Out of the Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam

Journal of East Asian Studies, Vol. 9, pp. 249-290, 2009

42 Pages Posted: 1 Sep 2010

See all articles by Edmund J. Malesky

Edmund J. Malesky

Duke University, Political Science

Markus David Taussig

Harvard Business School

Date Written: 2009

Abstract

Scholars have long argued that institutional context significantly influences business strategy and economic performance. Research on the relationship between institutions and business strategy, however, has overwhelmingly focused on the decisions of larger, established corporations, mostly neglecting the strategic thinking of smaller, more entrepreneurial ventures. This article seeks to correct this bias by focusing the analysis directly on the critical decision of small-scale entrepreneurs to move from the informal and largely unregulated sector into operation as formal companies. Using a unique dataset and ranking of provincial governance institutions from Vietnam, the authors show that improvements in institutions make firms more likely to choose the formal sector from the start and, for those who do not, to spend less time in the informal sector. The study also finds that property rights have a more salient impact on formalization than other types of institutions.

Keywords: formalization, property rights, Vietnam, land title, governance, institutions

JEL Classification: P2, P3, P4

Suggested Citation

Malesky, Edmund J. and Taussig, Markus David, Out of the Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam (2009). Journal of East Asian Studies, Vol. 9, pp. 249-290, 2009. Available at SSRN: https://ssrn.com/abstract=1669688

Edmund J. Malesky (Contact Author)

Duke University, Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

Markus David Taussig

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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