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The Dynamics of Entry, Exit and Profitability: An Error Correction Approach for the Retail Industry

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  • Carree, M.
  • Thutik, R.

Abstract

We develop a two equation error correction model to investigate determinants of and dynamic interaction between changes in profits and number of firms in retailing. An explicit distinction is made between the effects of actual competition among incumbents, new firms competition, and potential competition from firms outside the market. Effects of cost, demand and general income changes on profitability are investigated to gain insight in the role of retailing in the cost, demand and wage inflationary process. The relative importance of profitability, growth and unemployment as determinants of net entry are studied. The model is tested using a panel data set of 36 Dutch shoptypes covering the 1977-1988 period. Copyright 1994 by Kluwer Academic Publishers
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Suggested Citation

  • Carree, M. & Thutik, R., 1993. "The Dynamics of Entry, Exit and Profitability: An Error Correction Approach for the Retail Industry," Papers 9308-g, Erasmus University of Rotterdam - Institute for Economic Research.
    • Handle: RePEc:fth:erroec:9308-g
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    Cited by:

    1. Burke, A.E. & van Stel, A.J. & Thurik, A.R., 2009. "Blue Ocean versus Competitive Strategy: Theory and Evidence," ERIM Report Series Research in Management ERS-2009-030-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Amin, Mohammad, 2015. "Competition and labor productivity in India's retail stores," Journal of Asian Economics, Elsevier, vol. 41(C), pages 57-68.
    3. Carree, M. A. & Thurik, A. R., 1999. "The carrying capacity and entry and exit flows in retailing," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 985-1007, October.
    4. Dennis Fok & André Stel & Andrew Burke & Roy Thurik, 2019. "How entry crowds and grows markets: the gradual disaster management view of market dynamics in the retail industry," Annals of Operations Research, Springer, vol. 283(1), pages 1111-1138, December.
    5. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 67-84, February.
    6. André van Stel & Roy Thurik & Andrew Burke, 2008. "Investigating Blue Ocean v. Competitive Strategy: A Statistical Analysis of the Retail Industry," Scales Research Reports H200801, EIM Business and Policy Research.
    7. Koen de Backer, 2002. "Does foreign direct investment crowd out domestic entrepreneurship?," Economics Working Papers 618, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Martin Carree, 2002. "Does Unemployment Affect the Number of Establishments? A Regional Analysis for US States," Regional Studies, Taylor & Francis Journals, vol. 36(4), pages 389-398.
    9. Dennis Fok & Andre van Stel & Andrew Burke & Roy Thurik, 2010. "Industry Dynamics and Entrepreneurship: An Equilibrium Model," Tinbergen Institute Discussion Papers 10-012/3, Tinbergen Institute, revised 08 Oct 2010.
    10. Vesa Puhakka, 2011. "Developing a Creative-Cognitive Model of Entrepreneurial Alertness to Business Opportunities," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 2(4), pages 85-94, December.
    11. Robert M. Feinberg, 2009. "Foreign Competition and Small-Firm Entry in US Manufacturing," Working Papers 2009-04, American University, Department of Economics.
    12. André van Stel & Roy Thurik & Dennis Fok & Andrew Burke, 2009. "The Dynamics of Entry and Exit," Scales Research Reports H200907, EIM Business and Policy Research.

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    Keywords

    profit ; retail trade;

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