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

Purpose – The 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/approach – This 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. Findings – It 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/implications – The 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 implications – East 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 implications – The 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/value – No 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.