Working Paper
The missing middle

We study the exporting and subcontracting decisions, mark-ups, market concentration, and growth of a panel of Vietnamese private micro, small, and medium-sized enterprises.

Our main findings are as follows. First, we find that among subcontractors, subcontracting is a supplementary rather than primary activity. Second, there is strong evidence that the propensity to export increases with managers’ or owners’ knowledge of customs law. Third, all else equal, mark-ups are lower for larger micro, small, and medium-sized enterprises. Fourth, there is significant home province bias in the sales of Vietnam’s micro, small, and medium-sized enterprises.

Membership of business associations and having internationally recognized quality certifications attenuate the size of the home market bias. Fifth, a significant number of enterprises did not grow or even contracted in size between 2010 and 2014. Finally, we find no evidence that inspections deter enterprises from expanding beyond their core competencies.