Determinants of firm growth in the Vietnamese commercial-service sector. Employing the dynamic panel model, this study tests the validity of Gibrat ’s law and investigates determinants of firm growth in Vietnam. The empirical study is setup for both simple and multiple regressions with the data of the commercial-service sector. | Journal of Economics and Development Vol. 14, , April 2012, pp. 57 - 77 ISSN 1859 0020 Determinants of Firm Growth in the Vietnamese Commercial-Service Sector Nguyen Thi Nguyet Central Institute for Economic Management, Vietnam Email: nguyetnt@ Abstract Employing the dynamic panel model, this study tests the validity of Gibrat’s law and investigates determinants of firm growth in Vietnam. The empirical study is set up for both simple and multiple regressions with the data of the commercial-service sector. The balanced panel dataset used in this paper is abstracted from the National Census of Vietnamese Enterprises during the period 2000-2007. Applying the system GMM estimator to control unobserved heterogeneity and endogeneity, the findings imply that Gibrat’s Law should be rejected. The results confirm the sensitivity of the growth-size relationship to firm attributes. Besides, firm size and labor quality are the main determinants of firm growth. Keywords: Firm growth, determinants of firm growth, developing countries, dynamic panel model, Gibrat’s Law, GMM estimator. Journal of Economics and Development 57 Vol. 14, , April 2012 1. Introduction ings. The law was supported by some authors (Steindl, 1965; Prais, 1976, Chap. 2), but rejected by others (Reid, 1992; Audretsch et al., 1999; and Calvo, 2006). Recently, Gibrat’s law has been tested in the presence of other potential determinants of firm growth (Higson et al., 2004; Beck et al., 2005; Bartelsman et al., 2005; Fisman and Svensson, 2007). The analysis of firm growth plays an important role in the field of economic dynamics. From a microeconomic perspective, the more continuously firms grow, the higher probability of survival they have (Ghosh, 2008). Furthermore, firms with positive rates of growth will reduce unemployment via creating new jobs, and even push competition in the market. Firm growth at a high rate will increase its market share, thus enhancing its competitiveness. .
