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How does big-box retail entry affect incumbents in the hospitality industry: Evidence from a natural experiment

Author

Listed:
  • Mihaescu, Oana

    (HUI Research)

  • Rudholm, Niklas

    (HUI Research)

Abstract

This paper empirically measures the effects of big-box retail entry on the productivity of incumbent firms within the hospitality sector in the entry regions and investigates whether the effects differ depending on the size of the local market before entry. We use the entry of IKEA in four Swedish municipalities as a natural experiment to study how it affects productivity in incumbent firms within the hospitality sector. Our results show that entry by IKEA has a negative impact on the productivity of incumbents in Haparanda, Kalmar, and Karlstad, but no statistically significant effects in the metropolitan region of Gothenburg. As the majority of firms in the hospitality sector are restaurants, we expect that our results are due to increased competition within this part of the hospitality sector since all new IKEA stores come with a large, popular, and reasonably-priced restaurant.

Suggested Citation

  • Mihaescu, Oana & Rudholm, Niklas, 2018. "How does big-box retail entry affect incumbents in the hospitality industry: Evidence from a natural experiment," HUI Working Papers 134, HUI Research.
    • Handle: RePEc:hhs:huiwps:0134
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    Cited by:

    1. Nilsson, Helena, 2020. "IKEA entry - Effects on firms in retail and hospitality," HFI Working Papers 11, Institute of Retail Economics (Handelns Forskningsinstitut).

    More about this item

    Keywords

    Big-box entry; agglomeration; production function; hospitality sector;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics

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