Will Cross-Border Logistics Performance Contribute to Export Competitiveness: Evidence From China Based on the Iceberg Transportation Cost

Will Cross-Border Logistics Performance Contribute to Export Competitiveness: Evidence From China Based on the Iceberg Transportation Cost

Ting Ding, Wenzhong Zhu, Ming Zhao
Copyright: © 2022 |Pages: 20
DOI: 10.4018/IJAL.309406
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Abstract

This paper investigates the economic relationship between logistics performance (LP) and export competitiveness (EC) based on the iceberg transport costs theory and conducts further empirical analysis according to China's logistics performance index (LPI). It finds that the higher the efficiency of logistics and transport, the lower the transportation costs coefficient per unit distance; when logistics and transportation costs decrease, domestic goods demand of foreigners increases, and so does the export value expressed in domestic prices. Additionally, Spearman's rank correlation method is used to analyze the relationship between LPI and export level (EXP), indicating that LPI has a positive rank correlation with the EXP at a significant level of 1%. This research confirms the positive correlation between LP and EC and proposes specific solutions to enhancing the logistics capability in other developing countries.
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1. Introduction

As the international logistics performance(LP) can significantly contribute to the development of the country's bilateral trade, it is of great significance to figure out the relationship between LP and export competitiveness(EC). Originally, logistics is focused on the analysis of the supply chain in order to optimize the flow of components necessary for production processes. However, with the globalization and modernization of markets, the concept of logistics acquires much broader functions, including space and time relationships. Buyers and sellers contract logistics services to transport freight from their place of origin to their destination. Authors such as Langley et al. (2008); Mangan et al. (2008); Rushton et al. (2009); CILT (2012) have updated the definition of the term 'logistics', and all of them agree that logistics can be considered a piece of integrated information, packaging, storage, and transport system that obeys time, quality and cost demands and that performance is crucial for competitiveness. Consequently, the LP and the competitiveness of a country are highly interrelated (Arvis et al., 2018).

LP is most often referred to as the LP of an organization, a supply chain, or a supply chain network (Beamon & Balick, 2008). In this paper, LP refers to cost, time, and complexity in accomplishing import and export activities from the perspective of a supply chain. The LPI (LPI) was published by the World Bank every two years since 2007 (Arvis et al., 2018) including costs, time, and reliability (Hotrawaisaya et al., 2014). LPI can be used to measure the logistics operations performance among partners in the supply chain, including on-time delivery, lead time, error-free delivery, scheduled delivery fulfillment, order fill rate, damaged orders, delivery of urgent orders, deliveries in periods of high demand, short transit time, availability of cargo space, and the condition of vehicles and containers (Lai et al., 2002; Lu, 2003; Simatupang & Sridharan, 2002; Vieira et al., 2015).

China, as one of the leading export and import countries in scale, has attached great importance to the construction of a cross-border logistics system. In the past decades, several bonded zones and free trade zones were established along the coast and inland, and strong support was provided in both institutional and financial resources. However, China's LP still lags behind that of developed countries and needs to be improved urgently. Although many previous research studies have shown a high association between improved LP and cross-border trade, there are few works that analysis the effects of LP on the EC based on the Iceberg Transport Costs model and the relationship between the LPI and Export Level (EXP) of a country.

In the following sections of this paper, we briefly review the related literature about research on Iceberg Transport Costs, the impact of logistics effectiveness on trade, the efficiency of customs and border management clearance, and the competence and quality of logistics services in the second part. In the third section, conceptual models are developed. In the fourth section, the LPI of China is selected and regression analysis is made according to the above models. Some important empirical results are drawn from the case study on China. Then, several problems and implications about the case are discussed in section five.Finally, the conclusion is presented.

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