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Social embedding as a solution to a control problem? Evidence from Vietnamese small business* - page 26 / 52





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owner but they did tend to either buy from or sell to the partner and they tended to be located

nearby. One of the key theoretical aspects of network forms of business and of industrial

districts was uncommon in our sample and, when it did occur, it had a commercial, rather

than social, glue.

(Table Three about here)

Over one-fourth of the businesses counted other businesses among their customers;

60 percent of those had other firms as steady customers. Businesses that counted firms

among their steady customers differed only in being slightly larger and slightly older on

average than the other sampled businesses. Of the 74 businesses with firms as steady

customers, approximately two-thirds (49) had state-owned enterprises as their most important

customer, suggesting the integration of small businesses into the state sector as suppliers and

support firms. Family members were the point of contact in 23 percent of the businesses that

were steady customers (including the state-owned enterprises), suggesting that their point of

contact helped arrange for the sale and that relatives with control over resources can be a

benefit for small businesses.

The interviewed owners had family relationships with less than 10 percent of

materials suppliers. That low prevalence didn’t hold for the sources of start-up capital. Forty

percent of the businesses borrowed funds to start the business. The sources of credit and the

materials suppliers tended not to be located nearby (within 500 meters). Individuals were the

source of choice but even when funds were borrowed from a formal credit organization, in

three-fourths of the cases, the contact person was an immediate family member or a relative.

This suggests that the business owners may receive privileged access to those funds and that

there may be a degree of favoritism in the granting of loans. From the point of view of the

focal business, socially embedding economic relationships serves to expand access to


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