Abstract
There is a growing consensus among scholars that the liberalization of shop opening hours increases revenues and creates jobs. While this is probably true, prior literature does not provide evidence on the risks of this kind of liberalization on the reduction of firm performance, and how firms in the retail industry manage the risk of underperformance. In fact, although theory establishes a direct link between increasing of shop opening hours with revenues and employment, it is challenging to rule out how firms react to this and if there are effects on firm performance. While several studies on firms’ strategic choices on opening hours have recently been released, no empirical studies provide evidence on firm performance following a change in the regulation of shop opening hours. The study contributes to the literature adding evidence on consequences on firm performance, an aspect generally not analysed by prior scholars in this field. We explore the effects of extended shopping hours on performance faced by firms operating in retail industries. To this purpose, we collected data about a large sample of limited liability companies in Italy, where a reform was issued in 2012 to boost the economy even through liberalization of shop opening hours. Using data of Italian firms operating in the retail industries, we find that reducing restrictions on shopping hours increases revenues and personnel costs. Interestingly, our model predicts that the deregulation of shopping hours involves firm lower performance.
Highlights
The debate concerning liberalization in terms of a number of opening hours is still a controversial topic for scholars and practitioners
This effect is due to the fact that firms increase too much the number of shop opening hours to compete with the competitors, and because liberalization tends to increase concentration in the retail sector, and there is a relevant increase of competition able to reduce firm performance (Wenzel, 2010)
This study investigates whether the introduction of deregulation may influence the firms affected by the policy in terms of revenues, employees, and performance
Summary
The debate concerning liberalization in terms of a number of opening hours is still a controversial topic for scholars and practitioners. Firms have to manage the risk of losing clients if they do not leave the shops open, and at the same time have to manage the risk of maintaining the same profitability even with higher costs (e.g., employees costs) This kind of liberalization provides a unique setting in which to examine the effects of increasing the flexibility of firms’ business activities in the market in a context with substantive reforms. While most of the previous studies analysed the perceived impact on employment, and how liberalization of shop opening time affect retail labour and product markets (Shy & Stenbacka, 2008; Wenzel, 2011), there are no empirical studies with the aim to understand firm performance in consequence to this kind of reform (Kügler & Weiss, 2016).
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