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The influence of labor market size and social capital to outsourcing decision: Empirical study for Small and Medium enterprises in Vietnam

(A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS, VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS)



Academic Supervisor: Dr. PHAM KHANH NAM



The purpose of this paper is to provide an insight to the impact of labor market size and social capital on the outsourcing decision in Vietnam Small and Medium enterprises, using the data collected in 2013. Logit binary model is employed to explore the effect of labor market size and social capital on firm’s probability to outsource. The result indicates that there is connection between firm’s social capital and outsourcing decision. While the link between labor market size and outsourcing in Vietnam is not proved to be significant in this research, the study does not reject the importance of market environment to outsourcing but suggest finding a more appropriate variable to quantify market condition.

Keywords: outsourcing, social capital, labor market size, Vietnam SMEs

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