The Association among Corporate Governance, Corruption, and Economic Prosperity in the Socialist Republic of Vietnam

Abstract

The OECD considers compliance with the OECD principles of corporate governance and reduced corruption to be positively associated with economic prosperity. Prior empirical research supports this notion for developed countries. However, findings for developing and emerging countries are more diverse, as some studies document an "East Asia paradox"and link higher levels of corruption with positive outcomes at the firm or country level. Our case study on the Socialist Republic of Vietnam contributes to the literature by identifying determinants of these mixed findings. Relying on triangulation, our results suggest that internationalizing and international firms must adhere to OECD expectations to prosper, while domestic firms prefer operating in corrupt but stable conditions. Due to this mechanism, noncompliance with OECD principles and corruption can deter foreign direct investments and thus negatively influence economic growth. Nevertheless, noncompliance with OECD principles and corruption can still work to benefit domestic firms. Given our results for Vietnam, we argue that the internationalization of the business models of the firms analyzed might explain the prior inconclusive empirical findings.