2.1.1 International standards of corporate governance

International best practices of corporate governance are largely shaped by the OECD and the World Bank. In 1998, the OECD set milestones for global guidelines on corporate governance with its “OECD Principles of Corporate Governance,” (OECD, 1999b) which were revised in 2004 and updated to a G20 version in 2015 (OECD, 2015). The OECD principles ensure a basis for effective corporate governance through a framework based on five areas: the rights of shareholders, equitable treatment of shareholders, the role of stakeholders, disclosure and transparency, and responsibilities of the board. The International Organization of Securities Commissions (IOSCO) recommends the OECD principles of corporate governance for emerging markets. In fact, the OECD principles serve as a blueprint when frontier or emerging countries enact corporate governance reforms. Although some researchers note that “it is unlikely that a single set of best practices exists for all firms” (Larcker & Tayan, 2015, p. 11; see also Andrews, 2010) or discuss the suitability of such practices for emerging economies (Berglöf & von Thadden, 1999; Siems & Alvarez-Macatela, 2014), OECD principles seem to be the de facto benchmark for “good” corporate governance (Jesover & Kirkpatrick, 2005; OECD, 1999a, 2011). For example, the World Bank produces “Enterprise Surveys” with a focus on the rights and treatment of shareholders and stakeholders (Mallin, 2012). Moreover, the World Bank publishes scorecards through its affiliate International Finance Corporation (IFC), which attempts to protect investors from inadequate corporate governance by publishing corporate governance ratings based on OECD principles (Larcker & Tayan, 2015).

2.1.2 Association between corporate governance and economic prosperity

Regarding the association of corporate governance and economic prosperity, La Porta et al. (1997), La Porta et al. (2000), Levine and Zervos (1998) and Rajan and Zingales (1998) find that higher levels of investor protection and more developed capital markets are associated with economic prosperity at the country level. At the firm level, Gombers et al. (2003) find stronger shareholder rights to be associated not only with higher firm value, higher profits, and higher sales growth but also with lower capital expenditures and fewer corporate acquisitions. It is also questioned whether capital market-based evidence can be generalized to emerging economies and whether OECD principles are suitable for emerging countries (Berglöf & von Thadden, 1999; Siems & Alvarez-Macotela, 2014). Emerging countries are often characterized by concentrated ownership structures, connection-based transactions and a dominant role of specific stakeholders, such as the state. These characteristics can induce an agency conflict between the controlling and minority shareholders (Young et al., 2008). Consequently, conflicts of interest between minority and majority shareholders and between firm managers and owners become more severe (Claessens & Fan, 2002). Building on these findings, Chen et al. (2011) argue and document that a commitment to OECD principles of corporate governance cannot attenuate the negative effect of controlling-shareholder expropriation on firm performance in a Chinese setting. To explain their results, the authors cite the OECD’s focus on the resolution of conflicts between shareholders and management but not on conflicts between controlling and minority shareholders. Additionally, they point to board directors who are typically not independent of controlling shareholders, while supervisory directors often have low status and weak power in a firm.

In addition to these predominantly empirical-archival papers, political science studies argue that the developmental state plays an important role in explaining economic growth (Haggard, 2018; Johnson, 1982; Stiglitz, 1998). A developmental state is characterized by, among other things, a concentration of power, authority, autonomy and competence in central political and bureaucratic institutions and can be found in many East Asian countries (Leftwich, 1995). In particular, the literature emphasizes the role of government intervention and industrial policy as well as the significance of strong states in explaining economic growth. Existing research also emphasizes the transformation of society and education. A shift to scientific ways of thinking and a narrowing technological gap are considered essential for explaining economic development (Stiglitz, 2002, 2003). Consequently, according to the developmental state literature, the adoption of international standards of corporate governance, the introduction of anti-corruption measures or the implementation of market-conforming policies in general play a weak role in economic growth (Moran, 1999; Önis, 1991; Stiglitz, 1998; Woo-Cumings, 1999).

2.1.3 Corporate governance quality in Vietnam

Considering the quality of governance in Vietnam, the state of convergence towards international standards, and in particular, the relation with economic prosperity, existing empirical findings are rather scarce. In McGee’s (2009) cross-country study of emerging countries based upon the OECD principles, Vietnam is ranked lowest in almost all areas. Nguyen (2008) concludes that Vietnam’s corporate governance system is characterized by two particular features, namely, that authority is concentrated in a few persons and that external supervision is nonexistent or very weak. He infers that this allows for abuse of power that negatively impacts the development of companies in particular and the whole economy in general. He thus suggests the need to improve corporate governance regulation and its actual enforcement. Minh and Walker (2008) conduct case studies on corporate governance issues in selected Vietnamese companies. They infer that inadequate securities regulation erodes investor protection, and they develop recommendations to address those weaknesses. In line with these findings, the IFC (2012) scorecard on the quality of corporate governance in 100 Vietnam-listed firms concludes as follows: “It is accurate to say CG practices in Vietnam remain more evident in rules than in application and implementation” (IFC, 2012, p. 14). The World Bank’s “Report on the Observance of Standards and Codes (ROSC)” from August 2013 reached similar conclusions. While the ROSC acknowledges achievements such as the country’s rapid market growth since 2006 and the equitization of state-owned enterprises (SOEs), the report points to key obstacles; for example, “Overall, the corporate governance of many SOEs remains poor, with weaknesses in terms of transparency, board professionalism, and how the state acts as owner” (World Bank, 2013, p. 27). Owoeye & van der Pijl (2016) discuss recent corporate governance reforms in Vietnam and conclude that with the enactment of the Enterprises Law 2014, which came into force in July 2015, many of the challenges associated with corporate governance in Vietnam are being addressed. Those authors infer that the major challenge is the enforcement of the regulatory reforms, and they address the interrelation between corporate governance and corruption: “It is also important to take effective measures to address the issue of corruption as this is a serious challenge that could make the implementation of good corporate governance standards particularly daunting” (Owoeye & van der Pijl, 2016, p. 74).

2.1.4 Interrelation between corporate governance quality and corruption

In line with the argument by Owoeye & van der Pijl (2016), the empirical results by Wu (2005) indicate that good corporate governance can reduce corruption. Assuming a negative association between corruption and economic prosperity, Wu (2005) postulates that shareholders and investors in countries experiencing a high level of corruption may receive double dividends from improvements in corporate governance. At the country level, improvement in corporate governance may help a country with a high level of corruption to partially offset the negative impacts of the perception of corruption on the flow of capital (both financial and human). At the firm level, better corporate governance helps to reduce bribery practices, which can further increase firm valuation.

2.1.5 Development of research question 1

Prior research on the country and firm levels generally finds a positive association between compliance with OECD principles – or similar standards or proxies of “good corporate governance” – and performance indicators. However, some evidence for emerging countries casts doubt on whether those results can be generalized to developing and emerging economies with concentrated ownership structures and connection-based transactions. The developmental state literature emphasizes the prevailing role of government intervention, industrial policy and education as well as the significance of strong states and a transformation of society when explaining rapid economic developments in emerging countries.

In addition to the relation between corporate governance and economic prosperity, it is uncertain whether and how a high level of corruption might affect the relation between corporate governance and economic prosperity in developing and emerging countries. Because of these inconclusive empirical findings and the enduring debate on the suitability of the OECD principles of corporate governance for developing and emerging countries, we believe it is promising to complement a descriptive analysis primarily relying on archival data with qualitative insights from the field, followed by examining the role of corruption.

Research question 1: Is there an association between compliance with OECD principles and economic prosperity? If so, what are the channels through which compliance with OECD principles affects economic prosperity?

2.2.1 International view on corruption

The international perception of corruption is mainly shaped by Transparency International, which defines corruption as “the abuse of entrusted power for private gain,” which might undermine “people’s trust in political and economic systems, institutions and leaders.” According to Transparency International, corruption “hinder[s] the development of fair market structures and distorts competition, which in turn deters investment” (Transparency International, 2017). Transparency International perceives measures against corruption to be “an integral part [of] sustainable growth” (Transparency International, 2015). To quantify the current level of corruption on a country level, Transparency International constructs and publishes a Corruption Perceptions Index (CPI) on a yearly basis; the World Bank’s Control of Corruption Index (CCI) follows a similar approach. Consistent with Transparency International’s view, the OECD infers that measures against corruption and improvements to governance structures (which reduce opportunities for corruption) should be given high priority in a country’s structural reform agenda: “The subversive effects of corruption regarding general trust and government legitimacy prevail in both low and high quality governance scenarios, and their damage to overall efficiency and wellbeing is likely to be significant” (OECD, 2013, p. 36).

2.2.2 Association between corruption and economic prosperity

Prior research on the association between corruption and economic prosperity has produced puzzling results. As the OECD summarizes, empirical studies show that corruption negatively affects many of the drivers or determinants of economic growth. The OECD infers that the ultimate effect on growth is negative, despite the absence of a significant and robust direct correlation among these variables (OECD, 2013). Some empirical findings show a negative association between performance indicators and corruption at the country and/or firm level more directly. Still other papers question the direction of causality (e. g. Everett, Neu, & Rahaman, 2007).

For instance, several studies at the country level find that corruption – mostly measured by indices or scores – is negatively associated with performance indicators such as investments or growth rates (e. g. Ahlin & Pang, 2008; Borlea et al., 2017; Donadelli et al., 2014; Garmaise & Liu, 2005; Mauro, 1995; Mo, 2001; North, 1990; Romer, 1994; Shleifer & Vishny, 1993). According to Mo (2001), the most important channel through which corruption affects economic growth is political instability. Owoeye & van der Pijl (2016) point to a survey study by Hellman (2000) and suggest that corruption makes a country less competitive for investors and undermines the potential for economic prosperity. They infer that corruption not only limits the amount of FDI a country attracts but also undermines the quality of this investment. Studies that utilize country-level corruption measures based on scores are criticized because the scores might not necessarily reflect reality (for an overview, see Lopatta, Jaeschke, Tchikov, & Lodhia, 2017).

At the firm level, some studies suggest a negative association between corruption and several performance indicators. For instance, Nguyen and Van Dijk (2012) use data from the World Bank’s ‘‘Productivity and Investment Climate Enterprise Survey’’ and compare private firms with SOEs in Vietnam. Quantifying corruption by developing a corruption severity perception survey, they find that corruption harms economic growth because it favors the state sector at the expense of the private sector. Using survey data for Vietnam, Rand and Tarp (2012) find that bribe payments are associated with several firm characteristics and negatively affect firm growth.

Several studies have produced mixed or inconclusive results (e. g. Li, Xu, & Zou, 2000; Sharma & Mitra, 2015). Some studies find that corruption is less harmful in some countries than in others. According to the studies by Méndez and Sepúlveda (2006) and Huang (2016), corruption may be less harmful in developing countries and in countries that are not considered politically free. Other studies even find a positive association between corruption and performance indicators. There is a stream of literature suggesting that corruption improves efficiency and contributes to growth. Those studies argue that corruption might add to economic growth in two ways: “(i) corrupt practices such as ‘speed money’ would enable individuals to avoid bureaucratic delay; and (ii) government employees who are allowed to levy bribes have incentives to work harder and more efficiently” (Nguyen & Van Dijk, 2012, p. 2937 referring to Leff, 1964; Huntington, 1968; Lui, 1985; see also Cheung, 2005). In line with this reasoning, Zeume (2017) exploits the U.K. Bribery Act 2010 as a shock to U.K. firms’ cost of doing business and finds that U.K. firms operating in high-corruption countries experience a decline in firm value, while their non-U.K. competitors in these countries experience an increase in value. He concludes that bribes facilitate doing business in certain countries. In the Vietnamese setting, the empirical findings of Nguyen et al. (2016) also tend to support a positive association between corruption and firm performance as measured by innovation. Furthermore, a few studies explicitly examine the characteristics of corrupting firms. For instance, Sahakyen & Stiegert (2012) analyze survey data from Armenian businesses and find that corruption is perceived as favorable among firms that (1) do not face significant competition, (2) are relatively larger, and (3) are younger.

2.2.3 “East Asia Paradox”

Some papers refer to an “East Asia paradox” because countries in China and Southeast Asia show exceptional growth records despite having thriving cultures of corruption. Wang and You (2012) argue and find that there is a substitution relationship between corruption and financial development on firm growth. Thus, corruption appears not to be a vital constraint on firm growth in underdeveloped financial markets. However, pervasive corruption deters firm growth in more developed financial markets (Wang & You, 2012). Somewhat consistent with this notion, Aidt et al. (2008) build an analytical model and argue that in a regime with high-quality political institutions, corruption has a substantial negative impact on growth, whereas in a regime with low-quality institutions, corruption has no impact on growth.

2.2.4 Development of research question 2

Reviewing prior literature, we conclude that prior research on the country and firm levels produced puzzling results and divergent theories about the association between corruption and economic prosperity as well as about the channels through which corruption might affect economic prosperity. In summarizing the state of research, the OECD comes to similar conclusions and notes that corruption negatively affects many of the drivers or determinants of economic growth, suggesting that the

fact that corruption appears to be less damaging to growth in an environment of poor public sector governance does not justify complacency by policy makers. Rather, it provides a strong signal that improving governance structures (which will in turn reduce corruption opportunities) should be given high priority in the country’s structural reform agenda. The subversive effects of corruption regarding general trust and government legitimacy prevail in both low- and high-quality governance scenarios, and their damage to overall efficiency and wellbeing is likely to be significant. (OECD, 2013, p. 36)

In light of the puzzling empirical results and the persistently negative views on corruption, we believe it is promising to complement a descriptive analysis primarily relying on archival data with qualitative insights from the field in order to obtain a deeper understanding.

Research question 2: Is there an association between corruption and economic prosperity? If so, what are the channels through which corruption affects economic prosperity?

5.1.1 General perceptions of compliance with OECD principles

We began the interviews by capturing views on the current economic situation and outlook in Vietnam. After these opening questions, the interviewer directed the discussion to the interviewee’s general perceptions of OECD principles.

The results show that interviewees with an international background consider compliance with OECD principles to be a prerequisite for attracting FDI and participation in international business. Moreover, interviewees consider OECD principles-based ratings to be an incentive to reform the current corporate governance framework to conform to international standards. For instance, as interviewee 9-I-T outlined,

Vietnam is interfering globally and tries to compete on an international basis, the international ranking is just logical. Although the level of development has to be taken into account, I strongly support the idea because the publishing of these numbers will encourage the government to accelerate the reforms. (9-I-T)

However, 4-I-L added that international standards and ratings might not be appropriate for Vietnam or at least not accepted by the local business community:

[I]t is unfair, but it possibly helps Vietnam to improve its own system – on which, until now, they have done a good job. And they will always go their own way. They won every war, so why should they change anything suddenly because of some overseas pressure? Which dominates the perception of the people, it is a different attitude than ours. (4-I-L)

Interviewee 6-I-O noted that Vietnam might not be important enough to justify divergence from international standards, even if international rating criteria are not completely suitable for Vietnam:

To create more investors in the future, Vietnam should create comfortable circumstances for foreign companies and set conditions for sustainable investments […] Of course, Vietnam has to consider global principles. Although they will go their own way, honestly, they are not a superior market force, like China, so if they want to participate globally, they have to adapt their system to some extent. […] Regarding the results of these ratings: In the case of an emerging country, they might provide a distorted picture from the overall conditions here. So the results have to be obtained with caution. (6-I-O)

In line with the latter argument, interviewee 2-I-I also emphasized that a poor rating might not necessarily correlate with weak business prospects at the country level:

[T]he idea behind the scorecard is to get a view on best practice, and it also includes ‘our’ principles of how to operate a company. Vietnam has a totally different perspective and varying standards. Nevertheless, scorecards […] should consider these differences and should also include cultural aspects – and evaluate it again. Of course, Vietnam wants to develop like an industrial country and wants to participate globally, so they should agree with some standards, but we should help them to do so rather than rate them [as] insufficient. Additionally, it is important to obtain local requirements and whether they are fulfilled or not. A bad rating, based on global principles, won’t tell you much about the actual possibilities Vietnam can offer to the world. (2-I-I)

Interviewees with a Vietnamese background answered similarly and emphasized the importance of compliance with OECD principles if Vietnam seeks to participate in international trade. For example, according to interviewee 7-L-L, compliance with OECD principles and corresponding rankings “might be the key issue for foreign investment” (7-L-L). Interviewee 5-L-C stated, “we have to change a lot, as we are trying to participate more globally” (5-L-C).

5.1.2 Discrepancies between compliance on paper and in practice

During our interviews, almost all interviewees pointed to a discrepancy between the adoption of international standards of “good” corporate governance on paper and the application of those standards in practice; specifically, they cited a lack of enforcement and enforceability. For instance, interviewee 1-I-L pointed out that convergence towards international standards does not guarantee consistent application: “Vietnam is already part of the ASEAN Economic Community, since the first of January 2016, but it remains unclear whether all these relevant local and domestic requirements will be applied in practice” (1-I-L). Interviewee 9-I-T made a similar comment and emphasized the importance of enforcement mechanisms for attracting FDI: “I think the codes are decent and working well – but the enforcement of these rules is the crucial fact. […] [In] order to attract foreign investors, strengthening the legal enforcement is crucial” (9-I-T). However, during the course of our interviews, we also became aware of large differences among private, public, and state-owned enterprises, as well as regional differences. For instance, interviewee 8-I-C distinguished between public and private companies:

The question might not be if you are aware of your rights – rather, are you able to enforce them? As […] a foreign investor in Vietnam, I think you are better protected if you invest in listed companies. The corporate governance standards on stock market-listed companies are pretty high. Like a copy-paste model of Singapore or Hong Kong. But if you go into private-equity, venture-capital type of companies, you need to do your homework like due diligence; otherwise, it won’t be possible to know what kind of investment you are participating in, nor will you be aware of your rights. (8-I-C)

Other interviewees pointed to large differences with respect to industries and regions:

We have to make a very strict separation between the north and the south of Vietnam. There is a significant difference between the Hanoi and Ho Chi Minh City–metropolitan areas. Ho Chi Minh City remains very capitalistic, very straight forward and very investor-friendly, while Hanoi remains rather communistic and governmental oriented. (1-I-L)

Additionally, interviewee 2-I-I emphasized the importance of the region:

But it also depends on the reason, the kind of business and the location. For example, trading in Ho Chi Minh City is more developed than in rural areas, like [location anonymized by the authors], for example, where we also trade. An overall rating for Vietnam is hardly measurable without considering different phases of development in each province. (2-I-I)

5.1.3 Association between compliance with OECD principles and economic prosperity

We captured the interviewees’ perceptions regarding the association between compliance with OECD principles and economic prosperity in the first one-third of our interviews, namely, after capturing the interviewees’ perceptions of Vietnam’s general economic performance and outlook as well as their perceptions regarding the applicability of OECD principles and rankings to emerging countries. We first directed the interview towards the relation between corporate governance quality and firm performance as a disaggregated measure before talking about the wider picture. This approach reduced the possibility that interviewees would simply confirm a positive correlation because they considered such confirmation to be an expected and accepted behavior. Nevertheless, we were still able to choose and follow trajectories during our follow-up questions. In particular, we were able to explore the interviewees’ reasoning and experiences when discussing further aspects of the OECD principles and their application in Vietnam.

Among our international interviewees, interviewees 3-I-I and 11-I-L supported the notion that better OECD compliance comes with better firm performance (1.1). 3-I-I outlined: “I would definitely confirm this positive correlation. That’s why we place and advise so much emphasis on corporate governance” (3-I-I). 11-I-L commented: “Yes, of course. Because corporate governance means thinking a bit more ahead about future developments, requirements, avoiding problems, being more aware of the requirements of specific business lines – and this will lead to better results” (11-I-L). Additionally, interviewees 8-I-C and 6-I-O generally supported this view. However, they emphasized that this notion might hold only when applying a long-term perspective, as 8-I-C outlined: “The stronger the corporate governance codes in the company, the higher the stock price on the market – in the long run. But there might be distortion in short-term perception” (8-I-C). Interviewee M 6-I-O said, “From a long-term point of view, the positive correlation between corporate governance performance and company performance will be observable – but this is not the case at the moment” (6-I-O). Interviewee 2-I-I was slightly more reserved, as he observed size effects: “Of course. […][but acknowledging] the correlation may depend on the size of the company” (2-I-I). Moreover, interviewee 4-I-L expected a positive association between compliance with OECD principles and firm performance and underlined his view with a comparison between private and state-owned enterprises:

I would confirm a positive correlation. The negative example is a state-owned enterprise with a clique inside, who are in managing position, where no performance of corporate governance is found at all – and the results of these companies will suffer. […] For private sector companies, we can observe good performance of corporate governance, and it is getting better. (4-I-L)

Additionally, interviewee 9-I-T emphasized that firm performance is more than financial performance:

Yes, generally. But it is important to consider more facets. From my point of view, company performance should also be measured beyond returns on equity or revenue. I like to consider more measures of efficiency and also corporate social responsibility and social impacts. The definition of company performance is crucial. (9-I-T)

One interviewee took a more diverse perspective. Interviewee 1-I-L noted that the positive correlation might not hold for domestic firms with local business models and considered the interaction with corruption:

That depends on the society, the country itself and the business the company is running. If you are solely relying on exports or on internal outsourcing – like Vietnam is a very favorable country for internal outsourcing – then yes, the better the corporate governance, the better the general performance. […]. If you sell on the local market, if you distribute to the local market, it might be different. Because the more open you are to the widely accepted corruption, the more business turnover is receivable. (1-I-L)

Two of our interviewees with a Vietnamese background argued that compliance with OECD principles is associated with better firm performance. Interviewee 7-L-L gave a short answer: “I think there is a positive correlation because the daily operations are affected by corporate governance and vice versa” (7-L-L). Additionally, interviewee 10-L-L anticipated a correlation and pointed to long-term benefits with regard to nonfinancial performance:

Yes, I think they are going towards the same direction. […] For SMEs, it is often hard to see any benefit in corporate governance – as they are not able to evaluate the whole picture. They have to think further. This can also be related to environmental protection, […] responsibility while doing business should be one key aspect. (10-L-L)

The third local interviewee took an opposing view and referred to the issues already raised by 1-I-L. Interviewee 5-L-C noted a possible positive association between compliance with OECD principles and firm performance:

No, I would not confirm this. As the reliance on doing business is focused on insider trading and relationships, this correlation cannot be observed in Vietnam – or at least not generally. Companies in Vietnam will still be able to increase their revenue per year although their corporate governance performance, according to ‘our’ ideas, is decreasing. (5-L-C)

More generally, 5-L-C points to the importance of networks: “Starting the business and setting up your company is not difficult, but it will become difficult after you’ve started – as you need to develop your network quickly in order to not lose track” (5-L-C).

5.1.4 Political stability and economic prosperity

When discussing the suitability of OECD principles for emerging countries, corresponding ratings, and the relation between compliance with OECD principles and economic prosperity, some interviewees pointed to specific determinants of corporate governance quality that might affect firm performance and economic prosperity in the aggregate. Some of those determinants, such as equitable treatment of shareholders, enforceability of rights, and board independence, have been partly mentioned and discussed above. However, almost all interviewees pointed to political stability as another important factor that needs to be considered because political uncertainty can negatively affect the conditions for doing business. Interviewees considered Vietnam’s political stability to be high, which they cited as one of the major benefits of doing business in Vietnam. Interviewee 8-I-C noted:

In terms of corporate governance, there might be a lot of things to improve. But in general, Vietnam is a frontier market and hence still needs ongoing reforms. As Vietnam is a socialist republic, the state has the highest rank and the most powerful position in the country. In terms of political stability, Vietnam can be rated as quite high; even if you look at the World Bank statistics, it’s quite a favorable score, although coming nowhere close to Singapore – but Singapore probably has one of the best political stability scores in Asia – but Vietnam’s score is higher than China, Malaysia or of course Thailand. (8-I-C)

Interviewees 3-I-I and 11-I-L made similar comments. Interviewee 3-I-I noted,

[I]f you compare Vietnam to Thailand, the clear advantage is the stability of the government – as Thailand has a lot of problems in that area. Further, the government of Vietnam places a lot of emphasis on attracting foreign investors – or on making the investment climate very easy. (3-I-I)

Interviewee 11-I-L stated: “Vietnam is already very attractive because the economic and legal environment is very stable” (11-I-L).

For interviewee 6-I-O, political stability seems to be an important indirect determinant of economic prosperity, particularly when comparing Vietnam to other Southeast Asian countries:

The most important point is political stability, a factor which we can definitely not underestimate. Have a look at the Philippines, Thailand or Cambodia – where this may not always be the case and where things can change very fast. However, Vietnam is not a democracy – but in terms of economic opportunities and possibilities, Vietnam is a quite open-minded country. (6-I-O)

Likewise, interviewees 1-I-L and 2-I-I argued that economic prosperity might be influenced by political stability and other country-level determinants, as 1-I-L said: “An additional point is the political system, which is very stable – whether the political system is good or sustainable is a totally different topic – and the people living in Vietnam are very young and eager to learn” (1-I-L). Interviewee 2-I-I said:

Attributes of Vietnam that may attract foreign investors in the future: The big and young population, good education, good infrastructure, and the political system has been stable for years – so I don’t anticipate serious upcoming changes in the political environment within the coming years. (2-I-I)

Interviewee 4-I-L outlined:

What makes Vietnam attractive at the moment: political stability, good labor force – more or less – and cheap labor. The main benefit of Vietnam, more generally: It is not worse than everywhere else. For example, Myanmar is too early in its development, Thailand has a lot of problems – recently, the king died – Indonesia is very corrupt and also questionable, the Philippines are not quite sure where they want to go now – America, yes, China, no, whatever. So considering all the options you have in Southeast Asia, Vietnam is still the best option. Not because they do it specifically very well but they are just not doing it worse than the others. They are very clever in maintaining this kind of stability, and this is, in my opinion, what makes Vietnam very attractive at the moment. (4-I-L)

Among our local interviewees, 5-L-C made a similar comment: “Generally, I think every country has its advantages and disadvantages; for example, Thailand, of course there is some observable political instability, but the economic development of the automotive industry is far beyond Vietnam’s” (5-L-C).

5.2.1 Level of corruption and measures against corruption

When the interviews were directed towards the issue of corruption, interviewees revealed that they perceive corruption to be high but do not consider the situation worse than elsewhere in Southeast Asia or other regions. For example, interviewee 2-I-I acknowledged a high level of corruption but put this view in perspective:

[Vietnam is] Not as corrupt as India, but yes, it is absolutely corrupt. […]. For Vietnam, it might be a problem resulting from the socialistic system – because everybody can benefit from their political positions. So, for example, if there is someone responsible for bringing up investment rules or availability in terms of investment, it is possible to earn extra money, off the bill, at any time. (2-I-I)

A similar insight was shared by interviewee 6-I-O: “Another factor is corruption in Vietnam, of course. But, in comparison to other countries, I’ve experienced a much higher level of corruption in Eastern Europe – and they are now members of the EU” (6-I-O). According to interviewee 4-I-L, “Indonesia is worse than Vietnam, as corruption is more apparent and more direct. Generally, you will face corruption in all of these countries [referring to East Asia]” (4-I-L). Additionally, interviewee 3-I-I mentioned a high level of corruption when talking about the suitability of corporate governance quality rankings:

We talked about the rules and regulations; we also mentioned the still-existing corruption. Take a look at Vietnam’s score on the corruption index, as they are ranked 112 and Denmark, for example, claims first place. Vietnam wants to participate globally, so they should also receive a ranking on global measures. (3-I-I)

Later, when discussing the enforcement of shareholder rights, 3-I-I mentioned the high level of corruption once again:

There is some kind of enforcement, but I will be very honest with you. I recently talked with several people about this exact topic, and we agreed on one thing: The government does this [issuance of regulation that leaves room for interpretation] on purpose in order to put money into certain pockets. The level of corruption is still high in Vietnam. (3-I-I)

When interviewees were asked about the efficiency of anti-corruption measures and about whether corruption has been reduced, they did not consider the measures to be effective. For example, interviewee 2-I-I noted: “No, I think there has been no change” (2-I-I). Interviewee 1-I-L outlined, “First, the infrastructural development has to be followed up, and the high level of corruption needs to be reduced” (1-I-L). Additionally, interviewee 4-I-L even supported a notion of increasing corruption while acknowledging the existence of measures to reduce corruption:

Vietnam strives to achieve a better reputation. For example, you see a lot of newspaper articles banishing some public officials. […] You can experience it [corruption] daily on your way to work, when the policeman wants you to pay a fine without a receipt. During the last ten years, where I am here, I cannot confirm that these situations have decreased; on the contrary, they have gotten even worse. (4-I-L)

5.2.2 Association between corruption and economic prosperity

Regarding the association between corruption and firm performance and economic prosperity as an aggregated measure, expats particularly acknowledged the existence of severe corruption; however, they did not seem to consider it harmful to their own business, or at least they had integrated it into their expectations. For instance, interviewee 2-I-I noted: “But it [corruption] doesn’t harm my business at all. I expected this kind of circumstances when I came here for the first time” (2-I-I). Interviewee 6-I-O made a similar statement: “In addition, corruption is hardly a problem when you know about it – problems only arise when you make mistakes, and yes, the extent of corruption is still high. Nonetheless, you can have success in business in Vietnam, without corruption” (6-I-O). As mentioned above, interviewee 1-I-L did not regard poor corporate governance quality and corruption as harmful to firms that operate in the mode of local business: “If you sell on the local market, if you distribute to the local market […] the more open you are to the widely accepted corruption, the more business turnover is receivable” (1-I-L). It is noteworthy that our interviewees with a Vietnamese background did not make – and did not want to make – any direct statements on their perceptions of the level of corruption in Vietnam, nor did they make direct statements on the perceived effect of corruption on economic prosperity or firm performance. However, when discussing Vietnam’s corporate governance performance with respect to compliance with OECD principles (Section 5.1), some locals pointed to the importance of networks, related-party and/or connection-based transactions when doing business in Vietnam.