Analysis on dynamics of SMEs in Vietnam: evidence from SME survey 2009-2013

Abstract

To analyze dynamics of Small and Medium Enterprises (SMEs) in Vietnam, firm level panel data of 1,673 enterprises in three periods of census of 2009, 2011, and 2013 are employed in this paper. Unlike previous studies, this paper has a new approach in using the growth rate of labor productivity, the capital productivity as the indicators for measuring the results of firm performance. Findings discover that TFP and the firm age significantly impact on firm growth. Moreover, the Driscoll & Kraay estimation approach, which has the advantage of standard error estimation correcting the problem of heteroscedasticity and autocorrelation contributes to better estimate the growth of labour and capital productivity equations. In general, the finding confirms a significantly positive relationship among firm age, TFP and firm growth of labor productivity and capital productivity. The findings suggest the importance of helping firms to sustain their business because the more time of operation, the more experience firms can gain from “learning by doing” which contributes to improve their productivity. Moreover, the results emphasize the importance of increasing TFP for enhancing enterprises’ performance even in the period of economic difficulties.