Because many manufacturers are unable to integrate vertically into global distribution, the nonintegrated market entry modes of foreign distributor and agent are frequently used. Unfortunately, little is known about choosing efficiently between distributor and agent because research has only partially examined the importance of transaction and production costs in determining institutional arrangements. To specify efficient channel design, this article develops and tests hypotheses linking the characteristics of export exchange to the cost-minimizing mode of export channel governance. Based on a sample of 269 manufacturers, results suggest that market diversity, type of transaction-specific asset, and production cost economies all affect the choice between foreign-based agents and distributors. The article concludes with the implications of these results for export management and future export research.
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