Working Paper | HBS Working Paper Series | 2013

Does Planning Regulation Protect Independent Retailers?

by Raffaella Sadun

Abstract

Regulations aimed at curbing the entry of large retail stores have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the United Kingdom in the 1990s, I show that independent retailers were actually harmed by the creation of entry barriers against large stores. Instead of simply reducing the number of new large stores entering a market, the entry barriers created the incentive for large retail chains to invest in smaller and more centrally located formats, which competed more directly with independents and accelerated their decline. Overall, these findings suggest that restricting the entry of large stores does not necessarily lead to a world with fewer stores, but one with different stores, with uncertain competitive effects on independent retailers.

Keywords: Country; Governing Rules, Regulations, and Reforms; Employment; Governance Controls; Framework; Planning; Market Entry and Exit; Retail Industry; United Kingdom;

Citation:

Sadun, Raffaella. "Does Planning Regulation Protect Independent Retailers?" Harvard Business School Working Paper, No. 12-044, December 2011. (forthcoming Review of Economics and Statistics, Revised December 2013. Slides; The Economist reference; non technical Summary.)