Firm entry in the Swedish wholesale trade sector: Does market definition matter?

Brandt, Daniel; Macuchova, Zuzana; Rudholm, Niklas

doi:10.1007/s00168-014-0639-8

Cited by 1 publication

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“…We chose municipalities as the relevant markets to study based on previous studies (e.g. Daunfeldt et al 2006Daunfeldt et al , 2010; in addition, as demonstrated by Brandt et al (2013), municipalities work fairly well as relevant markets in the Swedish wholesale trade industry.…”

Section: Introductionmentioning

confidence: 99%

Predicting entry of Swedish wholesale firms into local markets

Håkansson

Macuchova

Rudholm

2014

The International Review of Retail, Distribution and Consumer R

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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. As in previous entry studies, 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 four of five 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.

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Section: Introductionmentioning

confidence: 99%