International Trade Intermediaries Research Articles

Seaport service quality and customers’ expectation: an exploratory study of seaport terminals in South East Vietnam

Seaport terminals are important intermediaries in international trade. One issue that is critical to the performance and survival of port terminals is the quality of the services provided. However, to improve the quality of the service of these terminals, it is important to know the expectations of the customers and the perceptions about the quality of the service. Regardless, very little is known about customer expectations and perceptions of the quality of service at Vietnam seaport terminals. Therefore, this document offers a comparative analysis of the quality of service of the South East Vietnam seaport terminals using the Gap Score Technique of the Service Quality (QoS) Model (SERVQUAL). It is found that, in general, all examined selected terminals have a low quality of service. With the average gap score per QoS dimension for all selected terminals, transparency has the best QoS (lowest gap score), while responsiveness has the lowest QoS (highest gap score). The implication is that import terminals strive to improve the quality of service. More attention should be paid to improving responsiveness by providing fast services, assisting customers, and letting them know exactly when services are being performed.

Customs brokers as intermediaries in international trade

Recent studies suggest that intermediaries like merchants facilitate international trade by reducing fixed trade costs for producers that trade through them instead of exporting or importing directly. This study argues that customs brokers–a type of intermediary rarely studied in economics before–play a similar role by reducing fixed costs of clearing goods through customs for firms that use them instead of self-declaring. Using panel data of Norwegian trade transactions, the paper shows that the majority of manufacturing producers participating in international trade use such brokers, and that the brokers typically handle large trade values on behalf of several different produces. In an econometric analysis, the author finds that the share of a producer’s market specific trade that is self-declared rather than handled by brokers increases with the traded value. This is in line with predictions from theoretical models on trade intermediaries and holds after controlling for observed as well as unobserved factors at the producer, country and product level. Results are similar for exporting and importing, indicating that brokers facilitate both modes of trade.

A theory on the role of wholesalers in international trade based on economies of scope

AbstractThis paper offers a theoretical foundation for the existence of wholesalers and other intermediaries in international trade and analyzes their role in an economy with heterogeneous manufacturing firms and fixed costs of exporting. Wholesalers are assumed to possess a technology such that they can buy manufacturing goods domestically and sell in foreign markets and they can, unlike manufacturers, export more than one good. A wholesaler therefore faces an additional fixed cost, which increases in the number of goods it handles. The presence of wholesale firms leads to productivity sorting. The most productive firms export on their own by paying a fixed cost, but a range of firms with intermediate productivity levels export through international wholesalers. A higher fixed cost of exporting to a destination means that wholesalers handle: (i) a higher share of total export volumes to this destination and (ii) a higher share of the exported product scope (i.e., the number of exported products) to this destination. A higher fixed cost of exporting gives wholesalers a larger role, since these can spread the fixed cost across more than one good. The wholesale technology therefore exhibits economies of scope. An empirical analysis using Swedish firm‐level data supports the main assumption and predictions of the model.

Quality screening and trade intermediaries: Evidence from China

AbstractWe examine the quality‐screening role played by intermediaries in international trade, exploiting export data at the product level for Chinese exporters. We uncover substantial heterogeneity among intermediaries, and distinguish two types: generalized and specialized intermediaries. We find strong evidence of a quality‐verification role for specialized intermediaries: they are more prevalent in products with greater quality dispersion among local exporters, and export goods of higher quality than do generalized intermediaries. Our results suggest that specialized intermediaries have the capacity to reduce the incidence of quality problems.

Export Intermediaries and Adjustments to Exchange Rate Movements

Building on a heterogeneous-firm model a la Melitz (2003), we propose a theory of intermediaries in international trade which rationalizes the available evidence on both aggregate and firm-level exports as well as their responsiveness to exchange rate movements. We introduce double marginalization for goods traded indirectly, i.e. through intermediaries, and local distribution costs for all exporting firms, either intermediaries or direct exporters. This leads to heterogeneous markups, pricing-to-market and to a lower degree of exchange rate pass-through for goods exported by intermediaries. This result, validated on Italian firm-level trade data, is consistent with productivity sorting in the export mode and with the propensity of high productivity firms to absorb more exchange rate movements in their markups. We also explore how direct and intermediary export ows to a given destination react to exchange rate movements along the extensive margin of adjustment. Consistently with our theory, we find evidence of a larger variation in the overall number of varieties traded along the intermediary channel.

Trade Intermediaries and the Tariff Pass-through

This paper aims at improving our understanding of the price effects of trade policies following two perspectives. First, we wish to study how the role of intermediaries in international trade affects the transmission of tariff changes to domestic prices. Second, we explore how our results are influenced by the degree of competition in the distribution-service market. In a Cournot oligopoly-oligopsony model, we show how the pass-through of tariff cuts to domestic prices is limited by the market power of intermediaries producing distribution services. Our long-run equilibrium is characterized by a larger number of firms selling at a higher mark-up. Market access barriers in distribution services determine to what extent tariff cuts are transferred to domestic consumers and foreign producers, affecting the size of their welfare effects. The benefits of trade liberalization policies can be better achieved if they are complemented by competition enhancing measures in the intermediation sector.

Intermediaries in International Trade: Products and Destinations

Abstract This paper examines the factors that give rise to intermediaries in exporting and explores the implications for trade volumes. Export intermediaries such as wholesalers serve different markets and export different products than manufacturing exporters do. Wholesalers are more prevalent in markets with higher destination-specific fixed costs and focus on products that are less differentiated, have lower contract intensity, and have large sunk entry costs. Aggregate exports to destinations with high shares of indirect exports are less responsive to changes in the real exchange rate than are exports to markets served primarily by direct exporters.

Who Uses Intermediaries in International Trade? Evidence from Firm‐level Survey Data

AbstractThe present paper uses data from the World Bank Enterprise Survey conducted in Turkey in 2005 to shed light on the firms that use intermediaries in international trade. It lends robust empirical support to recent theories which suggest that indirect exporters are mostly small firms that are not profitable enough to cover the high fixed costs of building an own distribution network abroad. Manufacturers who develop new products are more likely to use trade intermediaries, as are firms that produce low‐quality goods. In contrast, neither foreign ownership nor credit constraints are correlated with the choice of export mode. Moreover, firms that rely on trade intermediaries to sell their goods abroad also do so to source their foreign inputs, implying that the role of intermediaries in facilitating trade may be larger than previous studies suggest.

Who Uses Intermediaries in International Trade? Evidence from Firm-Level Survey Data

The present paper uses data from the World Bank Enterprise Survey conducted in Turkey in 2005 to shed light on the firms that use intermediaries in international trade. It lends robust empirical support to recent theories which suggest that indirect exporters are mostly small firms that are not profitable enough to cover the high fixed costs of building an own distribution network abroad. Manufacturers who develop new products are more likely to use trade intermediaries, as are firms that produce low‐quality goods. In contrast, neither foreign ownership nor credit constraints are correlated with the choice of export mode. Moreover, firms that rely on trade intermediaries to sell their goods abroad also do so to source their foreign inputs, implying that the role of intermediaries in facilitating trade may be larger than previous studies suggest.

Imperfect Competition, State Trading and Japan's Imports of Rice

In the negotiations on agriculture in the World Trade Organization, it was asserted that an importing state trading enterprise affects the domestic market but not the international market. This claim is investigated through specifying a model of intermediaries in international trade. There are two kinds of intermediaries: first, a state trading enterprise; and second, an n-firm Cournot oligopsony/oligopoly that acts as the counterfactual. Using Japanese market price and quantity data for rice, and elasticity parameters drawn from the literature, the equations of the model are calibrated to these data and parameters. The resulting equations then permit the calculation of the tariff equivalence of the state trading enterprise under different assumptions about market structure, as well as the welfare effects associated with them. The equations are re-specified to model the existing import regime for rice, which is a tariff quota. The conclusions are: first, that, compared with the counterfactual, an importing state trading enterprise acts like a tariff by restricting imports; and second, the current import regime of a tariff quota causes a welfare loss compared with the counterfactual.

Is Market Orientation Affected by the Size and Diversity of Customer Networks?

The link between market orientation and firm performance is well documented. However, less is known about those factors which lead to firms being market oriented in the first place. Existing antecedent research has emphasized factors internal the firm. A complementary emphasis on external, network-specific factors is taken in this study. Data collected from a sample of international trade intermediaries reveal that market orientation is affected by both the size and diversity of firms’ customer networks and trading activities. Network diversity both promotes and hinders a market orientation. In low diversity environments, increasing levels of network and geographic diversity boost a firm’s market orientation. In high diversity environments, additional diversity confounds the interpretation of market intelligence with adverse consequences for market orientation.

Intermediaries in International Trade: Direct Versus Indirect Modes of Export

Intermediaries in International Trade: Direct Versus Indirect Modes of Export

Human capital for supply chain management capabilities: a study of international trade intermediaries

This paper examines the impact of supply chain management (SCM) capabilities on the performance of international trade intermediaries (ITIs). SCM capabilities here are defined as supplier management capabilities, customer-focused capabilities and business process capabilities. Research has been undertaken using a study framework that incorporates the role of human capital (HC) in SCM. A survey of 147 ITIs showed that SCM capabilities are associated with performance and that HC moderates this relationship. Interpretation of the research findings is made in the light of the context of the study, which has involved small-sized ITIs and low-to-medium priced products. HC is the most difficult category of resource residing in firms to imitate and this study directs attention to the ‘everyday’ skills for implementing SCM that support the success of ITIs.

International trade intermediaries and the transfer of marketing knowledge in transition economies

The process of market reform that characterizes the move away from regimes of central planning in transition economies creates a need for managers to acquire the techniques and skills of marketing. In contrast with an extant emphasis on inward direct investment, this study examines the role played by international trade intermediaries in the transfer of marketing knowledge across borders. Data collected from manufacturers in central China reveal that the value of marketing knowledge transferred is contingent upon intermediary performance of export marketing services and the likelihood of intermediary replacement.

Recent changes in the Japanese wholesale system and the importance of the Sogo Shosha

Interest in Japanese distribution as a field of academic study has waned in recent years, but there is a continuing interest with the activities of Japan's general trading companies or Sogo Shosha. Previous research has concentrated largely on their function as international trade intermediaries but it has overlooked their role in the domestic economy. In recent years, the same Sogo Shosha have expanded their involvement in domestic distribution, in particular into food wholesaling, but more recently into retailing. The aim of this paper is to explore the extent of this involvement and to present an analysis of the reasons behind such a shift from both a managerial and a theoretical perspective. Further, we look at the current and future consequences of such large, internationally powerful companies taking a significant share in domestic distribution in Japan.

Do Crises Tear the Fabric of Oil Trade?

In 1990, Iraq invaded Kuwait, touching off an economic, financial, diplomatic, and military crisis associated with a tremendous spike in oil prices and recession in OECD and oil-importing developing countries. But was the Gulf Crisis a disruption? Did it affect the fabric of oil trade? To examine this question, this paper examines the changing role of international trade intermediaries (ITIs, often referred to as companies) in the oil market. ITIs connect buyers and sellers, serving as the glue that holds many commodity markets together. Oil trading companies have attracted harsh scrutiny form policymakers as a result of allegations regarding their role in the United Nations' Iraqi Oil-for-Food Program, but minimal scholarly attention. The paper takes advantage of a unique microdatabase on the Brent market. Produced in the U.K. North Sea, Brent Blend is by far the most widely traded crude oil in the international market. Participants in the Brent market are diverse, with the largest traders falling into two categories. The first comprises industrial MNEs - companies active in the business of producing or refining crude oil. The second category comprises financial houses and trading companies. This diversity provides an opportunity to test hypotheses regarding behavioral differences across types of companies and geographic origin, before, during, and after the crisis.

Offshoring, Foreign Direct Investment, and the Structure of U.S. Trade

Theory suggests that multinational enterprises (MNEs) play the role of factor service intermediaries in international trade. This paper presents the results of an empirical analysis that exploits variation in the intrafirm trade by U.S. MNEs across countries and industries to assess this theory. The results provide support for recent models of multinational enterprise and suggest that the activities of U.S. MNEs alter the structure of international trade, particularly among middle-income countries. (JEL: D2, F1, F23, L2)

Social Structure and Intermediation: Market‐making Strategies in International Exchange*

ABSTRACT Information gaps between markets create opportunities for international trade intermediaries to negotiate cross‐border exchanges. Faced with the prospect of eventually being eliminated from these exchanges, intermediaries must continually search for new opportunities to mediate international exchange. In this paper an original explanation is derived from the core principles of structural hole theory to explain how these market‐making firms operate in the tension found between the inevitable decay of existing exchange relationships and the uncertainty of finding replacement sources of income.

Are International Trade Intermediaries Catalysts in Economic Development? A New Research Agenda

International trade intermediaries (ITIs) represent a valuable conduit for market information and marketing technology for the international neophyte firm. However, aware that their intermediary role can become redundant over time, ITIs may adopt survival strategies that are suboptimal from the manufacturer's point of view. This article identifies the catalytic and sometimes ambiguous role of ITIs in the economic development of host nations. The author identifies some propositions and proposes a research agenda.

Adaptive strategies of trading companies

Past research into the development of trading companies has seldom been able to separate the economic raison d'être of the firm from the political and legislative influence of the home-country government. In contrast to other countries, the evolution of international trade intermediaries in Hong Kong has not been directly influenced by government policy. In the absence of legislative inducements or protection, Hong Kong traders exist purely by their ability to respond to market forces, suggesting that important insights regarding organizational survival can be gleaned from studying their patterns of behavior. In this paper, an evolutionary model is proposed and then evaluated against data collected from trading companies at five different stages of development. Specifically, these firms' adaptive strategies are assessed in terms of their patterns of diversification along three dimensions: product, geographic, and function. For scholars, the findings may be considered a stepping stone towards the articulation of a truly generic model of trading company evolution, while the value of the study for policy-makers in search of new archetypes lies in the identification of a variety of market-responsive organizational forms.