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Who benefits when IKEA enters local markets in Sweden?: An empirical assessment using difference-in-difference analysis, synthetic control methods, and Twitter sentiment analysis
Dalarna University, School of Technology and Business Studies, Microdata 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 in Microdata Analysis ; 7
Keywords [en]
big-box entry effect; spatial spill-over effect; heterogeneous causal effect; difference-in-difference; synthetic control method; sentiment analysis.
National Category
Economics and Business
Research subject
Complex Systems – Microdata Analysis
Identifiers
URN: urn:nbn:se:du-27896ISBN: 978-91-85941-85-8 (print)OAI: oai:DiVA.org:du-27896DiVA, id: diva2:1218639
Public defence
2018-09-14, Clas Ohlson, Borlänge, 13:00 (English)
Opponent
Supervisors
Funder
Swedish Retail and Wholesale Development Council, 2015:4Available from: 2018-08-21 Created: 2018-06-14 Last updated: 2019-06-17Bibliographically approved
List of papers
1. Big-box retail entry in urban and rural areas: Are there productivity spillovers to incumbent retailers?
Open this publication in new window or tab >>Big-box retail entry in urban and rural areas: Are there productivity spillovers to incumbent retailers?
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.

Keywords
Big-box entry, IKEA, agglomeration, Retail productivity, Retail entry subsidies
National Category
Economics and Business
Research subject
Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-27887 (URN)10.1080/09593969.2018.1562956 (DOI)2-s2.0-85060352043 (Scopus ID)
Funder
Swedish Retail and Wholesale Development Council, 2015:4
Available from: 2018-06-14 Created: 2018-06-14 Last updated: 2019-03-05Bibliographically approved
2. Comparison and one-stop shopping after big-box retail entry: a spatial difference-in-difference analysis
Open this publication in new window or tab >>Comparison and one-stop shopping after big-box retail entry: a spatial difference-in-difference analysis
2018 (English)In: Journal of Retailing and Consumer Services, ISSN 0969-6989, E-ISSN 1873-1384, Vol. 40, p. 175-187Article 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 1) if the entry is in a rural or urban area, and 2) if the incumbent retailers are within retail industries selling substitute or complement goods to those found in IKEA. To identify the IKEA-entry effect, a difference-in-difference model is suitable, but traditionally such estimators neglect the possibility that firms’ sales are determined by a process with spatially interactive responses. If ignored, these responses may cause biased estimates of the IKEA entry effect due to spatial heterogeneity of the treatment effect. One objective of this paper is thus to propose a spatial difference-in-difference estimator accounting for possible spatial spillover effects of IKEA entry. Particular emphasis is placed on the development of a suitable weight matrix accounting for the spatial links between firms, where we allow for local spatial interactions such that the outcome of observed units depends both on their own treatment as well as on the treatment of their neighbors. Our results show that for complementary goods retailers (or one-stop shopping retailers) in Haparanda and Kalmar, productivity increased by 35% and 18%, respectively, due to IKEA entry. No statistically significant effects were found for the entries in Karlstad and Gothenburg, indicating that it is mainly incumbents in smaller entry regions that benefit from IKEA entry. Also, for incumbent retailers selling substitute (or comparison shopping) goods no significant effects were found in any of the entry regions, indicating that it is mainly retailers selling complementary goods that benefit from IKEA entry. Finally, our results also show that ignoring the possibility of spatially correlated treatment effects in the regression models reduces the estimated impact of the IKEA entries in Haparanda and Kalmar on productivity in one-stop shopping retail firms with 3% and 0.1% points, respectively. © 2017 Elsevier Ltd

Keywords
Big-box entry, Production functions, Retail entry subsidies, Retail productivity, Spatial difference-in-difference
National Category
Economics and Business
Research subject
Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-26630 (URN)10.1016/j.jretconser.2017.10.003 (DOI)2-s2.0-85033554892 (Scopus ID)
Available from: 2017-11-29 Created: 2017-11-29 Last updated: 2019-08-26Bibliographically approved
3. Agglomeration economies in urban retailing: Are there productivity spillovers when big-box retailers enter urban markets?
Open this publication in new window or tab >>Agglomeration economies in urban retailing: Are there productivity spillovers when big-box retailers enter urban markets?
2019 (English)In: Applied Economics Letters, ISSN 1350-4851, E-ISSN 1466-4291, Vol. 26, no 19, p. 1586-1589Article in journal (Other academic) Published
Abstract [en]

Previous studies have found that big-box retail entry does not affect the productivity of incumbent retailers when entry occurs in urban areas. In this paper, we show that there are positive spillover effects of big-box retail entry to incumbent retailers in urban areas as well, but that these are limited to relatively small retailers, making the effects difficult to detect using traditional econometric methods, such as difference-in-difference estimation on the full sample of firms. In a two-step procedure, we first use panel smooth transition regression to determine size thresholds that delimit incumbent retail firms by their possible reactions to the new big-box entry. We then use difference-in-difference estimations on these subgroups of firms to determine, within each group, the direction and magnitude of the effects of big-box entry on their productivity. For the group of small incumbent retailers, we find positive spillover effects on productivity of approximately 9%.

Keywords
Productivity growth; Cobb-Douglas production function; IKEA; panel smooth transition regression; regression tree analysis.
National Category
Economics and Business
Research subject
Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-27882 (URN)10.1080/13504851.2019.1588939 (DOI)000461969800001 ()2-s2.0-85063161158 (Scopus ID)
Funder
Swedish Retail and Wholesale Development Council, 2015:4
Available from: 2018-06-14 Created: 2018-06-14 Last updated: 2019-11-26Bibliographically approved
4. The Power of the Synthetic Control Method
Open this publication in new window or tab >>The Power of the Synthetic Control Method
2016 (English)Report (Other academic)
Abstract [en]

The synthetic control method (SCM) is a new, popular method developed for the purpose of estimating the effect of an intervention when only one single unit has been exposed. Other similar, unexposed units are combined into a synthetic control unit intended to mimic the evolution in the exposed unit, had it not been subject to exposure. As the inference relies on only a single observational unit, the statistical inferential issue is a challenge. In this paper, we examine the statistical properties of the estimator, study a number of features potentially yielding uncertainty in the estimator, discuss the rationale for statistical inference in relation to SCM, and provide a Web-app for researchers to aid in their decision of whether SCM is powerful for a specific case study. We conclude that SCM is powerful with a limited number of controls in the donor pool and a fairly short pre-intervention time period. This holds as long as the parameter of interest is a parametric specification of the intervention effect, and the duration of post-intervention period is reasonably long, and the fit of the synthetic control unit to the exposed unit in the pre-intervention period is good.

Place, publisher, year, edition, pages
Borlänge: Högskolan Dalarna, 2016. p. 15
Series
Working papers in transport, tourism, information technology and microdata analysis, ISSN 1650-5581 ; 2016:10
Keywords
Bootstrap; Comparative case study; Counterfactual analysis; Intervention effect; Monte Carlo Simulation; Statistical Inference
National Category
Probability Theory and Statistics
Research subject
Complex Systems – Microdata Analysis, General Microdata Analysis - methods
Identifiers
urn:nbn:se:du-23901 (URN)
Funder
Swedish Retail and Wholesale Development Council
Available from: 2017-01-02 Created: 2017-01-02 Last updated: 2018-08-21Bibliographically approved
5. How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach. How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach
Open this publication in new window or tab >>How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach. How Does Big-Box Entry Affect Labor Productivity in Durable Goods Retailing? A Synthetic Control Approach
2018 (English)Report (Other academic)
Abstract [en]

Using  data  from  2001–2012,  the  effects  of  IKEA  entry  in  four  Swedish  municipalities,   2004–2007,   on   labor   productivity   in   durable   goods   retailing   is   investigated  using  synthetic  control  methods.  We contribute  to  the  literature  on  synthetic   control   methods   by considering   parametric   specifications   of   the   intervention effect, which in our case arguably improves the likelihood of identifying the intervention effect of IKEA entry on labor productivity. As inference relies on a single  treated  observational  unit  (i.e.,  a  single  IKEA-entry  municipality),  statistical  testing  is  a  challenge,  and  randomization  and  replication  for  inference  is  done  with  regard to the pool of control municipalities. Our results indicate that in three out of four  entry  municipalities,  labor  productivity  increased  more  than  in  their  synthetic  counterparts after IKEA entry, and that the size of the positive effect is related to the size of the new IKEA relative to the size of the existing durable goods retail sector in the entry municipalities, with larger positive effects found in municipalities where the new IKEA was large relative to the existing durable goods retail market.

Place, publisher, year, edition, pages
Stockholm: , 2018
Series
HUI Working Paper Series ; 130
Keywords
Productivity growth;Quantitative Case Study; Parametric Synthetic Matching;Bootstrap Confidence Intervals
National Category
Economics
Research subject
Complex Systems – Microdata Analysis, Handel och regional tillväxt. -Kopplingen mellan regionalt tillväxtarbete och lokala etableringsstrategier.
Identifiers
urn:nbn:se:du-27305 (URN)
Available from: 2018-02-23 Created: 2018-02-23 Last updated: 2018-08-21Bibliographically approved
6. Twitter Sentiment Analysis of New IKEA Stores Using Machine Learning
Open this publication in new window or tab >>Twitter Sentiment Analysis of New IKEA Stores Using Machine Learning
2018 (English)In: 2018 International Conference on Computer and Applications, ICCA 2018, 2018, p. 4-11, article id 8460277Conference paper, Published paper (Refereed)
Abstract [en]

This paper studied public emotion and opinion concerning the opening of new IKEA stores, specifically, how much attention are attracted, how much positive and negative emotion are aroused, what IKEA-related topics are talked due to this event. Emotion is difficult to measure in retail due to data availability and limited quantitative tools. Twitter texts, written by the public to express their opinion concerning this event, are used as a suitable data source to implement sentiment analysis. Around IKEA opening days, local people post IKEA related tweets to express their emotion and opinions on that. Such “IKEA” contained tweets are collected for opinion mining in this work. To compute sentiment polarity of tweets, lexiconbased approach is used for English tweets, and machine learning methods for Swedish tweets. The conclusion is new IKEA store are paid much attention indicated by significant increasing tweets frequency, most of them are positive emotions, and four studied cities have different topics and interests related IKEA. This paper extends knowledge of consumption emotion studies of prepurchase, provide empirical analysis of IKEA entry effect on emotion. Moreover, it develops a Swedish sentiment prediction model, elastic net method, to compute Swedish tweets’ sentiment polarity which has been rarely conducted.  

Keywords
big-box effect, opinion analysis, customer emotion, elastic net model, text mining, natural language processing
National Category
Computer Sciences
Research subject
Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-27646 (URN)10.1109/COMAPP.2018.8460277 (DOI)000450258100002 ()2-s2.0-85054497923 (Scopus ID)9781538643716 (ISBN)
Conference
International Conference on Computer and Applications, July 25th-26th, 2018, Beirut, Lebanon
Available from: 2018-05-08 Created: 2018-05-08 Last updated: 2018-11-29Bibliographically approved

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