This paper examines entrepreneurship in Vietnam from 1975 to 2013, tracing the country's transition from a state-controlled economy that banned private business to one in which self-employment became a de facto survival strategy for millions. Drawing on historical context, existing theories of entrepreneurship, and a planned study of approximately 300 Vietnamese entrepreneurs, the paper investigates whether Vietnamese entrepreneurs are primarily motivated by choice or necessity, what resources they lack, and what obstacles prevent their businesses from growing. The paper also situates Vietnamese entrepreneurship within global trends, arguing that Western labor markets are increasingly resembling Vietnam's self-employment landscape as job security erodes and social protections shrink.
The paper demonstrates effective use of contextual framing before theory introduction. Rather than opening with abstract definitions, it establishes the socioeconomic and political history of Vietnam first, then deploys entrepreneurship theory to make sense of that history. This technique — moving from phenomenon to framework — is especially persuasive in applied social science research and helps readers understand why the theoretical distinctions (e.g., replicative vs. innovative, forced vs. voluntary) actually matter.
The paper is divided into two major parts. Chapter 1 covers context, purpose, research questions, scope, and significance: it builds the rationale for studying Vietnamese entrepreneurship and connects it to global labor market trends. Chapter 2 begins a literature review that surveys classical functional definitions (Cantillon, Say, Schumpeter, Baumol), moves to indicative/psychological definitions (McClelland, Kets de Vries, Gartner), then to behavioral definitions, and finally turns to the distinctive challenges of entrepreneurship in developing countries. The progression is logical and mirrors the standard thesis-introduction-then-literature-review structure expected at the graduate level.
Microbusinesses form a large share of the economy of Vietnam. Owned by self-employed entrepreneurs, they create employment and provide income for millions. Although the density of vendors, boutiques, and other small shops in any Vietnamese city or town is impressive, such activities were banned by authorities until the end of the 1980s.
Communist rulers long believed that private businesses had no place in the socialist economy. This policy had been implemented in North Vietnam after French colonialism came to an end in 1954. Following the fall of South Vietnam and the reunification of the country in 1975 and 1976, it was also applied to the South. It proved to be a significant failure. In 1979, the government began to realize that its policies were leading the nation toward complete collapse (Freeman, 1996). A short war with China, ignited by Vietnam's liberation of Cambodia, resulted in economic despair that forced authorities to tolerate the beginnings of what would become a bustling private sector. For years, the Vietnamese government would desperately try to contain it.
Gradually, Party leadership realized that fighting underground private sector businesses was harming society. The poorly managed State-Owned Enterprises failed to provide employment for all, and by 1986 inflation was almost 500% (Kimura, 2003). A year later, a process named Doi Moi ("change to something new") gave private businesses greater freedom. In a gradual process spanning a few years, a free market emerged and the underground entrepreneurs came to the surface.
The socio-economic developments of the past decades explain how the teeming streets came to be. When confronted with this abundance of entrepreneurship, it seems absurd that the authorities ignored its economic potential for such an extended period of time. But despite being an obvious part of present-day Vietnamese economy, the small entrepreneurs that fill the streets of towns and cities are not the primary contributors to its growth. Growth comes from foreign investments. The additional capital from foreign direct investment (FDI) inflow is the only channel that significantly helps increase economic growth in Vietnam (Hoang, Wiboonchutikula, & Tubtimtong, 2010).
With substantial growth coming from foreign investment, there was little urgency for Vietnam to focus on its numerous but ineffective State-Owned Enterprises (SOEs). Suffering from foreign competition in virtually all activities these companies are engaged in, many SOEs owe their survival to the generous support they receive from Party officials. This preferential treatment comes in the form of protectionist measures that harm foreign competitors, cheap access to capital through state-owned banks, and selective enforcement of laws and regulations. The state-owned corporations employed 1.9 million employees in 2006, making up 4 percent of total employment in the country (Viet, 2009). In an effort to avoid excessive debt levels, certain SOEs are being partially privatized, forcing them to focus more on growth and competitiveness. If adequately managed, these companies could, in the long run, contribute to economic growth as well.
Many scholars believe that entrepreneurship has an underappreciated but significant causal relationship with economic growth (Bunten, 2010). Various countries have adopted policies aimed at facilitating the business creation process, such as tax incentives and a simplified administrative process. The governments that implemented such measures are trying to extract the entrepreneurial potential from their populations. Very often, this potential remains unused because many individuals prefer the predictability and relative security of paid employment.
In Vietnam, the opposite was the norm for decades. Rather than extracting and utilizing entrepreneurial potential, the government tried to suppress it. Although in theory this has changed, the Ease of Doing Business ranking of the World Bank indicates that Vietnam still scores poorly in the ease of starting a business category — 109th out of 189 countries (World Bank, 2013). Without improvement in this area, Vietnam will remain unable to help small-scale entrepreneurs unleash their potential.
Instead of relying on uncertain foreign investment and uncompetitive SOEs, Vietnam could take measures to develop the entrepreneurial resources it already possesses. Policy makers around the world are increasingly aware of the economic growth opportunities offered by entrepreneurship. One example is the European Union. The Entrepreneurship Action Plan created by the European Commission urges member states to remove obstacles and implement supportive measures. The Commission believes that investing in entrepreneurship education is one of the highest-return investments Europe can make. Surveys suggest that between 15% and 20% of students who participate in a mini-company program in secondary school will later start their own company — a figure that is about three to five times that for the general population (European Commission, 2013).
This study focuses primarily on the motivations that drive many Vietnamese to become entrepreneurs. However, the researcher's long-term objective is that this knowledge ultimately contributes to creating an economic environment in which entrepreneurs are recognized as important actors in the development of the Vietnamese economy.
Globalization has pushed corporations in Western societies to constantly focus on competitiveness. This is changing the structure of labor markets. Psychological contracts (Rousseau & Greller, 1994) between employers and employees — in which an employer would guarantee decades of employment in exchange for effort and loyalty — are becoming rare. Instead of permanently hiring employees, companies are increasing their reliance on consultants, freelancers, and interim workers.
Simultaneously, and in Europe especially, governments are realizing that the social protection measures established in the 20th century are becoming harder to sustain economically. Individuals who fail to secure employment in companies affected by globalization-related demand fluctuations become more reliant on themselves to maintain their financial well-being. This transition demonstrates how labor markets in Western societies are gradually starting to resemble the situation in present-day Vietnam. Countries such as France and Germany currently occupy a middle ground: job security there is not as high as it was in the second half of the 20th century, but it remains higher compared to the United States and Vietnam.
The researcher identifies two distinct types of entrepreneurs. The first consists of those who could not imagine being anything but an entrepreneur. The second consists of individuals who were pushed toward self-employment by external factors. The changing societal context is making the second group increasingly important.
A survey conducted in 2009 by the independent research firm Decision Analyst mapped the views of 600 American entrepreneurs. Despite the difficult situation most U.S. businesses were facing at that time, nearly 90% of respondents said they would still prefer to start their own business rather than work for someone else (Wilson, 2009). However, the same survey showed that only 40% had a positive outlook for their business in 2009. The respondents clearly belong to the first group of entrepreneurs defined above — the difficulties they faced did not cause them to question their choice of becoming entrepreneurs.
The second type of entrepreneur is playing an increasing role in Western societies. These can be described as forced entrepreneurs. They generally lack the skills and motivation that successful entrepreneurs consider essential. Because of the lack of employment opportunities, these individuals have no choice but to create their own jobs.
The researcher assumes that a vast majority of Vietnamese entrepreneurs can be considered forced or necessity entrepreneurs (Serviere, 2010). This implies that most of them would prefer the financial security of employment, provided that salaries are in line with their revenue as entrepreneurs. The research conducted in this study will confirm whether that is the case.
The first definitions of entrepreneurship date back to the 18th century and focus on its function in an industrialized, capitalist society. Entrepreneurs are portrayed as the pivots allowing the alignment of supply and demand. French-Irish economist Richard Cantillon first defined entrepreneurs in his Essay on the Nature of Trade in General, published in 1755. In his view, entrepreneurs "are as it were on unfixed wages" (Cantillon, 1755).
Cantillon's definition captures the uncertainty inherent in the investments entrepreneurs make. The willingness and ability to take on these investments sets them apart from the "hired people," who form the largest part of society.
The definition of Cantillon is categorized as functional because of the fundamental role entrepreneurs play in a capitalist society. Jean-Baptiste Say, a French economist who rose to prominence a few decades after Cantillon, further defined the function of entrepreneurs: "The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield" (Hindle, 2009). To function adequately, a capitalist society needs entrepreneurs.
The functional perception of entrepreneurship still prevailed in the early 20th century. At that time, Austrian-American economist Joseph Schumpeter added another dimension to existing definitions. He distinguished replicative entrepreneurs from innovative ones (The Economist, 2014). Replicative entrepreneurs offer products or services that do not distinguish them from their competitors. This form of entrepreneurship is particularly relevant to this study. Entrepreneurship in Vietnam is characterized by countless self-employed individuals and limited differentiation among them.
From a Schumpeterian perspective, every country requires innovative entrepreneurs to drive its growth. A study on entrepreneurship in Latin America found that "reducing replicative entrepreneurship leads to increased economic efficiency" (Acs and Amoros, 2008). But fostering innovation is complicated by what Schumpeter describes as "the extreme difficulty of changing traditional ways of doing things" (McCraw, 2006). Moreover, creating innovation through education is very challenging: education, being based on previous experiences, "is likely to encourage more replicative entrepreneurs" (Gaglio and Katz, 2001).
Replicative entrepreneurship does have its merits, especially in the economic context of Vietnam. What is replicative in one country could be innovative in another. Vietnam has seen tremendous economic growth, driven primarily by entrepreneurship of a replicative nature. When entrepreneurs in a given country borrow "technology from abroad by accepting foreign direct investment" (Baumol, Litan, and Schramm, 2007), they replicate existing business processes — and this generally creates economic growth.
The views of William Baumol follow the lines of Schumpeter's innovative and replicative depictions of entrepreneurship. Baumol distinguishes productive, unproductive, and even destructive forms of entrepreneurship. Destructive entrepreneurship includes organized crime and warfare. Baumol links productive entrepreneurship to innovation and its unproductive version to "rent-seeking" (Baumol, 1990).
The functional definitions described above paved the way for the second wave of entrepreneurship theory. Baumol, Say, Schumpeter, and Cantillon all depict entrepreneurs — or at least the productive ones — as a special breed of individuals. The skills they possess set them apart from the so-called "fixed-income earners." Scholars suggest that entrepreneurs form the foundation of capitalist economies and the lubricant that keeps them going. They are also considered the innovators that drive society forward. According to Baumol, "entrepreneurs are always with us." But who are they, and why do they choose to become self-employed?
Psychologist David McClelland is considered the first scholar to analyze the human factors influencing an entrepreneur. In The Achieving Society, published in 1961, he describes the "Need for Achievement" (McClelland, 1961) as predominant among entrepreneurs. While others value the "Need for Affiliation" or the "Need for Power," it is achievement that primarily drives entrepreneurs. "Those with a high need for achievement like challenges and stimulating environments" (Ondracek, Bertsch, & Saeed, 2011) and are drawn toward autonomy and self-responsibility. "Need for achievement stands out consistently as a principal motive for entrepreneurial success" (Wu, Matthews, & Dagher, 2007).
Other scholars, such as JoAnn Carland, also claim that "personality temperament is an important part of understanding entrepreneurial tendency" (Carland, Carland, & Higgs, 1993). In research published in 2000, William Gartner argues that "nascent entrepreneurs are less likely to consider the views of others" (Gartner, Shaver, & Gatewood, 2000). Gartner's conclusion implies that those who disregard the opinions of others are less prone to the fear of failure. On the other end of the spectrum are those who value the views of the people around them and are likely to prefer the relative security and predictability of life as an employee. The validity of this theory in the Vietnamese context is debatable. Similarly to other Asian cultures, the people of Vietnam attach significant importance to how they are perceived by others. Fear of failure — or fear of being perceived as failing — is omnipresent across all layers of Vietnamese society. Nevertheless, the country is home to a sprawling entrepreneurial community.
Dutch INSEAD professor Manfred F.R. Kets de Vries perhaps went furthest in defining entrepreneurs and their psyche. His findings "suggest that the fathers of many entrepreneurs were self-employed" (Kets de Vries, 1977). In later work he concluded that "many entrepreneurial individuals counteract feelings of low self-esteem, inferiority, and helplessness through excessive control and activity" (Kets de Vries, 1996). Difficulty dealing with structure and authority is also a recurring theme among the entrepreneurs he studied. Kets de Vries also describes the tendency of entrepreneurs to surround themselves with yes-men, "thereby depriving themselves of the function of critical thinking in their organizations." This emphasis on control complicates their ability to delegate the management of their ventures once these reach a certain size, making succession a persistent problem.
Howard H. Stevenson defines the functional, indicative, and behavioral definitions of entrepreneurship as follows: "what happens when entrepreneurs act [functional]; why they act [indicative]; and how they act [behavioral]" (Stevenson, 1990). Entrepreneurs do not necessarily match the characteristics described by scholars quoted in the indicative section. Fundamentally, only those individuals who show entrepreneurial behavior are entrepreneurs.
Despite the excellent research that has been done from the indicative perspective, it creates the impression that "The Entrepreneurial Personality" (Kets de Vries, 1977) actually exists. In reality, entrepreneurs come from all walks of life and there is extraordinary heterogeneity among them. Scholars studying the behavioral side of entrepreneurship acknowledge this heterogeneity. Gartner recognizes "great diversity of entrepreneurs, many types of startup firms, multiple ways entrepreneurs go about starting firms, and innumerable situations in which entrepreneurial activity takes place" (Gartner, 2008). Robert Baron studied the relationship between affect and entrepreneurial behavior, concluding that feelings impact "important elements of the entrepreneurial process" (Baron, 2008). Every entrepreneur exhibits his or her own entrepreneurial behavior.
Research also focuses on what distinguishes high-performance entrepreneurs from those with poorer results. Studies in this domain suggest that "the closer the match between entrepreneurs' personal characteristics and the requirements of being an entrepreneur, the more successful they will be" (Markman & Baron, 2003). Markman and Baron also describe the "person-entrepreneurship fit" as a prerequisite for success — there must be a match between the entrepreneur as an individual and the objectives pursued through his or her venture.
Many large organizations are intrigued by research on entrepreneurial behavior. Such organizations have acknowledged the potential benefits of developing entrepreneurship within the company. Google and 3M are companies that have successfully implemented such practices. From a Vietnamese perspective, entrepreneurial behavior is also of interest. Countless Vietnamese individuals display entrepreneurial behavior, although many of them probably do not have the personal traits that predestine them for self-employment. Moreover, their entrepreneurial behavior rarely results in high-value-adding activities or significant innovation.
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