Developing Small and Medium Enterprises (SMEs) in a Transitional Economy-from Theory to Practice: An Operational Model for Vietnamese SMEs

Abstract

This paper examines the factors contributing to the growth of SMEs by using a conceptual framework derived from the concept of resource; cluster; networking; and institutional theories. The Vietnamese experience suggests that institutional weakness and lack of proper coordination between policy making, implementation and market conditions has made the support regime ineffective. Literature review indicates that Vietnamese government has mainly focused on increase the number of SMEs rather than improving the performance of SMEs and strengthening the business competitiveness. This must be facilitated by the critical entrepreneurial role of the state. Furthermore, this paper argues that no adopted model from one country to another country would be suitable without consideration. It is vital to address the issues of external business environment, market environment, and social culture. The paper then recommends that the evolving relationship between the state’s entrepreneurial role and market factors are parts of the success picture. More importantly, support policies may be invalidated by the unbalance relationship between the state and market. Unfortunately, such important relationship has not thoroughly been identified by the Vietnamese government.