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No 81:
Entry in the Swedish Wholesale Trade Sector: Does Market Definition Matter?

Daniel Brandt, Zuzana Macuchova () and Niklas Rudholm ()

Abstract: Entry of firms into local markets has often been studied using administrative areas such as municipalities as the assumed relevant markets to study. However, administrative areas and the actual relevant markets based on local demand for firmsí products often need not coincide, which could bias the results of studies treating administrative areas as the relevant markets. Based on a behavioural assumption regarding how retailers act when purchasing products from wholesale trade firms, we create alternative markets using Voronoi diagrams. We then compare the empirical results of investigating the determinants of entry using municipalities as the relevant markets with the results obtained using the Voronoi markets. The results indicate that, in both cases, the same variables are statistically significant in affecting entry, though the estimated effects differ in size.

Keywords: Firm entry; market delineation; entrepreneurship; regional economics; count data; (follow links to similar papers)

JEL-Codes: L13; L81; R12; (follow links to similar papers)

22 pages, March 15, 2013

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