The Management of Countertrade: Factors Influencing Success
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THE MANAGEMENTOF COUNTERTRADE: FACTORSINFLUENCINGSUCCESS DonaldJ. Lecraw* Universityof WesternOntario and InstitutPengembanganManajemen Indonesia (IPMI)
Abstract. Countertradesuccesswas found to be higher for large firms that were experienced in exporting and in countertrade operations,could accommodatecountertradetakebacksand valued verticalintergration,exportedhigh value, high visibility,complex products,had a low reputationfor qualityand had excesscapacity. Success was also higher if the importer valued quality, had low technicalproficiency,was inexperiencedin exporting,facedbarriers in export markets, had a high cost of forward contracts, foreign exchangeconstraints,and faced a disequilibriumexchangerate.
INTRODUCTION Countertradehas emerged as one of the most interestingand importanttopics of internationaltrade and internationalbusiness of the 1980s. Some view countertradeas one means by which countriescan expandtheirexports,transfer technology, and alleviate problemsarisingfrom internationaldebt burdensand absolutely scarce foreign exchange reserves. Others view countertradeas an archaicform of tradeand a retrogressionaway from the goal of free tradeand free international financialflows thatreducesthe efficiencywith which resources, products, and factors of production are allocated both nationally and internationally.' More recently, several authors[Murrell1982; Parsons 1985; Mirus and Yeung 1986, 1987; and Lecraw 1987] have explored a middle ground between these extremesby analyzingthe potentialfor countertradeto increasetradeefficiency and hence create value under certain circumstances.This analysis essentially revolves aroundthree economic phenomena:marketfailure, the theory of the second best, and principalagent problems. *DonaldJ. Lecrawis Professorof International Tradeand Economicsat the Centre forInternational BusinessStudies,Schoolof BusinessAdministration, TheUniversity of WesternOntario.His areas of researchconcerninternationaltrade, industrial organization, andthe MNEas it relatesto the developingcountriesof Asia. Professor Lecrawwas on leave in Jakartain 1988 where he developedcase materialfor the MBAProgramat InstitutPengembangan Manajemen Indonesia. Research for this paper was partially funded by the Centre for InternationalBusiness Studies, School of Business Administration,The University of Western Ontario. Received: June 1987; Revised: Febru-ary& May 1988; Accepted May 1988. 41
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JOURNAL OF INTERNATIONALBUSINESS STUDIES, SPRING 1989
Pastresearchhaspresentedeconomicrationalesforsomeformsof countertrade basedon its potentialto increasethe efficiencyof tradein some situations [Parsons1985;Lecraw1987]andframedhypothesesconcerningthelikelihood by economicagentsin preferenceto other
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