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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 22 / 52





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the businesses that moved, customer traffic was only slightly more important as a

consideration than among those who had not. Despite the obvious implication for retail sales,

location was not, for most of those sampled, a strategic choice.

In order to be included in our sample, businesses needed to employ at least one person

outside the immediate family. We, therefore have not included the very large number of

businesses that do not employ anyone outside the household. Vijverberg (1998) reports that

only 6.9 percent of Vietnam’s businesses hire at least one wage worker. Still, the businesses

were, on the whole, quite small with a mean number of people working full-time of 3.9

(median 3) and a mean number of total people working of 5.3 (median 4). The largest

sampled business, an outlier with over twice as many employees as the next largest firm, had

110 people employed. The 33 firms with 10 or more employees were a fairly diverse set

differing from the sample as a whole mainly by being almost twice as old on average. The

urban businesses had, on average, slightly more employees but we found no North-South

differences. The facts that 93 percent of small businesses do not hire any employees and that

those businesses that do so are, on average, quite small provides evidence in support of the

transaction cost arguments for the small size of firms in developing countries. Those facts

are also consistent with a range of other explanations for small size ranging from small size

of market niches to productive inefficiency, however.

With some 266 different main products offered, the businesses were active in a wide

range of branches. Many were quite specialized in narrowly defined products (such as a

particular type of noodle dish or a particular type of metal part) and, on average, almost 90

percent of each business’ sales was accounted for by a single product. Over half

concentrated on food and other daily necessities. Some businesses specialized in producer

products. Some produced or handled goods that required specialized knowledge. All


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