Demand agglomeration economies, neighbor heterogeneity, and firm survival: The effect of HHGregg's bankruptcy

Sharma, S and Chung, W (2021) Demand agglomeration economies, neighbor heterogeneity, and firm survival: The effect of HHGregg's bankruptcy. Strategic Management Journal, n/a (n/a).

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Abstract

Research Summary While agglomeration economies can enhance collocated firms' performance, firms' gains will be heterogeneous. Gains will be driven not only by firms' own traits, but also by their neighboring firms' traits. We expect a focal firm gains more from neighbors that are larger, more proximate geographically, and more related in economic activity. We leverage a quasi-experiment that features micro-geographic, establishment-level data: the exit of the HHGregg electronics retailer in outdoor shopping malls, to estimate the intensity of demand agglomeration benefits from two sources: (a) a focal-pair—how HHGregg's exit harms a focal store's survival, and (b) the other neighbors—how the attributes of the remaining neighbors attenuate this reduced survival effect. We find results consistent with the focal store's, HHGregg's, and neighbors' heterogeneity in size and distance affecting the focal store's survival. Managerial Summary While agglomeration economies can enhance collocated firms' performance, firms' gains will be heterogeneous. Gains will be driven not only by firms' own traits, but also by their neighboring firms' traits. We expect a focal firm gains more from neighbors that are larger, more proximate geographically, and more related in economic activity. We leverage a quasi-experiment that features micro-geographic, establishment-level data: the exit of the HHGregg electronics retailer in outdoor shopping malls, to estimate the intensity of demand agglomeration benefits from two sources: (a) a focal-pair—how HHGregg's exit harms a focal store's survival, and (b) the other neighbors—how the attributes of the remaining neighbors attenuate this reduced survival effect. We find results consistent with the focal store's, HHGregg's, and neighbors' heterogeneity in size and distance affecting the focal store's survival.

Affiliation: Indian School of Business
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Sharma, S
UNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Demand Agglomeration, Firm Heterogeneity, Neighbor Heterogeneity, Survival
Subjects: Economics
Business Strategy
Depositing User: Gurusrinivasan K
Date Deposited: 25 Oct 2021 09:06
Last Modified: 25 Oct 2021 09:06
URI: https://eprints.exchange.isb.edu/id/eprint/1591
Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1002/sm...
Publisher OA policy: https://v2.sherpa.ac.uk/id/publication/7573
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