Intermediaries in Transaction Networks: Location of Wholesalers' Headquarters and Other Establishments

Using establishment-level data in Japan, this paper analyzes the role of information and geographical location of establishments, and the location of wholesalers' headquarters and establishments as factors in determining export behavior, especially focusing on regional economies. There are two main findings. First, regarding export probability of wholesalers' establishments, whether headquarters are located in urban areas matters more than the location of the establishments themselves; and the export probability is higher when there are other exporting establishments within the same firm, which suggest that information (exporting know-how held by headquarters and other export establishments within the same firm) is more important than infrastructure (access to trade hubs such as ports). Second, regarding domestic transaction networks between wholesalers and manufacturers, manufacturing firms in rural areas sell to exporting wholesaler firms in distant urban areas for indirect export, but the transaction distance measured between the closest establishments is significantly shorter than the distance between headquarters, at approximately one-third to one-quarter. The number of establishments per wholesaler firm is much larger than that of manufacturers and the distance between establishment and headquarters for wholesalers is much larger than that for manufacturers, which suggests that exporting wholesaler firms in urban areas reduce search costs by setting up other establishments in various regions, from which they search for suppliers.