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Networking in Weak Institutions: When Is It Good for Small Business Investment? The Case of Vietnam

Published online by Cambridge University Press:  11 June 2021

Bach Nguyen*
Affiliation:
University of Economics Ho Chi Minh City, Vietnam, and Aston University, UK

Abstract

This study investigates the influence of business-specific, bank-specific, and political-specific networks on small firm investments in Vietnam. Also, I aim to explain how these social networks substitute the weaknesses of local institutions. Examining a set of more than 9,800 firm-year observations of small businesses in Vietnam from 2005–2015, I find that social ties with bank officials can boost firm investments; social ties with government officials can help firms overcome institutional voids; whereas social ties with businesspeople appear trivial to investment decisions. More importantly, I propose that networking, especially networks built upon connections with government officials, can substitute local institutions by addressing weaknesses in (1) inefficient legal enforcement, (2) corruption, (3) bureaucratic compliance, and (4) non-transparent governance system.

摘要

本文旨在研究与商业、银行和政治相关的关系网络对越南小型企业投资决策的影响,并就这些社会网络如何弥补地方制度的不足做出解释。根据2005–2015年越南小型企业数据大约9,800个观测值,我们发现与银行的关联会促使公司增加投资,与政府的关系能够帮助公司克服外部环境中的制度缺失,而与商业人士的社会联系对公司的投资决策并无显著影响。更重要的是,我们认为人际网络,特别是与政府官员的关系网络,能够在执法低效、贪污腐败、官僚服从和治理体系不透明等方面弥补地方制度的不足。

Аннотация

В данной работе изучается влияние социального взаимодействия в деловой сфере, банковском секторе и политике на инвестиции в малый бизнес во Вьетнаме. Кроме того, я ставлю своей целью объяснить, каким образом эти социальные связи компенсируют слабость местных институтов. На основании выборки из более чем 9800 годовых наблюдений на предприятиях малого бизнеса во Вьетнаме в период 2005–2015 годов, я прихожу к выводу о том, что социальные контакты с банковскими служащими могут стимулировать инвестиции в компании; социальные контакты с правительственными чиновниками могут помочь компаниям преодолеть институциональный вакуум; тогда как социальные контакты с деловыми людьми не имеют особого значения при принятии инвестиционных решений. Более того, я предполагаю, что социальное взаимодействие, особенно связи, которые построены на контактах с правительственными чиновниками, могут заменить местные институты посредством устранения недостатков при (1) неэффективном правоприменении, (2) коррупции, (3) бюрократических процедурах и (4) непрозрачности системы управления.

Resumen

Este estudio investiga la influencia de las redes especificas de negocios, de la banca y de los políticos en las inversiones de los negocios pequeños en Vietnam. También, busco explicar cómo estas redes sociales substituyen la debilidad de las instituciones locales. Examinando un conjunto de observaciones de más 9.800 empresas en un año de negocios pequeños en Vietnam entre el 2005 y el 2015, encontré que los lazos sociales con funcionarios de bancos pueden impulsar las inversiones de los negocios, mientras que los lazos sociales con funcionarios del gobierno pueden ayudarles a superar los vacíos institucionales; mientras que los lazos sociales con personas de negocios parecen triviales para las decisiones de inversión. Más importante, propongo que el establecimiento de una red de contactos, especialmente redes basadas en conexiones con funcionarios del gobierno pueden substituir las instituciones locales al abordar las debilidades en: (1) el cumplimiento legal ineficiente, (2) corrupción), (3) cumplimiento burocrático, y (4) sistemas de gobernanza no transparentes.

Type
Article
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

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Footnotes

ACCEPTED BY Deputy Editor Xiaowei Rose Luo

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