; Vassdal, Terje

doi:10.1016/j.marpol.2020.103874

Cited by 12 publications

(11 citation statements)

References 35 publications

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“…Along this economic dimension, the exploring vessels performed significantly better over time, delivering on average 2.5% higher margin. The finding is in contrast to Bertheussen and Vassdal (2019) and Bertheussen et al (2020), and indicates that there can be economies of scale among the pelagic vessels in Norway.…”

Section: Vessel Performancecontrasting

confidence: 56%

“…Within an ITQ management system, adapting the catch capacity to the quota base is a central strategic decision for the individual fishing vessel firm (Iversen et al, 2018;Bertheussen et al, 2020). The size of the quota and the catch capacity of the vessel must be aligned for a firm to operate efficiently, and a mismatch will incur an economic loss on the company.…”

Section: Exploring New Technological Opportunitiesmentioning

confidence: 99%

“…This restricts the fleet from catching their quotas all year round. Despite these seasonal restrictions, there still is overcapacity in the fleet (Bertheussen et al, 2020). Thus, larger quotas entail very little increase in other costs, excluding the crews' share of the catch.…”

Section: Exploring New Technological Opportunitiesmentioning

confidence: 99%

“…There are probable several reasons why the exploiting vessel group to a lesser extent chose to participate in the "quota race" and the "renewal of vessel race" taking place in the industry. One obvious explanation is that they found it more profitable to invest strategically neither in quotas nor in a new fishing boat because their quota base and catch capacity were well tuned at the outset (Bertheussen et al, 2020). If they have assessed the market prices on quotas too expensive (Hannesson, 2016), they may also not have found it economically tempting to invest in a new or upgraded vessel.…”

Section: Vessel Performancementioning

confidence: 99%

See 3 more Smart Citations

The Exploitation-Exploration Dilemma of Fishing Vessels With Institutionally Protected Quota Shares

Hannevig

Bertheussen

2020

Front. Mar. Sci.

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It is an established "truth" in the literature that a company which restricts itself to utilize existing resources without exploring new business opportunities is doomed to fail in the long run. An underlying premise for the claim is that the competition arena is dynamic and organized according to free competition principles. This study, however, examines whether it is more profitable for a fishing vessel to primarily exploit existing resources when the quota shares of the players are institutionally protected so that there is no real competition between them. The context is Norwegian seagoing purse seiners, which in 2005 experienced the introduction of a more market oriented individual transferable quota (ITQ) system with some distinct modifications. The vessels in the study were classified into strategic groups based on their exploitation versus exploration approaches. Financial accounts covering the period 2003-2017 were collected and analyzed to empirically address the issue. Some vessels did considerable explorative activities in the period studied by fishing related species, investing in quotas, and in new vessel technology. The findings suggest that firms which did not explore, but instead exploited their existing resource base performed relatively better than their peers except for EBITDA (earnings before interest, tax, depreciation and amortization) margin. Finally in the paper, the findings are discussed and implications outlined.

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Section: Vessel Performancecontrasting

confidence: 56%

Section: Exploring New Technological Opportunitiesmentioning

confidence: 99%

Section: Exploring New Technological Opportunitiesmentioning

confidence: 99%

Section: Vessel Performancementioning

confidence: 99%

See 2 more Smart Citations

The Exploitation-Exploration Dilemma of Fishing Vessels With Institutionally Protected Quota Shares

Hannevig

Bertheussen

2020

Front. Mar. Sci.

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“…However, the political situations may be less liberal in the future and the extent to which quota trading will be allowed is more uncertain. Anyhow, several players have invested large amount of money in quota shares and matching vessel capacity based on a longterm business perspective (Bertheussen et al, 2020b). These stakeholders will expectedly use all available resources to oppose significant changes that underpin their original investment assumptions.…”

Section: Is the Institution-based Competitive Advantage Of The Harvesting Industry Sustainable?mentioning

confidence: 99%

Sustained Competitive Advantage Based on Industry-Specific Institutional Frameworks

Bertheussen

2021

Front. Mar. Sci.

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This study investigates the relationships between industry-specific institutions, industry structure, and industry performance. The Norwegian Pelagic value chain’s harvesting industry and its processing industry comprised the empirical context. The study findings reveal that the harvesters (the fishers), on average, achieved nearly twice the return on assets relative to the processors. Furthermore, the fishers’ cash flow margin was, on average, more than eight times higher, and their annual growth rate was approximately 70% above the corresponding figures of the processing industry. This study argues that the two industries’ performance differences are related to the variations in their institutional setups. The processing industry is subject to the general Norwegian business environment, whereas the fish harvesting industry benefits from a sector-specific framework that supports its relative competitiveness. The fishers have collectively established a legally supported sales organization, thereby strengthening their bargaining power, vis-à-vis the processors (buyers). The fishers’ rivalry is curbed by catch share regulations, and incumbent fishers are protected from intruders through entry barriers, for example, license requirements. Moreover, the processing industry’s potential threat to vertically integrate upstream into the fish harvesting industry is blocked through legislation. Finally, in contrast to the processing industry, the fish input cost is free for the harvesting industry. This study concludes that the fish harvesting industry has gained a sustained competitive advantage over the processing industry, based on a more supportive industry-specific institutional framework.

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Institution-based roots to fishing vessels profitability

Bertheussen

Vassdal

2021

Marine Policy

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Strategic investments in catch capacity and quotas: How costly is a mismatch for a firm?

Cited by 12 publications

References 35 publications

The Exploitation-Exploration Dilemma of Fishing Vessels With Institutionally Protected Quota Shares

The Exploitation-Exploration Dilemma of Fishing Vessels With Institutionally Protected Quota Shares

Sustained Competitive Advantage Based on Industry-Specific Institutional Frameworks

Institution-based roots to fishing vessels profitability

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