Do Better Managers Engage in Less Corruption

Title of Project: Do Better Managers Engage in Less Corruption

Sector: Evaluation of SME policies

Country: Vietnam 

Lead Institution: Duke Center for International Development, Duke University    

Co-PI Institution: Institute for Sustainable Development, National Economics University

Partner(s): Sustainable Development for Business, Vietnam Chamber of Commerce and Industry   

Final Budget: $ 231,946

Project Length: 24 months

Research Objective:

To evaluate the impact of improved management on the incidence of corruption among SMEs in Vietnam. The project will do this by randomly assigning SMEs to a management training intervention, along with three other interventions to rule out alternative pathways. The research team will measure outcomes related to management capacity, productivity, regulatory compliance, and participation in corrupt activities (e.g. bribery, etc.). 

Project Description:

Despite their growing role in the economy, Vietnamese Small and Medium Size Enterprises (SMEs) are still plagued by well-known limitations, including limited capacity, scale, and internationalization. Reports by the Office for Business Sustainable Development (SDforB) in the Vietnam Chamber of Commerce and Industry (VCCI) have drawn direct connections between these failings and inadequate management quality in the domestic sector (Nguyen and Vu 2019; Malesky et al. 2018). In this proposal, we incorporate the latest insights from the economics and business strategy literatures to tailor a training program to managers at SMEs. We expect this course to improve management practices as well as productivity and other development outcomes, such as increased business expansion, wage growth, and employment.  Most importantly, we hypothesize that better management will alleviate another notorious burden afflicting the domestic private sector — corruption.  Two mechanisms underlie this proposed relationship.  First, streamlined management practices help SMEs cut waste and become more efficient. Efficient businesses are less likely to violate regulations to stay competitive, which reduces the risk of extortion by regulatory inspectors. Second, cutting-edge management training allows managers to better monitor operations and the actions of lower-level employees, which reduces the risks of subordinates violating regulations and bribing government officials without managers’ knowledge. 

We propose to test these hypotheses by providing access to specialized management courses for a randomly selected set of restaurant owners and managers in Hanoi. To rule out alternative mechanisms, we will provide additional training courses for other SME owners and managers on internal controls, ethics, and marketing, and measure the outcomes for all participants. Working closely with local partners at the SDforB and the Institute for Sustainable Development at National Economics University (ISD-NEU) – with whom we have longstanding collaborative relationships, and whose previous research and interventions we are building upon – we will rigorously measure productivity via monthly workbooks, and corruption via behavioral and shielded survey techniques. Comparing outcomes for different kinds of training courses will allow us to isolate the pathways by which training affects corruption and provide a comprehensive cost-benefit analysis of specialized management training compared to other interventions.

An important feature of our project is that we focus on the under-researched but rapidly growing service sector, which has absorbed a significant share of the labor force during Vietnam’s structural transformation, and now accounts for over 42% of GDP and 35% of the labor force. In particular, since 2005, roughly two million workers have taken jobs in restaurants, hotels, and catering, leading to a 2.5 percentage point shift in its net employment share.  Part of this rise has been fueled by Vietnam’s 22.4 billion USD tourist industry (9.2% of GDP), but a larger portion is aimed at satisfying the demands of Vietnam’s expanding middle class markets. Vietnam’s $108 billion retail market is poised to grow at 7.3 percent annually over the next five years — the fastest-growing in Southeast Asia.  

Embedded Research Translation Product

Techniques for management training that enhance regulatory compliance and reduce exposure to bribe requests.

Embedded Research Translation Audience:

Small and medium size enterprises, women leaders, and local and national authorities in Vietnam.

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