An Exploratory Analysis of the Factors Affecting Incoterms Selection from the Perspective of Firm Characteristics

Abstract

This study explores the factors affecting Incoterms selection based on statistical analysis. Specifically, it focuses on free on board; cost and freight; and cost, insurance, and freight; and considers the impact of firm characteristics and trust in transaction partners on the selection of Incoterms using 2020 "sell" data from Trade Tie-up Promotion Program. The variables affecting the selection in this analysis are nationality of exporter, industry, nationality of importer, international experience, and using letter of credit. The results of multiple correspondence analysis and cluster analysis, following chi-square testing, show that industry, nationality of exporter, nationality of importer, and international experience are the main factors that affect the selection of Incoterms. Therefore, this study shows that firm characteristics, which were not considered in prior studies, are important factors in this context. In particular, the identified factors are useful for firms with little international trade experience in selecting Incoterms rules.