Competition and firm performance: evidence from Vietnam

PurposeThis paper aims to examine the impact of competition on firm performance using a data set of 352 firms listed on Vietnam’s stock exchanges from 2015 to 2019.Design/methodology/approachThe two-step system generalized method of moments is used to estimate this impact.FindingsThe findings reveal an inverted U-shaped relationship between competition and firm performance. Competition improves firm performance if its intensity is moderate. However, if the competition intensity exceeds the optimal level, the performance deteriorates accordingly.Research limitations/implicationsThe authors only studied Vietnamese firms due to the limited ability in data collection. It would be better to validate the findings using data from other transition economies.Practical implicationsThe non-linear relationship between competition and performance implies that government should pay more attention to retaining competition at an appropriate level.Social implicationsFirms contribute a lot to the prosperity of Vietnam. Therefore, the findings have a meaningful implication for Vietnam’s government to moderate competition to improve its firms’ performance.Originality/valueThis paper contributes to the extant literature by providing firsthand evidence of the impact of competition on firm performance in Vietnam – a transition economy.