Local Governance and Business Performance in Vietnam: The Transaction Costs Perspective

This paper adopts transaction costs perspective to explain why growth of small and medium-sized enterprises (SMEs) may vary across regions of an emerging economy. Furthermore, it is argued that young and small firms gain more from improvement of local governance than old and large firms do. In addition, depending on the institutional history, SMEs will respond differently to the incentives provided by local governance. Analysing more than 300,00 SMEs in Vietnam during the 2006-2012 period, it is shown that higher quality local governance positively influences local SME revenue growth; this effect is stronger for young and small firms, and matters more where institutional history suggests less support for entrepreneurship.

Keywords: Transaction costs, governance, institutions, local government, entrepreneurship, Vietnam

JEL Classification: D02, H73, L25, L26

Suggested Citation: Suggested Citation

Nguyen, Bach and Mickiewicz, Tomasz Marek and Du, Jun, Local Governance and Business Performance in Vietnam: The Transaction Costs Perspective (August 9, 2017). August 2017, Regional Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3015883