Customs-Related Transaction Costs, Firm Size and International Trade Intensity

Ernst Verwaal and Bas Donkers

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: The costs of paperwork and delays needed to clear international customs are generally perceived as a time-consuming impediment to international trade. However, few studies have empirically examined the determinants and the impact of this type of government-imposed transaction costs. This paper analyses the role of firm size as a determinant of customs-related transaction costs, as well as the effect of firm size on the relationship between these costs and the international trade intensity of firms. We submit that economies of scale should be related to the size of the activities the firm is specialised in, and not directly linked to the size of a firm per se. The results of this study indicate that customs-related transaction costs repress international trade activities of firms, even at low levels of these costs. The paper identifies transaction-related economies of scale, simplified customs procedures and advanced information and communication technology as main determinants of customs-related transaction costs. When these factors are taken into account, firm size has no effect on customs-related transaction costs. Policy implications are considered for firm strategy and public policy.

Keywords: firm size; international business strategy; international trade intensity; trade barriers (search for similar items in EconPapers)
JEL-codes: C44 F12 H32 M M31 (search for similar items in EconPapers)
Date: 2001-02-26
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Citations: View citations in EconPapers (1)

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Journal Article: Customs-Related Transaction Costs, Firm Size and International Trade Intensity (2003)
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