Productivity Dynamics and the Role of “Big-Box” Entrants in Retailing

Entry of large ("big-box") stores along with a drastic fall in the number of stores are striking trends in retail. We use a dynamic model to measure the impact of large entrants on productivity, allowing for a controlled productivity process and accounting for prices, local markets, and the endogeneity of entry. Using data on all retail food stores in Sweden, we find that incumbents' productivity increase after large entry and that the magnitude of the increase declines with the productivity of incumbents. Our findings highlight that large entrants play a crucial role in driving productivity growth.