Geography Still Matters: Examine the Role of Location in Online Markets for Foreign Branded Products

摘要

Internet technologies and e-commerce have significantly reduced communication and search costs and facilitated trade between distant parties. It has been advocated that the world becomes flat and geographic divisions are gradually irrelevant. However, recent studies have identified a type of location advantage in online platforms, that is, home bias. To further explore the role of geography in online markets, this study investigates another type of location advantage, the country of origin (COO) effect for online sellers. Using a large listing and transaction data set collected from both an e-commerce retail platform in China and the official Web sites of two foreign brands, we examine the impact of geographic location on online sellers' pricing strategies and transaction quantities. Our research provides empirical evidence supporting the existence of the COO effect for online sellers in the context of foreign branded product exchanges. Furthermore, the results suggest that sellers' location information can be a substitute to their reputation and observable effort in facilitating online transactions.