Firm performance in a transitional economy: a case study of Vietnam's garment industry

Amid the global financial crisis and economic downturn, efficiency improvement is one of the essential countermeasures for overcoming the hardship. Recognizing the role of the garment industry in Vietnam's economy, the paper addresses the relationship among technical efficiency and firm structure, business activity, export destination and location based on 2007 firm-level data. We find that high inefficiency exists in the Vietnam's garment industry and there is much room for improvement. Product specialization and export markets would contribute to efficiency enhancement in the short run. Also, garment firms located in Ho ChiMinh City, where competition is fiercer than other production areas, tend to achieve higher efficiency performance. To a lesser extent, private ownership and smaller firm size (small and medium-sized enterprise - SME) appear to be associated with higher efficiency. These findings would give rise to promotion of business competition, market-supporting institutions and nonstate ownership for the benefit of the garment industry as a whole.