Predicting Entry of Swedish Wholesale Firms into Local Markets

Johan Håkansson, Zuzana Macuchova and Niklas Rudholm ()
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Johan Håkansson: HUI Research, Postal: SE-103 29 Stockholm, Sweden and Dalarna University, SE-791 88 Falun, Sweden
Zuzana Macuchova: Dalarna University, Postal: SE-791 88 Falun, Sweden
Niklas Rudholm: HUI Research, Postal: SE-103 29 Stockholm, Sweden and Dalarna University, SE-791 88 Falun, Sweden

No 93, HUI Working Papers from HUI Research

Abstract: 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.

Keywords: firm location; firm entry; firm demography; spatial distribution of profits; spatial distribution of firms (search for similar items in EconPapers)
JEL-codes: D22 L13 L81 R12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2013-05-13
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