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Abstract

This paper analyzes the relationship between the performance of incumbent firms and the net entry of new firms by combining various theoretical views of entrepreneurship. Different regression models to treat dynamics and endogeneity issues are applied to test the research hypothesis with regional micro-data for 61 Vietnamese provinces from 2000 to 2008. The main finding is that net entry is associated with the performance of incumbent firms and the overall performance of the economy. Incumbents' growth and gross domestic product growth induce changes in the existing production system and stimulate the creation of an economic environment more favourable to new firm formation. Consistent with the hypotheses put forward within the “knowledge spillover,” the “error-correction,” and other approaches, incumbents may generate new entrepreneurial opportunities not only for themselves but also for the whole society.