Are new shopping centers drivers of development in large metropolitan suburbs? The interplay of agglomeration and competition forces

Oana Mihaescu (oana.mihaescu@huiresearch.se), Martin Korpi and Özge Öner
Additional contact information
Martin Korpi: Ratio, Postal: Box 3203, 103 64 Stockholm, Sweden and Södertörn University
Özge Öner: University of Cambridge, Postal: Department of Land Economics, 19 Silver Street, Cambridge, U.K.

No 9, HFI Working Papers from Institute of Retail Economics (Handelns Forskningsinstitut)

Abstract: We investigate to which extent shopping centers are drivers of economic development by studying how distance to newly established shopping centers affects the performance of incumbent firms located in the suburbs of the three Swedish major metropolitan areas (Stockholm, Gothenburg, and Malmö) between 2000 and 2016. We use a regression setup with 27,000 firm-year observations and explore the possible heterogeneity imposed on the results from two main elements of spatial economics theory: the size of the new retail area and the distance from the new retail area to the analyzed incumbents. We observe a clear difference in the direction of the effects of large versus small shopping centers. While competition forces are much stronger when large shopping centers make entry, yielding an average negative effect of 5% on incumbent firm revenue and 3% on firm employment, results indicate an opposite pattern for smaller shopping centers, with firm revenue and firm employment increasing by 4 and 3%, respectively. Moreover, we also observe that both agglomeration and competition effects attenuate sharply with distance from the new entrant, confirming one of the central premises of retail location theory. Finally, the results indicate that the geographical scope of the effects is much wider in the case of larger shopping centers, with the estimates becoming insignificant at about 9-10 km from the new entry, as compared to 3-4 km in the case of smaller retail centers.

Keywords: Shopping centers; firm performance; retail location; agglomeration effects; competition; attenuation of effects (search for similar items in EconPapers)
JEL-codes: D22 L25 P25 R11 R12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-05-06
New Economics Papers: this item is included in nep-com, nep-eur, nep-geo, nep-sbm and nep-ure
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Working Paper: Are New Shopping Centers Drivers of Development in Large Metropolitan Suburbs? The Interplay of Agglomeration and Competition Forces (2020)
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