Efficiency and regulation in Spanish hypermarket retail trade

Abstract

PurposeThis study aims to present an approach for analyzing hypermarkets efficiency data envelopment analysis (DEA) in Spanish retailing. In particular, the influence of the Retail Trade Act of 1996, by means of which the Spanish state transferred authority to concede licenses for opening commercial establishments to the regions, is to be studied.Design/methodology/approachThe analysis is based on a DEA model that allows for the evaluation of categorical variables in DEA in cross‐section data.FindingsThe findings suggest the existence of three different production frontiers in relation to the markets' regulation process where the hypermarkets operate; high, medium and low regulation. In the second place, the effect of the regulatory restrictions carried out by the autonomous communities is corrected in the second stage. This correction (once managerial inefficiencies have been eliminated) allows the hypermarkets operative in areas with low restrictions to be more efficient than those located in areas of greater regulation.Research limitations/implicationsThe generalization of the conclusions of the study to the whole sector should be made with caution, because only one of the players in the distribution channel has been analyzed.Practical implicationsThe implications that can be derived from the analysis carried out could be of great interest to policy makers in Spain with regard to the influence of the Retail Trade Act of 1996.Originality/valueThe paper uses the model mentioned as evaluation of the efficiency in relation to the environment or regulation carried out in the sector. The methodology proposed to analyze the impact of this environment variable is one of the main contributions of the work.