This thesis analyses whether there is any possible relationship between external shopping centers and city-center firms located in Swedish small cities from the perspective of their revenue level. The importance of this research question emerges as a result of a recent trend of business allocation from city centers towards edge-of-town areas. Newly established external shopping centers bring attractiveness to the local area; however, they prosper at the expense of city center businesses. As a result, city centers lose their attractiveness. This trend is especially harmful for small cities which usually do not have enough customer base to satisfy the demand required to support firms both located in the city centers and external shopping centers. Based on the firm level revenue data, a quantitative study is performed. According to main empirical findings a negative significant relationship is found between the revenue of city-center retailing firms and the revenue level of external shopping centers. However, no significant relationship is found for the firms belonging to the hospitality sector. Key-words: small city, retailing sector, h