The Effect of Firm Size on Its Productivity: Evidence from Vietnamese Small and Medium Enterprises

Firm size is an important factor influencing organizational performance, particularly in terms of productivity. Despite the increasing concern about the impact of firm size on business performance metrics such as productivity of SMEs, there has been limited research focusing on this topic, especially with the consideration of contexts of emerging economies such as Vietnam. Based on this research gap, this paper aims to examine the effect of firm size on productivity with the emphasis on Vietnamese SMEs. The study employed Bayesian method to estimate the coefficients based on the outstanding advantages of Bayes. The data sample includes more than 2500 small and medium enterprises in Vietnam from 2007 to 2015. The study’s results indicate that firm size has a notably positive impact on firm productivity. This discovery suggests that Vietnamese businesses should strive for larger-scale operations and shift their growth strategy from one rooted in basic resources to a more knowledge-driven approach, especially in the context of globalization and increased competitive pressures in the business landscape. This research can contribute to the literature development about the topic on enterprises’ size impact on productivity by responding to the call for a broad look at the relationship between firm size and productivity in its various forms theoretically and methodologically in numerous contexts across the globe and in different fields.