Wholesalers, Indirect Exports, Geography, and Economies of Scope: Evidence from firm transaction data in Japan

This study examines wholesalers' roles in manufacturers' exports in Japan. First, it is shown that, as in the case of the manufacturing sector, productivity sorting on overseas activities is also present in the case of wholesalers. Namely, only the most productive wholesaler firms can engage in foreign direct investment, and the next productive ones can participate in export activities, while the least productive ones conduct domestic transactions only. Second, we investigate how wholesalers facilitate manufacturers' export activities in the form of indirect exports. We have found that wholesalers through which manufacturing firms indirectly export their goods are predominantly located in Tokyo or Osaka. The probability of indirect exports is negatively correlated with distance between manufacturers and wholesalers, but there are certain threshold distances at 300 to 500 kilometers, over which the chance of indirect exports turns null. Another notable finding is that wholesalers' productivities have positive correlation with the chance of indirect exports whereas manufacturers' productivities do not matter. The number of manufacturers from which a wholesaler purchases goods is found to have a positive correlation with the probability of indirect exports, which is a type of economies of scope effect.

Published: Ito, Tadashi, Ryohei Nakamura, and Manabu Morita, 2022. "Wholesalers, indirect exports, geography, and economies of scope: Evidence from firm transaction data in Japan," Japan and the World Economy, Volume 58 (2021), 101055.
https://www.sciencedirect.com/science/article/abs/pii/S0922142521000037