This paper aims to investigate how institutional difference between home and host countries affects the choice of multinational enterprise’s entry mode in Vietnam. Adopting transaction cost theory, we hypothesize that a multinational enterprise (MNE) is more likely to entry an (formal and informal) institutionally distant country through acquisition (or joint-venture) rather than greenfield investment. Data of 82 MNE subsidiaries located in Vietnam from the data set of the World Bank Enterprise Surveys are used to test the proposed hypotheses. Probit regression indicates that the hypotheses of the study cannot be rejected with control of the characteristics of industry, of parent firm, and of subsidiary. The paper provides implications to international business (IB) literature.