IZA DP No. 10482: Household Entrepreneurship and Social Networks: Panel Data Evidence from Vietnam
published in: Journal of Development Studies, 2018, 54 (4), 594 - 618
Using a unique panel of household businesses for Vietnam, this paper sheds light on the links between households' and entrepreneurs' social networks and business performance. We address two related questions. One first question asks if we can find evidence of a differentiated effect of employment of members of the family versus hired workers on the business performance. A second question tackles the respective effects of various dimensions of social networks on the business technical efficiency. The hypothesis is that, beyond the channel of labour productivity, entrepreneurs that are confronted with an unfavourable social environment may produce less efficiently and realize a lower output than what could be possible with the same amount of resources. We find evidence of a marginal productivity differential between family and hired labour and highlight results consistent with the presence of adverse social network effects faced by households running a business, in particular ethnic minorities. We stress the importance of professional networks for successful entrepreneurship.