Duration of Trade Relationships of Polish Enterprises on the Intra-Community Market: The Case of Vehicles and Automotive Parts Trade

Round 1

Reviewer 1 Report

Review of the paper titled ‘Duration of trade relationships of Polish enterprises on the intra-community market’ under consideration to the Sustainability journal:

 

Major issues:

• The title of the paper has to be changed, as the analysis only refers to Chapter 87 of the CN. In the current form, the title wrongly suggests the total pool of trade relations between Poland and the EU, which is under evaluation. Similar amendments must be taken in the abstract, referring to Chapter 87 of CN.
• I think the paper needs some refinements in its composition to improve the clarity of the discussion. Some information seems to appear in the wrong parts of the paper, whereas others are lacking.
• In the introduction of the paper, I cannot find the novelty of the paper, which is still not properly anchored in the literature. One could better introduce the aim of the paper and at least give a glimpse of what kind of factors authors think about (lines 117-119).
• The choice of one CN chapter 87 may be to some extent arbitrary and vulnerable to different tax optimisation strategies, since mostly foreign-owned entities are involved in these kinds of transaction. Is the tax avoidance strategy taken into account? Second, it seems to be under high pressure from changes in GVCs. I would like to see a more profound reasoning for such a choice. Have the authors tried other subchapters for robustness?
• It would be interesting for an international reader to present some stylized facts on the chosen chapter (its role in foreign trade, number of transactions in years, no. of exporters/importers, i.e. at the background of other chapters).
• The dataset may be better described (lines 127-132). Have the authors used the data assigned to particular (known) firms or are these just anonymous transactions (firm unknown) in a large pool? These seem crucial for the quality and scope of implications that arise from the quality of the dataset. No such information appears in the data and methods section, nor in conclusion.
• For an economic paper, the hypotheses appear very suddenly, and they are not anchored in the literature.
• Some of the relevant information on the dataset shows an introduction, whereas insufficient information on the dataset is available in the Materials and Methods section.
• What is the reasoning for the choice of the break for transactions (6 and 12-month period)? Have the authors tried other periods, or is this a kind of educated guess? I would like to see a more in-depth description of the consecutive steps leading to the recognition of the two periods mentioned above.
• In the results section, the economic interpretation of the findings obtained is missing. This chapter presents statistical information together with p-values. What about the potential reasons for the particular significant/insignificant differences between ICS and ICA?
• The discussion of the obtained results is done at a very high level of generalisation, mostly not referring to the obtained findings, which should be directly contraposed to similar or opposite findings in other papers.
• There is no conclusion in the paper. What are the limitations of the research?

Minor issues:

• Lines 27-28: one could dwell more on the issue to have at least 4-row paragraph.

Author Response

Review 1

Thank you for your insightful review. All comments are very important to us. We have corrected the article as recommended.

• The title of the paper has to be changed, as the analysis only refers to Chapter 87 of the CN. In the current form, the title wrongly suggests the total pool of trade relations between Poland and the EU, which is under evaluation. Similar amendments must be taken in the abstract, referring to Chapter 87 of CN.

We have supplemented the title of the article with information: the case of vehicles and automotive parts trade. We have completed the abstract.

• I think the paper needs some refinements in its composition to improve the clarity of the discussion. Some information seems to appear in the wrong parts of the paper, whereas others are lacking.

We tried to refine the paper.

• In the introduction of the paper, I cannot find the novelty of the paper, which is still not properly anchored in the literature. One could better introduce the aim of the paper and at least give a glimpse of what kind of factors authors think about (lines 117-119).

We have completed the aim of the work and pointed out the novelty of the issues studied.

• The choice of one CN chapter 87 may be to some extent arbitrary and vulnerable to different tax optimisation strategies, since mostly foreign-owned entities are involved in these kinds of transaction. Is the tax avoidance strategy taken into account? Second, it seems to be under high pressure from changes in GVCs. I would like to see a more profound reasoning for such a choice. Have the authors tried other subchapters for robustness?

Due to the huge amount of data on all transactions, we have not attempted to study them altogether. Besides, transactions of different groups of goods are characterised by their specificity. We have chosen to study 87 CN chapter because of its importance in the trade in goods of Poland and other EU countries.  We have added information about it in the text.

• It would be interesting for an international reader to present some stylized facts on the chosen chapter (its role in foreign trade, number of transactions in years, no. of exporters/importers, i.e. at the background of other chapters).

Thank you for this suggestion. We have added the corresponding information.

• The dataset may be better described (lines 127-132). Have the authors used the data assigned to particular (known) firms or are these just anonymous transactions (firm unknown) in a large pool? These seem crucial for the quality and scope of implications that arise from the quality of the dataset. No such information appears in the data and methods section, nor in conclusion.

We have examined all transactions in this chapter. They are assigned to specific companies (their names are withheld). We have provided additional information.

• For an economic paper, the hypotheses appear very suddenly, and they are not anchored in the literature.

The hypotheses put forward in the paper are based on our own research and scientific and professional experience as well as on a few literature examples. We have added references to the literature. We also added new literature.

• Some of the relevant information on the dataset shows an introduction, whereas insufficient information on the dataset is available in the Materials and Methods section.

We have added some information on the dataset.

• What is the reasoning for the choice of the break for transactions (6 and 12-month period)? Have the authors tried other periods, or is this a kind of educated guess? I would like to see a more in-depth description of the consecutive steps leading to the recognition of the two periods mentioned above.

Indeed, determining this period is not a simple matter. There are no hints in the literature. Based on our own experience (both research and analytical work carried out in the Customs and Tax Office) we know that such an acceptable break is necessary. Trade transactions are not always characterised by monthly contiguity. We have attempted analyses for breaks shorter than 6 months, but these were not satisfactory.  We chose a break length of 6 months and, in addition, we checked the results for an interval of one year. The results were similar (in qualitative terms), so we stayed with the six-month period.

• In the results section, the economic interpretation of the findings obtained is missing. This chapter presents statistical information together with p-values. What about the potential reasons for the particular significant/insignificant differences between ICS and ICA?

We have included an interpretation of the results and a reference to the literature in the Discussion.

• The discussion of the obtained results is done at a very high level of generalisation, mostly not referring to the obtained findings, which should be directly contraposed to similar or opposite findings in other papers.

We have tried to make this comparison. However, there is very little work in this area.

• There is no conclusion in the paper. What are the limitations of the research?

We have added a passage concerning the conclusion and the limitations of the research.

Minor issues:

• Lines 27-28: one could dwell more on the issue to have at least 4-row paragraph.

A valuable comment. Thank you, we have expanded this passage.

Thank you

authors

Author Response File: Author Response.docx

Reviewer 2 Report

Good paper, although it needs more work to make it a publication quality.

First, I agree it is an interesting topic and could generate an interest from researchers and even practitioners. Some minor grammar corrections for absent commas and inappropriate use of articles, repetitions of the same word require editorial work, but in general, the language is clear.

The literature review is done in the completely inappropriate way. The number of sources is insufficient. Literature resources are selected to serve the goals of the author/s and even mainstream papers are left aside.

Among the recent 13 citations (just 13 out of 50!!!) - within 5-year period - two are the cited EU documents and not research papers, and six others are self-cited publications. Although some important works were cited in the paper, others are left aside with no reason. Thus, the paper is extremely light on foundational literature sources and many statements sound as having no support. For all the pages, except for result discussion, I had to put question marks for lacking literature resources. Thus, the statement on countries’ competitive advantage and its decreasing role for international trade research (page 4) is based on just ONE source (Ghioni, 2017). Although it was a survey, it actually served the specific role and was later criticized for misinterpreting the trend.

I have one more suggestion, to include more in depth developed piece on impact (for policy makers, researchers, and practitioners) and limitations of the study.

Also, I don’t believe that it is appropriate for the solid paper to justify the method by discussions from ONLY self-published papers (see Discussion part, citations 32 and 33). Similar passage is seen at the beginning of the paper, where the justification of importance of the research focus was confirmed by including citations for three self-published papers.

I believe, if my suggestions are accepted, the paper could substantially improve.

Author Response

Review 2

Thank you for your insightful review. All comments are very valuable to us. We have corrected the article as recommended.

• Good paper, although it needs more work to make it a publication quality.

Thank you very much.

• First, I agree it is an interesting topic and could generate an interest from researchers and even practitioners. Some minor grammar corrections for absent commas and inappropriate use of articles, repetitions of the same word require editorial work, but in general, the language is clear.

We have corrected the errors noted.

• The literature review is done in the completely inappropriate way. The number of sources is insufficient. Literature resources are selected to serve the goals of the author/s and even mainstream papers are left aside.

Among the recent 13 citations (just 13 out of 50!!!) - within 5-year period - two are the cited EU documents and not research papers, and six others are self-cited publications. Although some important works were cited in the paper, others are left aside with no reason. Thus, the paper is extremely light on foundational literature sources and many statements sound as having no support. For all the pages, except for result discussion, I had to put question marks for lacking literature resources. Thus, the statement on countries’ competitive advantage and its decreasing role for international trade research (page 4) is based on just ONE source (Ghioni, 2017). Although it was a survey, it actually served the specific role and was later criticized for misinterpreting the trend.

We have expanded the literature to address the issue. However, there are not many articles available that examine trade relationships’ duration on a transaction level, so the literature review might still look brief in that area.

• I have one more suggestion, to include more in depth developed piece on impact (for policy makers, researchers, and practitioners) and limitations of the study.

We have added a passage concerning the limitations of the study.

• Also, I don’t believe that it is appropriate for the solid paper to justify the method by discussions from ONLY self-published papers (see Discussion part, citations 32 and 33). Similar passage is seen at the beginning of the paper, where the justification of importance of the research focus was confirmed by including citations for three self-published papers.

We have expanded the literature on that topic, too.

• I believe, if my suggestions are accepted, the paper could substantially improve.

Thank you for your insightful review.

Thank you

authors

Author Response File: Author Response.docx

Reviewer 3 Report

The article broadens the discussions on the duration of trade relations with a study on Polish enterprises on the intra-Community market, separately for intra-Community supplies (ICS) and intra-Community acquisitions (ICA). The undertaken research topic is valuable, the research methodology is adequate. The article is well written.

I have no fundamental reservations about the methodology and results.

The weakness of the article is the lack of placing the research in the current discussion on the durability of trade relations. There is no adequate literature review at all. Literature references in the discussion are few and not always directly related to the subject of research. The article should be extended with an in-depth literature review. Similarly, the discussion should be expanded to include the consequences of the results obtained - what do they change in our current knowledge (taking into account the current state of research in literature) and how they can be used in the conduct of trade policy and, more broadly, economic policy.

Author Response

Review 3

Thank you for your valuable comments. We have corrected the article as recommended.

• The article broadens the discussions on the duration of trade relations with a study on Polish enterprises on the intra-Community market, separately for intra-Community supplies (ICS) and intra-Community acquisitions (ICA). The undertaken research topic is valuable, the research methodology is adequate. The article is well written.
  I have no fundamental reservations about the methodology and results.

Thank you

• The weakness of the article is the lack of placing the research in the current discussion on the durability of trade relations. There is no adequate literature review at all. Literature references in the discussion are few and not always directly related to the subject of research. The article should be extended with an in-depth literature review.

Similarly, the discussion should be expanded to include the consequences of the results obtained - what do they change in our current knowledge (taking into account the current state of research in literature) and how they can be used in the conduct of trade policy and, more broadly, economic policy.

We expanded the literature adding as much new content as possible. However, there are not many studies in the literature at the level of individual transactions or individual companies to which it would be best to compare.

We have added comments with suggestions for business practice based on our results, which are also supported by the cited literature.

Thank you

authors

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

 

Thank you for introducing the changes in the paper. However, a few areas could be slightly updated:

• The novelty of the paper in the introduction even after enhancements could be more descriptive in what particularly paper advances in.
• As for an economic paper, the hypotheses still appear very suddenly, and they are not anchored in the economic literature. These, has not been in any form corrected. I would like to see economic reasoning/foundations/reasons, followed by a few references that narrow down into the formulated hypotheses.
• In the results section, the economic interpretation of the findings obtained is missing. This chapter presents statistical information together with p-values. What about the potential reasons for the particular significant/insignificant differences between ICS and ICA?

Author Response

Rev. 1

Thank you for your second review. Clearly, despite our efforts there are still imperfections. We have made changes and corrections to further improve our article.

We have added a section on the novelty of our research.

Our hypotheses are indeed derived from our experiences and research ideas rather than from the literature. Nevertheless, the literature introduction has been extended. But it is still quite a novel research project.

We have added information on the importance of the duration of trade relationships in the context of corporate resource management..

We believe that the duration of trade relationships can be influenced by: the type of transaction (ICS, ICA), the commodity group, the country of the trading partner. This is what our research addresses. Of course, there could be more potential causes, but this needs to be supported by research. We do not currently have the relevant data. We also conducted an analysis of the impact of the place of activity (voivodeship, i.e. region of Poland). This feature however did not have any differential impact and we decided not to include it in the article.

Author Response File: Author Response.docx

Reviewer 2 Report

Version 2. Comments.

Significant:

Theoretical foundation: Why the duration of trade relationship is important? What are the factors that are limiting the duration, on a firm, community, industry, society/country, region level, within the EU? No clear explanation on factors you plan to consider when testing your hypotheses, and what will be dropped off the list and why? Until you explain on that, the article couldn’t be published in a good quality journal since all readers will question your approach. Why exploring the duration without looking deeper into reasons? It means that you need to check on mediating role of possible groups of potential reasons. If you haven’t done it yet, then, explain why, and what do you plan for your future research. What you are doing is interesting, but is a pilot methodology project that has, in my understanding, to lead to the comprehensive analysis of factors for prolonging or shortening of trade relationship.

139 -- It is inappropriate to refer to the end of the paper (in discussion).  If you state something here, you must provide it here and not refer to later piece of the paper (discussions).

Sorely, author (authors) was/were rushing through to complete the paper and didn’t want to rework it in the way it was suggested by reviewers. I consider it to be disrespectful to reviewers and editors. We have to read the paper again only to find out that it wasn’t done in the way we suggested.

Line 170 - no references to authors’ experience/research, 183,331 no references/examples. No explanation AT ALL on how different the authors’ approach is from everything that exists in the literature.

S(t) has to be better explained.

Lines 337-338 – contradict with the sentence citing #44.

Line 448 – wrong statement -- shorter relationships don’t mean it is more difficult to maintain them: what if it is more efficient in the dynamic markets? Then, all your statements are wrong?

Line 450 -- What is the evidence that they get abandoned? It is completely different area and needs more research before making these statements.

Lines 451-457 – For the source #68, it was used it for specific conditions. Your statement is contradicting with innovation principles!! For #69, when mentioning this particular paper, you need to explain on conditions they examined. Same for #70, 71 - your statements are too general. Markets are different, as well as industries. In other words, it might happen that the more innovative (dynamic) the market/industry is, the shorter trade relationship one should expect.

Reviewers asked for Limitations and conclusions piece to be added to the paper. I am not satisfied with the work done in the revised version.

The limitations piece is extremely vague and incomplete, no explanation on reasons of interruption of trade relationship, and shorter trade durations. Also, absolutely no explanation on authors’ assumptions for the research. Implications are formal and very weak, and absolutely aren’t acceptable for a good quality paper.

Conclusions need to be done in a proper way and not as a simple statement. The new end of the paper raises even more questions to its quality. Please, also consider not siting new papers in the conclusion part.

Literature review:

Looks like the team of authors didn’t pay attention to many literature sources. I just opened my files for the close topic and found a lot more valuable citations (see below) that could add to or challenge authors’ statements in this paper. Still, I don’t think the literature review is done at the level sufficient for publication.

Grammar: All over the paper-- editing is ABSOLUTELY necessary to the style, repetitions, use of ‘a’ and ‘the’ articles, word choice and sentence structure. Literally nothing was done since the first review. Author/s stated they edited the paper but (in reality) it wasn’t done. I referred to 21 lines in my letter to the editor, but actually it is more than that…

Additional sources:

1. Yan, Z., & Puyang, S. (2016). Bilateral business environment, contract dependence and duration of trade: evidence from firm-level data in China. Journal of Finance and Economics, 42(04), 49-60.
2. Battaglini, M., & Harstad, B. (2016). Participation and duration of environmental agreements. Journal of Political Economy, 124(1), 160-204.
3. Chung, K. H., & Ryu, D. (2016). Trade duration, informed trading, and option moneyness. International Review of Economics & Finance, 44, 395-411.
4. Costello, A. M. (2019). The value of collateral in trade finance. Journal of Financial Economics, 134(1), 70-90.
5. Ravindran, K., Susarla, A., Mani, D., & Gurbaxani, V. (2015). Social capital and contract duration in buyer-supplier networks for information technology outsourcing. Information Systems Research, 26(2), 379-397.
6. Straume, H. M. (2017). Here today, gone tomorrow: The duration of Norwegian salmon exports. Aquaculture Economics & Management, 21(1), 88-104.
7. Märkle-Huß, J., Feuerriegel, S., & Neumann, D. (2018). Contract durations in the electricity market: Causal impact of 15 min trading on the EPEX SPOT market. Energy Economics, 69, 367-378.
8. Von Hirschhausen, C., & Neumann, A. (2008). Long-term contracts and asset specificity revisited: An empirical analysis of producer–importer relations in the natural gas industry. Review of Industrial Organization, 32(2), 131-143.

 

Author Response

Rev. 2

The review is very thorough. However, we cannot make the appropriate corrections to the text that would correspond to all the comments. The duration of the transaction is important. We wrote this in the first version of the article. We have added a passage on the context of enterprise resource management. We believe that the duration of trade relationships can be influenced by: the type of transaction (ICS, ICA), the commodity group, the country of the trading partner. This is what our research addresses. Of course, there could be more potential causes, but this needs to be supported by research. We do not currently have the relevant data. We also conducted an analysis of the impact of the place of activity (voivodeship, i.e. region of Poland). This feature however did not have any differential impact and we decided not to include it in the article.

 

The article we submitted in the second version was reworked (these changes were highlighted in red). The remark about us not making changes and being disrespectful to reviewers and editors is unjust to us.

 

We have added a section on the novelty of our research.

We have added symbol S(t). Survival function is a well established term.

Lines 337-338 – contradict with the sentence citing #44.

– We can see no logical or material contradiction here.

Line 448

– Our research concerned vehicles and automotive parts trade. It is not a very dynamic market (in terms of volatility, entry threshold or the liquidity of assets).

Line 450 -- What is the evidence that they get abandoned? It is completely different area and needs more research before making these statements.

• This comment is incomprehensible to us. The sentence to which it refers expresses the potential, rather than the actual, possibility of a permanent cessation of transactions in a difficult to maintain relationship.

Lines 451-457 – For the source #68, it was used it for specific conditions. Your statement is contradicting with innovation principles!! For #69, when mentioning this particular paper, you need to explain on conditions they examined. Same for #70, 71 - your statements are too general. Markets are different, as well as industries. In other words, it might happen that the more innovative (dynamic) the market/industry is, the shorter trade relationship one should expect.

• Our text only points to the different findings in the literature.

 

We thank you for the links to the literature, unfortunately in most cases the literature proposed by the reviewer concerns a different range of issues that are not directly related to our research:

1. Yan, Z., & Puyang, S. (2016). Bilateral business environment, contract dependence and duration of trade: evidence from firm-level data in China. Journal of Finance and Economics, 42(04), 49-60.

Unfortunately, the article is published in Chinese. From the content of the abstract, we infer thematic incompatibility with our study: ‘In international trade, contract environment the two trade sides face and contract characteristics of trade products are the important factors affecting the trade relationship.’

The literature emphasises that China's trade (and the economy more broadly) is specific. Authors often discuss the effects of political relations on trade, e.g.

• Du, Y., Ju, J., Ramirez, C.D., Yao, X. Bilateral trade and shocks in political relations: Evidence from China and some of its major trading partners, 1990–2013. Journal of International Economics 2017, 108, 211-225.

A key foundation of Chinese-style institutions is that government at different levels controls allocation of resources and utilizes its political and economic power to support businesses connected to them, with a particular biased concentration on exports.

• Bai, C.E., Hsieh, C.T., Song, Z.M., 2014. Crony Capitalism with Chinese Characteristics. University of Chicago (Working Paper).
• Ding, H., Fan, H., Lin, S., Connect to trade. Journal of International Economics 2018, 110, 50–62.

Therefore, the problems associated with trade with China are different and more complicated than for smaller countries, which, moreover, constitute a common market. That is why we have not considered the studies on China. They deal with a different range of issues and the operations of individual actors on a much larger scale.

2. Battaglini, M., & Harstad, B. (2016). Participation and duration of environmental agreements. Journal of Political Economy, 124(1), 160-204.

The article is interesting, but it deals with other issues: ‘We analyze participation in international environmental agreements in a dynamic game in which countries pollute and invest in green technologies.’

3. Chung, K. H., & Ryu, D. (2016). Trade duration, informed trading, and option moneyness. International Review of Economics & Finance, 44, 395-411.

This article is about options trading. It does not overlap with our interests. As the authors say: ‘Using the intraday transaction data from the KOSPI 200 options market, one of the most famous and actively traded derivatives markets in the world, we find that the price impact is greater when the trade duration is shorter for in-the-money (ITM) options, while the correlation is opposite for out-of-the-money (OTM) options.’

Day trading in financial markets is completely different from trade in goods. And studying it uses different assumptions and methodologies.

4. Costello, A. M. (2019). The value of collateral in trade finance. Journal of Financial Economics, 134(1), 70-90.

This article is also outside the scope of our research as we can infer from this passage: ‘Suppliers are subject to the credit risk of their customers when they sell products on credit. However, rights to the collateral value of the products they sell may mitigate some of this risk. This paper demonstrates the important role of laws that support suppliers’ rights to reclaim and liquidate collateral.’

5. Ravindran, K., Susarla, A., Mani, D., & Gurbaxani, V. (2015). Social capital and contract duration in buyer-supplier networks for information technology outsourcing. Information Systems Research, 26(2), 379-397.

Again, an interesting article, but far from our interests. The authors not only study a different subject (outsourcing services, where a single contract, i.e. a transaction, lasts for many months or years), not even remotely connected with trade in goods, but also use different methodology.

6. Straume, H. M. (2017). Here today, gone tomorrow: The duration of Norwegian salmon exports. Aquaculture Economics & Management, 21(1), 88-104.

Indeed, relevant to our research is paper number 6, which deals with commodity trade (export of farmed salmon from Norway), and the methodology used as well as conclusions obtained by the author are qualitatively similar to those presented by us. The literature discussion section and the discussion of the results are also interesting. We cited the source in the updated version of our paper. Thank you for pointing out this source.

7. Märkle-Huß, J., Feuerriegel, S., & Neumann, D. (2018). Contract durations in the electricity market: Causal impact of 15 min trading on the EPEX SPOT market. Energy Economics, 69, 367-378.

Also, papers number 7 and number 8 deal with completely different topics and as such are not directly – or indirectly – applicable to our work. In particular, paper 7 deals with electricity futures contracts purchased on the spot market, and the term ‘duration’ is used here in a completely different sense (as a short time window, rather than the duration of a long-term trading relationship between partners). The paper deals with modelling energy demand in terms of time series, in the context of risk management.

8. Von Hirschhausen, C., & Neumann, A. (2008). Long-term contracts and asset specificity revisited: An empirical analysis of producer–importer relations in the natural gas industry. Review of Industrial Organization, 32(2), 131-143.

In contrast, paper 8 deals with modelling the relationship between several variables describing long-term contracts in the natural gas market, but does not deal with modelling the duration of trading relationships consisting of many repeated transactions between international trading partners. The only point of contact with our research is the finding (but obtained in a different approach) that 'duration decreases as international market structures grow more competitive', which is also true in our context.

Author Response File: Author Response.docx

Round 3

Reviewer 1 Report

Thank you for the introduced amendments.

Author Response

Thank you to Reviewer 1 (round 3).

Reviewer 2 Report

Please, see the file attached.

Best wishes.

Comments for author File: Comments.pdf

Author Response

Thank you to Reviewer 2 (round 3). We have tried to make the suggested corrections.

All revisions in the article are marked in red green and violet.