Insights into the nexus of linkages with state-owned firms and the productivity of private firms in a transition economy

Purpose This study investigates the impacts of backward and forward linkages with state-owned enterprises (SOEs) on private firm productivity within Vietnam's transitional economy, where SOEs remain influential. Furthermore, it examines how these effects vary across different firm sizes and local business environments, providing a nuanced understanding of the heterogeneous effects of SOE linkages on private firm productivity. Design/methodology/approach The empirical analysis utilizes firm-level panel data spanning the period 2012–2018. To address potential endogeneity and establish causal relationships, the study employs instrumental variable fixed effects estimation, propensity score matching combined with difference-in-differences and the system generalized method of moments techniques. Findings The empirical findings reveal that forward linkages with SOEs significantly improve private firm productivity, an effect that is particularly pronounced among small- and medium-sized enterprises and firms operating within favorable provincial business environments. Conversely, backward linkages with SOEs exhibit a statistically negligible impact on private firm productivity, demonstrating no notable variation across either firm size or local business environments. Originality/value This study contributes to the existing literature in two distinct ways. First, it untangles the asymmetric productivity effects of linkages with SOEs by explicitly distinguishing between forward and backward linkages. Second, it unpacks the heterogeneity of these effects by evaluating how they vary across diverse firm sizes and local business environments.