Capital Constraints and the Performance of Entrepreneurial Firms in Vietnam

Tuesday, May 6, 2014 ( 12:00 pm to 1:00 pm )

Location: Babbio Center 430

Dr. Vartuhi Tonoyan: [email protected]

Enrico Santarelli, Professor, Department of Economics, University of Bologna, Italy

Entrepreneurship has been among the key driving forces of the emergence of a dynamic private sector during the recent decades in Vietnam. This paper examines how capital constraints affect the performance of family firms, and how entrepreneurs' human and social capital interacts with capital constraints to leverage entrepreneurial income. A panel data of 1721 Vietnamese firms over four years is used. Results are consistent with the resource dependency approach, indicating an adverse effect of capital constraints on firm performance: firms suffering capital constraints perform substantially less well, suggesting that they need more capital to finance newly recognized profit opportunities. Human capital plays a vital role in relaxing capital constraints and improving the entrepreneurial firm performance, whereas the effect of social capital stemming from strong ties and weak ties is rather limited: strong ties bring emotional support and weak ties provide non-financial benefits from regular and useful business contacts. Advanced econometric tools are used to take into account the endogeneity of capital constraints.

Enrico Santarelli is Professor of Economics at the University of Bologna, Italy. From 2003 to 2009 he was Research Professor at the Max Planck Institute of Economics (Entrepreneurship, Growth and Public Policy Group) in Jena (Germany) and served as Senior Scientist (GH40) at the Institute for Prospective Technological Studies (JRC-IPTS) of the European Commission in 2010. He was Visiting Professor in several universities around the globe, including Stanford, Berkeley, Erasmus of Rotterdam, Sussex and Maastricht. He received a Ph.D. in Science and Technology Policy from the University of Sussex. From 2004 to 201O Professor Santarelli was a member of the Executive Committee of the European Association for Research in Industrial Economics (EARIE).

He is Associate Editor of Small Business Economics and Review Editor of the Journal of Business Venturing.

His main research line is the economic analysis of entrepreneurship, firm growth and innovation. Professor Santarelli published in a wide range of journals indexed in Thomson Reuters Web of Knowledge, including: Industrial and Corporate Change, International Journal of Industrial Organization, International Entrepreneurship and Management Journal, International Small Business Journal, Journal of Economic Behavior and Organization, Journal of Technology Transfer, Regional Studies, Research Policy, Review of Industrial Organization, Small Business Economics, and Southern Economic Journal.