Determinants of Small and Medium Enterprises’ Capital Intensity: The Case in Vietnam

Generally, there is still limited research, if any, which aims to identify and analyze determinants of the capital intensity of firms in Vietnam, including SMEs. Considering this research gap, this paper focuses on identifying various determinants of SMEs’ capital intensity across different industries in Vietnam. The influence level of different determinants, such as firm size, firm age, managers’ gender, and education, will also be evaluated using the Bayesian statistics method. The result findings show that: bigger firms in terms of the total labor force have lower capital intensity ratios; firms with larger liability have higher capital intensity ratios; older firms have higher capital intensity ratios; SMEs with male managers have higher capital intensity ratios. Additionally, firms with university-educated managers and vocational trained managers will have a lower capital intensity ratio than those with not formally educated managers. It is highly recommended that SMEs’ managers invest more in standardizing operation processes, quality management systems, and training programs along with expanding business activities. Additionally, firms should continually innovate their working process and apply advanced technology to adapt to rapid environmental changes and compete with their rivals.