Local Institutions on Small Firm Investments: Degree of Institutional Persistence Matter

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Abstract

This study investigates the influence of local institutions including corruption, administration transparency, and leadership proactivity on small firm investment. Drawing from the institutional theory, we suggest that the persistence (resistance to changes) of institutional forces is an important determinant of their effects on investment. Using a dataset of 945,725 firm observations in Vietnam from 2006 to 2015, we find that: (1) investment is a U-shaped function of corruption controls; (2) transparency has a positive effect on investment; and (3) leadership proactivity can moderate the adverse effects of corruption and opaqueness in public services. This variety in the association patterns between investment and institutional forces is due to the degree of institutional persistence in local norms of doing business.
Original languageEnglish
JournalInternational Journal of Entrepreneurship and Small Business
Publication statusAccepted/In press - 1 Jan 2018

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Persistence
Small firms
Local institutions
Firm investment
Corruption
Proactivity
Transparency
Public services
Resistance to change
Institutional theory

Keywords

  • Institutions
  • Corruption
  • Investment
  • Governance
  • Small Business
  • Vietnam

Cite this

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AB - This study investigates the influence of local institutions including corruption, administration transparency, and leadership proactivity on small firm investment. Drawing from the institutional theory, we suggest that the persistence (resistance to changes) of institutional forces is an important determinant of their effects on investment. Using a dataset of 945,725 firm observations in Vietnam from 2006 to 2015, we find that: (1) investment is a U-shaped function of corruption controls; (2) transparency has a positive effect on investment; and (3) leadership proactivity can moderate the adverse effects of corruption and opaqueness in public services. This variety in the association patterns between investment and institutional forces is due to the degree of institutional persistence in local norms of doing business.

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