Publication Details

Harvie, C. & Le, V. (2010). How do Vietnamese SMEs perform? Technical efficiency of SMEs in the manufacturing sector and its sub-sectors. Korea and the World Economy, IX (pp. 1-37). Korea: The Association of Korean Economic Studies, University of Incheon.


This paper evaluates the technical efficiency performance of Vietnamese manufacturing small and medium enterprises (SMEs) over the period 2002 to 2007. Using firm level data from three surveys in 2002, 2005 and 2007 with a total of 5,204 observations of domestic non-state manufacturing SMEs the paper assesses the technical efficiency level of SMEs for the aggregate manufacturing sector and separately for nine subsectors including: (i) Food and Beverages; (ii) Textiles, Garments and Footwear; (iii) Electrical and Electronic Equipment (iv) Wood and Furniture Products; (v) Chemical, Rubber and Plastic Products; (vi) Paper, Printing and Publishing; (vii) Metal Products; (viii) Non-metallic Products; and (ix) Machinery and Equipment. Results from the estimation of a stochastic frontier production function, an econometric approach to evaluate technical efficiency, reveal that Vietnamese non-state manufacturing SMEs in aggregate have relatively high average technical efficiency. Their technical efficiency reached an average level of 89.71 percent for the three surveys in 2002, 2005 and 2007. They have mean technical efficiencies of 84.25 percent, 92.55 percent, and 92.34 percent of the best practice frontier in 2002, 2005 and 2007, respectively. The results indicate that these firms can increase their current level of output by almost 15.7 percent in 2002, by about 7.5 percent in 2005 and by 7.7 percent in 2007 with the same level of inputs. The sub-sector analysis shows that technical efficiency ranges from 70 percent to 100 percent - or full technical efficiency, across sub-sectors in the 2002 – 2007 period. It is found that the high-tech Electronics and Electrical Equipment subsector has the lowest mean technical efficiency level of around 80 percent for the three surveys. The low-tech Wood and Furniture sub-sector consistently performs with full technical efficiency. Although the period examined is limited to only 5 years, there is evidence that technical efficiency increased over the 2002 – 2007 period. The findings from this study provide empirically-founded policy recommendations to improve efficiency and competiveness of Vietnamese manufacturing SMEs.

Link to publisher version (URL)

Korea and the World Economy Conference