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MULTIRETAIL - The contribution of multinational retailers from developed countries operating in developing economies to the export performance of local firms.

The project explores the link between globalization of the retail sector and export competitiveness of firms in their origin and host countries. Over the last one-and-a half decades a large number of retailers has started investing abroad or increased their presence in foreign markets. This trend has accelerated over the last years and the struggle for (acquiring) new markets remains a main priority and development strategy for these firms. The increased presence of multinational retailers (MRs) in a growing number of foreign markets has transformed them into major regional and global players, likely to shape not only the domestic and host country economies, as suggested by the traditional literature on foreign direct investment (FDI), but also the international trade patterns of countries where they operate. Most MRs originate from industrialized countries, but saturated domestic markets, fierce competition and restrictive legislation have persistently pushed them to internationalize. Emerging and transition countries with a high demand potential for retail services that opened their retail sectors to foreign competition were the main targeted foreign destinations.

The project has investigated the mechanisms via which retailers’ investments in foreign markets affect the export performance of firms, both in the host and origin countries. Previous pioneer work has highlighted the impact of FDI in the retail sector on the productivity of host country supplier firms. One of these very few works pointed to a subsequent positive effect on the export capability of Chinese cities. We establish a connection between these empirically identified effects and the new new theory of international trade with heterogeneous firms and intermediaries. We show that this theory offers a good framework for analyzing the mechanisms through which MRs affect producing firms in their host countries. Further, the project extends the empirical analysis of effects on the export competitiveness of host country firms to a large panel of countries and MRs. It confirms that MRs increase the overall export capability of host firms in a more general setting, and finds new evidence on retailers’ ability to link markets where they invest and to influence the variety of products exported by local supplier firms. We have also studied the effects on firms in the retailers' origin countries. This is the first study in the literature to investigate this channel. We have developed suitable empirical approaches by combining theory-guided specifications with state-of-the-art econometric methods. Effects were first investigated with country level data. In order to unravel the source of identified effects, we have used detailed information on retailers’ suppliers and the rest of home country firms. All empirical analyses within the project focus on food retailers and exports of edible grocery products. This was motivated by the fact that the overseas expansion of MRs has a primary impact on firms in the up-stream agri-food sector, for which retail outlets are one of the main ways for reaching final consumers. The project draws on (private) firm-level data on the foreign activity of retailers. These data was little explored in the research literature. The MRs’ impacts on origin and host country firms are analyzed in terms of export entry, of volume and orientation of exports, and of product diversity. The new insights provided by the project deepen the knowledge on retailers’ role in international trade, and suggest new directions for empirical and theoretical research.

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Project results:

Commissioned by:

European Union within the Specific Programme SP3-People – the EU Seventh Framework Programme for Researcher Development (Marie Curie Actions - Intra-European Fellowships (IEF)).

Contact Person:

Dr. Angela Cheptea

Status:

2013 - 2015