A commentary on the gravity equation in international business research

Abstract

Purpose

This commentary aims to discuss methodological issues and practical concerns of international business scholars who apply the gravity equation in their research.

Design/methodology/approach

The paper summarizes and compares theories and several advanced empirical specifications in the gravity equation.

Findings

The paper proposes a relatively low‐cost specification and estimation to implement such correction, which is robust in the presence of various endogeneity effects and non‐stationary variables. In the presence of zero‐values in the dataset, however, the multilateral specification is best estimated with a Poisson maximum likelihood.

Originality/value

The most important message of the commentary is that this equation should correct for multilateral resistance factors.

Citation

Fratianni, M.U., Marchionne, F. and Hoon Oh, C. (2011), "A commentary on the gravity equation in international business research", Multinational Business Review, Vol. 19 No. 1, pp. 36-46. https://doi.org/10.1108/15253831111126730