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Better Together? Retail Chain Performance Dynamics in Store Expansion Before and After Mergers

Author

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  • Mitsukuni Nishida

    (Johns Hopkins Carey Business School)

  • Nathan Yang

    (Yale School of Management)

Abstract

We study firm performance dynamics in retail growth using a dynamic model of expansion that allow these dynamics to operate through an unobserved serially correlated process. The model is estimated with data on convenience-store chain diffusion across Japanese prefectures from 1982 to 2012, whereby an actual merger between two chains takes place in 2001. Given the presence of serial correlation and selection biases in observed revenue, we combine particle filtering methods for dynamic games with control functions in revenue regressions. The estimated structural model provides us insights about how performance dynamics evolve before and after the merger. In particular, we demonstrate that the performance dynamics for the merged entity do not improve following the merger.

Suggested Citation

  • Mitsukuni Nishida & Nathan Yang, 2014. "Better Together? Retail Chain Performance Dynamics in Store Expansion Before and After Mergers," Working Papers 14-08, NET Institute.
    • Handle: RePEc:net:wpaper:1408
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    Cited by:

    1. Nicholas G. Rupp & Kerry M. Tan, 2019. "Mergers And Product Quality: A Silver Lining From De‐Hubbing In The U.S. Airline Industry," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 652-672, October.
    2. Brett Hollenbeck, 2020. "Horizontal mergers and innovation in concentrated industries," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 1-37, March.
    3. Suguru Otani, 2021. "Estimating Endogenous Coalitional Mergers: Merger Costs and Assortativeness of Size and Specialization," Papers 2108.12744, arXiv.org, revised Mar 2023.

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    More about this item

    Keywords

    Dynamic discrete choice; Firm size spillovers; Industry dynamics; Learning-by-doing; Market Concentration; Merger analysis; Particle filter; Revenue regression; Serial correlation;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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