Strategic Choice of Freight Mode and Investments in Transport Infrastructure within Production Networks

Abstract

In the context of production linkages in which downstream producers require freight services provided by transport operators, I show that the strategic choice of using an alternative transport mode does not necessarily induce lower access charges, relative to the standard transport mode. Additionally, I show that the nature of infrastructure investment determines the share of final goods delivery by the alternative transport mode. An immediate implication is that interactions among infrastructure investments; building transportation capacity costs; and industry-specific characteristics should be carefully assessed when planning transport infrastructure investments to enhance competitiveness in export markets.