UTILIZATION OF BLOCKCHAIN TECHNOLOGY IN THE SHIPPING INDUSTRY

Document Type:Dissertation

Subject Area:Business

Document 1

This is an extremely high cost of transaction. Besides the shipping industry still uses a lot of paper documentation that consume a lot of time to move from one authorizing office to the next. These causes’ delays in the logistics processes which translates into loss of revenue. Despite the challenges, blockchain technology has shown the potential to deal with these issues. Therefore this study has used the TASC model to investigate the potential of adoption of blockchain technology. Observability 17 f. Cost of innovation 18 2. Organizational characteristics factors 18 a. Centralization 18 b. Management Support 19 c. Building Trust 24 b. Enhanced Security 25 c. Visibility 25 d. Network Expansion 25 e. Integration of Supply Chain Flows 26 CHAPTER 3 27 METHODOLOGY 27 Introduction 27 Research Design 27 Exploratory Research 27 Qualitative Method 28 Data Collection 28 Inter-Firm Technology Adoption 29 Formulation of Questionnaires 29 Thematic Coding 29 Assessment of the Potential for Adoption of an Innovation 30 CHAPTER 4 31 FINDINGS 31 Introduction 31 Findings on the TASC Model 31 Technology characteristics 31 1.

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Environmental Uncertainty 35 3. Industry Support 36 CHAPTER 5 37 DISCUSSION 37 Introduction 37 Assessing the potential of adoption of blockchain technology in the shipping industry 37 TASC Model Factors 37 Characteristics of Technology 37 Organizational Characteristics 39 Inter-Firm Relations 40 External Environment 41 Limitation 42 CHAPTER 6 43 CONCLUSION 43 References 44 Appendix 47 CHAPTER 1 INTRODUCTION Background Information In all areas of involvement on this planet, individuals, businesses and governments are always looking for improved efficiency. Besides, there is an insatiable need to improve service deliver as well as profit maximization. These goals are determined by key aspects that include cost of operation, the time required to complete transactions, customer satisfaction and maintaining a competitive advantage within the industry. In the shipping industry, there is a need for reliable and secure flow of goods. In general terms, Blockchain can be described as a distributed ledger technology that enables information and transactions to be managed collectively across an entire network using a chain of data blocks.

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Blockchain has been presented as a secured decentralized and encrypted public ledger that has the potential to revolutionize ways of performing trade, transactions and payments across various industries (Seebacher, & Schüritz, 2017). Besides, Blockchain can be defined as a database used for storing various undertakings that are shared among all groups or individuals in a network. Blockchain can also function as an encrypted ledger for information. As a peer-to-peer network, Blockchain uses a consensus that ensures that transactions are valid before they are entered as records in the ledge. The system architecture constitutes the key design features that make a block chain system. It is made up of decentralized database and digital assets, peer-to-per networks, and public or private network (Seebacher, & Schüritz, 2017).

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Other features of the blockchain system architecture include time-stamping, proof-of-work, and proof-of stake. Since blockchain is a new technology, it is expected to undergo much change and further developments. However, as it is currently several authors and technology experts have identified main features of the blockchain technology. Bulk shipping involves the transportation of large parcels that contain raw materials and semi-manufactured goods such as oil, coal, and iron ore (Stopford, 2009). This transportation segment usually has few transactions and most companies have between 25 to 75 employees despite dealing in over $1 billion of shipment in a year (Stopford, 2009). On the other hand, linear shipping involves the transportation of both semi-manufactured and manufactured products (Stopford, 2009). These are collectively identified as general cargo and may also include perishable products.

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This kind of transportation involves so many small products that one container ship can handle about 10,000 to 50,000 transactions annually (Stopford, 2009). These are the port, the port authority and the terminal. The port can be defined as an area in which ships are brought adjacent to land to facilitate the discharge and loading of cargo. On the other hand, a port authority refers to the organization that bears the responsibility of providing maritime services that are connected to the facilitation of the process of getting a ship to the port (Stopford, 2009). Authorities at the port may include private organizations, government bodies and public organizations. The terminal refers to a specific location within a port that is made of one or more berths and the operations therein are dedicated to handling a specific type of good (Stopford, 2009).

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It has been projected by Tradewinds that blockhain would help in reducing the annual costs incurred in documentation of goods which now stands at $800 million out of the excess of about $4 billion worth of goods shipped annually (Morabito, 2017). However, the potential savings that using blockchain would bring will be weighed against the potential risks such as hacking and fraud that could occur in any digitized system Research Problem and questions In the maritime shipping industry, the majority of the information sharing systems between various firms rely on outdated and manual processes in its supply chain. This leads to poor coordination between key players in the industry, increased security risks, reduced the trust between parties involved in business, increased workload and ultimately lowered the efficiency of the business process.

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In addition, the presence of a huge number of players, different regulatory standards and the cost of information results into trade barriers that usually limit global trade (Stopford, 2009). However, based on the pilot programs that has been conducted involving the use of blockchain in other logistics industries and the shipping industry, there are indications that this technology can help in addressing some of the key issues in the shipping industry. What control measures should be put in place to execute the blockchain arrangement? Objective of the Study General objective To establish the potential of utilization of blockchain technology in the enhancement of port logistics and digital port development shipping in the industry Specific objective 1. To determine the adoption potential of blockchain technology in port logistics and digital development within the shipment industry.

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To gauge the level of readiness of adopting blockchain technology in enhancing port logistics and digital port development. To establish the potential risks and benefits of adopting blockchain technology in enhancing port logistics and digital port development. To determine the necessary measures for the success of the implementation of Blockchain technology. This is because it is the point at which an individual or decision making unit decides to reject or adopt a technology. Adopting a technology involves making a conscious choice to make extensive use or application of a technology as the best alternative available to perform particular set of actions. On the other hand, rejecting an innovation involves a decision not to apply or use a technology. According to Rodgers (2010), rejection may take place despite an earlier decision to adopt an innovation.

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Due to this possibility, rejection is categorized as active and passive rejection. 2) provides that the higher the motive to use an innovation, the higher the likelihood of individuals to use the innovation. Therefore, this is an important concept for this paper since the potential of adopting blockchain technology will be addressed based on the present intention to use the technology (Asare, Brashear-Alejandro & Kang, 2016). However, it is necessary to appreciate that the TAM model is primarily used to explain the adoption of simple innovations by individual users in environments in which the adoption of technology is voluntary. On the other hand, the AIM model was developed by Rodgers (2010) after he established various attributes that affect the adoption of various technological innovations. These include compatibility, relative advantage, trialability, complexity, and observability.

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Characteristics of the technology factors a. Relative advantage According to Asare, Brashear-Alejandro, & Kang (2016), relative advantage refers to the extent to which an innovation is perceived to be better than the one that it replaces. This can be equated to perceived usefulness as presented in TAM. Zablah, Johnson, & Belleger (2005) provide that companies have a higher likelihood to take up an innovation if they consider it to be better than the current technology or the methods that are currently in use. Based on this, the first principle of the TASC model provides that; the perception on the relative advantage of the technology being adopted has a positive relationship to the intention of an organization to take up B2B technologies. d. Trialability Asare, Brashear-Alejandro, & Kang (2016), define trialability as the extent to which a technology can be experienced on albeit on controlled basis before it is adopted.

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Companies use trials top help them understand how to use a technology. This makes it easier to understand and adopt such technologies. This leads to another principle of the TASCA model which provides that; trialability of an innovation being adopted has a positive relationship to the intention of an organization to take up B2B technologies. This leads to the principle that provides that; the cost of a technology product has a negative relationship to an organizations intention to take up B2B technologies. Organizational characteristics factors a. Centralization This is the degree to which an authority responsible for decision making is limited within a firm (Asare, Brashear-Alejandro, & Kang, 2016). Studies have indicated that lower-level managers are more likely to understand the technology of an organization, it operational challenges and the business processes compared to managers in higher levels.

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Therefore, assigning them more power makes an organization more open to innovative technologies. This is because higher IT sophistication enables firms to have the necessary internal resources and expertise to adopt and implement new technologies. This leads to the principles that; IT readiness has a positive relationship to the intention of an organization to take up B2B technologies. d. Size of an Organization In most cases, large organizations have more resources at their disposal to help in adopting technologies. However, they are less flexible and unable to quickly adopt. Credibility can be competence based or honesty based. Competence credibility relates with the ability to trust another person to complete a task. On the other hand, honesty is based on each partner’s belief that both are reliable, and sincere.

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Benevolence is described as the perception that an exchange partner is motivated to seek joint benefits by having a genuine interest in the welfare or interest of the other partner (Asare, Brashear-Alejandro, & Kang, 2016). Therefore, trust is a key factor that will greatly influence the decision of an organization to adopt a technology since the technologies will involve sharing and accessing confidential information between the two firms which might lead to increased interdependence and vulnerability. Distributive justice refers to the perception individuals have of how just the share of resources they receive in social exchanges are (Brashear, Brooks, & Boles, 2004). It includes equity, equality and need. Equity is founded on the principle that the outcomes received by the members of a group in an exchange should be proportionate to their contributions to the group.

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On the other hand, equality provides that every member should receive equal proportions of the outcome regardless of their contribution. Need is founded on the principle that the welfare or need of each recipient dictates the sharing of the outcome. Based on this, the TASC model provides two principles. First, the firms that believe that there is a high level of interpersonal justice in the invitation to take up inter-firm technology have a higher likelihood to take up the technology. Second, firms that believe that the levels of informational justice in the invitation to take up inter-firm technology are high ate more likely take up the technology. External environment factors a. Competitive Pressure There is a lot of pressure in competitive business environments so that firms and trading partners feel the need to adopt modern technology especially when their direct competitors have such technologies as a key competitive advantage.

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These leads to the TASC model provision that; industry support has a positive relationship to the intention of an organization to take up B2B technologies. After considering these theories and models, and the factors that will affect the likelihood of firms to employ a technology, it is of necessity to account for the ways that blockchain can help at the port so that a vector is constructed on the future of blockchain technology in the shipping industry more specifically in the use of blockchain in port logistics and digital port development. Ways in Which Blockchain Technology Could Be Beneficial to the Port The main goal of this proposal is to establish the potential of utilization of blockchain in the enhancement of port logistics and digital port development shipping in the industry.

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Based on the features of blockchain technology as discussed in the introduction, several literatures have provides for the ways that blockchain technology can beneficial or ad value at the port. These include; a. It also protects the system from possible fraudulent activities. It is almost impossible to change the information on the blocks once they have been confirmed. This protects the system from any form of malice. c. Visibility Using blockchain in port logistics will enhance visibility in the supply chain. This should include the physical, financial and information flows. For example various parties involved in the unloading of a container can directly share information about the container (Sadouskaya, 2017). Besides, more information can be shared on the customs requirements for the process.

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These integration will ensure that services are faster and more accurate thereby increasing the efficiency of the port. CHAPTER 3 METHODOLOGY Introduction This chapter provides for how the research for this project will be conducted. This paper will also conduct semi-structured interviews with some of the key players in the shipping industry who are also enthusiastic about blockchain technology. Qualitative Method Qualitative research focuses on data in form of words and the perspective of various authors who have had their input on the research topic being studied. Qualitative studies also seek a contextual understanding of the topic without aiming at the potential for generalizing the findings to the whole population. This is in line with the study since it makes use of interviews to gather the opinion of the respondents on the research topic with the objective of understanding the potential for utilization of blockchain technology in the shipping industry.

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The study uses purposive sampling technique which includes a subjective judgment of the researcher to select the respondents who will be at the best position to enable the researchers to find answers to the research question besides meeting the research objective. Formulation of Questionnaires The questions were formulated to directly address each determinant in the TASC model. Besides, the questions have been formulated in a manner that they are not leading so that the risk of causing biases with the answers is avoided. The questions are preceded by explanations of each determinant so that the respondents are able to have an adequate understanding of the concepts. This would produce better results compared to assuming that they understand the questions. In some cases, follow up questions have been used to tie any possible loose ends in the answers given by the respondents.

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Relative Advantage Based on the data obtained from the respondents, it is apparent that blockchain technology would not replace any available technologies or legal systems. Besides, it cannot be compared easily with the technologies available in the industry today. The results also indicate that the shipping industry has severable IT legacy systems which do not operate as unit thereby causing overwhelming amount of data silos. This isolates organizations. Some of the respondents noted that blockchain technology is the best alternative to address the data silos problem since it will make it possible to have inter-organizational operations with the legal systems. Since blockchain technology is relatively new, it would be expensive to acquire the few available blockchain experts. Trialability All the respondents agree that the trial of blockchain usage in the shipping industry is possible.

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Majority gave the example of the IBM and Maersk joint research on the viability of using blockchain in the shipping industry. In addition, some also pointed out to the blockchain technology project in the shipping industry of South Korea that is backed by its government. Observability Majority of the respondents indicated that the outcomes that have been provided by the main users of blockchain technology in the shipping industry mainly include the cost savings that have been derived from the automation of services as well as other gains in efficiency in the administrative operations. Thus they cannot be operated between various firms in the industry. This is known as non-interoperability of legacy systems within the shipping industry. However, blockchain technology can be used to develop inter-firm IT systems that would allow for interoperability.

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Inter-Firm Relationships 1. Power Majority of the respondents attributed very low degree of power in the shipping industry since most of the firms are independent of each other and the shipping industry is very competitive. External Environmental Factors 1. Competitive Advantage Most of the respondents agree that the shipping industry is highly competitive. In addition, the respondents also indicate that it is difficult for the shipping companies to differentiate their products and services from their competitors. Therefore, they are always seeking new solutions to improve the levels of their costs. Due to this, the shipping companies are always looking out to find if and what technologies their competitors are adopting. Studies have indicated that blockchain technology is a foundational technology that can enable progress and applications in several domains.

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That is, it can be designed for use and application in addressing different issues. In the shipping industry, blockchain technology is mainly used to address information sharing between various firms. The goal is to help in saving costs and improving efficiency through digitizing the trading documents. Based on this value proposition, the study has identified two key relative advantages. Therefore, the complexity of blockchain technology is likely to decrease the potential for its adoption. Moreover, the TASC model provides for both organizational and system compatibility. Blockchain has technology has the potential of improving information sharing between key players in the shipping industry. This is a relative advantage in terms of system compatibility. That is, the technology is compatible with the existing legacy system in the industry.

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The management is highly risk averse and is slow to invest in new technologies. This might be attributed to the high competitive pressure in the shipping industry where managers have been accustomed to investing in safe technologies that offer no significant improvements in process efficiencies. Besides, there are serious considerations on costs of using and acquiring the technology. Therefore, since the management in this industry is slow to support new innovations and the TASC model provides that management support is positively related to the intention of an organization ton adopt a new technology, then it implies that there is a low likelihood of adopting blockchain technology in the shipping industry. On the other hand, the study found out that IT readiness in the shipping industry is low.

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Therefore, based on the findings of this study, it is less likely the industry to adopt the block chain technology if a shipping firm is the lead initiator. On the other hand, trust was found to be very low in the shipping industry due to high competition and the high number of incidences of fraud in the industry. However, there other key players who trust one another based on credibility and honesty. The findings indicated high levels of distrust, and the TASC model suggests that trust has a positive relationship with the intention of an organization to adopt a technology, then the low levels of trust lowers the potential of adopting blockchain technology in the shipping industry. External Environment The key factors that were investigated on the external environment include industry support, competitive pressure and environmental uncertainty.

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Limitation The research has covered key areas of the adoption of inter-firm technologies and the factors that influence the intention and likelihood of adoption based on the TASC framework. However, the paper is limited in the scope and methodology. First the study has failed to investigate all the factors in the TASC framework. Besides, the findings of the study are based on qualitative interviews. This implies that they cannot be generalized across the shipping industry. K. , Brashear-Alejandro, T. G. & Kang, J. B2B technology adoption in customer driven supply chains. G. et al. Adoption of cloud computing technologies in supply chains. The International Journal of Logistics Management, 23(2), pp. Chan, F. vermont. gov/assets/Legislative-Reports/blockchain-technology-report-final. pdf Cousins, S. Ports take their place in blockchain revolution.

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 Ports & Harbors. Available at: https://www03. ibm. com/press/us/en/pressrelease/51712. wss [Accessed November 13, 2017]. Jensen, T. , & Saldana, J.  Qualitative data analysis: a methods Miranda, M. Q. et al. Technology Adoption In Diffusion Of Innovations Perspective: Introduction Of An Erp System In A Non-Profit Organization. Beyond bitcoin: Can the blockchain power industrial IoT? Computerworld. Available at: https://www. computerworld. com/article/3027522/internet-of-things/beyond-bitcoincan-the-blockchain-power-industrial-iot. html [Accessed November 14, 2017] Rogers, E. Seebacher, S. & Schüritz, R. Blockchain Technology as an Enabler of Service Systems: A Structured Literature Review. Lecture Notes in Business Information Processing Exploring Services Science, pp. sourcebook. R. , Johnston, W. J. & Bellenger, D. N. For how may years have you worked in the shipping industry? 2. What is your knowledge about the shipping industry? 3.

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What is your knowledge about blockchain technology? Part 2: Technology Related Characteristics I. Relative Advantage Relative advantage refers to the extent to which an innovation is perceived to be better than the one that it replaces. a) What is your perception of blockchain technology compared to other technologies in the shipping industry? b) What are the merits and demerits of using blockchain in the shipping industry? II. Management Support This entails the degree to which the top executives of a firm back a new technology. It calls for active support for the innovation throughout the organization. a) To what degree does top management in shipping companies support the adoption of new technologies in their organizations? This question asks the level of involvement of top management of top executives in the shipping industry in the adoption of new technologies in their firms? II.

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IT Readiness This encompasses the sophistication level of IT management in a firm. a) How sophisticated is the IT management within the shipping industry? b) Is this sophistication sufficient or insufficient for the adoption of blockchain technology? Part 4: Inter-Firm Relationships I. Environmental uncertainty This is the degree to which firms believe that the business environment in which they operate makes them vulnerable and as such there is need to adopt new technologies that they consider that would be helpful in improving their performance. a) To what extent is the shipping industry uncertain? III. Industry support Industry support include the support from associations in the industry, availability of industry wide standards as well as other initiatives in the industry that are focused on managing and promoting ne innovations.

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