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Formal and Informal Institutions in a Transition Economy: The Case of Vietnam

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  • Steer, Liesbet
  • Sen, Kunal

Abstract

Summary We examine the role of informal and formal institutions behind the growth of private sector in Vietnam since the official recognition of private enterprises in the early 1990s. We show that firms have increasingly taken on risks in their transactions in spite of weak formal institutions. Risk-taking by firms can be explained by the use of informal institutions such as relational contracts and networks along with recourse to emerging formal institutions such as written contracts. Our results suggest that informal institutions remain important as mechanisms of risk management even as the economy matures and new formal institutions gradually develop.

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  • Steer, Liesbet & Sen, Kunal, 2010. "Formal and Informal Institutions in a Transition Economy: The Case of Vietnam," World Development, Elsevier, vol. 38(11), pages 1603-1615, November.
    • Handle: RePEc:eee:wdevel:v:38:y:2010:i:11:p:1603-1615
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    3. Nguyen, Thi Tuyet Mai, 2017. "An examination of independent directors in Vietnam," OSF Preprints ay6dv, Center for Open Science.
    4. Berulava, George, 2013. "Do Trust-Based Relations Improve Firm’s Performance? Evidence from Transition Economies," MPRA Paper 48430, University Library of Munich, Germany.
    5. Jing Wang & Kai Zhao & Yue Cui & Hui Cao, 2022. "Formal and Informal Institutions in Farmers’ Withdrawal from Rural Homesteads in China: Heterogeneity Analysis Based on the Village Location," Land, MDPI, vol. 11(10), pages 1-19, October.
    6. Mike, Károly & Kiss, Gábor, 2017. "Hitelesek-e a vállalkozások ígéretei Magyarországon? [Do Hungarian entrepreneurs make credible promises?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1285-1315.
    7. Svatopluk Kapounek, 2017. "The Impact of Institutional Quality on Bank Lending Activity: Evidence from Bayesian Model Averaging," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(5), pages 372-395, October.
    8. Pierre-Guillaume Méon & Khalid Sekkat, 2013. "The Formal and Informal Framework of Foreign Direct Investment," Working Papers 810, Economic Research Forum, revised Dec 2013.
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    12. Ritchie, Holly A., 2016. "Unwrapping Institutional Change in Fragile Settings: Women Entrepreneurs Driving Institutional Pathways in Afghanistan," World Development, Elsevier, vol. 83(C), pages 39-53.
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