Review of Industrial Organization (2006) 29:213–225 © Springer 2006
Entry into Swedish Retail and Wholesale
, NIKLAS RUDHOLM
The Swedish Research Institute of Trade (HUI), SE-103 29 Stockholm, Sweden;
Department of Economics, University of G
avle, SE-801 76 G
Abstract. This paper examines, using a zero-inﬂated negative binomial regression model,
what determined entry into the Swedish retail and wholesale trade markets between 1990
and 1996. According to the results, high returns on equity and low sunk costs seemed to
attract more entry into retail trade industries, while recent entry and higher total industry
sales were associated with more entry into both retail and wholesale trade local markets.
Key words: Wholesale trade, retail trade, entry, number of ﬁrms, panel data.
JEL Classiﬁcations: L13, L81.
This paper examines the entry process of retail and wholesale trade ﬁrms
into the Swedish market between 1990 and 1996. It is generally believed
(see, e.g., Geroski, 1991) that new ﬁrms produce a number of beneﬁts. For
instance, the entry, or the threat of entry, of new ﬁrms is assumed to force
prices down, thereby eliminating excess proﬁts. Moreover, high entry rates
may stimulate innovation and increase productivity and product quality.
In Sweden, as in other countries, retail and wholesale trade are con-
stantly adjusting to new circumstances, and in recent years, for exam-
ple, out-of-town shopping, chain stores’ market shares, and the number
of international competitors have all increased (see, e.g., Bergstr
Moreover, the number of ﬁrms and total employment have increased more
over the last decade in the wholesale than in the retail trade sector, and a
relatively larger proportion of the employees in the wholesale trade sector
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