Out of the gray: The impact of provincial institutions on business formalization in Vietnam

Edmund Malesky, Markus Taussig

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)249-290
Number of pages42
JournalJournal of East Asian Studies
Volume9
Issue number2
DOIs
StatePublished - 2009
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Development
  • Sociology and Political Science
  • Economics and Econometrics
  • Political Science and International Relations

Keywords

  • Economic growth
  • Formalization
  • Governance
  • Institutions
  • Land title
  • PCI
  • Property rights
  • Provincial competitiveness index
  • Vietnam

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