Time Zones Matter: The Impact of Distance and Time Zones on Services Trade

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractUsing distance and time zone differences as a measure for coordination costs between service suppliers and consumers, we employ a Hausman-Taylor model for services trade by foreign affiliates. Given the need for proximity in the provision of services, factors like distance place a higher cost burden on the delivery of services in foreign markets. In addition, differences in time zones add significantly to the cost of doing business abroad. Decomposing the impact of distance into a longitudinal and latitudinal component and accounting for differences in time zones, it is possible to identify in detail the factors driving the impact of increasing coordination costs on the delivery of services through foreign affiliates. Working with a bilateral US data set on foreign affiliate sales in services this paper examines the impact of time zone differences and East-West and North-South distance on US outward affiliate sales. Both distance as well as time zone differences have a significant positive effect on foreign affiliate sales. By decomposing the effect of distance our results show that increasing East-West or North-South distance by 100 kilometers raises affiliate sales by 2 percent. Finally, focusing on time zone differences our findings suggest that affiliate sales increase the more time zones we have to overcome. AbstractUsing distance and time zone differences as a measure for coordination costs between service suppliers and consumers, we employ a HausmanTaylor model for services trade by foreign affiliates. Given the need for proximity in the provision of services, factors like distance place a higher cost burden on the delivery of services in foreign markets. In addition, differences in time zones add significantly to the cost of doing business abroad. Decomposing the impact of distance into a longitudinal and latitudinal component and accounting for differences in time zones, it is possible to identify in detail the factors driving the impact of increasing coordination costs on the delivery of services through foreign affiliates. Working with a bilateral U.S. data set on foreign affiliate sales in services this paper examines the impact of time zone differences and East-West and NorthSouth distance on U.S. outward affiliate sales. Both distance as well as time zone differences have a significant positive effect on foreign affiliate sales. By decomposing the effect of distance our results show that increasing East-W...

Time Zone Difference, Comparative Advantage and Trade: A Review of Literature

“…Because service provision requires proximity and interaction between the buyer and the supplier, distance and time zone difference increase the coordination cost between service suppliers and consumers. Christen (2012) finds that both distance and time zone difference positively drive U.S. outward affiliate sales. In order to precisely capture the transactions costs associated with distance and time zone difference, three different model specifications are used.…”

“…The authors postulate that technological advancement may actually reinforce the time zone effect because parties exposed to such technologies and located in very different time zones are now expected to work beyond regular business hours whenever real time interaction of doing business is deemed important. Christen (2012) examines the role of distance and time zone difference as a measure of transaction cost for the delivery of services. Because service provision requires proximity and interaction between the buyer and the supplier, distance and time zone difference increase the coordination cost between service suppliers and consumers.…”

“…However, the authors find that this negative impact is much smaller in case of bilateral trade. Christen (2012) compares the effects of time zone difference on service trade and delivery of services through foreign affiliates. As services require proximity between the producer and the consumer; with time zone difference the transaction cost of doing business abroad increases because both time and space of the buyers and the suppliers differ.…”

The Distributional and Allocative Impacts of Virtual Labor Mobility across Time Zones through Communication Networks

“…The positive time‐zone effect on goods trade is somewhat puzzling; it needs to be examined more in detail. Christen (), in contrast, has investigated the relation between the time‐zone differences and the sales of affiliates and found a significantly positive effect.…”

Time Zones and FDI with Heterogeneous Firms

“…This further strengthens the underlying encouragement to write this paper. A representative sample of empirical papers consists of Anderson (2012), Christen (2012), Costinot et al (2012), Dettmer (2011) etc. 3 California time) providing feedback and reviewing assignments for that day in Beijing. In a single-location firm this work-feedback cycle take two days instead of one."…”