The impact of retail establishments in hinterlands on the export role of retail establishments in rural places

Abstract

Rural retail trade industries can serve an export function for and contribute to the economic growth of a rural place. The importance of a retail trade industry to the economy of a rural place depends on its market area. Since those market areas often extend into a place’s hinterlands, retail trade can effectively have an export component for the place itself. Yet empirical determination of the export role of a rural retail trade industry has been historically confounded by data limitations which limit testing for and identification of an industry’s market area. Using geographic information system tools to define variables for differing driving distances (as contrasted with circles defined by Euclidean distance) from a place, this paper tests for the market areas of seven retail trade industries in rural places and for the impact of retail trade in hinterlands on those market areas. This paper contributes to the relevant literature in three ways. First, it tests formally for a retail industry’s “market area driving time.” Prior articles which have incorporated distance into their analyses have not generally tested for the actual travel times more appropriate for such analyses. Second, it finds that not undertaking such testing might produce misleading results regarding the relationship between a place and the hinterlands in its market areas. Third, the regression results suggest subtlety in the export nature of rural retail trade, with some industries losing their export nature when competing businesses appear in hinterlands (Weak Export Retail industries) and other industries retaining their export nature under those circumstances (Strong Export Retail industries).