Performance of manufacturing enterprises – Vietnam case study

Abstract

The main purpose of this study has been to measure technical efficiency and determine factors affecting it in production during the transition process to a market economy. Using firm level data for Vietnam from 2000 to 2008, stochastic frontier analysis shows that average efficiency levels of the manufacturing industries are 0.49 and increase during the 2000–2008 periods. The analysis also investigates determinants of technical efficiency and the result indicates that ownership is one of the important determinants. Other determinants which have significant impacts are industry identity, business scale, capital intensity, female ratio, labor quality, municipal location and economic endowment amongst different regions. Furthermore, the study also decomposes the efficiency of manufacturing companies to examine the growth source of TFP. It finds that the TFP growth mostly driven by technical efficiency changes (moving toward frontier production) rather than from technical progress (shifting of the frontier production). The passive role of technical progress can be partly explained by the negative contribution of capital intensity on technical efficiency, which is considered as a determinant of growth in technical progress.