The impact of accessible capital on labor growth of small and medium enterprises in Vietnam

Abstract

There are significant constraints that limit the present SMEs from extending up in terms of labor and employment. Firms have a higher demand for workforce and thus create employment when enlarging their business operation scale. There has been a theoretical gap related to the labor growth of SMEs in developing countries, such as Vietnam, and a necessity of finding solutions to overcome difficulties in accessing capital to foster firms’ labor growth. Most of the previous studies on growth used the statistical frequency method. Meanwhile, the results of the Bays method can ignore the influence condition due to the small sample or missing observations. While previous studies often used debt ratio or financial leverage in the model, these are two different approaches. This study used the Bayesian estimation method to examine the labor growth of SMEs in Vietnam due to the impact of equity and liabilities, which better reflects the impact of each specific component of capital used for business growth, along with a group of control variables. The research results demonstrate that debt has a positive effect while equity has a negative impact on business growth. Enterprise size, male entrepreneurs, and businessmen with educational and vocational qualifications in the group of undergraduate and graduate, college, and vocational secondary schools have a positive impact on the growth of enterprises. Firm age, export factors, and untrained entrepreneurs have a negative impact on firm growth.