When IKEA enters: Do local retailers win or lose?

Sven-Olov Daunfeldt, Oana Mihaescu (), Helena Nilsson () and Niklas Rudholm
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Niklas Rudholm: HUI Research, Postal: SE-10329 Stockholm, Sweden and Dalarna University, SE-79188 Falun, Sweden

No 109, HUI Working Papers from HUI Research

Abstract: IKEA is one of the world’s largest retailers, but little is known about how IKEA impact incumbent retailers when deciding to enter a local market. Previous studies on the effects of big-box entry on surrounding retailers have also generated inconclusive results, and mainly been focused towards entry of Wal-Mart in the United States. We contribute to this literature by investigating the effects of IKEA entry on revenues and employment for incumbent retail firms in three Swedish municipalities during 2000-2010. Our results indicate that a new IKEA store increases average revenues for incumbent retailers within the entry municipality by 11%, but also that the effect is highly heterogeneous within the municipality. Retailers that were located up to 1 km from IKEA experienced a 26% increase in revenues when IKEA entered the municipality. However, the positive spillover effect of a new IKEA store on retail revenues diminished with the distance to IKEA, and turned insignificant for retailers in the city centers and those that were located 5-10 km from IKEA. The effects on employment were much less pronounced, and in most cases statistically insignificant.

Keywords: Big-box retailing; retail revenues; firm entry; propensity-score matching; panel data (search for similar items in EconPapers)
JEL-codes: D22 L11 L25 L26 P25 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-02-24
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:huiwps:0109

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