Impact of geographic proximity on manufacturing export dynamics

This study examines the impact of geographic proximity on manufactured exports dynamics. Using Tanzania manufactured exports data to SADC and EAC markets obtained from UNCOMTRADE database for the years 2005 to 215, the impact of distance factor (as continuous variable) and market demand (as associated variable) was estimated using regression and descriptive analysis. The two factors were analyzed separately to realize their individual impact on the country’s export level. However, the analysis focused much on distance factor since it was already mentioned in the stage theory as one of the variables during geographical diversification. The findings showed that, throughout the years, observing different markets with different geographical distance from Tanzania, exports level to the respective market continue to react even more negatively as the distance to the market was increasing. In the analysis done on market demand factor, its impact to export level, the results showed that the change in market demand by 1 percent, lead to positive change in export level to the respective market of not less than 1 percent, lead to positive change in export level to the respective market of not less than 1 percent. From the stage theory used in this study, together with physical distance factor between trade partners, the findings add an important observation on the necessity of market demand factor during geographical diversification. It is then recommended that, the policy makers should consider all the possible factors when deciding on where to export and how much to trade with, not only to reduce transaction costs, but also to increase the likelihood of obtaining and maintaining substantial market share.