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The exporting and subcontracting decisions of a panel of Vietnamese private small- and mediumsized enterprises is investigated. We find that among subcontractors, subcontracting is a supplementary rather than primary activity; the propensity to export increases with managers' or owners' knowledge of customs law; and, there is some evidence that subcontractors are more likely to have made product improvements while exporters are more likely to have adopted new processes or technologies. Our study provides useful insights into SME exporting and subcontracting strategies made more relevant by the expected reductions in trade costs associated with the World Trade Organization's Trade Facilitation Agreement.
6. Concluding remarks and extensions
In a short time, Viet Nam has become an important merchandise exporter worldwide. It was ranked 26 in 2016 (WTO, 2017b), but more than half of the country's exports in 2015 originated from FIEs while Viet Nam's SMEs only account for 20 per cent of exports (International Trade Center, 2015). Close to 66 per cent of private sector employment was with SMEs in 2012 (Ministry of Planning and Investment, 2014). Given this backdrop, we investigate issues related to SMEs' exporting and subcontracting decisions. We find evidence that knowledge of customs law increases the likelihood of exporting directly. Based on this result, an aggressive informational campaign by government or business associations to increase SMEs' knowledge of customs law is an important precondition to foreign market participation. Because exporting is hard, the subcontracting route has been touted as an option for SMEs worldwide (e.g. International Trade Centre, 2015). Subcontracting traditionally involves large enterprises. Subcontracting as an option for SMEs is a much understudied area in the literature. We uncover some evidence that the likelihood of subcontracting is associated with improvements in existing products while the likelihood of exporting is associated with adoption of new processes or technologies. Thus, expanding programmes that enhance the technical capacity of the SMEs could potentially expand their participation in foreign markets or subcontract work for FIEs operating in Viet Nam.