Skip to main content
×
×
Home

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

  • Edmund Malesky and Markus Taussig
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.

    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Out of the Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Out of the Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Out of the Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam
      Available formats
      ×
Copyright
References
Hide All
Abrami, Regina M., and Henaff, Nolwen. 2004. “The City and the Countryside: Economy, State and Socialist Legacies in the Vietnamese Labor Market.” In Reaching for the Dream: Challenges of Sustainable Development in Vietnam, ed. Beresford, Melanie and Tran, Angie. Honolulu: University of Hawaii Press.
Acemoglu, Daron, and Johnson, Simon. 2005. “Unbundling Institutions.” Journal of Political Economy 113, 5: 949995.
Aldrich, Howard, and Marlene Fiol, C. 1994. “Fools Rush In? The Institutional Context of Industry Creation.” Academy of Management Review 19, 4: 645670.
Antunes, Antonio, and Cavalcanti, Tiago. 2007. “Start-Up Costs, Limited Enforcement, and the Hidden Economy.” European Economic Review 51: 203224.
Ardagna, Silvia, and Lusardi, Annamaria. 2008. “Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints.” NBER Working Paper Series 14012. Cambridge, MA: National Bureau of Economic Research.
Bennett, John, and Estrin, Saul. 2007. “Entrepreneurial Entry in Developing Economies: Modeling Interactions Between the Formal and the Informal Sector.” International Policy Center Working Paper Series 44. Available at http://hdl.handle.net/2027.42/55758 (accessed February 20, 2009).
Coase, Ronald. 1937. “The Nature of the Firm.” Economica 4, 16: 386405.
Phong, Dang. 1999. “The Private Sector in Vietnamese Industry from 1945 to the Present.” In Vietnam's Undersized Engine: A Survey of 95 Larger Private Manufacturers, ed. Webster, Leila and Taussig, Markus. Mekong Project Development Facility (MPDF) Private Sector Development Discussion Brief 8. Hanoi: MPDF.
De Soto, Hernando. 1989. The Other Path: The Invisible Revolution in the Third World. London: Tauris.
De Soto, Hernando. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books.
DiMaggio, Paul, and Powell, Walter. 1991. The New Institutionalism in Organizational Analysis. Chicago: University of Chicago Press.
Di Tella, Rafael, Galiani, Sebastian F., and Schargrodsky, Ernesto S. 2007. “The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters.” Quarterly Journal of Economics 122, 1: 209241.
Djankov, Simeon. 2008. “A Response to Is Doing Business Damaging Business?Journal of Comparative Economics. Available at www.doingbusiness.org/documents/Response_to_Arrunada_JCE.pdf? (accessed February 5, 2008).
Djankov, Simeon, La Porta, Rafael, Lopez-De-Silanes, Florencio, and Shleifer, Andrei. 2002. “The Regulation of Entry,” Quarterly Journal of Economics 117, 1: 137.
Djankov, Simeon, Qian, Yingyi, Roland, Gerard, and Zhuravskaya, Ekaterina. 2008. “Entrepreneurship in Development: First Results from China and Russia.Manuscript.
Do, Quy-Toan, and Iyer, Lakshmi. 2008. “Land Titling and Rural Transition in Vietnam.” Economic Development and Cultural Change 56: 531579.
Fforde, Adam, and de Vylder, Stefan. 1996. From Plan to Market: The Economic Transition in Vietnam. Boulder: Westview Press.
Field, Erica. 2007. “Entitled to Work: Urban Tenure Security and Labor Supply in Peru.” Quarterly Journal of Economics 122, 4: 15611602.
Friedman, Eric, Johnson, Simon, Kaufmann, Daniel, and Zoido-Lobaton, Pablo. 2000. “Dodging the Grabbing Hand: The Determinants of Unofficial Activity in 69 Countries.” Journal of Public Economics 76, 3: 459493.
Frye, Timothy, and Shleifer, Andrei. 1997. “The Invisible Hand and the Grabbing Hand.” American Economic Review 87, 2: 354358.
Galiani, Sebastian, and Schargrodsky, Ernesto. 2007. “Property Rights for the Poor: Effects of Land Titling.” Business School Working Papers, Universidad Torcuato Di Tella, Buenos Aires.
Ghemawat, Pankaj. 2007. Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter. Boston: Harvard Business School Publishing Corporation.
Grief, Avner. 2006. Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. Cambridge: Cambridge University Press.
Haare, Denise. 2008. “The Origins and Influence of Land Property Rights in Vietnam.” Development Policy Review 26, 3: 339363.
Ihrig, Jane, and Moe, Karine. 2004. “Lurking in the Shadows: The Informal Sector and Government Policy.” Journal of Development Economics 73: 541557.
Johnson, Simon, Kaufmann, Daniel, McMillan, John, and Woodruff, Chris. 2000. “Why Do Firms Hide?Journal of Public Economics 76, 3: 495520.
Johnson, Simon, Shleifer, Andrei, and Kaufmann, Daniel. 1997. “The Unofficial Economy in Transition.” Brookings Papers on Economic Activity 28, 2.
Kaufmann, Daniel, Kraay, Aart, and Mastruzzi, Massimo. 2007. “Growth and Governance: A Reply.” Journal of Politics 69, 2: 555562.
Kenyon, Thomas. 2007. “A Framework for Thinking About Enterprise Formalization Policies in Developing Countries.” World Bank Policy Research Working Paper No. 4235. Washington, DC: World Bank. Available at http://ssrn.com/abstract=988845 (accessed February 20, 2009).
Kim, Annette. 2004. “A Market Without the ‘Right’ Property Rights.” Economics of Transition 7, 3: 275305.
King, Gary, Murray, Christopher J. L., Salomon, Joshua A., and Tandon, Ajay. 2003. “Enhancing the Validity and Cross-Cultural Comparability of Measurement in Survey Research.” American Political Science Review 97, 4: 567584.
King, , Tomz, , and Wittenberg, . 2000. “Making the Most of Statistical Analyses: Improving Interpretation and Presentation.” American Journal of Political Science 44, 2: 341355.
Knack, Stephen, and Keefer, Phillip. 1995. “Institutions and Economic Performance: Cross-Country Testing Using Alternative Institutional Measures.” Economics and Politics 7, 3: 207228.
Kocher, Matthew, Pepinsky, Thomas B., and Kalyvas, Stathis N. 2008. “Into the Arms of Rebels? Aerial Bombardment, Indiscriminate Violence, and Territorial Control in the Vietnam War.Manuscript. Yale University.
Kurtz, Marcus J., and Schrank, Andrew. 2007. “Growth and Governance: Models, Measures, and Mechanisms.” Journal of Politics 69, 2: 538554.
Laeven, Luc, and Woodruff, Christopher. 2007. “The Quality of the Legal System, Firm Ownership, and Firm Size.” Review of Economics and Statistics 89, 4: 601614.
La Porta, Rafael, López-de-Silanes, F., Shleifer, A., and Vishny, R. 1999. “The Quality of Government.” Journal of Law, Economics and Organization 15, 1: 222279.
Loayza, Norman, Oviedo, Ana Maria, and Serven, Luis. 2005. “The Impact of Regulation on Growth and Informality Cross-Country Evidence.” World Bank Policy Research Working Paper No. 3623. Washington, DC: World Bank.
Malesky, Edmund. 2007. “The Vietnam Provincial Competitiveness Index: Measuring Economic Governance for Private Sector Development: 2007 Final Report.” Vietnam Competitiveness Initiative Policy Paper No. 12. USAID's Vietnam Competitiveness Inititative, Hanoi.
Malesky, Edmund. 2008. “Provincial Governance and Foreign Direct Investment in Vietnam.” In Twenty Years of Foreign Investment in Vietnam. Ho Chi Minh City: Saigon Economic Times.
Malesky, Edmund. 2009. “Gerrymandering Vietnamese Style: The Political Geography of Economic Transition in an Authoritarian State.” Journal of Politics 71, 1: 130.
Malesky, Edmund, and Taussig, Markus. 2008. “Where Is Credit Due? Legal Institutions, Connections, and the Efficiency of Bank Lending in Vietnam.” Journal of Law, Economics, and Organization. http://jleo.oxfordjournals.org/cgi/reprint/ewn011v1?maxtoshow=&HITS=2&hits=2&RESULTFORMAT=&andorexacttitle=and&titleabstract=vietnam&andorexacttitleabs=and&andorexactfulltext=and&searchid=1&resourcetype=HWCIT. Accessed March 10, 2009.
Miguel, Edward, and Roland, Gerard. 2006. “The Long Run Impact of Bombing Vietnam.” NBER Working Paper No. W11954. Cambridge: National Bureau of Economic Research.
Cung, Nguyen Dinh, Tuan, Pham Anh, Van, Bui, and Dapice, David. 2004. “Why Don't Northern Provinces Grow Faster?Hanoi: Central Institute for Economic Management and United Nations Development Program.
North, Douglass. 1991. “Institutions.” Journal of Economic Perspectives 5, 1: 97112.
North, Douglass, and Weingast, Barry. 1989. “Constitutions and Commitment: The Evolution of Institutional Governing Public Choice in Seventeenth-Century England.” Journal of Economic History 49, 4: 803832.
O'Conner, Dennis. 2000. “Financial Sector Reform in China and Vietnam: A Comparative Perspective.” Comparative Economic Studies 42, 4: 4566.
Porter, Michael. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Simon & Schuster.
Ravallion, Martin, and van de Walle, Dominique. 2006. Does Rising Landlessness Signal Success or Failure for Vietnam's Agrarian Transition? World Bank Policy Research Working Paper No. 3871. Washington, DC: World Bank.
Riehl, Evan. 2008. “Regional Regulations and Foreign Investment in Vietnam.” Manuscript, Washington University, St. Louis.
Santos, Felipe, and Eisenhardt, Kathleen. 2006. “Constructing Markets and Organizing Boundaries: Entrepreneurial Action in Nascent Fields.Manuscript.
Schneider, Friedrich. 2005. “Shadow Economies Around the World: What Do We Really Know?European Journal of Political Economy 21, 3: 598642.
Seligson, Mitchell. 2006. “The Measurement and Impact of Corruption Victimization: Survey Evidence from Latin America.” World Development 34, 2: 381404.
Taussig, Markus, and Hang, Pham Thi Thu. 2004. “Private Enterprise Formality and the Role of Local Government: Making Markets Work Better for the Poor.” Asian Development Bank Discussion Paper No. 2. Hanoi: Asian Development Bank.
Tran, Thi Bich, Quentin Grafton, R., and Kompas, Tom. 2008. “Institutions Matter: The Case of Vietnam.” International and Development Economics Working Paper No. 08-01. Australian National University, Canberra.
Turley, William, and Womack, Brantly. 1998. “Asia's Socialism's Open Doors: Guangzhou and Ho Chi Minh City.” The China Journal 40: 95119.
VCCI (Vietnam Chamber of Commerce and Industry). 2008. Vietnam Business 2008. Hanoi: VCCI.
Vietbao.vn. 2006. “Ho kinh doanh ca the chua muon chuyen thanh DN.March 22.
Vietbao.vn. 2007. “Ho kinh doanh ca the gop 13% GDP.October 14.
Vijverberg, Wim. 2006. “Non-Farm Household Enterprises in Vietnam,” World Bank Research Working Paper. Washington, DC: World Bank.
Anh, Vu Thanh Tu, Thai, Le Viet, and Thang, Vo Tat. 2007. “Provincial Extralegal Investment Incentives in the Context of Decentralisation in Viet Nam: Mutually Beneficial or a Race to the Bottom?United Nations Development Program Vietnam Working Paper Series. Hanoi: UNDP.
Webster, Leila, and Taussig, Markus, eds. 1999. Vietnam's Undersized Engine: A Survey of 95 Larger Private Manufacturers. MPDF Private Sector Development Discussion Brief 8. Hanoi: MPDF.
Weingast, Barry. 1993. “Constitutions as Governance Structures: The Political Foundations of Secure Markets.” Journal of Institutional and Theoretical Economics 146, 1: 286311.
Woodruff, Christopher. 2006. “Measuring Institutions.” In International Handbook on the Economics of Corruption, ed. Rose-Ackerman, Susan. Cheltenham, UK: Edward Elgar Publishing Ltd.
World Bank. 2002. Vietnam Development Report 2002: Implementing Reforms for Faster Growth and Poverty Reduction. Hanoi: World Bank.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of East Asian Studies
  • ISSN: 1598-2408
  • EISSN: 2234-6643
  • URL: /core/journals/journal-of-east-asian-studies
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed