Replacing the Foreign Intermediary

Abstract

What factors impel exporters to replace a foreign intermediary (i.e., agents or distributors), and what factors impede such actions? Dissatisfaction with the current intermediary is the explanation typically given for why intermediaries are replaced, but other factors may also influence the likelihood of such a change. Using longitudinal data from a sample of Danish exporters, we apply logistic regression analysis to model the impact of a number of factors. Our data show that dissatisfaction with the local intermediary does not appear as a determinant of replacement. Instead, changes in the level of information asymmetry exert the most important influence on the decision to replace the foreign intermediary. As an exporter becomes more informed about alternative—and potentially more qualified—intermediaries operating in a particular market, the existing intermediary faces a higher risk of being replaced. The study also shows that switching costs are important impediments to change of intermediaries.

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