Determinants of foreign firm existence in Vietnam

Dinh Thi Thanh Binh

Abstract

Abstract
This paper studies the survival of 187 foreign invested firms in Vietnam that were newly
established in 2000 and measures for how many years they stay in the market over the 2000-
2011 period. By using the Cox proportional hazard model, the empirical results show that
foreign firms with growing current size are more likely to stay longer in the market. We also
find that foreign firms entering the market with wholly-owned subsidiaries rather than doing
joint ventures with local partners can live longer. However, locating in industrial zones or
export processing zones does not help foreign firms to increase their survival probabilityin
the market. By contrast to our prediction, agglomeration economies have no significant
effect on firm survival. Further, cultural distance is found to have a quite strong impact
on the survival of foreign firms. Proximities in culture make it easier for foreign firms in
cooperating with local partners; therefore increasing their success in foreign markets.
Key words: Foreign firm; Survival; Duration; Foreign direct investment