Why do carriers use owner operators in the U.S. for-hire trucking industry?

Abstract

Using the theoretical lenses of transaction cost economics and the structure-conduct-performance paradigm, this article examines the rationale for U.S. for-hire trucking carriers' use of owner operator contract drivers. The analysis employs a cross-sectional financial and operational data set from the U.S. Department of Transportation on the largest U.S. for-hire trucking carriers. Regression results show that the use of specialized equipment and the engagement in less-than-truckload services reduce the use of owner operators. These findings provide a strong support for Williamson's core notion of asset specificity as a driver of make-or-buy decisions. Results also demonstrate that higher segment concentration levels reduce the use of owner operators. This suggests that lack of segment competition may facilitate a higher level of vertical integration among for-hire trucking carriers as evidenced by a greater reliance on employee drivers as opposed to contract owner operators.