Vertical integration in the indirect export channel: an empirical test of some operating variables

Abstract

Several variables are tested as they relate to a manufacturer's vertical integration into direct marketing in the export channel, and, more generally, to the exclusion of the middleman by the manufacturer. The framework of the political economy of the distribution channel is used. The results of the empirical analyses indicate that the manufacturer's acquisition of experiental market knowledge in regard to a given foreign market is associated with that manufacturer's sentiments and behaviors which suggest that s/he will exclude the middleman in de facto and de jure senses in the focal channel. The export market expansion strategy of the manufacturer is shown to moderate this process. A key operating principle of Johanson and Vahlne's (1977, 1990) “internationalization process of the firm” was confirmed. Further, the moderator role which “export market expansion strategy” played in this process supports Reid's (1983) contention that strategy affects the character of the internationalization process. The nature of the moderated relationship is consonant with the work of Markowitz (1952). To the best of the authors' knowledge, this empirical result is the first one reported in the literature where a “firm level variable” — export market expansion strategy — systematically affects the character of the political economy in an export channel of distribution.