National Reputation Matters for Trade

For many, rankings of countries by reputation in publications like Forbes and U.S. News and World Report are nothing more than a headline or social media post. However, when three Drexel LeBow professors examined the impact of a country’s reputation on trade, it told a different, surprising story.

Marketing professors Daniel Korschun and Boryana Dimitrova and economics professor Yoto Yotov found that something as intangible as “reputation” can in fact have very tangible economic consequences.

The researchers chose to use the 2008 Anholt-GfK Nation Brands Index to determine reputation and compared it to the corresponding trade data from the United Nations Statistical Division Commodity Trade Statistics Database for 2010. They specifically looked at the impact on exports between 861 pairs of countries. The researchers then applied the structural gravity model of international trade to determine how the relationship played out globally.

The results showed a two percent decrease in export volume for each spot a country dropped in the reputation rankings. This effect is similar to a country raising import tariffs by three percent. Conversely, the study found that an increase in reputation had an equally positive impact on exports.

What this means in a practical example is that if the US were to drop by just one place in a world ranking among Canadians, the model would predict a drop of more than more than $5 billion in US exports to that country.

This research is perhaps especially relevant today as some publications and studies argue that the reputation of the US has declined since the 2016 presidential election. For example, the Pew Research Center has found that global opinions of the US are directly correlated to confidence in our president. The results of this Drexel LeBow study suggest that such a decline in reputation could create a headwind for US companies seeking to sell goods abroad.

“Our research makes one thing clear,” said Korschun. “Countries ignore their international reputations at their peril. If Trump is serious about increasing exports, a good place to start would be improving America’s – and his – standing in the world.”

Korschun, Dimitrova and Yotov’s paper titled When and How Country Reputation Stimulates Export Volume was published in the International Marketing Review in May 2017.