Competition and firm performance: evidence from Vietnam

Abstract

Purpose: This paper aims to examine the impact of competition on firm performance using a data set of 352 firms listed on Vietnam’s stock exchanges from 2015 to 2019. Design/methodology/approach: The two-step system generalized method of moments is used to estimate this impact. Findings: The findings reveal an inverted U-shaped relationship between competition and firm performance. Competition improves firm performance if its intensity is moderate. However, if the competition intensity exceeds the optimal level, the performance deteriorates accordingly. Research limitations/implications: The authors only studied Vietnamese firms due to the limited ability in data collection. It would be better to validate the findings using data from other transition economies. Practical implications: The non-linear relationship between competition and performance implies that government should pay more attention to retaining competition at an appropriate level. Social implications: Firms contribute a lot to the prosperity of Vietnam. Therefore, the findings have a meaningful implication for Vietnam’s government to moderate competition to improve its firms’ performance. Originality/value: This paper contributes to the extant literature by providing firsthand evidence of the impact of competition on firm performance in Vietnam – a transition economy.