Scale diseconomies and efficiencies of liner shipping

In the context of liner shipping, carrying capacity can be seen as one of the key resources to strive for better firm performance. The liner shipping market nowadays has entered a phase in which Liner Shipping Companies (LSCs) reap economies of scale. The concept of economies of scale has led the industry to grow by enlarging its carrying capacity and LSCs allocate more ships to offer shipping services in the global market. However, the results of enlarged capacity may be uncertain. By examining empirical data between 1997 and 2008, this paper investigates the relationship between capacity and firm performance in the liner shipping industry and attempts to use an S-curve to describe the association between capacity and firm performance in liner shipping operations. The findings suggest that the S-curve is robust. Furthermore, this study attempts to provide theoretical basis for shipping lines to determine the optimal carrying capacity.