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

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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.

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Authors and Affiliations

  1. Centre for Advanced Small Business Economics, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands

    Martin Carree & Roy Thurik

  2. Department of Fundamental Research, Research Institute for Small and Medium-Sized Business, P.O. Box 7001, 2701 AA, Zoetermeer, The Netherlands

    Martin Carree & Roy Thurik

Authors
  1. Martin Carree
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  2. Roy Thurik
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Carree, M., Thurik, R. The dynamics of entry, exit and profitability: An error correction approach for the retail industry. Small Bus Econ 6, 107–116 (1994). https://doi.org/10.1007/BF01065183

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