Networks, Trust and Search in Vietnam's Emerging Private Sector

25 Pages Posted: 8 May 1998  

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Christopher M. Woodruff

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS)

Date Written: March 1998

Abstract

Using a survey of private firms in Vietnam, we examine how ongoing relationships serve information-provision and contract-enforcement purposes, substituting for absent market infrastructure. We find that ongoing relationships work when firms face high costs in finding alternative trading partners; the firms have access to information about their trading partners from other firms or from family members; and community sanctions are invoked if the trading partner reneges on the deal. Ongoing relationships have costs, however, in that inefficient matches can persist. These networks develop quite easily in response to the need for some contracting assurance; they need not be based on family ties.

JEL Classification: L14, D23

Suggested Citation

McMillan, John and Woodruff, Christopher M., Networks, Trust and Search in Vietnam's Emerging Private Sector (March 1998). Available at SSRN: https://ssrn.com/abstract=99028 or http://dx.doi.org/10.2139/ssrn.99028

John McMillan

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christopher Woodruff (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States
858-534-0590 (Phone)
858-534-3939 (Fax)

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