Adaptive Institutional Change and Economic Transition: from “Fence-breaking” to a Market Economy in Vietnam

Abstract

This study analyzes Vietnam’s economic transition from the perspective of institutional change, emphasizing the role of adaptive dynamics and the interaction between formal and informal institutions. Drawing on a historical institutional approach combined with process tracing, the study reconstructs the trajectory from the pre-Đổi Mới period, through the phenomenon of “fence-breaking,” to the phases of transition, institutionalization, and contemporary development. The findings show that economic reform in Vietnam has not followed a linear or purely top-down logic, but rather constitutes a dynamic process in which practical experiences function as mechanisms of experimentation and learning, shaping formal reforms. This process has led to the emergence of a “hybrid” institutional structure that provides flexibility in economic governance while simultaneously generating institutional bottlenecks in the current development stage. Theoretically, the study contributes by extending the institutional economics framework toward an integrated approach, conceptualizing institutional change as an evolutionary, context-dependent process shaped by multi-actor interactions. Practically, the findings suggest that further institutional reform in Vietnam should focus on improving implementation quality, enhancing transparency, and fostering adaptive mechanisms in the context of digital transformation and deepening international integration.