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Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing

Author

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  • Maican, Florin

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Orth, Matilda

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Entry of large (“big-box”) stores along with a drastic fall in the total number of stores is a striking trend in retail markets. In this paper we provide a dynamic structural model, controlling for unobserved prices and local market characteristics, to estimate total factor productivity in retail markets. Then we evaluate how increased competition from large entrants influences incumbents’ productivity in local markets. Using detailed data on retail food stores in Sweden, we find that net entry substantially contributes to industry productivity growth. In local markets, productivity dispersion increases as a consequence of large entrants, i.e., low productive incumbents become less productive whereas high productive incumbents become more productive. We conclude that large entrants play a central role in explaining productivity differences across stores.

Suggested Citation

  • Maican, Florin & Orth, Matilda, 2008. "Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing," Working Papers in Economics 328, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0328
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    File URL: http://hdl.handle.net/2077/18683
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    Cited by:

    1. Maican, Florin & Orth, Matilda, 2015. "A dynamic analysis of entry regulations and productivity in retail trade," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 67-80.
    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. Maican, Florin G., 2012. "From Boom to Bust and Back Again: A dynamic analysis of IT services," Working Papers in Economics 543, University of Gothenburg, Department of Economics.

    More about this item

    Keywords

    Retail markets; Imperfect competition; Industry dynamics; TFP; Space productivity; Dynamic structural model;

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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