Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top
Management International Review
Published in: Management International Review 6/2012

01-12-2012 | Research Article

Markets and Networks in International Trade: On the Role of Distances in Globalization

Authors: Prof. Lars Håkanson, Prof. Douglas Dow, Ph.D.

Published in: Management International Review | Issue 6/2012

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

  • The enduring importance of geographic distance as an impediment to international trade has recently become recognized as an empirical fact in need of explanation. According to one line of argument—the ‘network view’—the continuing high sensitivity of international trade to geographical distance is associated with a shift in the composition of trade towards goods requiring more extensive information exchange and personal interaction between buyers and sellers. An alternative explanation—‘the market view’—contends that improved availability of information and increasing transparency of markets have facilitated the matching of geographically more proximate buyers and sellers, and that the observed decline in average transportation distances is a reflection of increasingly efficient markets.
  • This paper examines empirically the merits of these two arguments based on a longitudinal analysis of bilateral trade between 25 major trading nations for the period 1962–2008. It compares the development of the relative importance of ‘psychic distance’—a proxy for information related transaction costs—and geographic distance—a proxy for transportation costs—in three categories of goods.
  • The results are broadly in support of the ‘market-view’, showing that the sensitivity of trade to psychic distance has declined dramatically for all categories of goods. The impact of geographic distance has increased markedly for homogenous goods, whereas for more differentiated goods it has decreased mildly.
next article The Effects of Legal, Normative, and Cultural-Cognitive Institutions on Innovation in Technology Alliances

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Management International Review

MANAGEMENT INTERNATIONAL REVIEW is a double-blind refereed journal that aims at the advancement and dissemination of research in the fields of International Management.

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

inform now
Literature
Anderson, J. E. (1979). A theoretical foundation for the gravity equation. American Economic Review, 69(1), 106–116.
Anderson, J. E., & van Wincoop, E. (2003). Gravity with gravitas: A solution to the border puzzle. American Economic Review, 93(1), 170–192.CrossRef
Baumgartner, H., & Steenkamp, J.-B. E. M. (2001). Response styles in marketing research: A cross-national investigation. Journal of Marketing Research, 38(2), 143–156.CrossRef
Beckerman, W. (1956). Distance and the pattern of intra-European trade. Review of Economics and Statistics, 1(1), 31–40.CrossRef
Berthelon, M., & Freund, C. (2008). On the conservation of distance in international trade. Journal of International Economics, 75(2), 310–320.CrossRef
Brun, J.-F., Carrère, C., Guillaumont, P., & de Melo, J. (2005). Has distance died? Evidence from a panel gravity model. World Bank Economic Review, 19(1), 99–120.CrossRef
Cairncross, F. (1997). The death of distance. Cambridge: Harvard University Press.
Carrère, C., & Schiff, M. (2005). On the geography of trade. Distance is alive and well. Revue économique, 56(6), 1249–1274.CrossRef
Chan, C. M. (1998). Functional relations among constructs in the same content domain at different levels of analysis: A typology of composition models. Journal of Applied Psychology, 83(2), 234–246.CrossRef
Coe, D. T., Subramanian, A., & Tamirisa, N. T. (2007). The missing globalization puzzle: Evidence of the declining importance of distance. IMF Staff Papers, 54(1), 34–58.CrossRef
Deardorff, A. V. (1998). Determinants of bilateral trade: Does gravity work in a neoclassical world? In J. A. Frankel (Ed.), The regionalization of the world economy (pp. 7–28). Chicago: University of Chicago Press.
Deardorff, A. V. (2002). Time and trade: The role of time in determining the structure and effects of international trade, with an application to Japan. In R. M. Stern (Ed.), Analytical studies in U.S.-Japan international economic relations (pp. 63–76). Cheltenham: Elgar.
Disdier, A.-C., & Head, K. (2008). The puzzling persistence of the distance effect on bilateral trade. Review of Economics and Statistics, 90(1), 37–48.CrossRef
Djankov, S., Freund, C., & Pham, C. (2006). Trading on time. World Bank Policy Research, Working Paper 3909.
Dow, D., & Karunaratna, A. (2006). Developing a multidimensional instrument to measure psychic distance stimuli. Journal of International Business Studies, 37(5), 578–602.
Duranton, G., & Storper, M. (2008). Rising trade costs? Agglomeration and trade with endogenous transaction costs. Canadian Journal of Economics, 41(1), 292–319.CrossRef
Evans, C., & Harrigan, J. (2005). Distance, time and specialization: Lean retailing in general equilibrium. American Economic Review, 95(1), 292–313.CrossRef
Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation. Journal of Political Economy, 110(2), 281–316.CrossRef
Feenstra, R. C., Markusen, J. R., & Rose, A. K. (2001). Using the gravity equation to differentiate between alternative theories of trade. Canadian Journal of Economics, 34(2), 430–447.CrossRef
Feenstra, R. C., Lipsey, R. E., Deng, H., Ma, A. C., & Mo, H. (2005). World trade flows 1962–2000. NBER Working Paper Series, Working Paper 11040.
Frankel, J. A. (1997). Regional Trading Blocs in the World Economic System. Washington, DC: Institute for International Economics.
Grossman, G. M. (1998). Comment. In J. A. Frankel (Ed.), The Regionalization of the World Economy (pp. 28–32). Chicago: University of Chicago Press.
Guiso, L., Sapienza, P., & Zingales, L. (2009). Cultural biases in economic exchange. Quarterly Journal of Economics, 124(3), 1095–1131.CrossRef
Hagen, S. (1993). Languages in European business: A regional survey of small and medium sized companies. London: CILT.
Hair, J. F. Jr., Anderson, R. E., Tatham, R. L., & Black, W. C. (1992). Multivariate data analysis (3rd ed.). New York: Macmillan Publishing.
Håkanson, L., & Ambos, B. (2010). The antecedents of psychic distance. Journal of International Management, 16(3), 195–210.CrossRef
Harrigan, J. (2003). Specialization and the volume of trade: Do the data obey the laws? In E. K. Choi & J. Harrigan (Eds.), Handbook of international trade (pp. 85–118). Oxford: Blackwell.CrossRef
Harzing, A. W., & 22 country collaborators. (2007). Ranking and rating in native-language versus English-language questionnaires: A methodological comparison. Paper presented at the 33rd EIBA Conference in Catania, December 13–15, 2007.
Harzing, A. W., & 32 country collaborators. (2005). The use of English questionnaires in cross-national research: Does cultural accommodation obscure national differences? International Journal of Cross Cultural Management, 5(2), 213–224.CrossRef
Harzing, A. W. (2006). Response styles in cross-national survey research: A 26-country study. International Journal of Cross Cultural Management, 6(2), 243–266.CrossRef
Helpman, E., Melitz, M., & Rubinstein, Y. (2008). Estimating trade flows: Trading partners and trading volumes. Quarterly Journal of Economics, 123(2), 441–487.CrossRef
Hömell, E., Vahlne, J.-E., & Wiedersheim-Paul, F. (1973). Export och utlandsetableringar. Stockholm: Almqvist & Wiksell.
Hufbauer, G. C., Schott, J. J., Elliot, K. A., & Oegg, B. (2007). Economic sanctions reconsidered (3rd ed.). Washington, DC: Peterson Institute for International Economics.
Hummels, D. (2001). Time as a trade barrier. GTAP Working Paper No. 18. Center for Global Trade Analysis, Purdue University.
Hummels, D. (2007). Transportation costs and international trade in the second era of globalization. Journal of Economic Perspectives, 21(3), 131–154.CrossRef
Hummels, D., & Levinsohn, J. (1995). Monopolistic competition and international trade: Reconsidering the evidence. Quarterly Journal of Economics, 110(3), 799–836.CrossRef
Ivus, O., & Strong, A. (2007). Modeling approaches to the analysis of trade policy: Computable general equilibrium and gravity models? In W. A. Kerr & J. D. Gaisfield (Eds.), Handbook of international trade policy (pp. 44–54). Cheltenham: Elgar.
Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 25–34.CrossRef
Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3), 411–432.CrossRef
Krugman, P. (1995). Increasing returns, imperfect competition and the positive theory of international trade. In G. M. Grossman & K. Rogoff (Eds.), Handbook of international economics, III (pp. 1243–1277). Amsterdam: Elsevier.
Leamer, E. E. (1993). The commodity composition of international trade in manufactures: An empirical analysis. Oxford Economic Papers, New Series, 26(3), 350–374.
Leamer, E. E. (2007). A flat world, a level playing field, a small world after all, or none of the above? A review of Thomas L. Friedman’s the world is flat. Journal of Economic Literature, 45(1), 83–126.CrossRef
Leamer, E. E., & Levinson, J. (1995). International trade: The evidence. In G. M. Grossman & K. Rogoff (Eds.), Handbook of international economics, III (pp. 1339–1394). Amsterdam: Elsevier.
Leamer, E. E., & Storper, M. (2001). The economic geography of the internet age. Journal of International Business Studies, 32(4), 641–665.CrossRef
Linnemann, H. (1966). An econometric study of international trade flows. Amsterdam: North-Holland.
McCallum, J. (1995). National borders matter: Canada-U.S. regional trade patterns. American Economic Review, 85(3), 615–623.
Melitz, J. (2007). North, south and distance in the gravity model. European Economic Review, 51(4), 971–991.CrossRef
NBER-United Nations Trade Data, 1962–2000. http://​cid.​econ.​ucdavis.​edu/​data/​undata/​undata.​html.​ Accessed 16 Sep 2009.
Nordström, K. A. (1991). The internationalization process of the firm: Searching for new patterns and explanations. Ph.D. dissertation, Stockholm: Institute of International Business, Stockholm School of Economics.
Nordström, K. A., & Vahlne, J.-E. (1994). Is the globe shrinking? Psychic distance and the establishment of Swedish sales subsidiaries during the last 100 years. In M. Landeck (Ed.), International trade: Regional and global issues (pp. 41–56). New York: St Martin’s Press.
Portes, R., & Rey, H. (2005). The determinants of cross-border equity flows. Journal of International Economics, 65(2), 269–296.CrossRef
Ralston, D. A., Cunniff, M. K., & Gustafson, D. J. (1995). Cultural accommodation: The effect of language on the response of bilingual Hong Kong Chinese managers. Journal of Cross-Cultural Psychology, 26(6), 714–727.CrossRef
Rangan, S. (2000). Search and deliberation in international exchange: Microfoundations to some macro patterns. Journal of International Business Studies, 13(2), 205–222.CrossRef
Rauch, J. E. (1999). Networks versus markets in international trade. Journal of International Economics, 48(1), 7–35.CrossRef
Rauch, J. E. (2001). Business and social networks in international trade. Journal of Economic Literature, 39(4), 1177–1203.CrossRef
Robinson, W. S. (1950). Ecological correlations and the behavior of individuals. American Sociological Review, 15(3), 351–357.CrossRef
Selvin, H. C. (1958). Durkheim’s suicide and problems of empirical research. American Journal of Sociology, 63(6), 607–619.CrossRef
Silva, J. M. C. S., & Tenreyro, S. (2006). The log of gravity. The Review of Economics and Statistics, 88(4), 641–658.CrossRef
Singh, J. (1995). Measurement issues in cross-national research. Journal of International Business Studies, 26(3), 597–620.CrossRef
Smarzynska, B. (2001). Does relative location matter for bilateral trade flows? An extension of the gravity model. Journal of Economic Integration, 16(3), 379–398.
Soloaga, I., & Winters, L. A. (2001). Regionalism in the nineties: What effect on trade? North American Journal of Economics and Finance, 12(1), 1–29.CrossRef
Tinbergen, J. (1962). Shaping the world economy. New York: Twentieth Century Fund.
Turnbull, P. W., & Welham, G. F. (1985). The characteristics of European export marketing staff. European Journal of Marketing, 19(2), 31–41.CrossRef
Wei, S. J. (1996). Intra-national vs. international trade: How stubborn are nations in global integration? NBER Working Paper Series, Working Paper 5531. Cambridge: National Bureau of Economic Research.
Metadata
Title
Markets and Networks in International Trade: On the Role of Distances in Globalization
Authors
Prof. Lars Håkanson
Prof. Douglas Dow, Ph.D.
Publication date
01-12-2012
Publisher
SP Gabler Verlag
Published in
Management International Review / Issue 6/2012
Print ISSN: 0938-8249
Electronic ISSN: 1861-8901
DOI
https://doi.org/10.1007/s11575-012-0142-3

Other articles of this Issue 6/2012

Management International Review 6/2012 Go to the issue

Research Article

Progressive Focusing and Trustworthiness in Qualitative Research

Research Article

International Diversification

Research Article

Political Institutional Change, Obsolescing Legitimacy, and Multinational Corporations

Biblio Service

Biblio Service

Research Article

The Effects of Legal, Normative, and Cultural-Cognitive Institutions on Innovation in Technology Alliances

Premium Partner

    Image Credits