The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1757-4323.htm

Why do micro-businesses hesitate Why do micro-

businesses
to “grow up”? hesitate to
“grow up”?
Le Quang Hieu
Hong Duc University, Thanh Hoa City, Vietnam
409
Vu Hong Van
University of Finance - Marketing, Ho Chi Minh City, Vietnam, and Received 4 February 2021
Nguyen Khanh Doanh Revised 21 April 2021
10 May 2021
Thai Nguyen University, Thai Nguyen City, Vietnam Accepted 10 May 2021

Abstract
Purpose – This study analyzes the factors that affect the decisions of micro-businesses to switch to
enterprises in Thanh Hoa, Vietnam.
Design/methodology/approach – In order to explain the behavior of micro-businesses in switching to
enterprises, the authors designed a questionnaire and collected survey data from 404 micro-businesses. The
generalized structural equation modeling was applied to analyze the structured model with the dichotomous
dependent variable.
Findings – First, the behavior of micro-businesses to switch was indirectly affected by needs and directly
affected by attitudes, perceived behavioral control, subjective norm and institutional quality. Second, the
subjective norms exerted the most influence on the behavior of the micro-businesses in switching. This finding
implies that (1) the behavior of the micro-businesses depended on the assessments, perceptions and views of
their friends, relatives and colleagues, and (2) the behavior to switch stems mainly from the desire to improve
the businesses’ position in society. Finally, both formal and informal institutions play an essential role in the
behavior of the micro-businesses to switch to enterprises.
Originality/value – There have been no previous studies that have applied structured models to test the
behavior of micro-businesses to switch to enterprises. Furthermore, previous studies had mainly addressed the
psychological factors or needs of micro-businesses. In this study, apart from the above factors, the authors
discuss the impact of institutions on the behavior of micro-businesses to switch.
Keywords Micro-businesses, Enterprises, GSEM, Institutions, Switching behavior, The theory of planned
behavior
Paper type Research paper

1. Introduction
In recent years, Thanh Hoa province has had remarkable production and business activities.
These activities contributed 42.99% to the province’s GDP in 2016 and 60.87% in 2020
(Thanh Hoa Statistical Office, 2020). These impressive results are due to the essential
contributions of enterprises, followed by those of micro-businesses [1]. For example, from
2017 to June 2020, enterprises contributed approximately 19,802 billion VND to the state
budget, making up 38.83% of the province’s total state budget revenue (Hieu and Xuan, 2020).
Similarly, in 2020, micro-businesses contributed nearly 110.8 billion VND to the state budget
(Thanh Hoa Statistical Office, 2020). From an academic perspective, the enterprise is defined
as a generation and application of ideas (Quality Assurance Agency for Higher Education,
2012), which is considered an essential component of professional practice (Moon, 2014).
Enterprise covers creativity, idea generation, design thinking, adaptability and reflexivity
with problem identification, problem-solving, innovation, expression, communication and
practical action (Quality Assurance Agency for Higher Education, 2012). The practical Asia-Pacific Journal of Business
Administration
definition of an enterprise is an organization that has established or registered its name, Vol. 13 No. 3, 2021
pp. 409-432
© Emerald Publishing Limited
1757-4323
JEL Classification — C12, D02, D15 DOI 10.1108/APJBA-02-2021-0049
APJBA assets and transaction office under the law of establishment for business purposes [2]. It is
13,3 wholly owned by an individual who contributes all capital and bears all benefits and
responsibilities by himself or herself. Micro-businesses refer to businesses with less than ten
employees (Gherhes et al, 2016). A micro-business is owned by an individual, a group of
individuals or a household. It may register only one business location, employ fewer than ten
employees and it takes responsibility for all business operations and its property [3].
Micro-businesses are characterized as owner-manager entrepreneurs (OME)-centric
410 (Gherhes et al, 2016). In the micro-business model, the OME is frequently in charge of all the
activities related to running and managing their business (O’Dwyer and Ryan, 2000).
Therefore, micro-businesses’ capabilities and processes should demonstrate, and are
dependent on, the OME’s capabilities (Gherhes et al, 2016). The literature regarding micro-
businesses has indicated that micro-businesses usually hesitate to grow and are often limited
in crucial professional business functions such as planning, marketing, networking, human
resource management and application of information technology (Chaston, 2000; Chell and
Baines, 2000; Foreman-Peck et al., 2006; Gherhes et al., 2016; Greenbank, 2000; Huggins and
Johnston, 2009).
In essence, enterprises and micro-businesses are similar. However, there are specific
differences between these two types of businesses [4]. First, in terms of business scale, the
operation scales of enterprises are more significant than those of micro-businesses. Also,
micro-businesses must select a fixed location to register, which may be a permanent or
temporary residence, the most frequent business location or the collecting station. Micro-
businesses must notify the tax authority and market surveillance authority if they do
business on a mobile basis or outside the registered locations. Second, in terms of the number
of employees, enterprises can employ an unlimited number of employees, while a micro-
business cannot hire more than ten employees. Third, in terms of business registration,
enterprises must register their business according to the Enterprise Law provisions and have
a seal. In contrast, micro-businesses only need to register their business in some instances,
and they do not have a stamp. Finally, the enterprise owner has unlimited liability for the
enterprise’s property, while the micro-business is responsible for all assets of the owner of the
micro-business.
In principle, enterprises have more advantages over micro-businesses (Management,
2017) [5]. First, enterprises have legal status, while individual micro-businesses have no legal
status. Compared with micro-businesses, it is easier for enterprises to get loans due to their
accountability regime. Second, enterprises can import and export, while individual micro-
businesses cannot import and export. Third, enterprises are allowed to register an unlimited
number of business lines, while micro-businesses can only register a certain number. Fourth,
enterprises are allowed to open branches and representative offices. In contrast, micro-
businesses are only allowed to register at one location and do business within that district;
they are not allowed to open branches or representative offices in other areas. Finally,
enterprises contribute more to the industrialization and modernization of the economy than
micro-businesses do.
From a theoretical point of view, enterprises have many advantages over micro-
businesses. The Government of Vietnam has encouraged micro-businesses to switch to
enterprises through many preferential policies on borrowing and tax payment. However,
many micro-businesses are not willing to switch to enterprises. According to the statistics of
Thanh Hoa province, the number of new micro-businesses registering each year and the
number of active micro-businesses are still much higher than the number of enterprises. The
whole province has a considerable number of individual micro-businesses with
approximately 20,235 micro-businesses, while the number of enterprises is 22,943
(Thanh Hoa Statistical Office, 2020). This phenomenon leads to an interesting question:
“what are the factors that affect micro-businesses when deciding whether to switch to
enterprises?” To explain this question adequately, we have conducted the study titled “Why Why do micro-
do micro-businesses hesitate to grow up?” This study’s main objective is to analyze the businesses
factors affecting micro-businesses’ decision to switch to enterprises and uses Thanh Hoa
province as a case study [6]. Guiding this study are the following specific objectives:
hesitate to
“grow up”?
(1) To analyze the factors that affect the decision of micro-businesses to switch to
enterprises.
(2) To quantify the direct and indirect impacts of demand, attitude, perceived behavioral 411
control, subjective norm and institutional quality on the behavior of micro-businesses
to switch.
(3) To explain why micro-businesses hesitate to grow up.
(4) To suggest policies that would encourage micro-businesses to switch to enterprises.
The innovative aspect of this study is twofold. First, to the best of our understanding, this is
the first study on the determinants that affect the decision of micro-businesses to switch to
enterprises. Second, apart from factors identified by the theory of planned behavior (TPB) of
Ajzen (1991) and the self-determination theory (SDT), we also address the impact
of institutional quality (including formal and informal institutions) on the behavior of
micro-businesses to switch. The inclusion of institutional quality is justified because
Vietnamese regulations still overlap and obstruct the operations of enterprises (Huy, 2021).
Also, informal institutions were mentioned a lot during the interviewing process of the
micro-businesses.
The remainder of this paper is structured as follows: Section 2 ties together the various
theoretical and empirical strands in an effort to develop a theoretical framework. Section 3
describes the methodology, study area and measurement of variables. Section 4 analyzes data
using generalized structural equation modeling (GSEM). Section 5 summarizes the study’s
principal findings.

2. Theoretical framework
2.1 Theory of planned behaviour
Ajzen (1991) explains the establishing behavior of enterprises through TPB. This theory
explains the behavior of establishing an enterprise through three factors. The first is the
attitude toward the behavior (ATT), which describes whether or not the individual prefers to
establish an enterprise. The second factor is the social norms (SN) which describe the
perception/assessment of the individual on the evaluation and the influence of local
authorities, partners, customers, workers, relatives and acquaintances on the establishment
of the enterprise. The third factor is the perceived behavioral control (PBC), which is the
perception of micro-businesses and how they can control and manage establishing and
operating enterprises.
TPB has been widely applied in business and entrepreneurship to predict entrepreneurial
intentions and actions (Gorgievski et al, 2018; Kautonen et al., 2015; Obschonka et al., 2014) [7].
Therefore, we employ TPB as the foundation for our conceptual framework. TPB framework
includes attitude, subjective norms and perceived behavioral control as sources of intention.
Our study aims to apply TPB to examine the intention of micro-businesses to switch to
enterprises. Hence, we chose to include the three potential sources of such intention (attitude,
subjective norms and PBC) in our research framework.
However, some studies suggest that if only TPB is used to explain the behavior of setting
up enterprises, there are the following limitations. First, according to Hagger and
Chatzisarantis (2009) and Al-Jubari et al. (2018), TPB has not yet reflected the individual’s
APJBA behavior stemming from belief or the impact of rewards, threats or control. Second,
13,3 Br€annback et al. (2007) argued that establishing an enterprise is a complicated act that is not
entirely under the control of the businessperson or the actor. Many studies have shown that,
in addition to the factors indicated by the TPB, the behavior of establishing enterprises is
influenced by several demographic characteristics, such as gender (Minniti and Nardone,
2007), age (Levesque and Minniti, 2006), education (Minola et al, 2014; van der Zwan et al.,
2016; Yang, 2013), experience (Dıaz-Casero et al., 2009; Yang, 2013), cross-country differences,
412 self-enhancement value, openness (Gorgievski et al, 2018), entrepreneurial self-identity
(Obschonka et al, 2014) and government regulation (Engle et al., 2011). Moreover, the research
literature on TPB and entrepreneurship recommended that additions and alterations should
be considered to implement TPB in explaining entrepreneurial decisions (intentions and
actions) (Lortie and Castogiovanni, 2015). Furthermore, cross-theoretical relationships are
suggested as potential directions for research using TPB to explain the behavior of
establishing enterprises (Lortie and Castogiovanni, 2015).

2.2 Self-determination theory

To solve the first limitation, we follow Al-Jubari et al. (2018) and Lortie and Castogiovanni
(2015) to integrate the theoretical model of autonomy with TPB to explain the behavior of
micro-businesses in switching from micro-businesses to enterprises.
Intrinsic motivation is derived from self-needs. This motivation is created to satisfy the
needs and desires of the subject. In other words, intrinsic motivation is encapsulated on
the subject’s side and does not need any additional sources outside of the behavior. When the
subject feels intrinsically motivated to do a specific behavior and does not encounter
obstacles, he or she will perform and maintain the behavior on their own without any further
impulses. The attractiveness and the need for self-satisfaction that make up internal
motivation can be varied. However, in general, they can be divided into three main categories:
(1) learning motivation which results from exploring and researching new things, (2)
achievement motivation which results from creating something new or overcoming one’s
limits and (3) experience motivation which results from the receptivity of sensory impulses.
External dynamics are derived from the surroundings (e.g. religion, culture, trends).
The most visible external motivation results from threats and coercion (money, fame, status
in society, work, family, appreciation or judgment of society). In general, an individual
influenced by external forces will perform an act to achieve a positive result or avoid a
negative result, and the act will therefore be entirely unrelated to the behavior itself.
A prevalent example in today’s society is a worker who works only for a salary and who
believes that they would quit if it were not for the money.
This autonomy theory holds that humans are organisms with a natural tendency to build
an increasingly more unified and complex “self” through acquisition, integrationand the re-
organizing of their experiences and surroundings. The internalization process, which is the
assimilation of external motivation with internal motivation, is considered to be a part of an
individual’s natural tendency. External motivation assimilated with internal motivation may
therefore be called autonomous motivation (Al-Jubari et al., 2018). Autonomy holds that each
human individual has three basic spiritual needs: the need for autonomy, competency and
relatedness (Deci and Ryan, 2000). The need for autonomy refers to an individual need to feel
a sense of self-choice and controlling of self-actions (Rigby and Ryan, 2018). An individual
will feel autonomous when he/she feels that his/her actions and decisions are an expression of
his/her intrinsic values. The need for competency is the need to feel like one can interact with
one’s surroundings effectively. For example, an individual feels that he/she can easily explain
what exists and is happening around them; they have a feeling that they know how to
influence or change those things; and they feel that their impact will bring desired results.
Feelings of competency may not match the individual’s true abilities (Niemiec et al, 2006). Why do micro-
From a certain angle (some researchers suspect), the need for autonomy can be seen as a need businesses
for controlling one’s own life. Overall, however, the need for autonomy focuses on the origin of
the action (self vs external), while the need for competency focuses on results (efficiency vs
hesitate to
inefficiency). Therefore, these two concepts are different. One point to note is that the sense of “grow up”?
competency is not necessarily aligned with one’s actual objective competency. The need for
relatedness is the feeling that one can connect with one’s surroundings in a close and
meaningful way (Weinstein and Ryan, 2011). The surroundings here include all individuals, 413
animals, relationships, social or spiritual structures such as organizations, communities,
people and countries. This need is often satisfied when the individual feels he/she is a part of
or belongs to something greater. The value that satisfies the need for relatedness lies in the
connection itself, as it gives the individual a sense of security in regard to loneliness and
intimidation (Al-Jubari et al., 2018).
It is considered that the three needs above have intrinsic value to oneself and are factors
that enhance the strength and endurance of human behavior (Deci and Ryan, 2000; Rigby and
Ryan, 2018). The satisfaction of mental needs results in feelings of security, improved spirits,
higher efficiency and more resilient behavior. Consequently, the satisfaction of such needs
brings positive outcomes to individuals such as improved job satisfaction, reduced turnover
intention and enhanced organizational citizenship behavior (G€ untert, 2014). Conversely,
when certain needs are not satisfied, it can lead to feelings of insecurity and ultimately result
in poor behavior (Al-Jubari et al., 2018; Weinstein and Ryan, 2011; Wilson et al., 2008).
Moreover, the three needs of autonomy, competence and relatedness could contribute to
entrepreneurs’ well-being, who are the ones who actively engage in entrepreneurship
(Shir et al, 2019). The above arguments show that needs can be the source of attitude,
subjective norm and perceived behavioral control (Fayolle and Li~ nan, 2014). Therefore, the
integration of the theory of SDT and TPB is necessary. Such integration is found mainly in
psychology, health, sports studies and students’ entrepreneurial intention (Al-Jubari, 2019).
According to our knowledge, this integration has not been applied to the study of the
behavior of micro-businesses to switch to enterprises. Therefore, to fill this research gap, we
have incorporated these two theories into our research model. SDT posits that needs can act
as intrinsic motivation for human intention and behavior (Rigby and Ryan, 2018). Our study
aims to examine the sources of the intention of micro-businesses to switch to enterprises.
Thus, we chose to propose needs as the determining source of such intention.

2.3 The impacts of institutions

In addition to the factors pointed out by the SDT and TPB, we have also included the essential
characteristics of the household, including gender, age, education level, business experience,
equity and institutions. The inclusion of institutions is based on the ground that government
policies and regulations are the critical factors in explaining the behavior of micro-businesses
to switch because they are the foundation for all business activities of individuals,
businesses and organizations (Martınez-Gonzalez et al., 2019). Institutions shape the
interactions between actors in society and are referred to as the “rules of the game in a
society” (North, 1991). The role of institutions in businesses’ or micro-businesses’ decision to
switch to enterprises has been mentioned in several studies such as Stephen et al. (2005),
Salimath and Cullen (2010), Bosma et al. (2018) and Martınez-Gonzalez et al. (2019). Studies
have shown that institutions reduce uncertainty by establishing a stable foundation for
human interaction. Institutions are divided into formal institutions and informal institutions.
First, formal institutions include laws, regulations, fiscal policies, tax regimes, registration
procedures, business operations and other systematized procedures. The clearer and more
transparent the formal institutions are, the more they will enhance entrepreneurship
APJBA (Co, 2004; Keuschnigg and Bo Nielsen, 2004) and help individuals to set up enterprises.
13,3 Klapper et al. (2004), Bianchi (2009) and Ndikumana et al. (2011) emphasize that access to
credit and capital is an essential factor that explains the trend of starting a new enterprise.
Similarly, Reynolds et al. (2000) argue that access to financial resources is crucial for
entrepreneurship. Apart from the financial aspect, regulations on registration procedures,
business operations and other procedures also affect individuals’ desire to set up enterprises.
Branstetter et al. (2014) demonstrated that a more straightforward business registration
414 reform increased the number of newly established Portuguese enterprises by about 17%.
Second, informal institutions are identified under many different perspectives. According
to North (1990), informal institutions refer to traditions, values, beliefs, social norms and
practices that define society’s culture. The World Bank has calculated the number of informal
institutions through various governance factors (Kaufmann et al., 2008). In studies related to
enterprise establishment, Douhan and Henrekson (2010) argued that informal institutions are
related to corruption and insecurity issues, which directly impact the motivation of
entrepreneurship in developing countries. Following Douhan and Henrekson (2010) and
Escandon-Barbosa et al. (2019), we analyze informal institutions through two main factors:
corruption and insecurity.
Accordingly, corruption and bribery can be seen as a cultural norm in some places,
especially in developing countries (Escandon-Barbosa et al, 2019). When corruption and
bribery are a part of some of the state apparatus, this can hinder individuals’ decision to
establish enterprises due to concerns about transaction costs that they may incur (Anokhin
and Schulze, 2009). The lack of security in financial transactions, security and violence issues
will reduce individuals’ desire to start enterprises and individuals’ morale. In short, if
informal institutions are not effective, they will negatively affect the behavior of the micro-
businesses in switching. Therefore, we choose to include formal institutions and informal
institutions in our research model as determining factors of the intention to switch from
micro-businesses to enterprises.

2.4 Conceptual framework

Based on related theoretical foundations and empirical results, we put forward the following
analytical model with necessary modifications. Our analytical model is given in Figure 1.
The description of independent variables and their expected value outcome are presented
in Table 1.

3. Material and methodology

3.1 Methodology
To achieve this study’s objectives, we use structural equation modeling (SEM), which has
been widely used in economic behavior studies. Many researchers describe SEM as a
covariance structure analysis (Klein, 2011). SEM is preferred for its unique features, such as
its ability to analyze latent variables and reflect on hypothetical constructs or factors, which
are explanatory variables that are supposed to reflect a continuum that cannot be observed
directly (Grzelak et al, 2020). This study uses this structural model to explain the behavior of
micro-businesses in switching, which is the hypothetical structure.
The classical SEM only uses continuous variables to index the latent structure. However,
our study’s dependent variable is dichotomous. It would take the value of 1 if the micro-
business decided to switch to the enterprise, or 0 if the micro-business decided not to switch to
the enterprise. Therefore, we chose to use the GSEM in the configuration with a level
proposed by Rabe-Hesketh et al. (2004). From an estimation perspective, GSEM is a pretty
diverse model. It combines general linear model (GLM) estimation and SEM model estimation.
 Why do micro-
businesses
hesitate to
“grow up”?

415

Figure 1.
The conceptual
framework for
analyzing micro-
businesses’ decision to
switch to enterprises

The GLM is the maximum likelihood estimator based on the density function in the linear
exponential family (Zhang and Zhang, 2018).
Compared to SEM, GSEM has several advantages because of its diversity. First, GSEM
allows the simultaneous use of multiple estimation methods in structures. It is very consistent
with our study where the first structural model includes the indirect effect of needs on
intention through ATT, SN and PCB; and the second structural model is the direct impact of
household characteristics, ATT, SN, PCB, formal_INS and informal_INS on the binary
variable intention. Second, GSEM removes the observed and latent variables from the
normative assumption. However, the second advantage disappears in the case of non-
continuous variables. In other words, goodness-of-fit tests cannot be used with GSEM. This
feature is one of the most significant disadvantages of GSEM. To compensate for this
drawback, we will pay attention to the normal distribution of errors, as Grzelak et al. (2020)
mentioned.
The general model of GSEM takes the following form:
gfEðyi Þg ¼ Xi β
yi ∼ F

Where yi is the dependent variable, which takes the value of 1 if the ith micro-business decided
to switch to the enterprise, and 0 otherwise; Xi is the explanatory variable(s); β is the
coefficient(s) of the explanatory variable(s); gð:Þ is called the link; F is called the family.
In this study, we employ two structures. The first structure describes the indirect impact
of element (needs) on intention through ATT, SN and PCB. For this structured model, we use
the Gaussian family and identity function as follows:
Eðyi Þ ¼ Xi β
yi ∼ Normal

The identity link function is defined as follows:

η ¼ gðμÞ ¼ μ
Where: μ 5 Eðyi Þ, η ¼ gðμÞ.
APJBA Expected
13,3 outcome
Variables Description Measurement type (þ/) Source

Gender Gender of farmer 1 5 female 0 5 male þ/ Levesque and

Minniti (2006)
Age Age of only Years þ/ Levesque and
416 household head Minniti (2006)
Education Number of years in Years þ van der Zwan
the schooling of the et al. (2016)
only household head
Experience Number of Years þ Dıaz-Casero
experiences in the et al. (2009)
business of only
household head
Capital Household’s financial VND billion þ
capital
ATT Attitude Being an entrepreneur implies þ Solesvik et al.
more advantages than (2012)
disadvantages to me
Being an entrepreneur would give
me great satisfaction
It is desirable for me to become an
entrepreneur
It is attractive for me to become an
entrepreneur
I am in favor of entrepreneurship
and the creation of household
SN Subjective norms My closest family members think þ Solesvik et al.
that I should pursue a career as an (2012)
entrepreneur
My closest friends think that I
should pursue a career as an
Entrepreneur
People that are important to me
think that I should pursue a career
as an entrepreneur
To what extent do you care about
what your closest family thinks as
you decide on whether or not to
pursue a career as self-employed?
To what extent do you care about
what your closest friends think as
you decide on whether or not to
pursue a career as self-employed?
To what extent do you care about
what people important to you
think as you decide on whether or
Table 1. not to pursue a career as self-
Independent variables employed?
and their expected
value outcome (continued )
 Expected
Why do micro-
outcome businesses
Variables Description Measurement type (þ/) Source hesitate to
PCB Perceived behavioral If I wanted to, I could easily þ Solesvik et al. “grow up”?
control become an entrepreneur (2012)
It is entirely up to me whether or
not I become an entrepreneur 417
As an entrepreneur, I would have
sufficient control over my
business
There are very few circumstances
outside my control that may
prevent me from becoming an
entrepreneur
Formal_INS The quality of formal The regulations on business þ Escandon-
Institution registration policies and Barbosa et al.
procedures are clear (2019)
The rules for borrowing and other
financial sectors are clear and
transparent
The rules on taxes are clear and
transparent
Informal_INS The level of informal Corruption and bribery are always þ Escandon-
institutional is strictly controlled by the Barbosa et al.
controlled government (2019)
We are always safe from
gangsters, reactionaries and other
crimes
Our financial transactions are
always safe
Need Business household’s I feel a sense of choice and freedom þ Al-Jubari et al.
need in the things I undertake (2018)
I feel connected with people who
care for me, and for whom I care
I feel competent to achieve my
goals
Source(s): By authors; (þ/) indicates a positive or negative relationship with the dependent variable Table 1.

The second structure is the direct impact of household characteristics, ATT, SN, PCB,
Formal_INS and Informal_INS factors on the binary intention. For this equation, we use the
Bernoulli family and the logit function as follows:
logitfEðyi Þg ¼ Xi β
yi ∼ Bernoulli

Where the logit link function is defined as follows:

n μ o
η ¼ ln
ð1  μÞ

As mentioned earlier, overall goodness-of-fit statistics are not available for GSEM. Therefore,
to assess a model fit, we used an Akaike information criterion (AIC) and the Bayesian
information criterion (BIC). In both cases, the lower the value is, the better the model
(Mohammed et al., 2015).
APJBA 3.2 Study area
13,3 Thanh Hoa province is located in the north of Central Vietnam. It is 150 km south of
Hanoi’s capital city and 1,560 km from Ho Chi Minh city. The province is the gateway
location connecting North and Central Vietnam. Thanks to this convenient location,
Thanh Hoa can easily trade with businesses in both the North and Central regions.
In 2020, the province’s GDP was approximately 131.2 thousand billion VND, 1.8 times
higher than in 2015 (Thanh Hoa Statistical Office, 2020). Thanh Hoa’s GDP is ranked
418 eighth in the country and the highest among the North Central region’s provinces. This
rapid growth has mainly come from enterprises doing business in the industry and
services sectors, for example, trucks, commercial electricity, petrochemical products
(gasoline, oil, liquefied gas, polypropylene, benzene, etc.) and rolled steel. According to
Thanh Hoa Department of Planning and Investment’s statistics, by the end of 2020,
Thanh Hoa province had 25,943 registered enterprises with a total registered charter
capital estimated at 145,507 billion VND. At the same time, the total number of micro-
businesses was 110,742 [8] (Thanh Hoa Department of Planning and Investment, 2020).
Among newly registered enterprises, the number of micro-businesses switching to
enterprises is relatively small.

3.3 Sampling
We collected quantitative data from 404 micro-businesses in six wards (Dong Tho,
Truong Thi, Lam Son, Ba Dinh, Dong Ve and Dong Huong) in the Thanh Hoa province,
Vietnam. We asked for the support and permission of the People’s Committee of each of
the six wards to get the list of the names of the micro-businesses in those areas. We
recruited ten research assistants and trained them on how to collect data. None of the
research assistants are citizens of any of the six wards in order to avoid association bias.
A convenient sampling method was employed: the research assistants approached the
households which had been chosen to be sampled according to the lists given by
the People’s Committee of each of the six wards. After briefing the residents on the study,
the research assistants received informed consent from the households for them to
participate in the survey. A total of 600 survey forms were distributed evenly in localities
that were experiencing business development and had a high proportion of
micro-businesses that had switched to enterprises. However, due to the complicated
situation of the covid pandemic, only 404 survey forms were collected. This still
constitutes the minimum requirement for the sample size of 385. Our sample distribution
includes 65 micro-businesses in Dong Tho, 52 micro-businesses in Truong Thi, 63 micro-
businesses in Lam Son, 71 micro-businesses in Ba Dinh, 96 micro-businesses in Dong Ve
and 57 micro-businesses in Dong Huong. At first, all households operated businesses in
the form of micro-businesses. After that, 95 micro-businesses switched to enterprises, and
298 micro-businesses remained the same. Although Thanh Hoa province has 20 wards
and 17 communes, we only chose the six above wards because they are the Thanh Hoa
province’s key economic areas. We sent the questionnaires to the most developed micro-
businesses for each ward. To avoid sampling bias between switched and unswitched
households, we selected a random sample from the list of micro-businesses provided by
Thanh Hoa province.

3.4 Instruments
The five items measuring attitude are from Solesvik et al. (2012). The six items measuring
subjective norms and the four items evaluating perceived behavioral control are from
Solesvik et al. (2012). The three items measuring the quality of the formal institutions and the
three items measuring the level of controlled informal institutions are from
Escandon-Barbosa et al. (2019). The three items measuring the needs of micro-businesses are Why do micro-
from Al-Jubari et al. (2018). Each item used in our study is accompanied by a response option businesses
ranging from 1 (strongly disagree) to 5 (strongly agree). Higher scores reflect higher levels in
the measured constructs.
hesitate to
“grow up”?
4. Results and discussions
4.1 Summary of socioeconomic characteristics of respondents 419
Table 2 displays socioeconomic characteristics of respondents. Overall, the study found that
the percentage of male-owned businesses that switched to enterprises (52.94%) was higher
than that of female-owned ones (47.06%). The household owners with higher educational
levels had a higher switch rate than those with lower educational levels. This might imply
that education level can be a decisive factor that influences the behavior of micro-businesses
switching to enterprises. Those who switched to enterprises have an education level of at
least a high school graduate (12 years or more). A few other studies have also shown that
higher education increases the probability of switching because their knowledge makes it
easier for them to make the right decisions and operate the enterprises successfully (Minola
et al., 2014; van der Zwan et al., 2016). Further, the experience that has been gained by running
micro-businesses also motivates micro-businesses to switch to enterprises. Micro-businesses
with 6–10 years or more of experience tend to switch to enterprises about 1.37 times more
than those with less than five years of experience. There is no significant difference between
the ages of those who switched and those who did not. The average age of those who switched
(44.37) was slightly higher than that of those who did not (42.74 years).
There are inherent differences between those who decided to switch to enterprises and
those who did not. Micro-businesses that switched to enterprises had a mean financial capital
that was 1.24 times higher than those that did not switch. This figure shows that capital is
also one factor that affects micro-businesses’ decision to switch to enterprises.

4.2 Determinants of the micro-businesses’ decision to switch to enterprises

This study has six latent variables: ATT, SN, PCB, Formal_INS, Informal_INS and Need.
Before using GSEM to examine the effects of the variables, we use factor analysis with
varimax rotation to check the 24 statements related to planned behavior, institutions and
needs. The Cronbach’s alpha test is used to control the scale’s reliability. As the results in
Appendix 2 show, the reliability values of all of the statements are above 0.75. The factor
loadings are all greater than 0.5, and there is no case of variables uploading both factors
simultaneously (see Appendix 1). This suggests that further analysis may proceed.
The second step of the study is to examine the pure effects of the explanatory variables on
the behavior of the micro-businesses in switching. As mentioned earlier, although GSEM
allows us to deal with the structural model with the independent variable being binary, it has
one major limitation of being unable to perform overall goodness-of-fit statistics. Therefore, to
assess the model fit, we will add explanatory variables (one by one) to the model to observe
the changes in their coefficients and compare the AIC and BIC test results in each model.
Table 3 presents the empirical results of various models. There are three issues worth
noting. First, in models (1) to (6), the coefficients’ signs are consistent with the theoretical
prediction mentioned earlier. Second, the elasticity of the explanatory variables changes very
little whenever we add new variables to the model. This means that our model is not sensitive
to the addition or elimination of explanatory variables. Finally, the latter models (with the
new variables) have better AIC and BIC statistics than the base model (Model 1). This
suggests that the model results from the GSEM method are efficient for further analysis.
The GSEM model results regarding the impact of the factors affecting the micro-
businesses’ decision to switch to enterprises are in Table 4. AIC and BIC test results are
APJBA Switching Non-switching
13,3 N 5 102 (25.25%) N 5 302 (74.75%)
Variable Group Freq. % Mean Freq. % Mean

Gender 0.47 0.48

Male 54 52.94 156 51.66
Female 48 47.06 146 48.34
420 Age 44.37 42.74
From 25 to 35 21 20.59 31.29 89 29.47 30.58
From 36 to 45 35 34.31 40.86 90 29.80 40.54
From 46 to 60 45 44.12 52.76 123 40.73 53.16
Over 60 1 0.98 65.00 0 0.00 0.00
Education 12.09 10.28
No 1 0.98 0.00 13 4.30 0.00
From 1 to 5 years 13 12.75 3.77 72 23.84 3.49
From 6 to 9 years 22 21.57 7.73 71 23.51 7.94
From 10 to 12 years 25 24.51 11.92 60 19.87 11.77
Over 12 years 41 40.20 17.46 86 28.48 18.43
Experience 6.75 5.71
From 1 to 5 years 43 42.16 3.65 150 49.67 2.87
From 6 to 10 years 42 41.18 7.88 117 38.74 7.54
Over 10 years 17 16.67 11.76 35 11.59 11.86
Capital 6.14 4.96
Under 1 billion 1 0.98 0.85 33 10.93 0.65
Table 2.
Socioeconomic From 1 to 5 billion 49 48.04 3.17 158 52.32 2.60
characteristics From 6 to 10 billion 40 39.22 8.15 74 24.50 6.26
between switching and Over 10 billion 12 11.76 12.00 37 12.25 12.27
not switching Source(s): The authors calculate from survey data

3283.01 and 3363.04, respectively. As indicated, most of the model variables are statistically
significant, except for gender and age. The coefficient of the variable gender is positive, while
that of the variable age is negative, but statistically insignificant. This may imply that
switching from micro-businesses to enterprises is more prevalent among those who are
young and male. This result may be because the elderly are more traditionally oriented than
the young [9]. Older people are often afraid of change and adapt poorly to market and
economic trends. Meanwhile, young people are exposed to many new trends and are ready to
adapt and innovate to achieve their goals. This finding is in line with Levesque and
Minniti (2006).
The variables of education and experience significantly affect, positively and statistically,
the behavior of micro-businesses in switching (at least at 0.05 level). Education and experience
are essential variables in the micro-businesses’ decision to switch to enterprises. The owners
of micro-businesses who have high education and long-term experience in the profession are
more likely to switch to enterprises than those with low education and less long-term
experience. This finding is reasonable because those with a high level of education and rich
experience would have enough theoretical and practical knowledge to operate the enterprises
(Christina, 2017; de Wit and van Winden, 1989; van der Zwan et al., 2016). Therefore, it would
be easier for them to overcome the process of switching and the challenges or risks it involves.
An indispensable factor in all business activities is capital, which is also positive and
statistically significant, at the level of 0.05. According to our estimation, a 1-unit increase in
capital is associated with a 0.07 increase in the log-odds of switching to an enterprise. Our
results support the view of Simoes et al. (2016), who pointed out that capital helps individuals
enhance their certainty, ensure perseverance with challenges and increase convertibility.
Variable Model 1 Model 2 Model 3 Model 4 Model 5 Model 6
Why do micro-
businesses
Direct effects hesitate to
Gender 0.026 0.088 0.010 0.036 0.067 0.006
(0.235) (0.241) (0.251) (0.255) (0.259) (0.265) “grow up”?
Age 0.037 0.029 0.034 0.039 0.041 0.039
(0.023) (0.023) (0.024) (0.025) (0.025) (0.026)
Education 0.040* 0.034 0.038 0.043* 0.045* 0.050* 421
(0.019) (0.020) (0.021) (0.021) (0.022) (0.022)
Experience 0.159* 0.144* 0.153* 0.173* 0.173* 0.174*
(0.068) (0.069) (0.071) (0.072) (0.074) (0.076)
Capital 0.056 0.040 0.053 0.059 0.071* 0.070*
(0.031) (0.032) (0.033) (0.034) (0.035) (0.035)
ATT 0.732** 0.808** 0.776** 0.840** 0.804**
(0.186) (0.194) (0.196) (0.199) (0.204)
SN 0.872** 0.898** 0.932** 0.940**
(0.181) (0.185) (0.190) (0.191)
PCB 0.508** 0.523** 0.485**
(0.157) (0.158) (0.161)
Formal_INS 0.534** 0.454**
(0.163) (0.168)
Informal_INS 0.561**
(0.169)
Constant 1.215 4.536** 8.347** 10.25** 12.84** 14.41**
(0.704) (1.114) (1.440) (1.612) (1.856) (1.982)
Indirect effects
ATT
Need 0.126** 0.126** 0.126** 0.126** 0.126**
(0.044) (0.044) (0.044) (0.044) (0.044)
Constant 3.634** 3.634** 3.634** 3.634** 3.634**
(0.190) (0.190) (0.190) (0.190) (0.190)
SN
Need 0.108* 0.108* 0.108* 0.108*
(0.048) (0.048) (0.048) (0.048)
Constant 3.563** 3.563** 3.563** 3.563**
(0.206) (0.206) (0.206) (0.206)
PCB
Need 0.119* 0.119* 0.119*
(0.055) (0.055) (0.055)
Constant 3.193** 3.193** 3.193**
(0.236) (0.236) (0.236)
No of obs. 404 404 404 404 404 404
Log- 1660.748 1652.241 1638.835 1633.207 1627.454 1621.504
likelihood
Table 3.
AIC 3351.496 3336.481 3311.669 3302.415 3292.907 3283.009 Sensitivity tests via the
BIC 3411.517 3400.504 3379.694 3374.44 3368.934 3363.037 changes in the
Note(s): Standard errors in parentheses; *significant at the 0.05 level; ** significant at the 0.01 level coefficients and AIC
Source(s): Empirical results and BIC tests

The indirect effect of the variable needs on the behavior of switching is positive and
statistically significant (at least 0.05 level). This means that the satisfaction of needs plays a
vital role in shaping the behavior of micro-businesses in switching. In particular, the
satisfaction of needs mostly affects the behavior to switch through ATT, this is followed by
PCB and finally SN. These results imply that micro-businesses’ attitudes are mainly formed
based on the desire to satisfy needs. Of the three factors that constitute needs, the need of
APJBA Variable Coef. Odds ratio Std. Err. Z P>z
13,3
Direct effects
Gender 0.006 1.006 0.265 0.02 0.982
Age 0.039 0.962 0.026 1.50 0.133
Education 0.050* 1.051 0.022 2.25 0.024
Experience 0.174* 1.190 0.076 2.29 0.022
422 Capital 0.070* 1.073 0.035 2.01 0.045
ATT 0.804** 2.234 0.204 3.95 0.000
SN 0.940** 2.560 0.191 4.93 0.000
PCB 0.485** 1.624 0.161 3.02 0.003
Formal_INS 0.454** 1.575 0.168 2.70 0.007
Informal_INS 0.561** 1.752 0.169 3.33 0.001
Constant 14.41** 0.000 1.982 7.27 0.000
Indirect effects
ATT
Need 0.126** 1.126 0.044 2.87 0.004
Constant 3.634** 24.361 0.190 19.17 0.000
SN
Need 0.108* 1.114 0.048 2.25 0.024
Constant 3.563** 35.269 0.206 17.33 0.000
PCB
Need 0.119* 1.126 0.055 2.17 0.030
Constant 3.193** 24.361 0.236 13.53 0.000
No of obs. 404
Table 4.
Factors affecting the Log-likelihood 1621.504
behavior of households AIC 3283.009
to switch from micro- BIC 3363.037
businesses to Note(s): *significant at the 0.05 level; **significant at the 0.01 level
enterprises Source(s): Empirical results

relatedness has the most in-depth explanation. This shows that the behavior of micro-
businesses to switch has the main objective of increasing their cohesion and improving their
community and society position.
All three TPB variables positively affect the switching behavior (the coefficients are all
statistically significant at the level of 0.01). According to the estimated results, SN has the
most influential impact on the intention to switch (odds ratio 5 2.56), followed by ATT (odds
ratio 5 2.23) and the PCB (odds ratio 5 1.62). This result shows that family, friends and
colleagues are the main influence on the behavior of micro-businesses in switching. This
result partly reflects the culture in Vietnam. In Vietnam, social status is highly valued,
especially for men. Owning enterprises can enhance their voice and status in the eyes of
friends, neighbors, family and society. Therefore, many people and micro-businesses tend to
start or set up enterprises under their ownership.
Finally, one of the factors that play a fundamental role in all enterprise operations is
institutions. According to the estimations, the coefficients of formal_INS and informal_INS
are positive and statistically significant. This result emphasizes that in addition to the
household characteristics and behavioral psychology, the state’s regulations and policies are
also important factors that strongly influence the intention of the micro-businesses to switch
to enterprises. According to our empirical results, a 1-unit increase in the formal institutions
and informal institutions leads to an increase in the log-odds of switching to enterprises by
0.45 and 0.56.
 In recent years, implementing Decree 39/2018/ND-CP which stipulates several articles of Why do micro-
the government’s law on support for small and medium enterprises, Thanh Hoa province has businesses
introduced many policies to promote the conversion of micro-businesses to enterprises [10].
Among these policies, the exemption or reduction of some taxes and fees for newly
hesitate to
established businesses is the most notable. For example, the province exempts the fees for “grow up”?
enterprise registration, the first provision of enterprise information and the first assessment
and granting of business licenses for conditional business lines. Further, license fees are
waived for three years from the date of the first issuance of the business registration 423
certificate. The province also exempted or reduced land use levy for a definite period under
the land law. So why is the ratio of conversion from micro-businesses to enterprises still low?
In this context, we use the terminology “grow-up” to refer to the behavior of people in
switching from micro-businesses to enterprises. Based on the empirical results regarding the
factors influencing the behavior of micro-businesses in switching and practical surveys, we
found that institutions are one of the main reasons micro-businesses hesitate to “grow up.”
Regarding the formal institutions, although the Vietnamese government has introduced
many preferential policies on tax and license fees as well as supported the implementation of
registration and declaration procedures, micro-businesses still hesitate to switch to
enterprises because of several reasons.
The first reason is related to the procedures that the micro-businesses need to complete to
switch to enterprises. Specifically, the owner of the micro-business must prepare legal
documents according to the type of enterprise they want to convert to. However, these
regulations have not been specifically disseminated to micro-businesses, especially micro-
businesses located in remote areas. According to the statistics of the Vietnam Chamber of
Commerce and Industry on the Provincial Competitiveness Index (PCI), 56% of the
respondents said that they need to have connections with the provincial officers to
understand those documents (VCCI, 2019). This figure shows that people have limited access
to legal information. Therefore, the micro-business owners are pretty hesitant to switch to
enterprises due to concerns about the complicated procedures and rising costs.
The second reason is concerned with the business accounting system and tax declaration.
For example, according to Vietnamese regulations, if one is operating as a micro-business, the
owner only pays three kinds of taxes: license tax, value-added tax and personal income tax. If
the micro-business’s turnover is less than 100 million VND per month, the micro-business will
be exempt from all the above taxes [11]. By the end of 2020, 49,568 micro-businesses did not
have to pay tax because their turnover was lower than the tax payment threshold (Thanh Hoa
province Department of Taxation, 2020). There might be a situation where a micro-business has
a turnover of more than 100 million VND per month and does not declare invoices in order to
take advantage of the loopholes in management and evade taxes. This problem creates
inequality between enterprises and micro-businesses and causes revenue loss to the state
budget. The tax determination is based on regulations and the annual tax declaration. However,
if a micro-business switches to an enterprise, it will have to pay four taxes and declare and pay
taxes on a monthly or quarterly basis. According to these regulations, once a micro-business
switches to an enterprise, it must change from the presumptive tax regime to self-declaration,
self-payment, self-printing and the use of invoices. It will have to fulfill more tax obligations and
pay more taxes [12]. Therefore, these things result in enterprise owners worrying about
increased labor costs or costs incurred from not understanding the regulations.
The third reason is associated with the inspection. According to Minh (2018), micro-
businesses are not interested in switching to enterprises. The fundamental reason for this is
that if a micro-business becomes an enterprise, it would be under more pressure of being
inspected. At the same time, they must bear more risks. In the recent report, VCCI has warned
about enterprises being under too much inspection and examination (Ha, 2018). According to
VCCI statistics, on average, an enterprise in Thanh Hoa province spends 24 h working with
APJBA the tax inspector; 8% of the enterprises are inspected and examined five times a year or even
13,3 more (two percent higher than the national average); 12% of the enterprises said they had
been tested repeatedly; the percentage of turnover paid for inspections in Thanh Hoa
province is 44% (about 5% higher than the national average) (VCCI, 2019).
The hindrance comes not only from formal institutions but also from informal institutions.
In actuality, informal institutions are no longer unfamiliar with people, micro-businesses and
enterprises in Vietnam. However, increasing costs due to informal institutions still hamper
424 micro-businesses’ motivation to switch to enterprises. According to the PCI statistics, Thanh
Hoa province’s unofficial cost was 5.64 in 2010, and it increased to 6.17 in 2019. Also, 54% of
the respondents said harassment is common during administrative procedures in Thanh Hoa
(VCCI, 2019). These figures show that informal institutions are common in this province.
The cause of this problem comes from both provincial officials and micro-businesses. In part,
a particular portion of officials lacks integrity in performing public duties, causing difficulties
for micro-businesses. Part of the reason for possible negative behavior stems from the micro-
businesses themselves. Many micro-businesses want to convert to enterprises, but do not
carefully inform themselves about the regulations, procedures and policies related to tax,
finance and other important areas. Therefore, these micro-businesses encounter many
obstacles in transition. Due to these troublesome procedures and many obstacles, some micro-
businesses may send gifts to state officials to speed up the process. If these behaviors are
repeated, they will form a bad culture in the business environment in the long run.

4.3 Theoretical implications

Our study makes several contributions to the literature review. First, we follow the efforts of
Al-Jubari et al. (2018) and Al-Jubari (2019) in integrating TPB and SDT in explaining
individuals’ behavior. Specifically, they used these two theories in testing students’
entrepreneurial intentions. However, our study incorporates these two theories into a new
domain (to explain the behavior of switching from a micro-business to an enterprise). This
would suggest that future studies should attempt to employ this combination of TPB and
SDT or the alternative theories in examining the intention and behavior in business and
entrepreneurship.
Second, Lortie and Castogiovanni (2015) recommended that future works consider adding
the alternative determinants of constructs in TPB to develop the theory further and expand
its application to explain individual behaviors. Our study responds to the recommendation of
Lortie and Castogiovanni (2015) by incorporating needs as a determinant of the attitude
toward behavior, subjective norm and perceived behavioral control (the constructs of TPB).
Specifically, we test their association in forming the intention to switch from micro-business
to enterprises. Our study’s unique feature contributes to a more comprehensive application
and development of TPB, further consolidating the critical role of TPB in explaining
individuals’ behaviors.
Finally, we contribute to the literature of SDT by employing it in the new domain of testing
the formation of the intention to switch from micro-businesses to enterprises. In our study, we
adopt needs as a unidimensional construct. Future research may consider replicating the model
proposed in our study. However, they could use the three dimensions of needs: need for
autonomy, need for competence and need for relatedness as determinants of TPB constructs.
That is, needs could be used as a multidimensional variable to further estimate the research
model proposed by our study. This should provide the robust validation of our research model.

4.4 Managerial implications

Our study finds that an increase in needs and sentiment factors positively affects the
behavior of micro-businesses to switch. The needs have an indirect impact on the intention to
switch through attitude, perceived behavioral control and subjective norm. Indirect impact Why do micro-
and subjective norms have the most significant effect on the behavior of micro-businesses to businesses
switch. This implies two aspects. First, whether a household business’s behavior becomes
realistic or not depends much on the assessment, perception and opinion of their friends,
hesitate to
relatives and colleagues. Second, the switching behavior stems mainly from improving the “grow up”?
head of the household’s status in society. This result is entirely consistent with the sample’s
characteristics when it is primarily male.
Besides the needs and psychological factors, the institutions’ quality also profoundly 425
impacts the behavior of micro-businesses to switch. Both coefficients of formal and informal
institutions are positive and statistically significant. This result implies that the clearer and
more transparent the government’s regulations and policies on business establishment
procedures, finance and tax, the more it would promote micro-businesses to transform into
enterprises. Based on the findings of this study, we put forward the several following
suggestions to motivate micro-businesses to switch to enterprises:
First, the empirical results show that the behavior of micro-businesses to switch is mainly
formed from their friends, relatives and colleagues’ assessments, perceptions and opinions.
Therefore, Thanh Hoa province should disseminate information to all the people in the
province, not just the micro-businesses, about the advantages and benefits of switching from
micro-businesses to enterprises. The popularization of this knowledge will help people
improve their social and legal knowledge. Moreover, this activity will increase the positive
influence that information and policy have on the behavior of micro-businesses to switch to
enterprises.
Second, the Vietnamese government needs to continue improving institutional quality
such as accounting policies, tax payments and procedures for switching from micro-
businesses to enterprises. Micro-businesses and enterprises are directly affected by these
policies. Therefore, policymakers need to get feedback from these entities to improve
mechanisms and policies and encourage micro-businesses to switch to enterprises.
Third, to help micro-businesses understand and enjoy the incentives when switching to
enterprises, Thanh Hoa province needs to issue a specific program to convert micro-
businesses into enterprises. In particular, policymakers should allow micro-businesses to
inherit existing licenses, even for conditional business lines, when switching to enterprises.
Simultaneously, it is necessary to build a database of contractual revenue and contractual
rates according to business lines, the number of employees and locality.
Finally, the government needs to continue to reform the tax administration for micro-
businesses. Vietnam should develop a transparent tax administration mechanism according
to each enterprise’s size. Doing so would encourage micro-businesses to switch to enterprises
and ensure a fair business environment. Accordingly, Vietnam can consider applying an
accounting system according to the size of the micro-businesses and enterprises. For
example, micro-businesses and small enterprises should use a simple accounting regime. In
contrast, it is necessary to expand the entities (to include micro-enterprises and large micro-
businesses) which must fully apply the accounting, invoice and document regimes. The
expansion of the accounting regime to include small and medium-sized enterprises and micro-
businesses will create a transparent and fair business environment, motivating micro-
businesses to switch to enterprises.

5. Conclusion
This study analyzes the factors affecting micro-businesses’ decision to switch to enterprises
in Thanh Hoa, Vietnam. It is the first study that examines the role of needs in forming TPB
constructs (including attitude toward behavior, subjective norm and perceived behavioral
control). Furthermore, this study consequently tests the impacts of TPB constructs on the
APJBA intention to switch from micro-businesses to enterprises. We are new to combining the two
13,3 theories of SDT and TPB to explain the formation of such switching behavior. The empirical
findings demonstrate the role of needs, psychological factors and institutional quality in the
behavior of micro-businesses to switch to enterprises in Thanh Hoa province, Vietnam.
Moreover, institutional quality is validated as a predictor of the decision of micro-businesses
to switch to enterprises. Thus, policymakers should improve the quality of institutions to
encourage such decisions. Future research could consider alternative approaches to using
426 TPB in combination with other theories explaining business intentions and behaviors.

Notes
1. The Vietnamese corporate law uses the term “business household.” However, in many academic
papers, scholars often use the term “micro-business.”
2. Clause 10, Article 4 of the Law 59/2020/QH14 dated June 17, 2020 of the Vietnam’s National
Assembly promulgating the Law on Enterprises.
3. Clause 1, Article 66 of Decree 78/2015/ND-CP dated September 14, 2015 of the Vietnamese
Government on Enterprise Registration.
4. The Law 59/2020/QH14 dated June 17, 2020 of the Vietnam’s National Assembly promulgating the
Law on Enterprises.
5. The Law 59/2020/QH14 dated June 17, 2020 of the Vietnam’s National Assembly promulgating the
Law on Enterprises.
6. The phrase “switching behavior” or “switching intention” will be used interchangeably to describe
the micro-businesses’ decision to switch to enterprise.
7. Entrepreneurial intentions and actions are the focus of our study.
8. The number of micro-businesses to pay taxes is 61,174, whereas the number of micro-businesses
that have not yet reached the tax payment threshold is 49,568.
9. Since the coefficients are statistically insignificant, this interpretation should be made with caution.
10. Decree 39/2018/ND-CP dated March 11, 2018 of the Vietnamese government on guidelines for law on
support for small and medium-sized enterprises.
11. Circular 92/2015/ TT-BTC dated June 15, 2015 of the Vietnam’s Ministry of Finance on the personal
income tax and value-added tax; Decree 139/2016 /ND-CP dated October 4, 2016 of the Vietnamese
government on licensing fees.
12. In addition to basic taxes such as license fees, corporate income tax, personal income tax for
employees and value-added tax, enterprises also have to pay environmental protection tax, import
and export tax, special consumption tax, etc.

References
Ajzen, I. (1991), “The theory of planned behavior”, Organizational Behavior and Human Decision
Processes, Vol. 50 No. 2, pp. 179-211, doi: 10.1016/0749-5978(91)90020-t.
Al-Jubari, I. (2019), “College students’ entrepreneurial intention: testing an integrated model of SDT
and TPB”, SAGE Open, Vol. 9 No. 2, doi: 10.1177/2158244019853467.
Al-Jubari, I., Hassan, A. and Li~nan, F. (2018), “Entrepreneurial intention among University students in
Malaysia: integrating self-determination theory and the theory of planned behavior”,
International Entrepreneurship and Management Journal, Vol. 15 No. 4, pp. 1323-1342, doi:
10.1007/s11365-018-0529-0.
Anokhin, S. and Schulze, W.S. (2009), “Entrepreneurship, innovation, and corruption”, Journal of
Business Venturing, Vol. 24 No. 5, pp. 465-476, doi: 10.1016/j.jbusvent.2008.06.001.
Bianchi, M. (2009), “Credit constraints, entrepreneurial talent, and economic development”, Small Why do micro-
Business Economics, Vol. 34 No. 1, pp. 93-104, doi: 10.1007/s11187-009-9197-3.
businesses
Bosma, N., Content, J., Sanders, M. and Stam, E. (2018), “Institutions, entrepreneurship, and economic
growth in Europe”, Small Business Economics, Vol. 51 No. 2, pp. 483-499, doi: 10.1007/s11187-
hesitate to
018-0012-x. “grow up”?
Br€annback, M., Krueger, N.F., Carsrud, A.L. and Kickul, J. (2007), “Trying’ to be an entrepreneur? A
’goal-specific’ challenge to the intentions model”, Paper presented at the Babson
Entrepreneurship Research Conference, Madrid. 427
Branstetter, L., Lima, F., Taylor, L.J. and Ven^ancio, A. (2014), “Do entry regulations deter
entrepreneurship and job creation? Evidence from recent reforms in Portugal”, The Economic
Journal, Vol. 124 No. 577, pp. 805-832, doi: 10.1111/ecoj.12044.
Chaston, I. (2000), “Organisational competence: does networking confer advantage for high growth
entrepreneurial firms?”, Journal of Research in Marketing and Entrepreneurship, Vol. 2 No. 1,
pp. 36-56, doi: 10.1108/14715200080001538.
Chell, E. and Baines, S. (2000), “Networking, entrepreneurship and microbusiness behaviour”,
Entrepreneurship and Regional Development, Vol. 12 No. 3, pp. 195-215, doi: 10.1080/
089856200413464.
Christina (2017), “Attitude, subjective norms, perceived behavior, entrepreneurship education and self-
efficacy toward entrepreneurial intention university student in Indonesia”, European Research
Studies Journal, Vol. XX, pp. 475-495, doi: 10.35808/ersj/654.
Co, M.J. (2004), “The formal institutional framework of entrepreneurship in the Philippines: lessons for
developing countries”, The Journal of Entrepreneurship, Vol. 13 No. 2, pp. 185-203, doi: 10.1177/
097135570401300204.
de Wit, G. and van Winden, F.A.A.M. (1989), “An empirical analysis of self-employment in The
Netherlands”, Small Business Economics, Vol. 1 No. 4, pp. 263-272, doi: 10.1007/bf00393805.
Deci, E.L. and Ryan, R.M. (2000), “The ‘what’ and ‘why’ of goal pursuits: human needs and the self-
determination of behavior”, Psychological Inquiry, Vol. 11 No. 4, pp. 227-268, doi: 10.1207/
s15327965pli1104_01.
Dıaz-Casero, J.C., Ferreira, J.J.M., Hernandez Mogollon, R. and Barata Raposo, M.L. (2009), “Influence of
institutional environment on entrepreneurial intention: a comparative study of two countries
university students”, International Entrepreneurship and Management Journal, Vol. 8 No. 1,
pp. 55-74, doi: 10.1007/s11365-009-0134-3.
Douhan, R. and Henrekson, M. (2010), “Entrepreneurship and second-best institutions: going beyond
Baumol’s typology”, Journal of Evolutionary Economics, Vol. 20 No. 4, pp. 629-643, doi: 10.1007/
s00191-010-0174-4.
Engle, R.L., Schlaegel, C. and Dimitriadi, N. (2011), “Institutions and entrepreneurial intent: a cross-
country study”, Journal of Developmental Entrepreneurship, Vol. 16 No. 2, pp. 227-250, doi: 10.
1142/s1084946711001811.
Escandon-Barbosa, D., Urbano-Pulido, D. and Hurtado-Ayala, A. (2019), “Exploring the relationship
between formal and informal institutions, social capital, and entrepreneurial activity in
developing and developed countries”, Sustainability, Vol. 11 No. 2, doi: 10.3390/su11020550.
nan, F. (2014), “The future of research on entrepreneurial intentions”, Journal of
Fayolle, A. and Li~
Business Research, Vol. 67 No. 5, pp. 663-666, doi: 10.1016/j.jbusres.2013.11.024.
Foreman-Peck, J., Makepeace, G. and Morgan, B. (2006), “Growth and profitability of small and
medium-sized enterprises: some Welsh evidence”, Regional Studies, Vol. 40 No. 4, pp. 307-319,
doi: 10.1080/00343400600725160.
Gherhes, C., Williams, N., Vorley, T. and Vasconcelos, A.C. (2016), “Distinguishing micro-businesses
from SMEs: a systematic review of growth constraints”, Journal of Small Business and
Enterprise Development, Vol. 23 No. 4, pp. 939-963, doi: 10.1108/jsbed-05-2016-0075.
APJBA Gorgievski, M.J., Stephan, U., Laguna, M. and Moriano, J.A. (2018), “Predicting entrepreneurial career
intentions: values and the theory of planned behavior”, Journal of Career Assessment, Vol. 26
13,3 No. 3, pp. 457-475, doi: 10.1177/1069072717714541.
Greenbank, P. (2000), “Micro-business start-ups: challenging normative decision making?”, Marketing
Intelligence and Planning, Vol. 18 No. 4, pp. 206-212, doi: 10.1108/02634500010333415.
Grzelak, A., Staniszewski, J. and Borychowski, M. (2020), “Income or assets—what determines the
approach to the environment among farmers in a region in Poland?”, Sustainability, Vol. 12
428 No. 12, doi: 10.3390/su12124917.
untert, S.T. (2014), “The impact of work design, autonomy support, and strategy on employee
G€
outcomes: a differentiated perspective on self-determination at work”, Motivation and Emotion,
Vol. 39 No. 1, pp. 74-87, doi: 10.1007/s11031-014-9412-7.
Ha, T. (2018), “Which agency inspects most businesses? Online newspaper of the government”,
available at: http://news.chinhphu.vn/.
Hagger, M.S. and Chatzisarantis, N.L. (2009), “Integrating the theory of planned behaviour and self-
determination theory in health behaviour: a meta-analysis”, British Journal of Health
Psychology, Vol. 14, pp. 275-302, doi: 10.1348/135910708X373959.
Hieu, L.Q. and Xuan, N.T.T. (2020), “Giải phap phat triển doanh nghiệp tr^en dịa ban tỉnh Thanh Hoa
dến nam 2025”, Economics and Business Administration, Vol. 2020 No. 4, pp. 8-13.
Huggins, R. and Johnston, A. (2009), “Knowledge networks in an uncompetitive region: SME
innovation and growth”, Growth and Change, Vol. 40 No. 2, pp. 227-259, doi: 10.1111/j.1468-
2257.2009.00474.x.
Huy, G. (2021), “Efforts to reduce overlap tied with businesses”, available at: https://baochinhphu.vn/
Tin-noi-bat/No-luc-giam-chong-cheo-troi-buoc-doanh-nghiep/418707.vgp.
Kaufmann, D., Kraay, A. and Mastruzzi, M. (2008), “Governance matters VII: aggregate and individual
governance indicators 1996-2007”, in The Worldbank.
Kautonen, T., van Gelderen, M. and Fink, M. (2015), “Robustness of the theory of planned behavior in
predicting entrepreneurial intentions and actions”, Entrepreneurship: Theory and Practice,
Vol. 39 No. 3, pp. 655-674, doi: 10.1111/etap.12056.
Keuschnigg, C. and Bo Nielsen, S. (2004), “Progressive taxation, moral hazard, and entrepreneurship”,
Journal of Public Economic Theory, Vol. 6 No. 3, pp. 471-490, doi: 10.1111/j.1467-9779.2004.
00175.x.
Klapper, L., Laeven, L. and Rajan, R. (2004), “Barriers to entrepreneurship”, NBER Working Paper.
Klein, R.B. (2011), Principles and Practice of Structural Equation Modelling, 3rd ed., The Guilford Press,
New York.
Levesque, M. and Minniti, M. (2006), “The effect of aging on entrepreneurial behavior”, Journal of
Business Venturing, Vol. 21 No. 2, pp. 177-194, doi: 10.1016/j.jbusvent.2005.04.003.
Lortie, J. and Castogiovanni, G. (2015), “The theory of planned behavior in entrepreneurship research:
what we know and future directions”, International Entrepreneurship and Management Journal,
Vol. 11 No. 4, pp. 935-957, doi: 10.1007/s11365-015-0358-3.
Management, C.I.F.E. (2017), Research Report on “Formalizing” Business Households in Vietnam:
Current Situation and Policy Recommendations, Hong Duc Publisher, Ha Noi.
Martınez-Gonzalez, J.A., Kobylinska, U., Garcıa-Rodrıguez, F.J. and Nazarko, L. (2019), “Antecedents of
entrepreneurial intention among young people: model and regional evidence”, Sustainability,
Vol. 11 No. 24, doi: 10.3390/su11246993.
Minh, Q. (2018), “Why do many household businesses do not want to become businesses?”, available
at: https://baodauthau.vn/vi-sao-nhieu-ho-kinh-doanh-khong-muon-thanh-dn-post48725.html.
Minniti, M. and Nardone, C. (2007), “Being in someone else’s shoes: the role of gender in nascent
entrepreneurship”, Small Business Economics, Vol. 28 Nos 2-3, pp. 223-238, doi: 10.1007/s11187-
006-9017-y.
Minola, T., Criaco, G. and Cassia, L. (2014), “Are youth really different? New beliefs for old practices in Why do micro-
entrepreneurship”, International Journal of Entrepreneurship and Innovation Management,
Vol. 18 Nos 2/3, doi: 10.1504/ijeim.2014.062881. businesses
Mohammed, E.A., Naugler, C. and Far, B.H. (2015), “Chapter 32 - Emerging business intelligence
hesitate to
framework for a clinical laboratory through big data analytics”, in Tran, Q.N. and Arabnia, H. “grow up”?
(Ed.), Emerging Trends in Computational Biology, Bioinformatics, and Systems Biology, Morgan
Kaufmann, Boston, pp. 577-602.
Moon, C.J. (2014), “Enterprise and entrepreneurship education: implications for innovation in 429
delivery”, in Galbraith, B. (Ed.), Proceedings of the 9th European Conference on Innovation and
Entrepreneurship, Academic Conferences and Publishing International, pp. 630-641.
Ndikumana, L., Baliamoune-Lutz, M. and Brixiova, Z. (2011), Credit Constraints and Productive
Entrepreneurship in Africa University of Massachusetts at Amherst: Political Economy
Research Institute, Amherst.
Niemiec, C.P., Lynch, M.F., Vansteenkiste, M., Bernstein, J., Deci, E.L. and Ryan, R.M. (2006), “The
antecedents and consequences of autonomous self-regulation for college: a self-determination
theory perspective on socialization”, Journal of Adolescence, Vol. 29 No. 5, pp. 761-775, doi: 10.
1016/j.adolescence.2005.11.009.
North, D.C. (1990), Institutions, Institutional Change and Economic Performance, Cambridge
University Press, Cambridge.
North, D.C. (1991), “Institutions”, Journal of Economic Perspectives, Vol. 5 No. 1, pp. 97-112, doi: 10.
1257/jep.5.1.97.
Obschonka, M., Silbereisen, R.K., Cantner, U. and Goethner, M. (2014), “Entrepreneurial self-identity:
predictors and effects within the theory of planned behavior framework”, Journal of Business
and Psychology, Vol. 30 No. 4, pp. 773-794, doi: 10.1007/s10869-014-9385-2.
O’Dwyer, M. and Ryan, E. (2000), “Management development issues for owners/managers of micro-
enterprises”, Journal of European Industrial Training, Vol. 24 No. 6, pp. 345-353, doi: 10.1108/
03090590010373334.
Quality Assurance Agency for Higher Education (2012), Enterprise and Entrepreneurship Education:
Guidance for UK Higher Education Providers, Gloucester.
Rabe-Hesketh, S., Skrondal, A. and Pickles, A. (2004), “Generalized multilevel structural equation
modeling”, Psychometrika, Vol. 69 No. 2, pp. 167-190, doi: 10.1007/bf02295939.
Reynolds, P.D., Bygrave, W.D., Autio, E. and Cox, L.W. (2000), “Global entrepreneurship monitor: 2002
executive report”, London, doi: 10.13140/RG.2.1.1977.0409.
Rigby, C.S. and Ryan, R.M. (2018), “Self-determination theory in human resource development: new
directions and practical considerations”, Advances in Developing Human Resources, Vol. 20
No. 2, pp. 133-147, doi: 10.1177/1523422318756954.
Salimath, M.S. and Cullen, J.B. (2010), “Formal and informal institutional effects on entrepreneurship: a
synthesis of nation-level research”, International Journal of Organizational Analysis, Vol. 18
No. 3, pp. 358-385, doi: 10.1108/19348831011062175.
Shir, N., Nikolaev, B.N. and Wincent, J. (2019), “Entrepreneurship and well-being: the role of
psychological autonomy, competence, and relatedness”, Journal of Business Venturing, Vol. 34
No. 5, doi: 10.1016/j.jbusvent.2018.05.002.
Simoes, N., Crespo, N. and Moreira, S.B. (2016), “Individual determinants of self-employment entry:
what do we really know?”, Journal of Economic Surveys, Vol. 30 No. 4, pp. 783-806, doi: 10.1111/
joes.12111.
Solesvik, M.Z., Matlay, H., Westhead, P., Kolvereid, L. and Matlay, H. (2012), “Student intentions to
become self-employed: the Ukrainian context”, Journal of Small Business and Enterprise
Development, Vol. 19 No. 3, pp. 441-460, doi: 10.1108/14626001211250153.
Stephen, F.H., Urbano, D. and van Hemmen, S. (2005), “The impact of institutions on entrepreneurial
activity”, Managerial and Decision Economics, Vol. 26 No. 7, pp. 413-419, doi: 10.1002/mde.1254.
APJBA Thanh Hoa Department of Planning and Investment (2020), available at: https://skhdt.thanhhoa.gov.
vn/portal/Pages/default.aspx.
13,3
Thanh Hoa province Department of Taxation (2020), available at: http://thanhhoa.gdt.gov.vn/wps/
portal.
Thanh Hoa Statistical Office (2020), available at: https://ctk.thanhhoa.gov.vn/portal/Pages/
default.aspx.
430 van der Zwan, P., Thurik, R., Verheul, I. and Hessels, J. (2016), “Factors influencing the entrepreneurial
engagement of opportunity and necessity entrepreneurs”, Eurasian Business Review, Vol. 6
No. 3, pp. 273-295, doi: 10.1007/s40821-016-0065-1.
VCCI (2019), “Provincial profile report 2019”, available at: https://pcivietnam.vn/uploads//VN-Bao-cao-
ngan-PCI/2019.pdf.
Weinstein, N. and Ryan, R.M. (2011), “A self-determination theory approach to understanding stress
incursion and responses”, Stress and Health, Vol. 27 No. 1, pp. 4-17, doi: 10.1002/smi.1368.
Wilson, P.M., Mack, D.E. and Grattan, K.P. (2008), “Understanding motivation for exercise: a self-
determination theory perspective”, Canadian Psychology/Psychologie Canadienne, Vol. 49 No. 3,
pp. 250-256, doi: 10.1037/a0012762.
Yang, J. (2013), “The theory of planned behavior and prediction of entrepreneurial intention among
Chinese undergraduates”, Social Behavior and Personality: An International Journal, Vol. 41
No. 3, pp. 367-376, doi: 10.2224/sbp.2013.41.3.367.
Zhang, L. and Zhang, J. (2018), “Perception of small tourism enterprises in Lao PDR regarding social
sustainability under the influence of social network”, Tourism Management, Vol. 69,
pp. 109-120, doi: 10.1016/j.tourman.2018.05.012.
Appendix 1 Why do micro-
businesses
hesitate to
“grow up”?
Factor loadings
1 2 3 4 5 6

ATT Being an entrepreneur implies more 0.989

431
advantages than disadvantages to me
Being an entrepreneur would give me 0.965
great satisfaction
It is desirable for me to become an 0.983
entrepreneur
It is attractive for me to become an 0.976
entrepreneur
I am in favor of entrepreneurship and the 0.986
creation of a household
SN My closest family members think that I 0.969
should pursue a career as an entrepreneur
My closest friends think that I should 0.978
pursue a career as an entrepreneur
People that are important to me think that 0.983
I should pursue a career as an
entrepreneur
To what extent do you care about what 0.965
your closest family thinks as you decide on
whether or not to pursue a career as self-
employed?
To what extent do you care about what 0.964
your closest friends think as you decide on
whether or not to pursue a career as self-
employed?
To what extent do you care about what 0.971
people who are important to you think as
you decide on whether or not to pursue a
career as self-employed?
PCB If I wanted to, I could easily become an 0.980
entrepreneur
It is entirely up to me whether or not I 0.979
become an entrepreneur
As an entrepreneur, I would have 0.975
sufficient control over my business
There are very few circumstances outside 0.974
of my control that may prevent me from
becoming an entrepreneur
Formal_INS The regulations on business registration 0.976
policies and procedures are clear
The rules for borrowing and other 0.981
financial sectors are clear and transparent
The rules on taxes are clear and 0.969 Table A1.
transparent The results of factor
analysis with varimax
(continued ) rotation
APJBA Factor loadings
13,3 1 2 3 4 5 6

Informal_INS Corruption and bribery are always strictly 0.973

controlled by the government
We are always safe from gangsters, 0.975
reactionaries and other crimes
432 Our financial transactions are always safe 0.971
Need I feel a sense of choice and freedom in the 0.967
things I undertake
I feel connected with people who care for 0.980
me, and for whom I care
Table A1. I feel competent to achieve my goals 0.974

Appendix 2

Factor Number of items Average inter-item covariance Scale reliability coefficient

ATT 5 0.611 0.990

SN 6 0.804 0.988
PCB 4 0.523 0.989
Table A2. Formal_INS 3 0.590 0.981
The results of Informal_INS 3 0.689 0.978
Cronbach’s alpha test Need 3 0.688 0.979

Corresponding author
Nguyen Khanh Doanh can be contacted at: nkdoanh@tnu.edu.vn; nkdoanh@yahoo.com

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com