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Predicting entry of Swedish wholesale firms into local markets
Dalarna University, School of Technology and Business Studies, Information Systems. Dalarna University, School of Technology and Business Studies, Human Geography.ORCID iD: 0000-0003-4871-833X
Dalarna University, School of Technology and Business Studies, Human Geography.ORCID iD: 0000-0001-7193-2989
Dalarna University, School of Technology and Business Studies, Economics. HUI Research.
2014 (English)In: International Review of Retail Distribution & Consumer Research, ISSN 0959-3969, E-ISSN 1466-4402Article in journal (Refereed) Published
Abstract [en]

Applying microeconomic theory, we develop a forecasting model for firm entry into local markets and test this model using data from the Swedish wholesale industry. The empirical analysis is based on directly estimating the profit function of wholesale firms. Profits are assumed to depend on firm- and location-specific factors, and the profit equation is estimated using panel data econometric techniques. Using the residuals from the profit equation estimations, we identify local markets in Sweden where firm profits are abnormally high given the level of all independent variables included in the profit function. From microeconomic theory, we then know that these local markets should have higher net entry than other markets, all else being equal, and we investigate this in a second step, also using a panel data econometric model. The results of estimating the net-entry equation indicate that 19 out of 30 estimated models have more net entry in high-return municipalities, but the estimated parameter is only statistically significant at conventional levels in one of our estimated models, and then with an unexpected negative sign.

Place, publisher, year, edition, pages
Taylor & Francis, 2014.
Keyword [en]
firm location, firm entry, firm demography, spatial distribution of profits, spatial distribution of firms
National Category
Social and Economic Geography Economics
Research subject
Complex Systems – Microdata Analysis
Identifiers
URN: urn:nbn:se:du-16264DOI: 10.1080/09593969.2014.927784OAI: oai:DiVA.org:du-16264DiVA: diva2:758600
Funder
Swedish Retail and Wholesale Development Council
Available from: 2014-10-27 Created: 2014-10-27 Last updated: 2017-01-23Bibliographically approved
In thesis
1. Essays on firm dynamics in the Swedish wholesale trade sector
Open this publication in new window or tab >>Essays on firm dynamics in the Swedish wholesale trade sector
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of a summary and five self-contained papers addressing dynamics of firms in the Swedish wholesale trade sector.

Paper [1] focuses upon determinants of new firm formation in the Swedish wholesale trade sector, using two definitions of firms’ relevant markets, markets defined as administrative areas, and markets based on a cost minimizing behavior of retailers. The paper shows that new entering firms tend to avoid regions with already high concentration of other firms in the same branch of wholesaling, while right-of-the-center local government and quality of the infrastructure have positive impacts upon entry of new firms. The signs of the estimated coefficients remain the same regardless which definition of relevant market is used, while the size of the coefficients is generally higher once relevant markets delineated on the cost-minimizing assumption of retailers are used.

Paper [2] analyses determinant of firm relocation, distinguishing between the role of the factors in in-migration municipalities and out-migration municipalities. The results of the analysis indicate that firm-specific factors, such as profits, age and size of the firm are negatively related to the firm’s decision to relocate. Furthermore, firms seems to be avoiding municipalities with already high concentration of firms operating in the same industrial branch of wholesaling and also to be more reluctant to leave municipalities governed by right-of-the- center parties. Lastly, firms seem to avoid moving to municipalities characterized with high population density.

Paper [3] addresses determinants of firm growth, adopting OLS and a quantile regression technique. The results of this paper indicate that very little of the firm growth can be explained by the firm-, industry- and region-specific factors, controlled for in the estimated models. Instead, the firm growth seems to be driven by internal characteristics of firms, factors difficult to capture in conventional statistics. This result supports Penrose’s (1959) suggestion that internal resources such as firm culture, brand loyalty, entrepreneurial skills, and so on, are important determinants of firm growth rates.

Paper [4] formulates a forecasting model for firm entry into local markets and tests this model using data from the Swedish wholesale industry. The empirical analysis is based on directly estimating the profit function of wholesale firms and identification of low- and high-return local markets. The results indicate that 19 of 30 estimated models have more net entry in high-return municipalities, but the estimated parameters is only statistically significant at conventional level in one of our estimated models, and then with unexpected negative sign.

Paper [5] studies effects of firm relocation on firm profits of relocating firms, employing a difference-in-difference propensity score matching. Using propensity score matching, the pre-relocalization differences between relocating and non-relocating firms are balanced, while the difference-in-difference estimator controls for all time-invariant unobserved heterogeneity among firms. The results suggest that firms that relocate increase their profits significantly, in comparison to what the profits would be had the firms not relocated. This effect is estimated to vary between 3 to 11 percentage points, depending on the length of the analyzed period. 

Place, publisher, year, edition, pages
Borlänge: Högskolan Dalarna, 2015. 38 p.
Series
Dalarna Doctoral Dissertations, 3
Keyword
Wholesale trade, firm location, firm entry, firm relocation, firm growth, spatial distribution of firms
National Category
Economics
Research subject
Komplexa system - mikrodataanalys
Identifiers
urn:nbn:se:du-17402 (URN)978-91-89020-95-5 (ISBN)
Public defence
2015-06-05, Clas Ohlson, Röda vägen 2, Borlänge, 13:00 (English)
Opponent
Supervisors
Available from: 2015-05-18 Created: 2015-05-17 Last updated: 2015-06-30Bibliographically approved

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Citation style
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