Resource Curse or Destructive Creation in Transition Turmoil
China-USA Business Review, Vol. 12, No. 5, pp. 486-493, 2013
9 Pages Posted: 4 May 2013
Date Written: May 2, 2013
This paper explores the “resource curse” problem as a counter-example of creative performance and innovation by examining reliance on capital and physical resources, showing the gap between expectations and ex-post actual performance became clearer under conditions of economic turmoil. The analysis employs the method of logistic regressions with dichotomous response and predictor variables, on a count data sample containing 154 point derived from the transition economy of Vietnam. Performance of analysis has shown significant results.
Several findings that have use for economic and business practice follow. First, in a transition period, a typical characteristic of successful firms was their reliance on either capital resources or physical asset endowments, whereas the innovation factor was not significant. Second, poor-performing enterprises exhibited evidence of over reliance on both capital and physical assets. Third, firms that relied on both types of resources tended to downplay creative performance. Fourth, reliance on capital/physical resources and adoption of “creative discipline/innovations” tend to be mutually exclusive.
In fact, some evidence suggests that firms face more acute problem caused by the law of diminishing returns in troubled times. The Vietnamese corporate sector’s addiction to resources may contribute to economic deterioration, through a downward spiral of lower efficiency leading to consumption of more resources. The “innovation factor” has not been tapped as a source of economic growth. The absence of innovations and creativity has made the notion of “resource curse” become identical to “destructive creation” implemented by ex-ante resource-rich firms, and worsened the problem of resource misallocation in transition turmoil.
Keywords: resource curse, transition economies, logistic regression, law of diminishing returns, destructive creation, rent-seeking
JEL Classification: D21, L23, M21, O31
Suggested Citation: Suggested Citation