The dynamics of entry, exit and profitability: An error correction approach for the retail industry

Martin Carree*, Roy Thurik

*Corresponding author for this work

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    Abstract

    We develop a two equation error correction model to investigate determinants of and dynamic interaction between changes in profits and number of firms in retailing. An explicit distinction is made between the effects of actual competition among incumbants, new firms competition and potential competition from firms outside the market. Effects of cost, demand and general income changes on profitability are investigated to gain insight in the role of retailing in the cost, demand and wage inflationary processes. The relative importance of profitability, growth and unemployment as determinants of net entry are studied. The model is tested using a panel data set of 36 Dutch shoptypes covering the 1977-1988 period.
    Original languageEnglish
    Pages (from-to)107-116
    Number of pages10
    JournalSmall Business Economics
    Volume6
    DOIs
    Publication statusPublished - Apr 1994

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