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Capital constraints and the performance of entrepreneurial firms in Vietnam

Author

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  • Hien Thu Tran
  • Enrico Santarelli

Abstract

Entrepreneurship has been among the key driving forces of the emergence of a dynamic private sector during the recent decades in Vietnam. This article addresses for Vietnam the questions "how capital constraints affect the performance of family firms" and "how entrepreneurs" human and social capital interact with capital constraints to leverage entrepreneurial income. "A panel of 1721 firms in 4 years is used. Results are consistent with the resource dependency approach, indicating an adverse effect of capital constraints on firm performance: firms suffering capital constraints perform substantially better, suggesting that they need more capital simply to finance newly recognized profit opportunities. Human capital plays a vital role in relaxing capital constraints and improves the entrepreneurial performance, whereas the effect of social capital stemming from strong ties and weak ties is limited: strong ties bring emotional support and weak ties give nonfinancial benefits from regular and useful business contacts. Advanced econometric analysis tools to take into account the endogeneity of capital constraints are used to establish relationships among relevant variables.

Suggested Citation

  • Hien Thu Tran & Enrico Santarelli, 2014. "Capital constraints and the performance of entrepreneurial firms in Vietnam," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(3), pages 827-864.
    • Handle: RePEc:oup:indcch:v:23:y:2014:i:3:p:827-864.
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    File URL: http://hdl.handle.net/10.1093/icc/dtt030
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    Cited by:

    1. repec:osf:osfxxx:uhwmn_v1 is not listed on IDEAS
    2. Emanuela Carbonara & Hien Thu Tran & Enrico Santarelli, 2020. "Determinants of novice, portfolio, and serial entrepreneurship: an occupational choice approach," Small Business Economics, Springer, vol. 55(1), pages 123-151, June.
    3. repec:osf:osfxxx:2qnp9_v1 is not listed on IDEAS
    4. Bach Nguyen, 2022. "Small business investment: The importance of financing strategies and social networks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 2849-2872, July.
    5. Ho, Manh-Toan, 2021. "Exploring the most influential papers in Vietnam's entrepreneurship in the past ten years," OSF Preprints 2qnp9, Center for Open Science.
    6. Jun Du & Bach Nguyen, 2024. "The ‘play’ of institutions and firm investment: Evidence from a transition economy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2740-2765, July.
    7. Tran, Quoc Trung, 2020. "Monetary loosening and cash holdings: Evidence from an emerging market," Finance Research Letters, Elsevier, vol. 36(C).
    8. Quan-Hoang Vuong, 2014. "Operational scales, sources of finance, and firms’ performance: evidence from Vietnamese longitudinal data," Working Papers CEB 14-017, ULB -- Universite Libre de Bruxelles.
    9. H. T. Tran & E. Santarelli, 2013. "Determinants and Effects of Innovative Activities in Vietnam. A Firm-level Analysis," Working Papers wp909, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Enrico Santarelli & Hien Thu Tran, 2017. "Young innovative companies: Are they high performers in transition economies? Evidence for Vietnam," The Journal of Technology Transfer, Springer, vol. 42(5), pages 1052-1076, October.
    11. David B. Audretsch & Antje Fiedler, 2022. "The Vietnamese entrepreneurship paradox: how can entrepreneurs thrive without political and economic freedom?," The Journal of Technology Transfer, Springer, vol. 47(4), pages 1179-1197, August.
    12. Daniel Ruiz-Palomo & Manuel à ngel Fernández-Gámez & Ana León-Gómez, 2022. "Analyzing the Effect of Financial Constraints on Technological and Management Innovation in SMEs: A Gender Perspective," SAGE Open, , vol. 12(1), pages 21582440221, March.
    13. Vuong Quan Hoang & La Viet Phuong & Vuong Thu Trang & Hoang Phuong Hanh & Ho Manh Toan & Ho Manh Tung & Nguyen Hong Kong To, 2020. "Multi-faceted insights of entrepreneurship facing a fast-growing economy: A literature review," Open Economics, De Gruyter, vol. 3(1), pages 25-41, January.
    14. Enrico Santarelli & Hien Thu Tran, 2018. "The interaction of institutional quality and human capital in shaping the dynamics of capital structure in Vietnam," WIDER Working Paper Series 66, World Institute for Development Economic Research (UNU-WIDER).
    15. Hien Thu Tran & Enrico Santarelli, 2017. "Spatial heterogeneity, industry heterogeneity, and entrepreneurship," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 59(1), pages 69-100, July.
    16. Cuong Nguyen, 2017. "Entrepreneurial intention of international business students in Viet Nam: a survey of the country joining the Trans-Pacific Partnership," Journal of Innovation and Entrepreneurship, Springer, vol. 6(1), pages 1-13, December.
    17. Nina Ponikvar & Katja Zajc Kejžar & Darja Peljhan, 2018. "The role of financial constraints for alternative firm exit modes," Small Business Economics, Springer, vol. 51(1), pages 85-103, June.
    18. Phan, Trang Hoai & Stachuletz, Rainer & Nguyen, Hai Thi Hong, 2022. "Export Decision and Credit Constraints under Institution Obstacles," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 132783, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    19. Jun Du & Bach Nguyen, 2022. "Cognitive financial constraints and firm growth," Small Business Economics, Springer, vol. 58(4), pages 2109-2137, April.
    20. Trang Hoai Phan & Rainer Stachuletz & Hai Thi Hong Nguyen, 2022. "Export Decision and Credit Constraints under Institution Obstacles," Sustainability, MDPI, vol. 14(9), pages 1-27, May.
    21. MinhTam Bui & Trinh Q. Long, 2021. "Women’s Economic Empowerment in Vietnam: Performance and Constraints of Female-Led Manufacturing SMEs," JRFM, MDPI, vol. 14(6), pages 1-17, June.
    22. Tran, Hien Thu, 2019. "Institutional quality and market selection in the transition to market economy," Journal of Business Venturing, Elsevier, vol. 34(5), pages 1-1.
    23. Nguyen, Minh-Hoang & Quang-Loc, Nguyen & Nguyen, Loan & Le, Tam-Tri & Phi, Xuan-Tuan & Vuong, Quan-Hoang, 2023. "How does the knowledge accumulation process affect Vietnamese entrepreneurs’ success likelihood?," OSF Preprints tgfr5, Center for Open Science.
    24. Tran, Hien Thu & Santarelli, Enrico, 2018. "Successful Transition to a Market Economy in Vietnam: An Interpretation from Organizational Ecology Theory," GLO Discussion Paper Series 181, Global Labor Organization (GLO).
    25. Zheng, Leven J. & Xiong, Chang & Chen, Xihui & Li, Chung-Sheng, 2021. "Product innovation in entrepreneurial firms: How business model design influences disruptive and adoptive innovation," Technological Forecasting and Social Change, Elsevier, vol. 170(C).

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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