This paper examines the relationship between productivity differentials and firm turnover in Vietnamese manufacturing. We utilize firm‐level data between 2000 and 2009, including the year 2007, when Vietnam joined the World Trade Organization. Our major findings are twofold. First, the productivity of entrants, survivors and exiters increased simultaneously from 2006 to 2007. This result suggests that the cut‐off productivity level increased after trade liberalization. Second, the resource reallocation between firms was facilitated after the liberalization. These findings are consistent with the implications of the recent models of international trade and firm heterogeneity.