[Research Contribution] Corruption and Firm Performance in Vietnam: The Moderating Role of Digital Transformation
13 August, 2026
Keywords: Corruption, digital transformation, firm performance, digital economy, public governance.
Against the backdrop of robust digital transformation, corruption remains a major impediment to business development in emerging economies. Can digital transformation help mitigate the negative impacts of institutional environments on firms? A research team from UEH Mekong, University of Economics Ho Chi Minh City (UEH), has clarified the relationship between corruption, firm performance, and the moderating role of digital transformation in Vietnam.
Corruption: An “invisible drag” on businesses
In the course of economic development, corruption has long been regarded as a significant barrier to competitiveness and growth, particularly in emerging economies. Informal costs, complex administrative procedures, and a lack of transparency in the institutional environment not only increase transaction costs but also prolong processing times, thereby diminishing firm performance.
In Vietnam, despite considerable improvements in the investment and business environment, firms continue to face difficulties related to administrative procedures, time costs, and unofficial payments. Meanwhile, digital transformation presents opportunities to enhance public governance quality through e-government, online public services, and digital infrastructure, reducing direct interactions between firms and regulatory agencies and thus limiting opportunities for corruption.
However, a critical question arises: Is digital transformation sufficient to mitigate the adverse effects of corruption on firm performance?
To address this research gap, the UEH Mekong research team assessed the impact of corruption on the performance of Vietnamese firms, while also examining the moderating role of digital transformation in this relationship. The study aims to provide additional empirical evidence to inform institutional reform and digital transformation processes.
Corruption: “Sand in the wheels” of firm growth
In institutional economics, two contrasting perspectives exist on the impact of corruption. The “grease the wheels” hypothesis suggests that corruption can help firms navigate inefficient administrative procedures. Conversely, the “sand the wheels” hypothesis posits that corruption increases transaction costs, leads to inefficient resource allocation, and hampers firm growth.
The study focuses on testing these two hypotheses in the Vietnamese context, with the target population comprising firms operating across the country.
The results indicate that corruption diminishes firm performance, thereby supporting the “sand the wheels” hypothesis. Notably, digital transformation is found to mitigate this adverse effect, contributing to an improved business environment and enhanced firm performance.
Digital Transformation – A resource for enhancing firm performance
Drawing on the Resource-Based Theory, the study posits that competitive advantage derives not only from market conditions but also from the effective utilization of internal resources, among which digital technology constitutes a strategic resource.
The analytical results indicate that digital transformation has a positive impact on firm performance. The adoption of digital technologies not only enhances resource utilization efficiency but also helps mitigate the influence of institutional constraints, particularly in high-corruption environments. This finding confirms that digital transformation is not only a driver of technological innovation but also a tool supporting improved governance and competitiveness for firms.
This study makes three notable contributions: (1) expanding the empirical evidence on the impact of corruption on firm performance; (2) clarifying the moderating role of digital transformation as a resource or substitute for traditional institutional reform; and (3) analyzing the mediating mechanism of time-cost efficiency, providing deeper insight into how institutional factors affect firms.
Time-cost efficiency: A key transmission mechanism
A noteworthy finding of the study is that time-cost efficiency mediates the relationship between corruption and firm performance. When corruption is better controlled, firms save considerable time in navigating administrative procedures and reduce waiting costs. Simultaneously, the implementation of e-government, online public service portals, and digital declaration platforms contributes to shortening document processing times, thereby enhancing firm performance.
However, the research findings also indicate that digital technology cannot entirely substitute institutional reform. Complex administrative procedures and opaque processes still require comprehensive reform to fully realize the benefits of digital transformation.
Policy implications
Based on the research findings, the authors propose several important implications:
For local governments, corruption control should be strengthened at the administrative procedure level; digital transformation in public service delivery should be accelerated; and monitoring mechanisms should be improved to enhance transparency and reduce informal costs for businesses.
For firms, proactive investment in digital solutions such as e-invoicing, digital signatures, and digital management systems is recommended to automate processes, reduce administrative processing time, and improve operational efficiency. Firms should also actively participate in policy feedback through industry associations to contribute to administrative reform and business environment improvement.
The combination of institutional reform and digital transformation will create an important foundation for reducing transaction costs, enhancing firm performance, and promoting sustainable economic growth. A coordinated approach involving proactive firm digitalization and government administrative transparency will help reduce informal costs, improve business efficiency, and drive sustainable economic growth.
Consequently, this study not only adds empirical evidence on the negative impact of corruption on firm performance in Vietnam but also confirms the important moderating role of digital transformation in the digital economy context. The findings provide a scientific basis for firms and policymakers in promoting digital transformation, improving institutional quality, and building a transparent and efficient business environment toward sustainable development.
Read the full research article on “Corruption and Firm Performance in Vietnam: The Moderating Role of Digital Transformation” HERE
Authors: MSc. Tran Thi Thao Quyen, Nguyen Van Tien Son, MSc. Doan Thi Thanh Hoa, MSc. Tran Ngoc Hoa – University of Economics Ho Chi Minh City (UEH)
This article is part of the series disseminating research and applied knowledge under the message “For a More Sustainable Mekong,” within the “Research Contribution For All” program implemented by UEH. UEH cordially invites readers to stay tuned for the next issue of the UEH Research Insights newsletter.
News, photos: Authors, UEH Mekong Department of Admissions and Communications , UEH Department of Communications and Partnerships
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