Productivity growth and job reallocation in the Vietnamese manufacturing sector

The challenge for labour market policy in the new member states and other transition economies of Eastern Europe has been to redress the sharp drops in employment and rises in unemployment in a way that fosters the creation of productive jobs. This paper first documents the magnitude and productivity of job and worker reallocation. It then investigates the effects of privatisation, product and labour market liberalisation, and obstacles to growth in the new private sector on reallocation and its productivity in Hungary, Romania, Russia, and Ukraine. We find that market reform has resulted in a large increase in the pace of job reallocation, particularly that occurring between sectors and via firm turnover. Unlike under central planning, the job reallocation during the transition has contributed significantly to aggregate productivity growth. Privatisation has not only stimulated intrasectoral job reallocation, but the reallocation is more productive than that among remaining state firms. The estimated effect of privatisation on firm productivity is usually positive, but it varies considerably across countries. The productivity gains from privatisation have generally not come at the expense of workers, but are associated rather with increased wages and employment.

The study follows mean reversion approach and applies different panel unit root tests on a balanced data-set of 8,670 firm-year observations of Chinese non-financial firms, spread over ten years (2003-2012). The objective of the study is to investigate whether the leverage behaviour of Chinese non-financial firms is mean reverting and consequently, to decide between two competing theoretic frameworks (trade-off theory, pecking order theory). Overall panel test results for short term, long term and total leverage support trade-off financing behaviour. Further, the study categorises firms into state-owned and private firms and compares the leverage behaviour of two categories. The results of comparative analysis explain that leverage behaviour of both types of the firms (state-owned firms, private firms) is mean reverting and therefore supports trade-off theory of capital structure. Our study indicates that both types of the Chinese firms (state-owned firms, private firms) follow long-term financing strategy that is very important for the firms operating in an emerging economy.

We present a firm-level inquiry on labour-demand characteristics in the BRICS economies, using standardized data from the World Bank Enterprise Surveys for the pre-crisis period of 2002-2003. The BRICS countries are the growth champions of that period, with numerous discussions on the effect of growth on inequality and the role of skills on labour-market performance. We examine employment, employment growth and its constituents, as well the returns to skill and the incidence of rent-sharing. We find that SMEs in the BRICS exhibit lower gross employment growth, compared to large firms. Large firms in Brazil, Russia and South Africa are responsible for most of the net job creation. In contrast, small and medium firms in China and India exhibit higher net job creation rates compared to large firms. Younger firms in Brazil, Russia and India generate higher net job creation figures, in contrast to China and South Africa, in which it is the large firms that generate more net new jobs. Foreign firms in China exhibit the highest net job creation, while in Brazil and India domestic firms create most of the new net employment. Private firms are responsible for most of the net job creation and job reallocation in all BRICS counties. The returns to skill are lower in SMEs and young firms, and we find evidence in favour of rent sharing, particularly in Brazil and India, by foreign and exporting firms, and by SMEs in China.

Institutional complexity, management practices, and firm productivity

There has been an increasing interest among economists in the impact of management practices on firm’s productivity. This paper explores how business practices affect firm productivity by using Vietnam’s bi-annual surveys of small firms conducted from 2006 to 2011. We constructed a simple weighted business practice index from 8 indicators. This index is simple but rather suitable for small and medium firms in developing countries. To examine the role of business practices in determining firm performance, production function and determinants of business practice adoption are estimated using the GMM-system method, which allows us to control for the endogeneity of production input, business practices index, and other factors. The results indicate that business practice index has a positive and statistically significant impact on firm productivity, employment and sales growth. As business practice index increases by 1 standard deviation (e.g. by 0.194 points over 1 and 0.173 points), the firm's value added increases by 19.1% to 24.0%. There is no evidence that the education level of the business owners/managers, percentage of employees with college degree on firm productivity. The results suggest that education may have indirect effects on productivity through business practice index. The effect of business practice on firm performance is found to vary across different sub-samples.. Both direct and indirect effects of competition lose their significance when we separately estimate production functions for each group of firms. We also find that for whole sample and for sole proprietorship businesses, the adoption of business practice in last period have a positive and statistically significant effects on the adoption of business practice in this period. However, total factor productivity (estimated from production function without business practice index) in the previous period does not have a strong impact on a firm’s adoption of business practice in this period while previous revenue and value added have a statistically significant impact.

Corruption, growth, and governance: Private vs. state-owned firms in Vietnam

We provide a firm-level analysis of the relation between corruption and growth for private firms and state-owned enterprises (SOEs) in Vietnam. We obtain three different measures of the perceived corruption severity from a 2005 survey among 741 private firms and 133 SOEs. Our analysis shows that corruption hampers the growth of Vietnam’s private sector, but is not detrimental for growth in the state sector. We document significant differences in the corruption severity across 24 provinces in Vietnam that can be explained by the quality of provincial public governance (such as the costs of new business entry, land access, and private sector development policies). Our results suggest that improving the quality of local public governance can help to mitigate corruption and stimulate economic growth.

Ownership discrimination and private firms financing in China

We study the impact of anticorruption efforts on firm performance, exploiting an unanticipated corruption crackdown in China’s Heilongjiang province in 2004. We compare firms in the affected regions with those in other inland regions before and after the crackdown. Our main finding is an overall negative impact of the crackdown on firm productivity and entry rates. Furthermore, these negative impacts are mainly experienced by private and foreign firms, while state-owned firms are mostly unaffected. We present evidence concerning two potential explanations for our findings. First, the corruption crackdown may have limited bribery opportunities that helped private firms operate. Second, the corruption crackdown may have interfered with personal connections between private firms and government officials to a greater extent than institutional connections between state-owned firms and the government. Overall, our findings suggest that corruption crackdowns may not restore efficiency in the economy, but instead lead to worse economic outcomes, at least in the short run (JEL L2, M1, O1).

The challenge for labor market policy in the transition economies has been to redress the sharp drops in employment and rises in unemployment in a way that fosters the creation of productive jobs. The authors first document the magnitude and productivity of job and worker reallocation. Then they investigate the effects of privatization, product and labor market liberalization, and obstacles to growth inthe new private sector on reallocation and its productivity in Hungary, Romania, Russia, and Ukraine. The authors find that market reform has resulted in a large increase in the pace of job reallocation, particularly that occurring between sectors and through firm turnover. Unlike under central planning, the job reallocation during the transition has contributed significantly to aggregate productivity growth. Privatization has not only stimulated intrasectoral job reallocation, but the reallocation is more productive than that among remaining state firms. The effect of privatization on firm productivity varies considerably across countries and is not always positive. The productivity gains from privatization have generally not come at the expense of workers but are rather associated with increased wages and employment.

Purpose - The study examines the effects of uncertainty and its interaction with state ownership and other block holders on agency costs of Vietnamese listed construction and real estate firms. Design/methodology/approach - Panel data were collected from 122 listed firms in Vietnam’s construction and real estate sector from 2011 to 2022. Data analysis involved the application of fixed-effect (FE) and random-effect (RE) regression models. Findings - Our results suggest that COVID-19 positively correlates with firms’ agency costs. In addition, firms’ high level of state ownership seems to worsen agency problems during the pandemic period. However, other types of ownership (managerial, institutional, and individual ownership) might mitigate agency problems as their reductive effect on agency cost is strengthened during this period. Research limitations/implications - The overall results imply that private firms will react better to crises due to their quick adaptation ability. State-owned firms’ managers should pay extra attention and formulate contingency plans to counter the complicated bureaucratic structure of State regulation to adapt to the crisis quickly. Regulators and policymakers from developing economies should focus on creating a more transparent system, specifically on how firms should react during times of instability. Originality/value - Our study investigates the impact of COVID-19 on a firm’s agency costs and how it interacts with different forms of ownership.

This thesis examines factors affecting aggregate total factor productivity (TFP) growth in developing countries. While the first two essays are devoted to exploring trade-embedded foreign R&D spillovers, the last two essays are more concerned about firm dynamics and misallocation of resources across firms. Although foreign R&D spillovers have been studied intensively since the emergence of the innovation-led growth models in the early 1990s, little research has been conducted on the impact of Free Trade Agreements (FTAs) on North-South diffusion processes. Also, few studies have incorporated domestic R&D and trade liberalisation to examine North-South R&D spillovers at industry level. The first two essays fill these gaps. The last two essays contribute to the literature by partly addressing the long-lasting puzzle of why productivity dispersion in developing countries is large and persistent, even within narrowly-defined industries. In particular, these essays explore the role of firm dynamics, including entry and exit, and reallocation of resources across firms in reducing TFP gap in the manufacturing sector of a transitional economy, namely Vietnam. Given the recent proliferation of FTAs, the first essay investigates the impact of FTAs on North-South R&D spillovers. Using panel data covering 56 developing countries and 15 OECD countries over 1980-2008, the results show that North-South R&D spillovers are sizeable. FTAs have, however, a negative impact on this diffusion process. This finding may be attributed to decreases in the variety of goods imported, and the switching of imports from more efficient non-member countries to less efficient member countries. The second essay employs the industry-level data in Vietnamese manufacturing over 2000-2009 to address the foreign technology diffusion from 16 OECD countries. The empirical results indicate that the domestic own industry R&D improves TFP growth in the sector, but in a much smaller scale than the foreign R&D counterparts. The foreign R&D spillovers themselves differ in diffusion channels, as Vietnamese manufacturing’s TFP seems to benefit more from the foreign R&D embedded in the inter-industrial relation through the Input-Output tables than that embedded in import from the same industries abroad. Despite experiencing several major trade liberalisations in the manufacturing sector over the study period, the sectoral TFP has seen little impact from these reforms. The third essay studies the impact of market deregulation on the aggregate TFP of Vietnamese manufacturing. Over 2000-2008, Vietnam experienced a big market deregulation which induces a massive entry of private firms amid privatisation of state-owned enterprises (SOEs). The results reveal that during this period firms’ entry and exit makes up around a half of aggregate TFP growth. Private firms account for most of this TFP improvement as they exhibit a “growth” effect over the state entrants and a “level” effect over the foreign counterparts. Despite huge entry of private firms, SOEs face lower hazard rates than the private counterparts, even accounting for productivity differentials. This may be attributed to SOEs’ receipt of favourable treatment from the government that prevents them from exposure to the same degree of market experimentation as experienced by the private firms. The last essay examines whether firm dynamics improves allocative efficiency in Vietnamese manufacturing over 2000-2008. Given that this is a period of unprecedented growth in domestic credit supply, the essay also investigates the impact of the credit policy on capital misallocation across firms in the sector. It finds that firms’ entry and exit contributes significantly to the allocative efficiency improvement in Vietnamese manufacturing, particularly in the second half of the study period. The across-firm TFP dispersion within 4-digit ISIC industries is large and persistent because SOEs disproportionately absorb a lion’s share of credit. In that context, providing more credit to the SOEs, relatively to their private counterparts, would yield an anti-capital distortion reducing effect rather than the desired capital distortion reducing effect of commercial and subsidised credit.

The paper studies the transactional and transformational styles of leadership and established the effective style that influences organizational effectiveness. It aimed at exploring and elaborating the styles of leadership (Transactional and Transformational) for managing small and medium firms in Manipur during Covid 19 pandemic. The study adopts survey and interview techniques and 98 employees from 25 small and medium firms in Manipur, India are considered as sample. The data are analysed using ordinal regression and the spearman correlation coefficient. It has been found that 55% of leadership effectiveness is subject to exhibition of either transactional or transformational leadership style. It has been found that leadership effectiveness is increased by 2.213 for every unit increase in transformational leadership style. On the other hand for every unit increase in transactional leadership style, effectiveness increased by 1.329. The result shows that transformational leadership style is more effective than transactional style in managing the Small and Medium firms in Manipur
 This study is an attempt to determine effective leadership style whether transactional or transformational for managing small and medium firms in Manipur during Covid 19 pandemic. A sample of 98 employees from small and medium firms in Manipur was taken for the research using Multifactor Leadership Questionnaire MLQ (Form 5x-Short). The data were analysed using ordinal regression and the spearman correlation coefficient. It has been found that 55% of leadership effectiveness is subject to exhibition of either transactional or transformational leadership style. The study highlighted that leadership effectiveness is increased by 2.213 for every unit increase in transformational leadership style as compare to transactional style. However, for every unit increase in transactional leadership style, leadership effectiveness increased by 1.329. The above comparison shows that transformational leadership style is more effective than transactional leadership style in Small and Medium firms in Manipur. This study is an attempt to determine effective leadership style whether transactional or transformational for managing small and medium firms in Manipur during Covid 19 pandemic. A sample of 98 employees from small and medium firms in Manipur was taken for the research using Multifactor Leadership Questionnaire MLQ (Form 5x-Short). The data were analysed using ordinal regression and the spearman correlation coefficient. It has been found that 55% of leadership effectiveness is subject to exhibition of either transactional or transformational leadership style. The study highlighted that leadership effectiveness is increased by 2.213 for every unit increase in transformational leadership style as compare to transactional style. However, for every unit increase in transactional leadership style, leadership effectiveness increased by 1.329. The above comparison shows that transformational leadership style is more effective than transactional leadership style in Small and Medium firms in Manipur.

Starting in the late 1990s, China undertook a dramatic transformation of the large number of firms under state control. Small state-owned firms were privatized or closed. Large state-owned firms were corporatized and merged into large industrial groups under the control of the Chinese state. The state also created many new and large firms. We use detailed firm-level data to show that from 1998 to 2007, (i) state-owned firms that were closed were smaller and had low labor and capital productivity; (ii) the labor productivity of state-owned firms converged to that of private firms; (iii) the capital productivity of state-owned firms remained significantly lower than that of private firms; and (iv) total factor productivity (TFP) growth of state-owned firms was faster than that of private firms. We find the reforms of the state sector were responsible for 20 percent of aggregate TFP growth from 1998 to 2007.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

This study adopts an integrated approach to employee voice (EV) and analyses the impacts of direct and indirect EV mechanisms on firm innovation in small and medium‐sized firms separately. It also proposes a new categorization for direct EV, by distinguishing between verbal and written mechanisms, allowing us to take the level of formality of different EV mechanisms into account. The analysis of 17,890 European firms shows that verbal, written and indirect EV mechanisms are all positively related to a higher propensity of firm innovation in both small and medium firms. However, for verbal EV mechanisms the relationship is significantly stronger for small firms than medium firms. The results also reveal that medium firms derive higher benefit than small firms while combining and balancing EV mechanisms with different levels of formalization (i.e. verbal and indirect voice). However, the former also suffers from excessive formalization of employees’ involvement in the innovation process (e.g. through written and indirect voice). Overall, this study supports recent calls for the need to adopt an integrated, pluralistic approach to EV and has important implications for EV research in small and medium firms.