Need for Coherence between Institutions and Technologies: The Example of Uncertain Train Paths in France

This article examines the organizational structure of the French freight railway industry – more precisely the capacity allocation process – through the lens of the theory of “coherence between institutions and technology†developed by Finger, Groenewegen Künneke and Ménard. The French capacity allocation process currently faces a major shortcoming: more than 40% of the capacity attributed to freight train operating companies (TOCs) is “uncertainâ€, i.e. TOCs cannot be sure they can run their trains up to a few days before planned operations. This uncertainty has strong consequences for the performance of the entire industry. Rail freight is viewed by freight customers as unreliable and uncompetitive compared to truck freight. This bad performance is explained by the poorly designed institutional framework of the French rail industry. Institutions of this sector were reformed to introduce competition in the late 1990s. The liberalization process did not take into account the technical functioning of rail capacity allocation and split responsibilities for this task between several actors with diverging preferences. To solve this issue, the French government should recast rail industry institutions and give more power to the rail regulator. The preferences of the various stakeholders should be realigned accordingly.