Findings imply that the Vietnamese government should provide more assistance to weak firms and release regulation interventions to promote formalisation. Firms moving from formal to informal conditions are often either weak businesses that have no potential to expand or strong enterprises which want to escape from government regulations. This first-ever study creates an informality index to capture the nature of informality using the Multiple Correspondence Analysis (MCA). By using Cluster Analysis to segment firms and investigate factors associated with each cluster, the paper contributes enormously to studies focusing on the high heterogeneity of informal enterprises in Vietnam
