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Entrepreneurship in International Trade

  • Rauch, J E
  • Watson, Joel

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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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt1qx2x540.

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Date of creation: 01 Dec 2001
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Handle: RePEc:cdl:ucsdec:qt1qx2x540
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