NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Entrepreneurship in International Trade

James E. Rauch, Joel Watson

NBER Working Paper No. 8708
Issued in January 2002
NBER Program(s):   ITI

Motivated by evidence on the importance of incomplete information and networks in international trade, we investigate the supply of 'network intermediation.' We hypothesize that the agents who become international trade intermediaries first accumulate networks of foreign contacts while working as employees in production or sales, then become entrepreneurs who sell access to and use of the networks they accumulated. We report supportive results regarding this hypothesis from a pilot survey of international trade intermediaries. We then build a simple general-equilibrium model of this type of entrepreneurship, and use it for comparative statics and welfare analysis. One welfare conclusion is that intermediaries may have inadequate incentives to maintain or expand their networks, suggesting a rationale for the policies followed by some countries to encourage large-scale trading companies that imitate the Japanese sogo shosha.

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Document Object Identifier (DOI): 10.3386/w8708

Published: "Network Intermediaries in International Trade", Journal of Economics and Management Strategy. Vol 13 (Spring 2004), pp. 69-93.

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