Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Study reveals empirical evidence on role of intermediary firms in trade

04.05.2011
Study co-authored by Columbia Business School faculty provides empirical evidence that depicts the role of intermediaries in expanding trade

A study by Columbia Business School Professors Amit Khandelwal, a Jerome A. Chazen Institute of International Business senior scholar and assistant professor, Finance and Economics, and Shang-Jin Wei, director, Jerome A. Chazen Institute of International Business, and N.T. Wang Professor of Chinese Business and Economy, Finance and Economics, alongside JaeBin Ahn, a Ph.D. candidate in economics at Columbia University, provides the first empirical evidence that quantifies the role of intermediary firms in developing and expanding international trade — data that can play an important role shaping US trade policies. Trade intermediaries help local producers import or export their goods and link to international markets.

Their study was published by the Journal of International Economics in its Volume 84, Issue 1, Pages 73-85), and is slated to be printed on May 11th. The online full text article is citable using DOI: 10.1016/j.jinteco.2010.12.003, and a link can be provided upon request.

While the study looked exclusively at China, its results are applicable across borders because it shows how all exporters, regardless of their homeport, face the same barriers when entering foreign markets. The study implies that once small firms export indirectly by using intermediary services, they could switch to interacting directly with their foreign clients. Firms that use intermediaries could become direct exporters more easily in subsequent periods.

To support their hypothesis, Khandelwal and his coauthors divided China's exporters into two groups: companies that export their goods directly into foreign markets, and companies that use intermediaries to manage their trade. They first leveraged the Enterprise Survey Data for Chinese firms collected by the World Bank that records direct and indirect exports at the firm level. First, they compared export values of new and incumbent varieties across markets and found that new varieties have relatively larger transaction values in smaller and high trade costs markets, precisely the markets where intermediaries play a relatively more important role. This suggests that although the customs data identify these varieties as new, it is likely that some firms used intermediaries to previously access these markets. They also provide more direct evidence for this hypothesis using a unique panel-level data on Ghanaian firms, which tracks their export status and export mode over time. They observe that firms using intermediaries in previous periods are more likely to export directly in subsequent periods than firms that did not use intermediaries. While these results are only suggestive, they provide the first evidence that intermediaries facilitate direct export participation.

Prof. Khandelwal discussed the implications this study has for future U.S. trade policies. "Our research shows that large firms can access markets on their own because they have the resources to do it, but smaller firms don't," he says. "The US government could create policies to increase the types of firms that can facilitate exports."

The study showed a direct link between the size of the firm and the use of trade intermediaries, implying that small firms can, and do, access foreign markets through intermediaries even when they aren't large enough to cover the fixed costs of direct exporting. And once small firms gain access to foreign markets, they can develop their own contacts there, enabling them to become direct exporters in the future. The model also predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate.

About Columbia Business School

Led by Dean Glenn Hubbard, the Russell L. Carson Professor of Finance and Economics, Columbia Business School is at the forefront of management education for a rapidly changing world. The school's cutting-edge curriculum bridges academic theory and practice, equipping students with an entrepreneurial mindset to recognize and capture opportunity in a competitive business environment. Beyond academic rigor and teaching excellence, the school offers programs that are designed to give students practical experience making decisions in real-world environments. The school offers MBA and Executive MBA (EMBA) degrees, as well as non-degree Executive Education programs. For more information, visit www.gsb.columbia.edu.

About The Jerome A. Chazen Institute of International Business

The Jerome A. Chazen Institute of International Business serves as the focal point for Columbia Business School's major international programs and initiatives, and supports, sponsors and promotes thought leadership and frontier research on topics related to the global economy and business. The Institute provides forums for collaboration and learning among students, faculty members and the global community, connecting these constituencies with experiences, cultures and practices in markets across the globe. The Chazen Institute plays a leading role in shaping international business policy and education through research, symposia and conferences, experiential learning programs, curricular innovation and the creation of intellectual content and its translation to wider international business communities. For more information, visit www.gsb.columbia.edu/chazen

Sona Rai | EurekAlert!
Further information:
http://www.columbia.edu

More articles from Business and Finance:

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Giant Magnetic Fields in the Universe

Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.

The results will be published on March 22 in the journal „Astronomy & Astrophysics“.

Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...

Im Focus: Tracing down linear ubiquitination

Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.

Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...

Im Focus: Perovskite edges can be tuned for optoelectronic performance

Layered 2D material improves efficiency for solar cells and LEDs

In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...

Im Focus: Polymer-coated silicon nanosheets as alternative to graphene: A perfect team for nanoelectronics

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...

Im Focus: Researchers Imitate Molecular Crowding in Cells

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

International Land Use Symposium ILUS 2017: Call for Abstracts and Registration open

20.03.2017 | Event News

CONNECT 2017: International congress on connective tissue

14.03.2017 | Event News

ICTM Conference: Turbine Construction between Big Data and Additive Manufacturing

07.03.2017 | Event News

 
Latest News

Argon is not the 'dope' for metallic hydrogen

24.03.2017 | Materials Sciences

Astronomers find unexpected, dust-obscured star formation in distant galaxy

24.03.2017 | Physics and Astronomy

Gravitational wave kicks monster black hole out of galactic core

24.03.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>