Foreign Direct Investment and the Survival of Domestic Private Firms in Viet Nam

Ari Kokko and Thang Tran

Asian Development Review, 2014, vol. 31, issue 1, 53-91

Abstract: Foreign direct investment (FDI) may benefit local firms in the host country through various kinds of spillovers, but it may also raise competition and result in the crowding out of domestic firms. Using detailed firm-level data for the period 2001–2008, this paper examines the aggregate effect of FDI on the survival of domestic private firms in Viet Nam. We estimate the impact of both horizontal and vertical FDI and explore how the presence of state-owned enterprises (SOEs) influences the exit hazard for private firms. The results suggest that horizontal and upstream FDI raise the exit hazard significantly, while downstream FDI may reduce the hazard. The presence of SOEs has a direct negative effect on the survival odds of local private firms in the same industry, but there is also an indirect impact on the exit hazard from FDI. Local firms are more vulnerable to foreign entry in sectors with high SOE shares. Looking at the net effects of FDI during the period 2001–2008, we find that results vary between sectors and over time but that the overall impact has been surprising small. The paper also discusses policy conclusions and implications for empirical analyses of spillovers from FDI. © 2014 Asian Development Bank and Asian Development Bank Institute.

Keywords: foreign direct investment; FDI; state-owned enterprises; exit hazard; survival; Viet Nam; Vietnam (search for similar items in EconPapers)
JEL-codes: F21 F23 L11 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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