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The Wal-Mart Effect: Wave of Destruction or Creative Destruction?

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  • Srikanth Paruchuri
  • Joel A. C. Baum
  • David Potere

Abstract

During the past quarter century, large multistore retailers have experienced considerable growth. In this article, we examine the widely held belief that the expansion of these chain stores, Wal-Mart in particular, has had a large negative impact on the small locally owned retail sector. Our analysis of four types of independent retailer entries and exits in Florida from 1980, prior to the opening of the first Wal-Mart store in the state, to 2004, reveals that Wal-Mart's impact varies with independent retailers' market overlap with and proximity to Wal-Mart. Notably, our findings suggest that within zip codes, the Wal-Mart effect is driven by the suppression of entry rates, but not by the increase in exit rates, while in adjacent zip codes, it is driven by exit rates increasing more than entry rates. Our results provide empirical evidence that may help economic developers, public officials, and owners of small businesses make informed decisions about economic development in their communities. Copyright (c) 2009 Clark University.

Suggested Citation

  • Srikanth Paruchuri & Joel A. C. Baum & David Potere, 2009. "The Wal-Mart Effect: Wave of Destruction or Creative Destruction?," Economic Geography, Clark University, vol. 85(2), pages 209-236, April.
  • Handle: RePEc:bla:ecgeog:v:85:y:2009:i:2:p:209-236
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    Cited by:

    1. Edgard Barki & Felipe Zambaldi & Carlos Eduardo Lourenço & Cristiano do Amaral Britto De Castro, 2016. "Store patronage and retail competition in emerging markets," International Journal of Business and Systems Research, Inderscience Enterprises Ltd, vol. 10(1), pages 62-77.
    2. Håkansson, Johan & Li, Yujiao & Mihaescu, Oana & Rudholm, Niklas, 2016. "Big-box retail entry in urban and rural areas: Are there productivity spillovers to incumbent retailers?," HUI Working Papers 118, HUI Research.
    3. Vandegrift, Donald & Loyer, John & Kababik, David, 2011. "The effect of Walmart on the tax base: evidence from New Jersey," MPRA Paper 30937, University Library of Munich, Germany.
    4. Rudholm, Niklas & Li, Yuijao & Kenneth, Carling, 2018. "How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach," HUI Working Papers 130, HUI Research.
    5. Donald Vandegrift, 2016. "The effect of Walmart and Target on property tax rates," Letters in Spatial and Resource Sciences, Springer, vol. 9(3), pages 309-327, October.
    6. Donald Vandegrift & John Loyer, 2015. "The Effect Of Walmart And Target On The Tax Base: Evidence From New Jersey," Journal of Regional Science, Wiley Blackwell, vol. 55(2), pages 159-187, March.

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