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Do the biggest aisles serve a brighter future? Global retail chains and their implications for Romania

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  • Javorcik, Beata S.
  • Li, Yue

Abstract

During the past two decades many countries have opened their retail sector to foreign direct investment (FDI), yet little is known about the implications of such liberalization for their economies. Using a unique dataset combining outlet-specific information on global retail chains with a panel of Romanian manufacturing firms, this study sheds some light on this question. The results suggest that the expansion of global retail chains leads to a significant increase in the total factor productivity (TFP) in the supplying manufacturing industries: a 10% increase in the number of foreign chains' outlets is associated with a 2.4% to 2.6% boost to the TFP in the supplying industries. The decomposition of the aggregate productivity in the supplying industries suggests that the boost to performance is driven by both within-firm improvements and between-firm reallocation. Both changes are found to be associated with the expansion of foreign chains. These conclusions are robust to a variety of specifications and supported by evidence from a firm-level survey. They suggest that the opening of the retail sector to FDI may stimulate productivity growth and improve allocation efficiency in manufacturing industries and thus provide another piece of evidence in favor of services liberalization.

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  • Javorcik, Beata S. & Li, Yue, 2013. "Do the biggest aisles serve a brighter future? Global retail chains and their implications for Romania," Journal of International Economics, Elsevier, vol. 90(2), pages 348-363.
  • Handle: RePEc:eee:inecon:v:90:y:2013:i:2:p:348-363
    DOI: 10.1016/j.jinteco.2012.12.004
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    Cited by:

    1. Arlan Brucal, Inessa Love, Beata Javorcik, 2018. "Energy savings through foreign acquisitions? Evidence from Indonesian manufacturing plants," GRI Working Papers 289, Grantham Research Institute on Climate Change and the Environment.
    2. Alessandra Guariglia & Marina-Eliza Spaliara & Serafeim Tsoukas, 2016. "To What Extent Does the Interest Burden Affect Firm Survival? Evidence from a Panel of UK Firms during the Recent Financial Crisis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 576-594, August.
    3. Lakatos, Csilla & Fukui, Tani, 2014. "The Liberalization of Retail Services in India," World Development, Elsevier, vol. 59(C), pages 327-340.
    4. David Atkin & Benjamin Faber & Marco Gonzalez-Navarro, 2015. "Retail Globalization and Household Welfare: Evidence from Mexico," CEP Discussion Papers dp1351, Centre for Economic Performance, LSE.
    5. Gould, David M. & Tan, Congyan & Emamgholi, Amir S. Sadeghi, 2013. "Attracting foreign direct investment : what can South Asia's lack of success teach other developing countries ?," Policy Research Working Paper Series 6696, The World Bank.
    6. Iacovone, Leonardo & Javorcik, Beata & Keller, Wolfgang & Tybout, James, 2015. "Supplier responses to Walmart's invasion in Mexico," Journal of International Economics, Elsevier, vol. 95(1), pages 1-15.
    7. Javorcik, Beata S. & Li, Yue, 2013. "Do the biggest aisles serve a brighter future? Global retail chains and their implications for Romania," Journal of International Economics, Elsevier, vol. 90(2), pages 348-363.
    8. Bill Battaile & Saurabh Mishra, 2015. "Transforming Non-Renewable Resource Economies (NREs)," IMF Working Papers 15/171, International Monetary Fund.
    9. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
    10. Raff, Horst & Schmitt, Nicolas, 2015. "Retailing and international trade: A survey of the literature," Economics Working Papers 2015-02, Christian-Albrechts-University of Kiel, Department of Economics.
    11. Bin Ni, 2016. "Productivity Gap and Vertical Spillover: Evidence from Vietnam," Discussion Papers in Economics and Business 16-04, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    12. Igan, Deniz & Suzuki, Junichi, 2012. "The “Wal-Mart effect” in central and eastern Europe," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 194-210.
    13. Massimo Armenise & Giorgia Giovannetti & Gianluca Santoni, 2011. "FDI in Business Services has general TFP effects : evidence from Italy," Working Papers - Economics wp2011_12.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    14. Thomas Farole & Deborah Winkler, 2014. "Making Foreign Direct Investment Work for Sub-Saharan Africa : Local Spillovers and Competitiveness in Global Value Chains," World Bank Publications, The World Bank, number 16390.
    15. Cheptea, Angela, 2016. "Multinational retailers and host countries’ export competitiveness," 149th Seminar, October 27-28, 2016, Rennes, France 244952, European Association of Agricultural Economists.
    16. repec:eee:jbfina:v:87:y:2018:i:c:p:150-163 is not listed on IDEAS
    17. Head, Keith & Jing, Ran & Swenson, Deborah L., 2014. "From Beijing to Bentonville: Do multinational retailers link markets?," Journal of Development Economics, Elsevier, vol. 110(C), pages 79-92.
    18. Görg, Holger & Spaliara, Marina-Eliza, 2017. "Export Market Exit and Financial Health in Crises Periods," KCG Working Papers 4, Kiel Centre for Globalization (KCG).
    19. Charlotte Emlinger & Sandra Poncet, 2016. "With a Little Help from My Friends: Multinational Retailers and China's consumer Market Penetration," Working Papers 2016-01, CEPII research center.
    20. Kovacs (Kiss) Marta, 2014. "An Empirical Research On The Evolution Of Businesses Of The Main Retail Companies In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 1013-1018, July.

    More about this item

    Keywords

    Global retail chains; Productivity; Services liberalization; Foreign direct investment; Backward linkages; Allocation efficiency;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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