Evidence from Firm-level Data in Vietnam

More documents

Recommendations

Info

more resources that only firms of a certain size can afford. Larger firms also have higher advantage inmobilizing resources and more ability to absorb risks, hence, can adapt more easily to the conditions offoreign markets. In this paper, we use a firm’s capital, defined as the net-book value of machinery andequipment, as a proxy for size of the firm. This may present more accurately the size of firms in Vietnamother than the number of employees or total output because employment or production are not as stable ascapital level in a developing country like Vietnam. Values of this variable are also expressed in real 2002terms, using the PPI of the industry of Machinery and Equipment.The Vietnam PICS also surveys on structure of ownership of firms. We define a firm having foreignownership when foreign capital of the firm accounts for at least 10 per cent of its total capital. In the literatureof business management, foreign-owned firms are more likely to be exporters, thanks to their experience andknowledge about foreign markets as well as their relationship with headquarters or branches of the same firmsand with foreign customers. Foreign-owned firms are usually thought of as more powerful than their domesticcounterparts. This increases their likelihood to export. However, the opposite can also be possible when someforeign firms are said host-country-market oriented and FDI is considered as a good measure to penetrate intohost-country markets.The foundation year of firms is also available in the survey data, allowing us to calculate age of eachfirm. It is usually argued that the older firms are more likely to export, because the longer a firm has been inbusiness, the more likely it is to look for foreign markets to grow further. In addition, firm age is sometimesrelated to firm experience, performance and size. All of these favor their exporting activities. However, theopposite has also been suggested. This is explained by the argument that young managers now have strongerglobal orientation and capability. These firms are called “born globals”, and start to export after a short timeof start-up [Moen (2002)]. We include both age and age squared to examine the effect of firms’ experience,with an aim to test the effect of firms’ experience and its deterioration with time.In this paper, we are also interested in relative intensity of factors used by firms. We define capitalintensity as the ratio of net-book value of machinery and equipment over the total number of employees.Firms in developed countries are believed to export capital-intensive products, while their counterparts indeveloping cou ntries export labor-intensive ones. Labor-intensive firms in a developing country are thought tobe more likely to export.We also consider the effect of workforce quality. In the related literature, this factor is usuallyproxied by either the ratio of skilled workers to total employees or the average wage. The former is preferredto the latter. Although the survey has data on the structure of workforce of each firm, this information isavailable only for the year 2004. Therefore, in order for us to construct the panel, we choose the average wagerate as a proxy for the quality of workforce. The average wage rate is defined as the total labor paymentsdivided by total employees. The labor payments are also in real 2002 terms, adjusted by using ConsumerPrice Indices (PPI) obtained from World Economic Outlook Database 2007 of IMF.As suggested by the theoretical backgrounds, lagged export status will be used to estimate the roleof sunk costs. Becaus e of the short panel, we can only use lags of one year period. Industry dummies, regiondummies and time dummies will be included in the right hand side of estimation equations, to proxy forindustrial characteristics, regional characteristics and time-specific macroeconomic conditions that firms arefacing. Although the manufacturing sector in Vietnam is classified into 17 industries in the Vietnam PICS, we16
combine Rubbe r and Plastic Products Industry and Non-metallic Mineral Products Industry into Rubber,Plastic and Non-metallic Products Industry, Basic Metals Industry and Metal Products Industry into Metalsand Metal Prod ucts Industry, Machinery and Equipment Industry and Electrical Machinery Industry intoMachinery, Equipment and Electrics Industry; and Vehicles and Other Transport Equipment Industry andOthers into Others, making a new classification of 13 industries. Because of the limited sizes of theseTable 2:VariablesVARIABLE DESCRIPTIONDefinitionExporter=1 if exporter (directly exporting at least 10% of total sales), 0 otherwiseRevenueTotal salesTFPTotal factor productivityLaborTotal number of permanent and adjusted temporary employeesLabor ProductivityValue added/LaborCapitalTotal net-book value of machinery and equipmentWageTotal labor payment/LaborAgeNumber of years in business, (equal 2004-foundation year)Age SquaredAge squaredCapital Intensity Ratio of total net-book value of machinery and equipment to total employeesForeignForeign-owned firm, with at least 10% of total capital owned by foreignersIndustry 1=1 if Food and Beverage Industry, 0 otherwiseIndustry 2=1 if Textiles Industry, 0 otherwiseIndustry 3=1 if Garments Industry, 0 otherwiseIndustry 4=1 if Leather Products Industry, 0 otherwiseIndustry 5 =1 if Wood and Wood Products Industry, 0 otherwiseInd ustry 6 =1 if Paper Industry, 0 otherwiseIndustry 7=1 if Chemical & Chemical Products Industry, 0 otherwiseIndustry 8=1 if Rubber, Plastic & Non-metallic Products Industry, 0 otherwiseIndustry 9=1 if Metals & Metal Products Industry, 0 otherwiseIndustry 10=1 if Machinery, Equipment and Electrical Products Industry, 0 otherwiseIndustry 11=1 if Electronics Industry, 0 otherwiseIndustry 12=1 if Construction Materials Industry, 0 otherwiseRegion 1=1 if Red River Delta, 0 otherwiseRegion 2=1 if Southern Central Costal, 0 otherwiseRegion 3=1 if South East, 0 otherwiseRegion 4=1 if Mekong River Delta, 0 otherwiseYear 2004=1 if the year 2004, 0 otherwiseNote:Other Industries and Northern Central are taken as reference groups for industry and regiondummies, respectively. Year 2003 is a reference group for time dummy.industries, we make the combination to satisfy the confidentiality requirement by the data provider (EnterpriseSurveys, The World Bank Group) as well as to make it more efficient in estimating some variables used in17
Page 1 and 2: ENTRY COSTS AND HETEROGENEOUS CHARA
Page 3 and 4: certainly different among firms. Th
Page 5 and 6: towards more productive firms. Firm
Page 7 and 8: In the framework of multiple period
Page 9 and 10: expenses and assets.Table 1: SAMPLE
Page 11 and 12: variable when there is the phenomen
Page 13 and 14: are vectors of parameters; andvitis
Page 15: that determines export status and p
Page 19 and 20: on the analysis of the direction of
Page 21 and 22: Besides TFP, we also use labor prod
Page 23 and 24: an important factor that guides fir
Page 25 and 26: APPENDIX(1) Estimation of total fac
Page 27 and 28: Table A.1:COEFFICIENTS OF PRODUCTIO
Page 29 and 30: (0.3254) (0.4484) (0.6159) (0.3229)
Page 31 and 32: Falvey, R., D. Greenaway and Z. Yu,

Evidence from Firm-level Data in Vietnam

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?