Competitor concentration, networking, and customer acceptance : The case of small firms in Vietnam

Purpose The purpose of this paper is to examine whether competitor concentration relates to better customer acceptance of the firm’s offerings and better networking of the firm with competitors and government officials. Design/methodology/approach The research is conducted in the context of the transition economy of Vietnam, using a combination of methods. Qualitative interviews are followed by a survey of 199 small firms in Hanoi, Vietnam. Since competitor concentration is count data, Poisson regression is used to test the relationship between networking, customer acceptance, and competitor concentration. Findings The results show that locating in a competitor concentration area improves customer acceptance of the firm’s offerings and increases networking with competitors, while decreasing networking with government officials. Competitor concentration does not help improve firm performance. Research limitations/implications A sample of 199 businesses in the food, furniture, and jewelry sectors in Hanoi may not be representative of all private businesses in Vietnam. The use of cross-sectional data could not establish causational relationships among variables. Practical implications Small firms in transition economies should be aware of the trade-offs between initial customer acceptance and negative consequences of being in a competitor concentrated area. Thus, once the firm’s offerings are generally accepted by customers, the firm may consider moving out of competitor concentration areas to expand and differentiate. Originality/value This paper points out that in the absence of effective market institutions, businesses want to be located near a concentration of similar firms as a means of gaining initial customer acceptance. This initial acceptance does not necessarily help firms improve business performance beyond the firm’s survival.