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This paper aims at understanding the firm‐specific determinants of logistics outsourcing in a transitional economy. Some hypotheses are made and tested based on a survey conducted in 2002. The results show that factors such as financial strength, production and industrial type, management level at which the logistics decision is made can significantly affect outsourcing decisions. Other factors such as number of employees and ownership type are considered as well. Some of our findings are different from previous studies that target at developed countries. Implications for practitioners and areas for future research are considered at the end.

The article attempts to study the current status and future prospects of logistics providers in the whole country as well as a comparatively developed Chinese city (Tianjin); reveal the disparities between China and Tianjin, as well as local firms and their foreign counterparts; and identify the challenges faced by Chinese logistics providers and offer managerial implications for logistics providers in an increasingly competitive environment.

This research is based on two surveys conducted in China and Tianjin, respectively, under the support from government authorities. Comparative analyses were conducted to ascertain the differences between logistics firms in China and developed countries, as well as regional differences within China.

The results reveal that Chinese logistics providers depend heavily on transportation and warehousing businesses but lack value‐added services and logistics information management. Rate setting ranks highly in provider priority while the importance of lead‐time performance is largely ignored. Significant regional differences in logistics exist and there is a long way for Chinese logistics providers to go in achieving international service standards. Most local firms wish to establish strategic alliances to enhance competitiveness.

This research enriches the literature by investigating the current status and future prospects of logistics service providers in a transitional economy. China being an emerging player in the world economy, an understanding and assessment of China's logistics service providers is appropriate and timely. It offers invaluable information and implications for local providers, government authorities and foreign logistic service providers that are interested in the market.