The role of family involvement in a firm’s performance

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM –NETHERLAND PROGRAMME FOR MA IN DEVELOPMENT ECONOMICS THE ROLE OF FAMILY INVOLVEMENT IN A FIRM’S PERFORMANCE Academic Supervisor: DR LE VAN CHON Student: NGUYEN QUOC KHANH HO CHI MINH CITY, OCTOBER 2013 ACKNOWLEGDEMENTS During doing research, I have received the supports, helps and guidance from my supervisor, committee members, friends and family First of all, I really appreciate and thank to the enthusiastic help of my supervisor - Dr Le Van Chon I always get clearly instructions, heartfelt encouragements and enthusiastic assistances from him during my thesis I also would like to thank Dr Pham Khanh Nam to suggest me the ideas for my thesis and supply the data source for the analysis in my research I would like to express my great appreciation to Associate Prof Dr Nguyen Trong Hoai – Vice Principal of the University of Economics & Director of Vietnam – Netherlands Programme for MA in Development Economic who oriented and facilitated me during two years learning this master course Finally, I would like to express my heartfelt gratitude to my family, my friends and my colleagues who supports, and encourage me to finish this research Ho Chi Minh City, October 2013 ii ABSTRACT This paper investigates the difference in performance between family businesses and non family businesses of small and medium enterprises (SMEs) in Vietnam It focuses on the differences in how the use of capital and labor and in total factor productivity (TFP) between the two types of firms The study used statistics on small and medium enterprises in Vietnam over the years 2005, 2007 and 2009.This paper also gives a number of policy implications for small and medium businesses to improve their performance and for the policy-maker to support the Vietnam small and medium enterprises Based on the Cobb-Douglas production function, we apply the methods OLS, GLS and panel model to estimate It finds that there are significant differences in the contribution of the two inputs that are labor and capital to output – the value added- between family businesses and non family businesses in Vietnam On labor, its contribution to output in the family businesses was significantly higher than non-family businesses In terms of capital, the contribution of this factor in the family business is low compared to their counterparts Moreover, there are no bases to conclude which kind of firm is more productivity iii TABLE OF CONTENTS ACKNOWLEDGEMENTS………………………………………………………………………ii ABSTRACT…………………………………………………………………………………… iii TABLE OF CONTENTS……………………………………………………………………… iv LIST OF TABLES……………………………………………………………………………….vi LIST OF FIGURES…………………………………………………………………………… vii CHAPTER I INTRODUCTION 1.1 Problem statement…………………………………………………………………………….1 1.2 Research objectives……………………………………………………………………… .2 1.4 Scope of study and data………………………………………………………………………2 1.5 Thesis structure……………………………………………………………………………….2 CHAPTER II LITERATURE REVIEW 2.1 What is family business? …………………………………………………………3 2.2 Differences between family and non-family businesses ……………………… 2.3 The performance of family and non-family firms……………………………………………7 2.4 The importance of the family firm………………………………………………………… 13 2.5 The other determinants of firm's performance………………………………………………14 2.6 Conceptual framework………………………………………………………………………15 CHAPTER III RESEARCH METHODOLOGY 3.1 The development of Domestic Private sector and Small and Medium Enterprises in Vietnam………………………………………………… 16 3.2 The recent performance of Small and Medium Enterprises in Vietnam………… ………19 3.3 Sources of data………………………………………………………………… …………20 3.4 Research methodology…………………………………………………………………… 21 3.5 Variable treatment……………………………………………………………………… 22 iv CHAPTER IV EMPIRICAL RESULTS 4.1 Descriptive statistics……………………………………………………………………….22 4.2 Empirical Results ………………………………………………………………………….34 CHAPTER V CONCLUSION…………………………………………………………… 41 REFERENCES APPENDIX v LIST OF TABLES Table 2.1: Summary of Empirical Review on the performance difference between family firms and their counterparts……………………………………………………………… Table 3.1: Number and ownership structure of Vietnamese enterprises 2000-2008…………….16 Table 3.2: Vietnamese SMEs’ share in different ownership type ………………… ………… 17 Table 3.3: The number and ownership structure of Vietnamese Small and Medium Enterprises period 2000-2008……………………………………………………………………………… 18 Table 3.4: Variables used in the Production Function……………………………………… 25 Table 4.1: Summary Statistic for SMEs sample (2005-2009)………………………………… 32 Table 4.2: Correlation Table…………………………………………………………………… 33 Table 4.3: The firm production function by OLS and GLS method with homogenous input 34 Table 4.4: The firm production function by OLS and GLS method with heterogeneous input…………………………………………………………35 Table 4.5: The firm production function estimation in pool data……………………………….37 Table 4.6: The firm production function estimation in panel fixed-effects…………………… 37 Table 4.7: The firm production function estimation in panel random-effects………………… 38 Table 4.8: Hausman Test for Fixed or Random Effects……………………………………… 39 vi LIST OF FIGURES Figure 2.1: The long-term view of family-business performance……………………………… Figure 2.2: Empirical framework……………………………………………………………… 15 Figure 4.1: The probability density function histogram of variables through years Log Value Add………………………………………………………………………………….27 Figure 4.2: The scatter-plot of log value add on variables of family and non-family firms through years…………………………………………………………………28 vii CHAPTER I INTRODUCTION 1.1 Problem statement The impact of the family involvement on the firm performance has been debated in many researches for a long time Many scholars have concerned the difference between family and non-family business performance However, the results of researches are not congruent due to the difference of the family firm definition, performance measurement or the samples So the issues about the “family effect” or “family involvement” impact on the productivity and firm performance are continued The role of the small and medium-sized enterprises (SMEs) is crucial in the developing economy for the goal of economic growth and integration like Vietnam The issues concerning to SMEs have received increased attention of several economists For example, CIEM (2010) investigates the characteristics of the SMEs, the government policies and the business environment in Vietnam The significance of innovation for exporting of SMEs has been studied by Nguyen Ngoc Anh et al (2008) In addition, Le Van Khoa (2006) considers the environment pollution problems caused by the SMEs in the Ho Chi Minh city In 2009, the firm recognized as family firm in the total number of the SMEs in Vietnam is large that more than 60 percent (CIEM, 2010) However, there is lack of studies investigating the differences of family and non-family firms More specifically, no research on the impact of the family ownership on the firm productivity for the case of Vietnam has been established In this paper, we consider how the family ownership impacts to the firm productivity in Vietnam, making it different to the non-family ones The Cobb Douglas is usually utilized to evaluate the firm output between family and nonfamily counterpart such as work by Bosworth and Londes (2002), Barth et al (2005), Martikainen (2009) that indicate ambiguous relationship To interpret to the difference, F Barbera, K Moores (2011) argued that assuming the homogeneity of factor elasticity lead to different result, then two main factors in the production function-labor and capital- contribute to the output differently 1.2 Research objectives The objective of this study aims to find out how the difference, between family and nonfamily firms, in using labor and capital affects the SMEs’ output and the difference in the total factor productivity (TFP) between two types of firms In addition to this, the paper also examines the other determinants that influence to the SMEs’ output and suggests some recommendations for firms to improve their performance 1.3 Research question This study tries to answer whether the family involvement has any impacts on the performance of the small and medium sized enterprises for the case of Vietnam 1.4 Scope of study and data Based on the production function Cobb-Douglas, this study applies the OLS and panel data to examine the factors affecting the firms’ output The panel data is utilized to solve the heterogeneity problem and to control the omitted variables of each individual It uses the data of small and medium enterprise surveys for the year 2005, 2007 and 2009 by the World Institute for Development Economics Research, the University of Copenhagen and some government agencies and bodies of Vietnam It contains the information of more than 2000 SMEs concerning the characteristic of the Vietnam business environment and of the firms 1.5 Thesis structure Following the introduction chapter, the paper is organized as followed Chapter Two gives some literature reviews and empirical studies that provide the rational for the firm performance difference between family and non-family firms Chapter Three presents the research methodology Chapter Four provides the descriptive statistics and the result The last discuss the conclusion and some recommendations CHAPTER II LITERATURE REVIEW This chapter by reviewing previous studies firstly provides the most frequently used definition of the family business Then it indicates the difference between family and non-family firm in using resources Next it points out the differences in performance between the two types of firms and the importance of family businesses in the economy In addition to using the resources and family involvement that impact to the firm performance, a number of other factors are also considered to build the conceptual framework for the next chapter 2.1 What is family business? Recent researchers have paid much attention on the difference in performance between family and non-family firm such as Gallo, (1995); McConaughy et al., (1999); Westhead et al., (1998) and Anderson et al., (2003) However, what is the family business? It has been the controversy issue for many authors to find out the clarity definition, although they have agreed on the view that the family business involvement is the factor make the firm different from others (Miller & Rice, 1967) Westhead et al., (1998), reviewing and investigating previous researches on the family firms, found that there are differences in the family definition used in studies According to Chrisman et al., (2003b), the work for family definition is continued Diversified definitions are given basing on different methods Shanker et al., (1996) gave two definitions for family-firm, the narrow one concerning to the daily business and the broad one regarding to strategic decision Astrachan et al., (2002) used factors regarding to experience, power and culture to measure the influence level of family on the firm Some authors based on the essence of the a family firm such as Davis et al , (1989); Shanker et al., (1996) to investigate the impact of family on making decision The concept “familiness” was first introduced by Habbershon et al., (1997) concerning to the resources of a family firm that originated in the systems of business, of family or individuals in family Habbershon et al., (2003) state that “familiness” can bring competitive advantage to the family firm  Le Van Khoa (2006) Greening Small and Medium-sized Enterprises - Evaluating Environmental Policy in Viet Nam Wageningen, Netherlands  Le, Viet and Harvie, Charles (2010), "Firm Performance in Vietnam: Evidence from Manufacturing Small and Medium Enterprises", Working Paper No 04-10, School of Economics, University of Wollongong  Litz, R.A (1997) ‘The family firm’s exclusion from business school research: Explaining the void; addressing the opportunity’, Entrepreneurship Theory & Practice, 21(3): 55-71  Martikainen, M., Nikkinen, J., & Vaăhaămaa, S (2009) Production functions and productivity of family firms: Evidence from the S&P 500 The Quarterly Review of Economics and Finance, 49(2), 295–307  Martin Andersson & Hans Lööf, (2011) "Agglomeration and productivity: evidence from firm-level data," The Annals of Regional Science, Springer, vol 46(3), pages 601620, June  Michael, P Todaro & Stephen, C Smith (2012) “Urbanization and Rural-Urban Migration: Theory and Policy” Economic Development 11th ed Pearson Education, Inc., Rights and Contracts Department, 501 Boylston Street, Suite 900, Boston  Miller, D., Le Breton-Miller, I., Lester, R H.,&Cannella, A A., Jr (2007) Are family firms really superior performers? 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Journal of Financial Economics, 80(2), 385–417  Wall, R A (1998) An empirical investigation of the production function of the family firm Journal of Small Business Management, 36(2), 24–32  Ward, J L (1988) The special role of strategic planning for family businesses Family Business Review, 1(2), 105–117  Zahra, S A (2005) Entrepreneurial risk taking in family firms Family Business Review, 18(1), 23–40 47  Yasar, M & Rejesus, R M (2005) Exporting status and _rm performance: Evidence from a matched sample Economics Letters 88(3), 397-402  Yong Yang (2008) The Impact of Exporting on Firm Performance: Evidence from Chinese Queen Mary, University of London  Westphal, J D., & Stern, I (2007) Flattery will get you everywhere (especially if you are a male Caucasian): How ingratiation, boardroom behavior, and demographic minority status affect additional board appointments at U.S companies Academy of Management Journal, 50: 267-288 48 APPENDIX Appendix 1: Criteria to for a small and medium enterprise according to the decree No 56/2009/NĐ-CP dated 30 June 2009 of the Government Criteria to for a small Micro and medium enterprise enterprises Small enterprises Medium enterprises Big enterprises according to the decree No 56/2009/NĐ-CP dated 30 June 2009 of the Government: Scope Sector Employees Capital Employees Capital Employee Capital s I Agriculture, forestry ≤10 and fishery (A) Employee s ≤ 20 More than More than More than More than More than billion 10 20 200 100 billion 300 to 200 to 100 to 300 billion II Industry and ≤10 construction (B-F) ≤ 20 More than More than More than More than More than billion 10 20 200 100 billion 300 to 200 to 100 to 300 billion III Trade and services (G-U) ≤10 ≤ 10 More than More than More than More than More than billion 10 10 50 50 100 to 50 to 50 to 100 billion Source: GSO 2010, The Enterprise in Vietnam years at the beginning of century 21 49 Appendix 2: Number of enterprises by size of capital resources (Large, medium and small) In unit Total number of enterprises By size of capital resource Small enterprises Year Medium enterprises Large enterprises 2000 42288 37564 3334 1390 2001 51680 46119 3943 1618 2002 62908 56013 4915 1980 2003 72012 64101 5622 2289 2004 91756 81941 6993 2822 2005 112950 101264 8336 3350 2006 131318 117680 9780 3858 2007 155771 136788 13365 5618 2008 205689 177803 20349 7537 In percentage (%) Total number of enterprises By size of capital resource Small enterprises Year Medium enterprises Large enterprises 2000 100 88.83 7.88 3.29 2001 100 89.24 7.63 3.13 2002 100 89.04 7.81 3.15 2003 100 89.01 7.81 3.18 2004 100 89.30 7.62 3.08 2005 100 89.65 7.38 2.97 2006 100 89.61 7.45 2.94 2007 100 87.81 8.58 3.61 2008 100 86.44 9.89 3.66 Source GSO 2010, calculated by author 50 Appendix 3: Number of enterprises by size of employees (Large, Medium and Small) In unit Total number of enterprise Year Employee Size Super small Small Medium Large enterprises enterprises enterprises enterprises 2000 42288 22638 14396 1849 3405 2001 51680 27957 18053 1970 3700 2002 62908 33047 23329 2284 4248 2003 72012 36949 28062 2483 4518 2004 91756 49042 35047 2892 4775 2005 112950 63456 41337 3196 4961 2006 131318 80060 42649 3418 5191 2007 155771 95332 50763 4059 5627 2008 205689 127180 68046 4484 5979 In percentage (%) Total number of enterprise Year Employee Size Super small Small Medium Large enterprises enterprises enterprises enterprises 2000 100 53.53 34.04 4.37 8.05 2001 100 54.10 34.93 3.81 7.16 2002 100 52.53 37.08 3.63 6.75 2003 100 51.31 38.97 3.45 6.27 2004 100 53.45 38.20 3.15 5.20 2005 100 56.18 36.60 2.83 4.39 2006 100 60.97 32.48 2.60 3.95 2007 100 61.20 32.59 2.61 3.61 2008 100 61.83 33.08 2.18 2.91 Source GSO 2010, calculated by author 51 Appendix 4: Estimation the equation (2) for the year 2005 by OLS method Source SS df MS Number of obs F( 20, 1727) Model 3172.132 20 158.607 Prob > F Residual 641.512 1727 0.371 R-squared Adj R-squared Total 3813.644 1747 2.183 Root MSE Log Value Add Coefficient Std Err t P>t 1748 426.980 0.000 0.832 0.830 0.609 [95% Conf Interval] Log Labor 0.533 0.037 14.550 0.000 0.461 0.605 Log Capital 0.462 0.024 19.570 0.000 0.415 0.508 F_Labor 0.379 0.046 8.300 0.000 0.289 0.469 F_Capital -0.300 0.028 -10.870 0.000 -0.354 -0.246 1.033 0.170 6.090 0.000 0.700 1.366 Ha_Noi -0.384 0.059 -6.550 0.000 -0.499 -0.269 Phu_Tho -0.627 0.060 -10.370 0.000 -0.746 -0.509 Ha_Tay -0.320 0.050 -6.410 0.000 -0.418 -0.222 Hai_Phong -0.382 0.064 -5.980 0.000 -0.507 -0.257 Nghe_An -0.517 0.052 -10.010 0.000 -0.618 -0.416 Khanh_Hoa -0.109 0.079 -1.390 0.166 -0.264 0.045 Quang_Nam -0.183 0.069 -2.660 0.008 -0.318 -0.048 Lam_Dong -0.226 0.093 -2.440 0.015 -0.407 -0.044 Long_An -0.098 0.073 -1.340 0.179 -0.240 0.045 Number of year -0.008 0.001 -6.130 0.000 -0.010 -0.005 Export 0.135 0.072 1.880 0.060 -0.006 0.276 Apparel -0.183 0.091 -2.000 0.045 -0.362 -0.004 0.117 0.041 2.870 0.004 0.037 0.196 -0.161 0.072 -2.230 0.026 -0.303 -0.020 Furniture 0.155 0.057 2.720 0.007 0.043 0.267 _cons 1.318 0.161 8.200 0.000 1.003 1.633 Family involvement Fabricated Textile 52 Appendix 5: Estimation the equation (2) for the year 2005 by GLS method Linear regression Number of obs F( 20, 1727) Prob > F R-squared Root MSE Log Value Add Robust Coefficient Std Err t P>t 1748 410.320 0.000 0.832 0.609 [95% Conf Interval] Log Labor 0.533 0.089 6.010 0.000 0.359 0.707 Log Capital 0.462 0.085 5.420 0.000 0.295 0.629 F_Labor 0.379 0.093 4.060 0.000 0.196 0.562 F_Capital -0.300 0.085 -3.530 0.000 -0.466 -0.133 1.033 0.405 2.550 0.011 0.239 1.827 Ha_Noi -0.384 0.068 -5.610 0.000 -0.518 -0.250 Phu_Tho -0.627 0.061 -10.320 0.000 -0.746 -0.508 Ha_Tay -0.320 0.052 -6.160 0.000 -0.422 -0.218 Hai_Phong -0.382 0.061 -6.280 0.000 -0.501 -0.262 Nghe_An -0.517 0.056 -9.270 0.000 -0.627 -0.408 Khanh_Hoa -0.109 0.070 -1.560 0.120 -0.247 0.028 Quang_Nam -0.183 0.060 -3.030 0.002 -0.302 -0.065 Lam_Dong -0.226 0.073 -3.100 0.002 -0.368 -0.083 Long_An -0.098 0.062 -1.590 0.113 -0.218 0.023 Apparel -0.183 0.116 -1.580 0.114 -0.410 0.044 0.117 0.034 3.420 0.001 0.050 0.184 -0.161 0.066 -2.430 0.015 -0.292 -0.031 Furniture 0.155 0.046 3.390 0.001 0.066 0.245 Export 0.135 0.089 1.520 0.129 -0.040 0.310 -0.008 0.001 -6.070 0.000 -0.010 -0.005 1.318 0.415 3.170 0.002 0.503 2.132 Family involvement Fabricated textile Number of year _cons 53 Appendix 6: Estimation the equation (2) for the year 2007 by OLS method Source SS df MS Number of obs F( 20, 1727) Model 3620.328 20 181.016 Prob > F Residual 733.523 1727 0.425 R-squared Adj R-squared Total 4353.851 1747 2.492 Root MSE Log Value Add Coefficient Std Err t P>t 1748 426.180 0.000 0.832 0.830 0.652 [95% Conf Interval] Log Labor 0.734 0.039 19.040 0.000 0.658 0.809 Log Capital 0.252 0.026 9.580 0.000 0.201 0.304 F_Labor 0.189 0.049 3.850 0.000 0.093 0.285 F_Capital -0.081 0.031 -2.620 0.009 -0.141 -0.020 Family involvement -0.051 0.199 -0.250 0.799 -0.440 0.339 Ha_Noi -0.230 0.063 -3.680 0.000 -0.352 -0.107 Phu_Tho -0.744 0.067 -11.060 0.000 -0.876 -0.612 Ha_Tay -0.418 0.054 -7.750 0.000 -0.524 -0.312 Hai_Phong -0.617 0.068 -9.040 0.000 -0.751 -0.483 Nghe_An -0.312 0.058 -5.390 0.000 -0.426 -0.199 Khanh_Hoa -0.396 0.085 -4.670 0.000 -0.562 -0.229 Quang_Nam -0.425 0.075 -5.700 0.000 -0.571 -0.278 Lam_Dong 0.015 0.100 0.150 0.883 -0.181 0.210 Long_An -0.517 0.077 -6.680 0.000 -0.669 -0.365 Number of year -0.011 0.001 -8.030 0.000 -0.013 -0.008 Export 0.325 0.079 4.120 0.000 0.171 0.480 Apparel -0.199 0.097 -2.050 0.040 -0.389 -0.009 0.095 0.044 2.170 0.030 0.009 0.180 -0.207 0.077 -2.690 0.007 -0.358 -0.056 Furniture 0.212 0.061 3.480 0.001 0.093 0.332 _cons 2.702 0.185 14.580 0.000 2.338 3.065 Fabricated Textile 54 Appendix 7: Estimation the equation (2) for the year 2007 by GLS method Linear regression Number of obs 1748 F( 20, 1727) Log Value Add Coef 472.010 Prob > F 0.000 R-squared 0.832 Root MSE 0.652 Robust Std Err t P>t [95% Conf Interval] Log Labor 0.734 0.039 18.750 0.000 0.657 0.810 Log Capital 0.252 0.027 9.510 0.000 0.200 0.304 F_Labor 0.189 0.053 3.560 0.000 0.085 0.293 F_Capital -0.081 0.032 -2.540 0.011 -0.143 -0.018 Family involvement -0.051 0.188 -0.270 0.788 -0.419 0.317 Ha_Noi -0.230 0.063 -3.640 0.000 -0.354 -0.106 Phu_Tho -0.744 0.062 -11.920 0.000 -0.866 -0.621 Ha_Tay -0.418 0.057 -7.320 0.000 -0.530 -0.306 Hai_Phong -0.617 0.076 -8.170 0.000 -0.765 -0.469 Nghe_An -0.312 0.054 -5.820 0.000 -0.417 -0.207 Khanh_Hoa -0.396 0.071 -5.570 0.000 -0.535 -0.256 Quang_Nam -0.425 0.062 -6.850 0.000 -0.546 -0.303 Lam_Dong 0.015 0.099 0.150 0.883 -0.180 0.210 Long_An -0.517 0.089 -5.830 0.000 -0.691 -0.343 Apparel -0.199 0.091 -2.190 0.028 -0.377 -0.021 0.095 0.043 2.220 0.027 0.011 0.178 -0.207 0.068 -3.030 0.003 -0.341 -0.073 Furniture 0.212 0.050 4.210 0.000 0.113 0.311 Export 0.325 0.085 3.840 0.000 0.159 0.491 -0.011 0.002 -6.810 0.000 -0.014 -0.008 2.702 0.178 15.210 0.000 2.353 3.050 Fabricated textile Number of year _cons 55 Appendix 8: Estimation the equation (2) for the year 2009 by OLS method Source SS df MS Number of obs 1748.000 F( 20, 1727) Model Residual 3948.012 20 592.868 1727 575.020 197.401 Prob > F 0.000 0.343 R-squared 0.869 Adj R-squared Total Log Value Add 4540.880 1747 Coefficient Std Err 0.868 2.599 Root MSE t P>t 0.586 [95% Conf Interval] Log Labor 0.801 0.035 22.980 0.000 0.733 0.869 Log Capital 0.264 0.026 10.120 0.000 0.213 0.315 F_Labor 0.135 0.044 3.070 0.002 0.049 0.221 F_Capital -0.050 0.030 -1.670 0.096 -0.108 0.009 Family involvement -0.164 0.171 -0.960 0.338 -0.498 0.171 Ha_Noi -0.027 0.056 -0.490 0.627 -0.138 0.083 Phu_Tho -0.473 0.063 -7.520 0.000 -0.596 -0.349 Ha_Tay -0.261 0.048 -5.430 0.000 -0.355 -0.166 Hai_Phong -0.132 0.061 -2.150 0.031 -0.252 -0.012 Nghe_An -0.294 0.053 -5.540 0.000 -0.398 -0.190 Khanh_Hoa -0.496 0.076 -6.530 0.000 -0.645 -0.347 Quang_Nam -0.184 0.067 -2.760 0.006 -0.315 -0.053 Lam_Dong -0.187 0.089 -2.090 0.037 -0.362 -0.011 Long_An -0.270 0.070 -3.880 0.000 -0.407 -0.134 Number of year -0.010 0.001 -8.220 0.000 -0.012 -0.007 Export 0.247 0.066 3.730 0.000 0.117 0.377 Apparel -0.160 0.088 -1.820 0.069 -0.331 0.012 0.135 0.039 3.450 0.001 0.058 0.212 -0.136 0.069 -1.970 0.049 -0.271 0.000 Furniture 0.116 0.055 2.120 0.034 0.009 0.224 _cons 1.824 0.163 11.200 0.000 1.504 2.143 Fabricated textile 56 Appendix 9: Estimation the equation (2) for the year 2009 by GLS method Linear regression Number of obs 1748 F( 20, 1727) Log Value Add Robust Coefficient Std Err 547.800 Prob > F 0.000 R-squared 0.869 Root MSE 0.586 t [95% Conf P>t Interval] Log Labor 0.801 0.044 18.240 0.000 0.715 0.887 Log Capital 0.264 0.036 7.300 0.000 0.193 0.335 -0.164 0.196 -0.830 0.404 -0.548 0.221 F_Labor 0.135 0.053 2.550 0.011 0.031 0.238 F_Capital -0.050 0.039 -1.260 0.206 -0.127 0.027 Ha_Noi -0.027 0.057 -0.480 0.630 -0.139 0.084 Phu_Tho -0.473 0.061 -7.790 0.000 -0.591 -0.354 Ha_Tay -0.261 0.054 -4.800 0.000 -0.367 -0.154 Hai_Phong -0.132 0.065 -2.020 0.044 -0.260 -0.004 Nghe_An -0.294 0.047 -6.320 0.000 -0.385 -0.203 Khanh_Hoa -0.496 0.069 -7.220 0.000 -0.631 -0.361 Quang_Nam -0.184 0.059 -3.130 0.002 -0.300 -0.069 Lam_Dong -0.187 0.070 -2.660 0.008 -0.324 -0.049 Long_An -0.270 0.053 -5.070 0.000 -0.375 -0.166 Apparel -0.160 0.086 -1.850 0.065 -0.329 0.010 0.135 0.033 4.070 0.000 0.070 0.200 -0.136 0.069 -1.960 0.050 -0.272 0.000 Furniture 0.116 0.048 2.440 0.015 0.023 0.210 Export 0.247 0.070 3.530 0.000 0.110 0.384 -0.010 0.001 -7.590 0.000 -0.012 -0.007 1.824 0.186 9.800 0.000 1.459 2.189 Family involvement Fabricated Textile Number of year _cons 57 Appendix 10: The firm production function estimation in pool data Source SS df MS Model Residual 10966.230 2302.028 20 5223 Total 13268.258 5243 Log Value Add Coefficient Std Err Number of obs F( 20, 5223) 548.312 Prob > F 0.441 R-squared Adj R-squared 2.531 Root MSE t P>t 5244 1244.05 0.000 0.827 0.826 0.664 [95% Conf Interval] Log Labor 0.660 0.023 29.270 0.000 0.616 0.705 Log Capital 0.377 0.015 24.920 0.000 0.347 0.406 F_Labor 0.225 0.028 7.940 0.000 0.170 0.281 F_Capital -0.145 0.018 -8.260 0.000 -0.179 -0.110 0.350 0.108 3.230 0.001 0.137 0.562 Ha_Noi -0.211 0.037 -5.740 0.000 -0.283 -0.139 Phu_Tho -0.552 0.039 -14.170 0.000 -0.628 -0.475 Ha_Tay -0.309 0.031 -9.830 0.000 -0.370 -0.247 Hai_Phong -0.379 0.040 -9.450 0.000 -0.457 -0.300 Nghe_An -0.322 0.033 -9.660 0.000 -0.388 -0.257 Khanh_Hoa -0.321 0.050 -6.470 0.000 -0.418 -0.224 Quang_Nam -0.210 0.043 -4.830 0.000 -0.295 -0.125 Lam_Dong -0.111 0.058 -1.900 0.058 -0.225 0.004 Long_An -0.269 0.046 -5.910 0.000 -0.358 -0.180 Number of year -0.010 0.001 -13.510 0.000 -0.012 -0.009 Export 0.215 0.045 4.800 0.000 0.127 0.302 Apparel -0.183 0.057 -3.200 0.001 -0.295 -0.071 0.122 0.026 4.780 0.000 0.072 0.173 -0.164 0.045 -3.630 0.000 -0.253 -0.076 Furniture 0.155 0.036 4.320 0.000 0.085 0.225 _cons 1.639 0.102 16.000 0.000 1.438 1.840 Family involvement Fabricated Textile 58 Appendix 11: The firm production function estimation in panel fixed-effects Fixed-effects (within) regression Group variable: Code2 R-sq: within = 0.3742 between = 0.6903 overall = 0.6339 Number of obs Number of groups Obs per group: avg max F(6,3490) Prob > F corr(u_i, Xb) = -0.6811 Log Value Add Coefficients Std Err t 5244 1748 3 347.850 0.000 P>t [95% Conf Interval] Log Labor 0.594 0.040 14.720 0.000 0.515 0.673 Log Capital 0.405 0.022 18.560 0.000 0.362 0.447 F_Labor 0.008 0.050 0.150 0.880 -0.091 0.106 F_Capital -0.194 0.025 -7.720 0.000 -0.244 -0.145 Number of year -0.080 0.005 -15.370 0.000 -0.091 -0.070 Export 0.205 0.065 3.170 0.002 0.078 0.332 _cons 3.299 0.133 24.770 0.000 3.038 3.561 sigma_u 1.131 sigma_e 0.601 Rho 0.780 (fraction of variance due to u_i) 59 Appendix 12: The firm production function estimation in panel random-effects Random-effects GLS regression Group variable: Code2 R-sq: within = 0.3359 between = 0.9148 overall = 0.8264 corr(u_i, X) = (assumed) Log Value Add Log Labor Log Capital F_Labor F_Capital Family involvement Ha_Noi Phu_Tho Ha_Tay Hai_Phong Nghe_An Khanh_Hoa Quang_Nam Lam_Dong Long_An Apparel Fabricated Textile Furniture Number of year Export _cons sigma_u sigma_e rho Number of obs Number of groups Obs per group: avg max Wald chi2(20) Prob > chi2 Coefficients Std Err z 0.649 0.024 0.385 0.016 0.208 0.030 -0.148 0.018 0.399 0.116 -0.211 0.042 -0.557 0.044 -0.305 0.036 -0.381 0.046 -0.330 0.038 -0.324 0.056 -0.215 0.049 -0.113 0.066 -0.270 0.052 -0.183 0.065 0.122 0.029 -0.158 0.051 0.157 0.041 -0.011 0.001 0.216 0.046 1.619 0.110 5244 1748 3 19799.56 0.000 P>z 27.210 24.620 6.940 -8.180 3.450 -5.050 -12.700 -8.540 -8.360 -8.770 -5.750 -4.370 -1.700 -5.210 -2.820 4.180 -3.060 3.840 -12.760 4.650 14.750 0.000 0.000 0.000 0.000 0.001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.090 0.000 0.005 0.000 0.002 0.000 0.000 0.000 0.000 [95% Conf Interval] 0.602 0.695 0.355 0.416 0.149 0.267 -0.184 -0.113 0.172 0.626 -0.293 -0.129 -0.643 -0.471 -0.375 -0.235 -0.470 -0.292 -0.404 -0.256 -0.435 -0.214 -0.312 -0.119 -0.243 0.018 -0.371 -0.168 -0.311 -0.056 0.065 0.179 -0.259 -0.057 0.077 0.237 -0.013 -0.009 0.125 0.307 1.404 1.834 0.246 0.601 0.144 (fraction of variance due to u_i) 60