Exports, Irreversible Investments and Product Market Uncertainty: The Role of Trade Intermediaries

Marco Di Cintio, Sucharita Ghosh and Emanuele Grassi

Global Economic Review, 2023, vol. 52, issue 4, 290-312

Abstract: This paper uses the theoretical underpinnings of the real options theory framework to investigate whether uncertainty affects a firms’ decision to directly export versus indirectly export and to determine whether indirect exports may offset the negative effects of uncertainty on export intensity. Using firm-level survey data of 40 emerging countries, we find that uncertainty and firms’ export intensity are negatively correlated. We also find that an increase in uncertainty increases a firms’ willingness to export through trade intermediaries. These results when considered holistically imply that trade intermediaries are able to countervail the negative effect of uncertainty on firms’ export intensity.

Date: 2023
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DOI: 10.1080/1226508X.2023.2281917

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