Business Climate, Economic Complexity, and Performance at the Provincial Level in Viet Nam

Ari Kokko, Nguyen Tien Thong and Katariina Nilsson Hakkala
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Ari Kokko: Copenhagen Business School
Nguyen Tien Thong: Nha Trang University
Katariina Nilsson Hakkala: Asian Development Bank

No 856, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This study explores the impact of subnational institutions on Viet Nam’s provincial manufacturing sector, comparing foreign-invested and domestic firms using a two-step difference GMM model with data from 63 provinces (2006–2020). Results show that changes in subnational institutions, measured by the Provincial Competitiveness Index, have little effect on economic complexity, revenues, employment, productivity, or firm size. Unexpectedly, weaker governance in areas like land access, transparency and legal institutions sometimes leads to better performance. This weak connection persists across all samples, periods, controls, and estimation methods, likely due to the dominance of foreign-invested companies and their limited interaction with local firms, which impacts overall firm development.

Keywords: FDI; provincial competitiveness index; business climate; economic complexity; manufacturing performance (search for similar items in EconPapers)
JEL-codes: F63 L53 O12 O25 (search for similar items in EconPapers)
Pages: 53
Date: 2026-07-16
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:023110

DOI: 10.22617/WPS260325-2

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