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Resource Curse or Destructive Creation: A Tale of Crony Capitalism in Transition

Quan Hoang VUONG () and Nancy K. Napier

No 12-037, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: This paper explores the “resource curse” problem as a counter-example of creative performance and innovation by examining reliance on capital and physical resources, showing the gap between expectations and ex-post actual performance became clearer under conditions of economic turmoil. The analysis employs logistic regressions with dichotomous response and predictor variables, showing significant results.Several findings that have use for economic and business practice follow. First, in a transition period, a typical characteristic of successful firms was their reliance on either capital resources or physical asset endowments, whereas the innovation factor was not significant.Second, poor-performing enterprises exhibited evidence of over reliance on both capital and physical assets. Third, firms that relied on both types of resources tended to downplay creative performance. Fourth, reliance on capital/physical resources and adoption of “creative discipline/innovations” tend to be mutually exclusive. In fact, some evidence suggests that firms face more acute problem caused by the law of diminishing returns in troubled times. The Vietnamese corporate sector’s addiction to resources may contribute to economic deterioration, through a downward spiral of lower efficiency leading to consumption of more resources. The “innovation factor” has not been tapped as a source of economic growth. The absence of innovations and creativity has made the notion of “resource curse” become identical to “destructive creation” implemented by ex-ante resource-rich firms, and worsened the problem of resource misallocation in transition turmoil.

Keywords: Organization of Production; Firm Behavior; Business Economics; Creativity/Innovation Processes (search for similar items in EconPapers)
JEL-codes: D21 L23 M21 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-tra
Date: 2012-12-17
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