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INTRODUCTION driving force of the economy", which motivated the private sector to thrive. strong in both
1. Rationale Institutions is an important factor in promoting business development in general, and quantity and quality. Experimental research on the model on the impact of institutions on the performance Small and Medium-sized Enterprises (SMEs) in particular. Research on institutions cannot of enterprises in general and Small and medium-sized enterprises in particular has been
fail to mention North (1990, 1991), who laid the foundations for the first theories of institutions. Then, inheriting the research of North, Alexiou et al (2014) showed that: studied by many authors. However, previous studies mostly study the impact of institutions on the performance of enterprises in general or Foreign Invested Enterprise in particular as
institutional quality is one of the most important factors protecting the prosperity of Sudan's economy. North (1990) shows that: Institutional quality leads to differences in the efficiency in Anh and Phuong (2016) or local institutional studies, productivity growth like Thang (2016) or studying the effects of individual actors in institutions - that is, corruption on
of different economies. In a good economic institutional environment, businesses will be provided with maximum conditions for production and development. According to Porter performance like Tuyen et al (2016)... Moreover, previous studies only research on the direct impact of economic institutions on business in general.
But according to Agosin and Mayer (2000), Harrison and Mc Millan (2001), and Ramirez and Ling (2004), Thang (2009) pointed out that State-Owned Enterprises (SOEs) (2008), the institutional environment is a direct factor affecting firm productivity, which is a condition that helps businesses achieve the highest level of productivity and level. According and Foreign Invested Enterprises (FIEs) have effects that prevent small and medium-sized to Acemoglu and Johnson (2005) these formal institutions are reflected in North (1981) with
domestic private enterprises from developing by privileged preferences in access capital, land access together with tax incentives. This shows that the impact of economic institutions "contract theory". State contract theory regarding the legal framework provided by the state and various institutions will facilitate and support private contracts to reduce transaction costs in economic transactions and consulted, Acemoglu and Johnson (2005).
Thus, economic institutions play a very important role in the productivity and efficiency of Small and Medium-sized Enterprises (SMEs). In recent years, Vietnam has been fully aware of the role of economic institutions in the economy and enterprises, and
on Small and Medium-sized Enterprises performance depends not only on institutional reforms, but also on the spillover effects of State-Owned Enterprises and Foreign Invested Enterprises on Small and Medium-sized Enterprises, especially non-state sector. Therefore, Postgraduate chooses the project title "The impact of institutional quality on the performance of small and medium enterprises in Vietnam", to do my doctoral thesis. 2. Research objectives has been thoroughly grasped by the Government in Documents of the XI National Party Congress. Specifically, the Government has implemented Resolution No.19/CP from 2014, 2015 to 2020, in order to fundamentally change economic institutions and management
mechanisms in the direction of creating good conditions. Most businesses, in recent years marked important turning points marking the reform of economic institutions, including the The thesis analyzes the impact of institutional quality on the performance of Small and Medium-sized Enterprises, and focuses on the impact of institutions on the spillover channel from State-Owned Enterprises and Foreign Invested Enterprises to small and
Enterprise Law and the Investment Law (2014) with issues of investment promotion and establishment, enterprises or the Law on Anti-Corruption 2005, amended and supplemented in 2012, Commercial Law, ... Institutional reform has achieved significant positive results in medium-sized domestic private firms. The empirical research results will provide sufficient and reliable evidence to help policy makers to come up with solutions to continue to reform and further improve the quality of institutions to create a fair business environment. reducing trade risks, legal risks, the business environment is more transparent, open and between business sectors, promoting Small and Medium-sized Enterprises to improve their
autonomous, opening up new opportunities for SMEs. The institutional changes have encouraged the development of the business sector, performance even more. Specifically, the thesis answers the following research questions: (i) How do institutions impact the performance of Small and Medium-sized Enterprises?; especially the private sector. Central Conference 5, term IX on March 18, 2002 passed (ii) How do institutions affect the spillover effect from Foreign Invested Enterprises to
Resolution 14-NQ/TW on "continuing to renew mechanisms and policies, to encourage and facilitate private economic development". Following that, the 5th Central Conference small and medium-sized domestic private firms?; (iii) How do institutions affect the spillover effect from State-Owned Enterprises to small and medium-sized domestic private session XII on June 3, 2017 on "private economic development becomes an important firms?
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number of limitations of previous studies. Specifically, the thesis has some theoretical and
3. Research subjects and scope - Research subjects: The thesis focuses on assessing the impact of institutional quality on the spillover effects from State-Owned Enterprises and Foreign Invested Enterprises to experimental contributions as follows: Theoretically: The thesis has built a theoretical framework on the impact of institutional quality on the performance of small and medium-sized enterprises (SMEs) small and medium-sized private firms. Since Small and Medium-sized Enterprises in
most fully when considered in both direct effects and indirects effects throgh spillover from State-Owned Enterprises and Foreign Invested Enterprises. Since then, the thesis has
+, In terms of content: Small and Medium-sized Enterprises performance is considered experimentally demonstrated that the impact of institutional quality on SMEs' performance depends on the spillover effects from State-Owned Enterprises and Foreign Invested Enterprises In terms of experiment: +, In terms of space: The thesis studies the impact of institutional quality on the • The thesis has experimentally proven on a whole sample of Vietnamese SMEs, by Vietnam are mainly non-state enterprises (accounting for more than 90%), all Small and Medium-sized Enterprises in this study are non-state sector. - Research scope: under two angles of labor productivity (VA/ L) and profitability rate (ROA). performance of domestic private firms on a small and medium scale across the country. each size group, by each economic sector. +, About time: The thesis studies the impact of economic institutions on Vietnamese SMEs using the General Statistics Office's annual business survey data set from 2010-2018 • Institutions have a positive impact on the performance of small and medium-sized
private firms in Vietnam. At the same time, institutions also have a spillover effect from State-Owned Enterprises and Foreign Invested Enterprises on the performance of small and and the IO data set of the General Department of Statistics to calculate spillover channels, but since there is no new IO data, the thesis uses IO of 2012 to calculate spillover channels medium-sized private firms, so the impact of institutions on the performance of large from State-Owned Enterprises and Foreign Invested Enterprises for all years. 4. Research Methodology private firms. Small and medium size depends on the spillover effects from State-Owned Enterprises and Foreign Invested Enterprises. To solve the research objectives, the thesis uses the following research methods: (i) • The impact of institutions on the performance of private firms on a small and medium scale varies across economic sectors. Methods of synthesizing, analyzing and evaluating research on the impact of institutions on the performance of enterprises, also like Small and Medium-sized Enterprises. After doing the research review, the postgraduate found research gaps and from there, built an analytical • Transparency and legal institutional norms play an important role in promoting the performance of small and medium-sized private firms. Market entry quotas affirm an
framework for the thesis on the impact of institutions on the performance of Small and Medium-sized Enterprises. (ii) Statistical analysis method: Based on secondary data, the postgraduate assesses the current status of Small and Medium-sized Enterprises operations, important role in promoting horizontal spillovers and downstream spillovers from State- Owned Enterprises. 6. The structure of the dissertation
the current institutional and business environment in Vietnam, the status of the spillover link between the enterprise sector. (iii) Quantitative research method: The PhD student uses array data regression to estimate the impact of institutions on the performance of small and In addition to the Index, List of abbreviations, List of tables, List of figures, List of references and Appendices, the thesis is structured into 4 chapters. Specifically: medium-sized private firms. The thesis uses the array data percentile regression method to Thesis structure Chapter 1: Theoretical basis of the institution and its impact on the performance of Small and Medium-sized Enterprises. estimate the impact of the institution on the financial performance of private firms ROA of small and medium scale. 5. New contributions of the dissertation Chapter 2: Overview of research on the impact of institutions on the performance of Small and Medium-sized Enterprises(SMEs). The thesis studies the impact of institutional quality on the performance of Small and Medium-sized Enterprises in Vietnam. Besides the inheritance, the thesis will overcome a Chapter 3: Research method on the impact of institutions on the performance of Small and Medium-sized Enterprises in Vietnam.
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Chapter 4: Institutional reality and operational efficiency of Vietnamese Small and Firstly, the institution plays a role of orientation, creating a framework for the Medium-sized Enterprises. Chapter 5: The impact of institutions on the performance of Small and Medium-sized organization and operation of the society. Secondly, institutions create the economic, political and social foundation of the country. Enterprises in Vietnam. Chapter 6: Policy recommendations. Thirdly, institutions play the role of social management and establish effective social management tools.
CHAPTER 1
Fourthly, the institution maintains a good government and limits corruption. Fifthly, institutions contribute to creating the premise and conditions to limit the
THEORETICAL BASIS OF INSTITUTIONAL QUALITY AND IMPACTS OF INSTITUTIONAL QUALITY TO OPERATION OF SMALL AND MEDIUM ENTERPRISES disabilities of the social development process. Sixthly, institutions control resources in society.
1.1. Institutional fundamentals and institutional role 1.1.1. The concept of economic institutions Economic institution is a set of rules of the game that includes parts: Seventhly, the institution guarantees social actors to exercise their rights and obligations. 1.1.4. Institutional measurement - First, official sets of rules such as the constitution, laws and regulations are Institutions reflect the political level, the political nature of the country. Institutional quality assessment is the process of examining and evaluating an institutional system to find promulgated by the State. - Second, informal constraints: such as traditional customs, customs, and social norms out the conformity or non-conformities in the system of a country. of conduct about the behavior of subjects ... Specific indicators measuring institutional quality are as follows: Economic freedom index, IQ institutional quality index, Global Competitiveness Index (GCI - Global Competitiveness Index), business facilitation index (EDBI - Ease of Doing Business Index), - Third, the enforcement mechanism of the rules: policies, support mechanisms, sanctions, ... 1.1.2. Classification of economic institutions provincial competitiveness of PCI. In Vietnam, institutional quality is used by many studies as measured by the Provincial Institutions can be classified according to many different criteria: Firstly, in terms of field of activity: Institutions include political institutions, economic Competitiveness Index (PCI). This is an index measuring and practical assessment of the institutions, cultural institutions, educational institutions, environmental institutions ... quality of economic governance of the provinces and cities in Vietnam. In other words, the PCI is the index that speaks to businesses about the quality of the operations of the Secondly, in terms of the degree of legalization. Institutions are divided into formal institutions and informal institutions. Formal institutions
Vietnamese government. 1.2. Enterprise efficiency 1.2.1. Concept and nature of the business performance are those established by the State, including the constitution, laws, decrees, and regulations from the central to local levels, up to the rules ratified and applied by public organizations and privately operated within the legal framework. Informal institutions are rules, Table 1.1: Classification of SMEs in Vietnam according to Decree 39/2018/ND-CP regulations, and standards set by the community and people: customs, practices, agreements Medium Business Very Small Business Small Business
... often operate outside of the formal institutional system. Thirdly, in terms of institutional characteristics. Total Capital Total Capital Number of employees Total Capital Number of employees Number of employees According to Acemoglu and Robinson (2012), institutions are of two basic types:
fusion institutions and appropriation institutions. 1.1.3. The role of the institution in economic activities
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1.Agriculture,
performance. According to Russell (2008), institutions that provide property rights, a fair ≤10 people 10 – ≤100 people 100 – ≤200 people justice system, and effective contract enforcement will help businesses participate in economic activities easily and effectively. He affirmed, in places where institutions are not effective, the rate of inefficient enterprises. He gives a model of the impact of institutions forestry and fisheries 2. Industry and ≤10 people 10 – ≤100 people construction on business performance as follows: Capital 100 – ≤200 people 3. Trade and ≤10 people 10 – ≤50 people services Labor Production inputs The infrastructure Available resources ≤3 billions dong ≤3 billions dong ≤3 billions dong 3 - ≤20 Billions dong 3 - ≤20 billions dong 3 - ≤ 50 billions dong 20 - ≤100 Billions dong 20 - ≤100 billions dong 50 - ≤100 billions dong 50 – ≤100 people Source: Decree No. 39/2018 / ND-CP Policy of tax Institutions The concept of SMEs' performance Business rules Currently, there are still many different views on business performance of enterprises. Legal system Free business / property protection Công (2007) shows that: performance of enterprises include three level: (i) Labor efficiency represents activity intensity - reflects the correlation between outputs and input costs. (ii) New business formation Performance, showing the ability that businesses can achieve when using input factors New products and services Business performance results Figure 1.1. Institutional impact model on enterprise performance Source: Russell Research (2008) (indicators reflect the rotation speed of the inputs). (iii) The highest variable is operational efficiency, which is the final result the business brings, measured by profit per input unit. 1.2.2. Indicators measuring the performance of SMEs
1.3.2. The impact of institutional quality on efficiency spillovers from State-Owned Enterprises and Foreign Invested Enterprises to domestic private firm. The view to evaluate the performance of enterprises according to Cong (2007) is a to Tien (2015), performance and comprehensive evaluation. However, according performance indicators have overlapping contents. That means performance is also just
FDI enterprises
- Increase K - Increase industrial
Spillover - Horizontal
showing the operational capacity of resources. Productivity is a sign of business efficiency. The second cornerstone of efficiency is financial performance. The indicators reflecting the
investment
Change -Technology
spread
Change
- Improve production
profitability include: rate of return on total revenue (ROS), rate of return on assets (ROA),
capacity
Institutions
level, parameter A
- Spread down the afternoon - Spread in the
-Output -Productivity -Effective
rate of return on equity (ROE), ... 1.3. The impact of institutional quality on SMEs' performance 1.3.1. Direct impact of institutional quality on SME performance
SOEs
opposite direction
- Quality of capital - Quality of
labor
- Increase K - Increase industrial
investment
- Increase production
Research by Acemoglu et al. (2005b) together with North (1990) has shown the role of economic institutions in the following model: Institutions Economic efficiencytEconomic
capacity
Distribution of resourcest+1
This model is the basis of institutional research for many later studies when studying the role of institutions as well as the impact of institutions on economic growth and business Figure 1.2. Diagram showing the institutional impact on operational efficiency through the spillover channel from State-Owned Enterprises and Foreign Invested Enterprises.
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Source: Author's synthesis this study lacks geographic data such as urban and rural areas, and has not yet controlled
All economic theories show that technology is an important factor for long-term growth (Solow, 1956, 1957). Investing in research and development and technological intermediate variables such as centralized business zones. Thus, the impact of economic institutions on business performance is different in previous studies, possibly due to studies conducted in different types of enterprises such as knowledge will increase productivity and drive economic growth (Romer, 1990). State-
Pham's research. The Anh and Chu Thi Mai Phuong (2016) researched on Foreign Invested Enterprises, while the research by Tran Quang Tuyen et al (2016) was on SMEs (mainly Owned Enterprises and Foreign Invested Enterprises were the sectors with higher investment capital than the small and medium-sized domestic private private sector. The
non-state enterprises). Also, according to Yi Che et al. (2011) pointed out that institutional quality positively affects the survival of Private Enterprises. He said that the economic ability to invest in R&D activities and import machinery and equipment will be higher than domestic private firms with small and medium scale. CHAPTER 2 institutional impact on business performance different between types of enterprises. Bhaumik et al (2012) also showed different results when studying from an industry
OVERVIEW OF RESEARCH ON IMPACT OF INSTITUTIONAL QUALITY ON SMALL AND MEDIUM BUSINESS OPERATION perspective, or between countries, there may be different results when studying in developed countries and countries with new economies, floating like Vietnam. Therefore, 2.1. Factors affecting the business performance of the business Research overview of factors influencing SMEs' performance is divided into two main groups: (i) External factors, such as: institutional quality, State policies, system law, the results have not really been consistent in previous studies. 2.3. Institutional impacts on spillovers from State-Owned Enterprises (SOEs) and Foreign Invested Enterprises (FIEs) to Private Firms 2.3.1. Factors affecting the ability to spread
customer and market or enterprise's raw material source. (ii) Factors within the enterprise, including: production technology level, labor, management capacity, average labor income, financial access, operating policies of the enterprise . These are factors that the business can FIEs has the ability to spread to business performance, Nguyen Khac Minh (2014). However, spillovers are dependent on many factors, which can either promote the spillover capacity to increase or possibly reduce the spillover effect. The empirical studies on the
control to some degree. 2.2. The impact of institutions on the performance of Small and Medium-sized Enterprises (SMEs) spillover effects from FIEs to domestic firms have shown that: the spillover effect of FIEs to domestic firms depends on many factors related to the characteristics of multinational companies and foreign investment, as well as host country characteristics, industries and Institutional impacts on SMEs' performance have two opposite conclusions: First, institutions have a positive impact on business performance such as Johan (2015), Tran Quang Tuyen et al (2016). , Bach Ngoc Thang (2017), Pham The Anh and Chu Thi Mai businesses. These factors include: absorption capacity of the firm, R&D activities and cooperation in research, linkages between input suppliers and customers. 2.3.2. The impact of institutional quality on SMEs performance Phuong (2016). Second, the opposite effect in the study of Tran Quang Tuyen et al (2016) when studying the impact of corruption on corporate performance, the author uses the variable ROA (return on assets) to research and show that institutions have opposite effects There are very few previous studies on the impact of institutions on the spillover effects of Foreign Invested Enterprises on domestic enterprises as well as the impact of State-Owned Enterprises on small and medium-sized domestic private firms that the thesis with ROA. However, there are studies that do not support a positive relationship of institutions and enterprise efficiency such as Joseph et al (2013) when studying the effects of institutions on researches. Some previous studies have not shown the impact of institutions on full spillover efficiency through spillover channels from SOEs and FIEs, Wang and Chen (2014) only assesses the of FIEs, institutional quality as measured by the NERI index export efficiency. He said that there are only a few institutions that positively affect small and new enterprises, he finds uncertainty about the direct relationship between institutions and enterprise efficiency, saying that: Return to enterprises performance. It is possible that published annually by the China National Institute of Economic Research. The PhD student studied the impact of the institution on the performance of Vietnamese SMEs in the non- state sector, but this enterprise sector is subject to the spillover effects of the SOEs and
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FIEs. Therefore, inheriting the research of Hongyan et al. (2015) as well as Danny and
FIEs Wendy (2014) in the use of the interactive variable of institutional quality and the spillover expression variable from the SOEs and FIEs sectors, The PhD student will give a more complete view of the institutional impact on the performance of SMEs, both directly and
Spillover
- Horizontal - Forward - Backward
indirectly through channels spread from the SOEs and FIEs sectors. 2.4. Research gap
Institutions Institutional impacts on SMEs performance still have mixed conclusions. Research on the impact of institutional quality on business performance, especially SMEs, is still Private SMEs performance (Productivity, ROA)
essential to have more evidence as well as to have a more multidimensional and fuller view. SOEs and FIEs are receiving great incentives from the Government, but the spillover effects
Spillover
on small and medium-sized domestic private firms are very vague. The preferential institutions have created an unequal playing field, causing great competition barriers for
- Horizontal - Forward - Backward -
SOEs small and medium-sized domestic private firms.
(cid:10)(cid:11)
(cid:2)
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(cid:10)(cid:13)
(cid:3)
(cid:3)
(cid:2)
(cid:9)
(cid:3)
(cid:3)
Figure 3.1: Analytical framework of institutional quality impacts on SMEs' In Vietnam, there are no studies on the impact of institutional quality on the performance of enterprises fully, include both direct and indirect through the spillover performance effects from SOEs and FIEs to small and medium-sized domestic private firms. The Source: Author's construction 3.2. Methodology of the impact of institutional quality on the performance of SMEs researcher thinks that this will be a major contribution to research on the impact of institutions on the performance of businesses in general or SMEs in particular, as well as 3.2.1. Method of measuring the direct impact of institutional quality on the contributing to policy making to offer solutions to change the body institutions to help performance of SMEs The thesis proposes an experimental model, such as Sumon (2012); Anh and Hung private SMEs maximize their capabilities in an equal competitive environment. Thereby, there is clearer evidence as to why SMEs are still active. Thereby, there is clearer evidence (2014) with the Cobb-Douglas function do not change by scale as follows: for why SMEs are still not commensurate with the recent institutional reform efforts in ( )(cid:5) = (cid:7)(cid:5). ( )(cid:5) . (cid:12)(cid:5) Vietnam. The researcher hopes that his research results will clearly show that the impact of institutions on SMEs performance will be supportive or possibly limited by the spillover Or ln( )(cid:5) = ln (cid:7)(cid:5) + (cid:18)(cid:19). ln( )(cid:5) + (cid:20)(cid:5) (3.1) channels from SOEs and FIEs. In which: Yi is the output of enterprise I, Who is the technological capacity of the enterprise i (factor productivity).
CHAPTER 3: RESEARCH METHODS
(3.2) ln (cid:7)(cid:5) = (cid:21)(cid:22) + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + ∑(cid:24)(cid:28)(cid:5)(cid:24)(cid:29)(cid:30)(cid:5)(cid:24) + (cid:31)(cid:5)
3.1. Analytical framework and research hypotheses
In which, BEij is a vector of variables representing the impact of the j institutional
The thesis studies on the impact of institutions on the performance of SMEs. In Vietnam, SMEs are mainly non-state enterprises, operating with small and micro scale
mainly, with their inherent limitations, SMEs in general still face many disadvantages in access to finance, access to information, resolve administrative procedures. Thus, the quality indicator on the performance of enterprise I, Cij is a vector of the variable controlling the effects of factors on the characteristics of SMEs such as type of ownership, industry of business, age of the enterprise ..., Zij is the vector that controls the effects of other factors.
institutional impact on SME performance also depends on the spillover effects from State- Owned Enterprises and Foreign Invested Enterprises.
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(cid:2)
(cid:9)
(cid:3)
(cid:3)
(cid:2)
(cid:9)
(cid:3)
(cid:3)
(cid:9)
From (3.1) and (3.2) models that estimate the impact of institutions on SME ln( )(cid:5)(cid:24)! = (cid:18)1 + (cid:18)(cid:19). #$( )(cid:5)(cid:24)! + (cid:18)(cid:25). +$2344543&$2(cid:5)(cid:24) + (cid:18),. 673##&(cid:20)(cid:31)'_6;(cid:30)2(cid:24)! + performance, assuming the production function remains constant by scale as follows: ln( )(cid:5) = (cid:18)(cid:22) +(cid:18)(cid:19). ln( )(cid:5) + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + ∑(cid:24)(cid:28)(cid:5)(cid:24)(cid:29)(cid:30)(cid:5)(cid:24) + Ɛ(cid:5) (3.3) (cid:18)/. +$2344543&$2(cid:5)(cid:24) ∗ 673##&(cid:20)(cid:31)'_6;(cid:30)2(cid:24)! + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! (model 2) Secondly, the impact of financial quality on SMEs' performance (ROA):
(cid:3)
(cid:9)
(cid:3)
(cid:2)
(cid:9)
(cid:3)
<;(cid:7)(cid:5)(cid:24)! = (cid:18)1 + (cid:18)(cid:19). #$( )(cid:5)(cid:24)! + (cid:18)(cid:25). +$2344543&$2(cid:5)(cid:24) + (cid:18),. 673##&(cid:20)(cid:31)'_893(cid:24)! + (cid:18)/. +$2434543&$(cid:5)(cid:24) ∗ 673##&(cid:20)(cid:31)'_893(cid:24)! + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! (model 3) 3.2.2. Method of measuring diffuse channels Spillover effects from FDI enterprises: To measure spillover effects across the three spillover channels as mentioned above, <;(cid:7)(cid:5)(cid:24)! = (cid:18)1 + (cid:18)(cid:19). #$( )(cid:5)(cid:24)! + (cid:18)(cid:25). +$2344543&$2(cid:5)(cid:24) + (cid:18),. 673##&(cid:20)(cid:31)'_6;(cid:30)2(cid:24)! + the thesis inherits the research of Javorcik (2004) as follows: ln( )(cid:5)(cid:24)! = " + (cid:18)(cid:19). #$( )(cid:5)(cid:24)! + (cid:18)(cid:25). %&'_)*+(cid:24)! + (cid:18),. (cid:29)(cid:21)-._)*+(cid:24)! + (cid:18)/. )&'_)*+(cid:24)! + (3.4)
(cid:3) (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! Spillover effects from State-Owned Enterprises
(cid:2)
(cid:9)
(cid:3)
(cid:3)
(cid:18)/. +$2344543&$2(cid:5)(cid:24) ∗ 673##&(cid:20)(cid:31)'_6;(cid:30)2(cid:24)! + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! (model 4) 3.3. Data and variables 3.3.1. Data sources The model given is: ln( )(cid:5)(cid:24)! + (cid:18)(cid:25). %&'_00(cid:24)! + (cid:18),. (cid:29)(cid:21)-._00(cid:24)! + (cid:18)/. )&'_00(cid:24)! + 3.2.1. Data sources 3.2.2. Data processing (3.5) 3.2.3. Variable 3.4. Estimation method The data sets used in the thesis are all array data. To analyze the impact of institutions )(cid:5)(cid:24)! = " + (cid:18)(cid:19). #$( (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! 3.2.3. A model for measuring the impact of institutional quality on the spillover effects from State-Owned Enterprises and Foreign Invested Enterprises to small and medium- sized domestic private firms. on the performance of SMEs in the spillover effects of State-Owned Enterprises and FIEs,
By the research model proposed above, the PhD student will study the impact of the institution on business performance in relation to the two sectors of State-Owned the researcher conducted the estimation with the above three models respectively. After that, the PhD student continues to use the tests to choose the appropriate model: Lagrange factor test (xttest0) to choose between POLS and RE model. In this test, Ho is the
Enterprises and FIEs. Moreover, to measure the impact of institutions on spillover effects, the thesis will use interactive variables between Institutional variables with FIEsjt horizontal spillovers, FIEsjt backward spillover, FIEsjt downward spillover, SOEsjt backward spillover, constant variance of variance or the POLS model is more suitable. Then there is a test of Hausman choosing between the FE and RE model (Hausman, 1978). In this test, Ho shows SOEsjt backward spillover, backward diffuse SOEsjt, according to Du et al. (2008) (2011), no correlation between the explanatory variable and the random component or the more
Hongyan et al. (2015), Danny and Wendy (2014). The process of testing the PhD student model found that there is a close relationship suitable RE model. After selecting a regression model, the PhD student conducted a VIF test to test the existence of multiple collinearities, Wald test (Greene, 2000) on the existence of variable
(cid:2)
(cid:9)
(cid:3)
(cid:3)
between the backflow from SOEs and the back diffusion from Foreign Invested Enterprises, because SMEs may provide inputs to SOEs, then the reverse link between SOEs and Foreign Invested Enterprises may occur causing the model to be multicollinear. Therefore, error variance, Wooldridge test on the A self-correlation phenomenon exists (Wooldridge, 2002). In the case of models with defects, the thesis uses robust regression to control changes in variance and autocorrelation of random errors (Greene, 2002). the PhD student split into two separate models: Firstly, the impact of the quality of finance on SME labor productivity: In addition, the postgraduate also uses the percentile regression to estimate the impact of the institution on the performance of SMEs in different percentiles of the dependent ln( )(cid:5)(cid:24)! = (cid:18)1 + (cid:18)(cid:19). #$( )(cid:5)(cid:24)! + (cid:18)(cid:25). +$2344543&$2(cid:5)(cid:24) + (cid:18),. 673##&(cid:20)(cid:31)'_893(cid:24)! + variable ROA to assess the impact of economic institutions in different dimensions, (cid:18)/. +$2434543&$(cid:5)(cid:24) ∗ 673##&(cid:20)(cid:31)'_893(cid:24)! + (cid:21)(cid:19)(cid:23)(cid:5)(cid:24) + (cid:21)(cid:25)(cid:26)(cid:5)(cid:24) + Ɛ(cid:5)(cid:24)! (model 1)
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different directions when changing the percentile of the explanatory variable, and also to The most important document on obligations, transactions and contracts is the Civil
overcome the limitations of the FE estimation method in the thesis. Code. There are also documents such as: Commercial Law, Maritime Code, Labor Code, Business Law ... The law in this area is considered quite progressive, regulating many basic CHAPTER 4 issues of modern business law. However, there are still many problems on transactions and inconsistency, lack of civil and commercial
INSTITUTIONAL SITUATION AND OPERATION EFFICIENCY OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM contracts such as duplicationand interconnection, many regulations are not compatible with the law of practice. 4.1.3. Situation of business environment in Vietnam In the period 2011-2018, many policies on institutional reform and economic 4.1. The current situation of economic institutions in Vietnam 4.1.1. Reform of the economic legal system in Vietnam Since the establishment of a new economic institution, Vietnam has undergone many restructuring have been made, but the results are not significant. In addition, the problems of social instability, inequality or environmental pollution tend to increase. With the Party's
amendments to the Constitution to suit the direction and reality of the socio-economic development. With each amendment of the Constitution, there is an important turning point
marking the reform effort, marking a transformation of Vietnam. 4.1.2. An assessment of reforms in the economic legal system in Vietnam After more than 30 years of reform, the economic law has made breakthrough policy, fully aware of the role and appropriateness of a fusion institution, but through the reforms, the Vietnamese institutions have not yet ensured the characteristics of the fusion institution. springboarding promotes development. - The business environment at the provincial level is clearly improved through the PCI - The effective capacity of the state is still limited when there is a lack of clarity in the legal regulations, many contradictions and cross-fighting among the departments. development steps. The improvement of the institutional legal environment has encouraged enterprises to invest and increase operational efficiency. Key reforms concern issues of: Investment encouragement, business establishment: Has significantly contributed to - Control of corruption in Vietnam has made progress. 4.2. The current situation of Small and Medium-sized Enterprises (SMEs) and the
reducing trade risks, legal risks, improving autonomy, helping businesses to make full use of potentials and opportunities to implement development. Regarding the protection of property ownership: The Investment Law and the
performance of Small and Medium-sized Enterprises (SMEs) in Vietnam 4.2.1. Number of Small and Medium-sized Enterprises (SMEs) in Vietnam The number of Small and Medium-sized Enterprises (SMEs) in Vietnam has grown year by year, but at the same time the number of decommissioned and dissolved enterprises
Enterprise Law have contributed to better protection of property ownership, as well as adding more regulations to protect the interests of investment enterprises. Clearly the right to participate in business activities that are not prohibited by the law (regulations on has also increased. Accounting for the largest proportion is the non-state sector, with small and fragmented activities, very vulnerable to market fluctuations. In terms of economic prohibited business lines decreased from 51 to 09 sectors). The 2012 Constitution is a major
development marking the renewal of Vietnam's law on property, which is favorable for promoting investment in business and production. Also in the 2013 Constitution on land regions, Vietnamese SMEs are mainly concentrated in the Red River Delta and the Southeast, construction, industry and science and technology. 4.2.2. Performance of Small and Medium-sized Enterprises (SMEs) in Vietnam management and use, it is clear that the protection of citizens' land use rights is necessary to The revenue and profit outputs of SMEs have relatively low growth rates. The total
promote the prevention and handling of violations (Clause 2, Article 54). In the field of anti-corruption, thrift practice and waste combat: The 2005 Law on revenue of small and medium-sized domestic private firms is highest in the whole period due to the large proportion of the total number of SMEs in Vietnam. The profit before tax of the domestic private sector is among the smallest of all regions. It is worth mentioning here Anti-Corruption has created an important legal framework to contribute to improving the effectiveness of anti-corruption. The revised law passed in 2012 has made many changes in the transparency of transparency issues in personnel organization and management. that the percentage of FIEs losses is higher than that of the non-state enterprise sector while the pre-tax profit is very large. Because the transfer pricing situation in Foreign Invested Laws on obligations, transactions and contracts Enterprises is very serious. With inherent advantages, Foreign Invested Enterprises also
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receives many tax incentives and access to land from the State and localities, but Foreign number is due to the non-home business sector. The water still has many limitations in
Invested Enterprises always takes advantage of legal loopholes to minimize the responsibilities and contribute to the budget state by transferring the price to the parent quality and capacity. According to VCCI (2018), FIEs cooperating with domestic enterprises are mainly large enterprises in the manufacturing sector. Technology transfer from Foreign Invested Enterprises (FIEs) to Small and
company. Labor productivity Labor productivity of small and medium-sized domestic private firms is the lowest, Medium-sized Enterprises (SMEs) In general, the FIEs sector has an indirect spillover effect on the domestic
less than labor productivity in FIEs sector SMEs (3.5 times in 2018), 3 times lower than labor productivity in SOEs. This is also understandable because SOEs and Foreign Invested manufacturing enterprises sector. But, the technology gap of SMEs in Vietnam is still relatively far from the world average. It should reduce the efficiency of technology transfer
Enterprises are enterprises that have many advantages compared to non-state enterprises, Foreign Invested Enterprises with the advantage of large capital, modern technology, high between Foreign Invested Enterprises and SMEs, along with the fact that enterprises in Vietnam operate in fragments, small, still lack interaction, so the ability to purchase and
management skills, and high production organization. Labor is high, while SOEs receive many incentives from the State and local authorities in accessing bank loans, land, and make transactions on raw materials, machinery and technology difficulties. In addition, SMEs still face many difficulties because the technology transfer is mostly done in processing and assembling stages without source technology, innovation capacity is markets. ROA ROA of SOEs was highest in most of the periods, but SOEs ROA was the highest in Competition between FIEs and SMEs low. On the other hand, it is too difficult for enterprises to conduct R&D. Only 11% of enterprises said that they have developed new types of technology ”.1 2010 (reaching 541.3%), then fell sharply in 2011 (49.88%), even in 2017 reaching -0.37%.
Vietnamese enterprises are facing a big problem of competition when FIEs are decreasing in size. Because Foreign Invested Enterprises wants to invest in Vietnam to aim ROA of the non-state enterprise sector is always negative for the whole period except 2017, ROA surged to nearly 60%, because 2017 was also the year with the lowest number of to become satellites for large FDI projects. Therefore, it is very difficult to participate in the dissolved enterprises, corporate profitswere highest in both Foreign Invested Enterprises
integration into the global value chain of Vietnamese enterprises in order to benefit from the spillover effect of technology and management capacity. This causes enterprises in the non- and non-state enterprises, showing the results of efforts to improve the business environment, creating favorable conditions for businesses to operate, along with stricter state sector of Vietnam to focus their resources on the domestic market, or only participate management to combat price transfer at Foreign Invested Enterprises. 4.2.3. The roles of SMEs in economy in providing services to FIEs operating in Vietnam or just exporting to a third party. participating in the global value chain, but not many Vietnamese non-state enterprises SMEs have a great role in sociaeconomic development, reflected in their contribution
participate in the global value chain, Nguyen Bich Ngoc (2016). FIEs with the advantages of capital capacity and more modern technology, has gained a competitive advantage over small and medium-sized domestic private firms. In addition, according to Nguyen Thi Tue Anh et al (2014), FIEs has always had an advantage over
in creating jobs, reducing unemployment and contributing to the state budget. In which, private enterprise sectors is majority and reflected the largest level of contribution among enterprise sectors. 4.3. The reality of linkage between businesses 4.3.1. The linkage between SMEs in Foreign Invested Enterprises (FIEs) sector and private enterprises is small and medium-sized Regarding the input and output relationship between Foreign Invested domestic enterprises in the production input and output markets, especially the export market. Regarding preferential policies between FIEs and SMEs Enterprises (FIEs) and Small and Medium-sized Enterprises (SMEs) The linkage between non-state enterprises and FIEs is still very loose, with only 14.6% of non-state enterprises in Vietnam supplying goods to FIEs in 2018. This limited
1 According to the survey report "Competitiveness and technology at the enterprise level in Vietnam" by the Central Institute for Economic Management (CIEM), the General Statistics Office and the University of Copenhagen from the survey results. 8,000 Vietnamese enterprises over a period of 4 years.
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5.2. The results of the model estimation of the impact of institutional quality on the Preferential policies for the FIEs sector are an ominous issue in promoting the
performance of SMEs in Vietnam 5.2.1. Describe the correlation of variables development of small and medium-sized domestic private firms, because their potentials are limited, but also in the treatment relationships in the market always be discriminated 5.2.2. Assess the impact of institutions on the performance of SMEs in Vietnam against, weak. 4.3.2. The linkage between SOEs and private firms is small and medium-sized 5.2.2.1. Assessment of institutional impacts on spillover effects from Foreign Invested About the input - output relationship Enterprises to small and medium-sized domestic private firms institutions have an
The main customer objective in Vietnam is private enterprise. That proves that, Vietnam private enterprise has not been able to build relationships with large enterprises impact on the performance of small and medium-sized domestic private firms, while also affecting the spillover effect from Foreign Invested Enterprises to small and medium-sized
such as FIEs or SOEs, which are capable of spreading as expected by the Government. Because of the hope that benefits spread from other enterprises to private enterprises, the domestic private firms. Institutional improvement increases the spillover efficiency from Foreign Invested Enterprises because legal institutions, access to land attracts investment
Government is Granting too many incentives in terms of capital, land, and policies for the FIEs sector as well as SOEs. But with this loose linkage, it is difficult to get spillover from Foreign Invested Enterprises, but also increases the ability to protect business ownership. Help businesses use land safely, businesses feel secure in using land, invest in effects, and even spillover effects are in the opposite direction when competition pressure is equipment, improve labor productivity, increase competitiveness in the market, the process
high and preferential policies are too many Competition between SOEs and SMEs of learning and fishing is easier. . But considering the total effect of quality on the performance of small and medium-sized domestic private firms, the impact of institutional Operational efficiency is not high, this is also the reason why it is difficult for private quality on labor productivity is positive, mainly due to improvement legal institutions and
firms to compete with other businesses to dominate the market. Thus, in terms of investment capital and labor productivity, it is clear that SOEs are holding the advantage transparency. Only firms with a high percentile of ROA experience a positive impact on improving institutional quality, while the low percentile shows the impact of institutional over private firms. SOEs with large investment capital will easily expand their scale, have quality on ROA efficiency and the impact of institutional quality. The spillover effect from
advantages in securing collateral to access credit loans (when not guaranteed by the Government), with advantages in capital. SOEs will be able to invest in technology Foreign Invested Enterprises to SME's ROA is opposite, so the total effect of institutional improvement on the business performance of the enterprise depends on the extent of the
improvements to make their productivity even higher. About preferential policy spillover from Foreign Invested Enterprises. 5.2.2.2. Evaluate the institutional impacts on the spillover effects from SOEs to domestic private firms on a small and medium scale SOEs is the business sector which accounts for the least proportion among the sectors.
But this is an area that causes a lot of losses, budget deficits, a great burden for the State, however, the SOEs sector enjoys great privileges in terms of natural resources, capital, land and public procurement. It is these perks that have distorted markets, and are the cause of Institutions have a positive impact on the performance of small and medium-sized domestic private firms, while improving institutional quality also has a spillover effect from SOEs to small-scale domestic private firms and fit. Considering the total impact of ineffective private investment. institutions on the performance of small and medium-sized domestic private firms, it is
CHAPTER 5
found that labor productivity will have a positive impact when institutional improvement through downstream diffusion channel spillovers from SOEs, contributed by improved legal ASSESSMENT OF INSTITUTIONAL IMPACT ON PERFORMANCE OF SMALL institutions, market entry and transparency. Through the opposite diffusion channel, how AND MEDIUM ENTERPRISES IN VIETNAM
the institutional impact on the performance of small and medium-sized domestic private firms depends on the size of the opposite diffusion channel. In terms of ROA efficiency, the 5.1. Descriptive statistics of the variables effect of institutions promoting ROA in the high quintile, firms with low ROA may receive
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a positive effect if the magnitude of the diffusion channel is less than the ratio of the enterprises as well as other sub-sectors showed that their institutional improvement has not
coefficients of Institutional variable with coefficients of interactive variables Institution * Spillover (because the coefficient of the Institutional variable is positive, while the promoted the spillover effects from SOEs and FIEs to private SMEs. Due to the improvement of institutional quality, it only focuses on attracting Foreign Invested coefficient of the interactive variable is negative). Enterprises investment in width, but not in depth, the massive investment by Foreign
Thus, the impact of institutions on the performance of small and medium-sized domestic private firms is positive. The institutional impact on the performance of small and Invested Enterprises lacks tight commitment to localization conditions, or Technology transfer has created greater competitive pressure for SMEs, nor has it fostered close
medium-sized domestic private firms depends on the spillover effects from SOEs and Foreign Invested Enterprises. The results show that, if the spread remains constant, when linkages to receive positive spillover effects. Although the equitization policy of SOEs has been strengthened, the share of capital in SOEs is still high, showing that the equitization
the institutional improvement of SMEs operations increases through all three diffusion channels from FIEs, but the small and medium-sized domestic private firms only receive process of SOEs is still slow, so despite improvement in creating an environment of equal competition for the regions. In the enterprise sector, the linkages between SOEs and SMEs
positive effects. through downstream spillovers from SOEs. Meanwhile, institutional improvement reduces horizontal spillovers and counter-spillovers from SOEs. The results are still lax when Foreign Invested Enterprises appears to threaten the inverse linkage between SOEs and SMEs, or even though they receive better support for enterprises and with ROA show that, most of the enterprises with high percentile ROA can promote the access to land, SMEs are still affected by SOEs. Outstanding competitiveness in the market
positive spillover effect when improving the institutions. The impact of institutions on the performance of small and medium-sized domestic with tax and land incentives is still very heavy. CHAPTER 6: SOLUTIONS AND POLICY RECOMMENDATIONS private firms also shows differences across economic sectors. Labor-intensive industries
6.1. Domestic and international context After more than 30 years of reform, the Party's policy line has changed many times, enjoy a more positive spillover effect of institutional improvement than firms in the high- tech industry. 5.3. CONCLUSION
Vietnam has gained many great achievements in socio-economic development and institutional reform. Specific characteristics: (i) The legal system has been increasingly To sum up, the impact of institutional quality on spillover effects from SOEs and FIEs to small and medium-sized domestic private firms is not entirely consistent between labor completed in the direction of creating a favorable business environment, supporting better productivity and financial efficiency ROA, because in recent years, foreign direct
enterprise development; (ii) Vietnam has built up a development strategy with clear orientations for SME and SME development; (iii) Vietnam has been implementing investment has shifted from labor-intensive industries to capital-intensive, high-tech industries such as computers, manufacturing of electrical and optical equipment to replace comprehensive SME support programs; (iv) The continuous development of science and improving
technology opens up many opportunities as well as challenges for SMEs 6.2. Recommendations and policy suggestions the the subgroup garment manufacturing enterprises. Therefore, when institutional quality, it creates favorable conditions for businesses to participate in the chain of links with high added value, increased labor productivity, but ROA is an efficiency On the basis of research results, the thesis gives some recommendations to improve indicator on total assets industrial use.
economic institutions in order to create a favorable business environment, promote SMEs to increase investment and development, and improve operational efficiency. The shift to a high-tech, capital-intensive industry increases the total assets of domestic private firms with small and medium scale, but investments in machines and technologies of SMEs are outdated and do not shorten the gap. With technology and high-tech enterprises, it Research results show that institutions have a great influence on the performance of SMEs. In addition, institutions also have a spillover effect from SOEs and FIEs to private
hinders SMEs' ability to absorb spillovers, therefore, in terms of ROA criteria, the spillover efficiency tends to decrease, so there are still some ROA percentiles, moving in the opposite SMEs. Therefore, in order for economic institutions to improve really effectively, it is necessary to strictly implement in a comprehensive and in-depth way in two aspects: First, direction when improving the quality of institutions. Processing and manufacturing
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the policies of institutional improvement need to aim at enhancing the operating efficiency (ii) It is necessary to speed up the review of State documents related to confidentiality
regulations, minimizing the unnecessary confidentiality of the government to minimize costs for businesses. of SMEs, increasing the competitiveness of SMEs in the market; Second, the policy aims to increase the spillover efficiency from SOEs and FIEs. Specific policies: 6.2.1. Institutional improvement policies to improve SMEs performance (iii) On the SME side, it is necessary to proactively access to information promptly
Firstly, about legal institutions. (i) Continue to improve and amend inadequate legal institutions to ensure effective judgment enforcement, and ensure the ability to enforce decisions when disputes occur. (ii) Business associations need to maximize their role in representing enterprises, new policies, new plans of the State and the locality. Fifthly, informal fees should be minimized. (i) It is necessary to shorten the time for handling administrative procedures. (ii) It is necessary to strengthen supervision and quality assessment of staff receiving communicating aspirations and difficulties. and handling related records. (iii) On the business side, it is also necessary to regularly update information, (iii) Local authorities need to conscientiously help businesses in solving problems,
protecting the interests of businesses, also helping to reduce unofficial costs for businesses. 6.2.2. Policies to improve economic institutions aim to promote spillover effects from understand the legal system, in order to be proactive and trust the legal system when disputes occur. SOEs and FIEs Secondly, about the market entry of enterprises: (i) The Government should continue to streamline and simplify business registration procedures as much as possible to reduce the number of days and duplicate procedures. Firstly, it is necessary to create an environment of equal competition among the business sectors to reduce the overwhelming competition pressure on small and medium- (ii) Establish and implement a mechanism to control market barriers to promote sized domestic private firms from SOEs and Foreign Invested Enterprises. inexpensive market entry procedures and ensure fastest time. (iii) It is necessary to further promote the one-stop shop mechanism in business Secondly, the Government should have policies to further promote the linkage between small and medium-sized domestic SOEs and private firms, or SMEs and domestic establishment, tax registration, and minimize the maximum time to process the application private firms of small and medium scale. for business registration. Thirdly, the Government should have policies to support SMEs in technology innovation and production capacity improvement, in order to reduce the technology gap of small and medium-sized domestic private firms compared to SMEs and SOEs to improve, (iv) Reviewing the types of Licenses after enterprise registration. Thirdly, in terms of land access and stability in land use (i) Local governments need to create conditions for SMEs to access land more easily, high diffuse absorption. and to develop an appropriate land price framework to get the consent of the people. Fourthly, it is necessary to strengthen the role and linkages with industrial zones and (ii) It is necessary to develop appropriate land planning in the direction of facilitating link between SOEs and SMEs and Foreign Invested Enterprises with SMEs. infrastructure, and favorable geographical location for SMEs. Fifthly, the Government needs to create forums and information channels to support (iii) SMEs also need to improve their understanding of the legal system related to land exchanges between businesses and research centers, universities and regulatory agencies. 6.3. Limitations of the thesis and the next research direction access and use, and be proactive in accessing important information. Fourthly, it is necessary to ensure transparency and access to information that are conducive to SMEs. Limitations of the thesis - The thesis only studies the impact of institutional quality on small and medium-sized (i) Government and local authorities at all levels need to increase planning domestic private firms.
information, timely orientation, and policies and projects need to be posted on the official portal to facilitate easy access for SMEs than. - The thesis only measures operational efficiency on two aspects: labor productivity and financial efficiency ROA. - The results of the model running impact on ROA do not have much meaning.
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- The PCI indicators reflecting the institutional quality are not really convincing. Direction to propose research Firstly, expand the research sample. Secondly, study specific measures for the suggestions and proposals of the thesis.
Thirdly, add regression testing methods. Fourthly, add other indicators to reflect the business performance of the business.
