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

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  • Marco Di Cintio
  • Sucharita Ghosh
  • Emanuele Grassi

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.

Suggested Citation

  • Marco Di Cintio & Sucharita Ghosh & Emanuele Grassi, 2023. "Exports, Irreversible Investments and Product Market Uncertainty: The Role of Trade Intermediaries," Global Economic Review, Taylor & Francis Journals, vol. 52(4), pages 290-312, October.
    • Handle: RePEc:taf:glecrv:v:52:y:2023:i:4:p:290-312
    DOI: 10.1080/1226508X.2023.2281917
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