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Firm location and firm performance: Evidence from small and medium enterprises in Vietnam

By Tran Ngoc Mai Thao (VNP 23)

Supervisor: Dr. Truong Dang Thuy

Abstract:

Small and medium-sized enterprises (SMEs) account for a large proportion and play a significant role in Vietnam's developing economy. Therefore, the research on strategies to improve the performance of these businesses is very important to the economy. Because of limited human and capital resources, SMEs need to focus on taking their own available advantages to improve performance, whereby choosing a good location is the first step in developing long-term strategic business development. This study examines the relationship between firm location and firm performance (return on assets, and return on sales) of SMEs in
Vietnam using ordinary least square regression and cross-sectional data of 2,559 firms in nine provinces taken from The Vietnam Small and Medium Enterprises survey in 2015. The results indicate those location characteristics differently impact on business performance. Location factors that improve performance including changed location and access to water system. In contrast, factors like distance to the main supplier, a main (paved) road leading to the firm, and easy access to a railway system and port have shown a negative effect on firm performance. The policy recommendations are suggested according to the context of SMEs. 

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