This paper aims to revisit the Porter hypothesis associated with TFP convergence using a panel data set of manufacturing SMEs in Vietnam covering 2005 - 2015. It contributes to the literature by giving more deeply understanding about TFP convergence of SMEs. Especially, this is the first one examining the link between environmental practices and TFP convergence. We apply the stochastic method developed by Levinsohn and Petrin (2003) to estimate stochastic TFP. The theory of σ- and β-convergence developed by Barro and Sala-i Martin (1995) and Sala-i Martin (1996) is used to establish empirical framework and test its convergence/divergence. We showed an existence a steady-state of productivity between enterprises. However, we found no significant evidence to support the ‘Strong version’ of the Porter hypothesis. Interestingly, cluster proximity has significantly negative impact on productivity growth.
