Abstract

This study explores firm heterogeneity as a potential predictor of business environment constraints, using the case of Vietnam. Unlike most earlier works assuming an identical set of barriers confronted by domestic and foreign-invested firms, our research sheds light on the divergent nature of prevailing obstacles and key determinants for these two categories. The empirical analysis employs a rich and updated firm-level panel dataset of 4,190 observations, incorporating four waves of World Bank Enterprise Surveys for Vietnam. Estimation results from the binary and ordinal Logit models indicate a notably heterogeneous spectrum of binding obstacles and their respective predictors across the two groups. Our findings suggest that the distinctive needs of businesses in the two sectors need to be better understood. Policy efforts should be directed to support the most susceptible firms and boost the domestic entrepreneurship and investment climate, which matters in an increasingly competitive global investment landscape.

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