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Big-box retail entry in urban and rural areas: Are there productivity spillovers to incumbent retailers?
Dalarna University, School of Technology and Business Studies, Microdata Analysis.ORCID iD: 0000-0003-4871-833X
Dalarna University, School of Technology and Business Studies, Microdata Analysis.ORCID iD: 0000-0001-6814-3970
HUI Research, Stockholm.ORCID iD: 0000-0003-3362-5755
HUI Research, Stockholm.
2019 (English)In: International Review of Retail Distribution & Consumer Research, ISSN 0959-3969, E-ISSN 1466-4402, Vol. 29, no 1, p. 23-45Article in journal (Refereed) Published
Abstract [en]

This paper empirically measures the potential spillover effects of big-box retail entry on the productivity of incumbent retailers in the entry regions, and investigates whether the effects differ depending on the size of the new establishment relative to the size of the local market. The results indicate that big-box entry increases the productivity of incumbent firms in two of three rural entry regions where the IKEA is large relative to the local retail market, while no productivity spillover effects could be found in the case of the urban IKEA entry in Gothenburg.

Place, publisher, year, edition, pages
2019. Vol. 29, no 1, p. 23-45
Keywords [en]
Big-box entry, IKEA, agglomeration, Retail productivity, Retail entry subsidies
National Category
Economics and Business
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
URN: urn:nbn:se:du-27887DOI: 10.1080/09593969.2018.1562956ISI: 000470275900002Scopus ID: 2-s2.0-85060352043OAI: oai:DiVA.org:du-27887DiVA, id: diva2:1218530
Funder
Swedish Retail and Wholesale Development Council, 2015:4Available from: 2018-06-14 Created: 2018-06-14 Last updated: 2021-11-12Bibliographically approved
In thesis
1. Who benefits when IKEA enters local markets in Sweden?: An empirical assessment using difference-in-difference analysis, synthetic control methods, and Twitter sentiment analysis
Open this publication in new window or tab >>Who benefits when IKEA enters local markets in Sweden?: An empirical assessment using difference-in-difference analysis, synthetic control methods, and Twitter sentiment analysis
2018 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Policy makers often spend considerable amounts of money to attract IKEA to their region despite not having any empirical measurements on its expected contribution to the local economy. As such, an empirical study of the economic and social impact of new IKEA stores can aid political decision making, and contribute to the literature regarding how big-box retail entry affects the regions where they enter.

This dissertation aims to estimate: the impact of IKEA entry on incumbent retailers productivity, and investigate if the impact is heterogenus depending on local maket size, type of retail industry, distance to surrounding retailers, and firm size; IKEA entry effects on the average labor productivity in durable goods retailing in the entry regions; and, finally, public opinions regarding  IKEA entry.

For IKEA entry effects on incumbent retailers, Paper I~III separately examine four factors of potential heterogeneity. Paper I finds that market size matters: smaller rural regions have bigger IKEA effects. Paper II considers two factors: firm industry and distance, and confirms that IKEA entry effects dissipate over distance. The positive impact of IKEA entry on incumbent retailers is limited to those selling complementary goods to IKEA. No positive effects were found for the urban entry in Gothenburg in the two first papers, which is somewhat surprising. Paper III found that a positive effect exist also in Gothenburg, but it is limited to relatively small incumbent retailers with a capital stock below 1 500 000 SEK. Policy making tends to consider IKEA overall effects on entry municipalities besides IKEA spillover effects on firms. Paper V shows that rural regions are affected by IKEA entry, while larger urban markets are not.

For the social effects of IKEA, Paper VI uses Twitter text mining to study public opinions regarding IKEA entry into local markets. The new IKEA stores under study caught significant public attention at the time of entry, with mostly positive attitudes toward the new stores. The favorite topics for discussion at the time of the different IKEA entries were heterogeneous depending on location.

Methodologically, Paper I uses traditional Difference-in-Difference (DID) to have an initial understanding of IKEA entry spillover effects in four regions; Paper II extends to Spatial DID to catch the spatial interaction between firms; Paper III uses Panel Smooth Transition Regression to identify heterogenous effects due to firms size. Paper IV investigates a new treatment effects estimation aproach, Synthetic Control Method (SCM), to explore when the SCM is powerful, and how to improve its performance; Paper V then uses SCM to estimate IKEA effects at municipality level. In addition, to make SCM developed readily available for other researchers, the author of this thesis also published one web-application to implement a synthetic control method power test, and another to implement parametric & non-parametric estimation and inference.  

These findings confirm that IKEA has a positive effect on the regions where they enter. Nevertheless, governments that are to decide if to allow a big-box retail entry into their local community should be aware that the impact of such entry will depend on the size of the existing retail market, the type of existing retail industry, and the size of existing retailers in the entry region.

Place, publisher, year, edition, pages
Borlänge: Dalarna University, 2018
Series
Dalarna Doctoral Dissertations ; 7
Keywords
big-box entry effect; spatial spill-over effect; heterogeneous causal effect; difference-in-difference; synthetic control method; sentiment analysis.
National Category
Economics and Business Computer and Information Sciences
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-27896 (URN)978-91-85941-85-8 (ISBN)
Public defence
2018-09-14, Clas Ohlson, Borlänge, 13:00 (English)
Opponent
Supervisors
Funder
Swedish Retail and Wholesale Development Council, 2015:4
Available from: 2018-08-21 Created: 2018-06-14 Last updated: 2023-08-17Bibliographically approved

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Håkansson, JohanLi, YujiaoMihaescu, Oana

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