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Keywords:

  • Wal-Mart;
  • independent retailers;
  • competition;
  • entry;
  • exit

abstract

During the past quarter century, large multistore retailers have experienced considerable growth. In this article, we examine the widely held belief that the expansion of these chain stores, Wal-Mart in particular, has had a large negative impact on the small locally owned retail sector. Our analysis of four types of independent retailer entries and exits in Florida from 1980, prior to the opening of the first Wal-Mart store in the state, to 2004, reveals that Wal-Mart's impact varies with independent retailers' market overlap with and proximity to Wal-Mart. Notably, our findings suggest that within zip codes, the Wal-Mart effect is driven by the suppression of entry rates, but not by the increase in exit rates, while in adjacent zip codes, it is driven by exit rates increasing more than entry rates. Our results provide empirical evidence that may help economic developers, public officials, and owners of small businesses make informed decisions about economic development in their communities.