Networking in Weak Institutions: When Is It Good for Small Business Investment? The Case of Vietnam

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Abstract

This study investigates the influence of business-specific, bank-specific, and political-specific networks on small firm investments in Vietnam. Also, we aim to explain how these social networks substitute the weaknesses of local institutions. Examining a set of more than 9,800 firm-year observations of small businesses in Vietnam from 2005-2015, we find that social ties with bank officials can boost firm investments; social ties with government officials can help firms overcome institutional voids; whereas social ties with businesspeople appear trivial to investment decisions. More importantly, we propose that networking, especially networks built upon connections with government officials can substitute local institutions by addressing the weaknesses in (1) inefficient legal enforcement, (2) corruption, (3) bureaucratic compliance, and (4) non-transparent governance system.
Original languageEnglish
Number of pages38
JournalManagement and Organization Review
Early online date11 Jun 2021
DOIs
Publication statusE-pub ahead of print - 11 Jun 2021

Bibliographical note

Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of The International Association for Chinese Management Research

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