Determinants of Export Channel Structure: The Effects ofExperience and Psychic Distance Reconsidered

Abstract

The effects of two commonly cited determinants of export channel structure are examined in a transaction cost framework. Psychic distance and experience have traditionally been thought to have uni‐directional effects. Channel structure was measured using three discrete points along a forward integration continuum, representing increasing degrees of commitment. The operation of the psychic distance and experience effects was found to reflect a firm′s vulnerability to opportunistic responses in a foreign market. Depending on the ability of the market to enforce behavioural safeguards, the effects of both determinants may be reversed. The article reveals the insights that may be gained from the application of transaction cost analysis to more traditional approaches.