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SUMMARY OF THE THESIS
1. The need for research
Investment activities in the enterprise were carried out on the following
fields: investment in construction, investment in human resources development,
R & D investment, investment in marketing and investment in intangible assets,
etc, and all referred as development investment in enterprises. Theoretical and
practical evidence has shown the impact of these investments on the business
results of the business. However, apart from the "formal" investment
expenditures, businesses also have to pay money that the law does not officially
recognize; this money is used to bribe, lubricate, bribe, etc and referred as
"informal costs". These two segments are not only isolated but also closely
related, the same is the investment content of the business, just one side of the
current and one hidden side, as a side painting side when increasing one factor
will reduce the remaining factor. The issue is how these areas affect the results
of business production of the business? Which sectors impact sustainability,
which array is short term? Which is more profitable for businesses?
In fact, research is needed to analyze and assess the impact of developed
investments and informal expenses on business performance. From that, we
propose solutions that help businesses to develop a sound investment strategy,
improve their competitiveness and business efficiency, and pay more attention
to technological or product innovation - Developed in today's harsh international
competition environment.
On the subject of research, the author decides to choose small and
medium enterprises (SMEs) because SMEs occupy a large proport on of the
whole enterprise (over 97%), which is an important part of the economy. the
developing market in Vietnam. Together with the private sector, SMEs are an
important driving force for development. With limited resources, SMEs face
many difficulties in the production and business process, and are also vulnerable
to the unhealthy nature of the business investment environment such as complex
administrative procedures and infomal costs.
When a company has large resources, spending money on developed
investment or informal financing is not a difficult decision to make. However,
for SMEs, a characteristic of this group of enterprises is the limitation of
resources (finance, human resources, material resources), thus limited in
capacity (production capacity, R & D capacity, competing capability). The
allocation of finite resources for capacity building is always a challenge for
SMEs. In the context of current development, in addition to allocating capital for
developed investment to renovate technology equipment, capacity building,
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SMEs also have to spend a considerable amount to spend for the infomal costs,
make the development of SMEs is more difficult when the limited capital
resources have to be distributed to many, while uncertainty of what actually
benefits. This fact shows that studying the effects of developed investment and
informal costs on SMEs performance, identifying the problem and explaining
the causes of the problems is needed. It also helps SMEs better understand the
impact mechanism, and helps the government to have policies to ensure the
development of SMEs in accordance with the objectives, ensuring the important
role of the SMEs sector in the economy.
2. Purpose of the study
- Give a new perspective on the investment of the business, in that the
informal costs are also an investment. Investment activities of the enterprise
include investment in development (such as investment in human resources,
investment in fixed assets, R & D investment), and informal investment (is the
investment for informal costs)
- Develop a model for assessing the impact of formal and informal
investment on SMEs performance, especially to distinguish between short-term
and long-term impacts, from which to find out what is the factor to play a key
role in raising the SMEs performance, affecting the sustainable development of
SMEs.
- Propose solutions / recommendations to the SMEs community in
making decisions on allocation of investment capital: developed investment or
informal costs; Propose to the Government to promulgate mechanisms / policies
to support enterprises, improve business climate.
3. Subjects and scope of research
Research subjects: Developed investment in SMEs (focus on fixed asset
investment, investment in human resources and investment in research and
development R & D); informal costs of SMEs; SMEs perfomance; Impact of
developed investment and informal costs on SMEs perfomance.
Research scope:
Spatial: Study of SMEs, private sector, in the field of production, in Nghe
An province.
Time domain: Because the research results of the thesis have the results of
business production in the short and long term, the data collected also need a
long time. Author selects a time frame of 6 years, from 2011 to 2016.
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4. Research Methodology
The dissertation uses a combination of qualitative and quantitative
research methods. The quantitative approach aims to establish a model to test
the relationship between factors, while the qualitative approach (in the form of
in-depth interviews) is used to test and explain the quantitative results.
In quantitative research, data is collected in the form of Panel data.
Analytical methods: Use the Engle-Granger method to estimate the relationship
between variables in the short and long term, including the steps: Verification of
co-linkages to determine whether there exists a relationship between long-term
variables, then construct the co-ordinate equation using the OLS method to
determine the long-term impact relationships; Estimate and construct the ECM
error correction model based on the co-aligned equation in step 1. The analytical
software support is Eviews version 9.0.
5. Model and hypothesis of research
Research models
Research question:
- How do the developed investments affect the SMEs perfomance in the
short term and in the long term?
- How do informal costs affect SMEs perfomance in the short term and in
the long term?
6. The importance and new contributions of the thesis
Scientific significance
The thesis builds the framework for informal costs as a form of SMEs
investment. This is the money that the business spend "implicitly", not legally
recognized, but also aimed at developing business activities of SMEs, is also an
investment for the future, is just "informal investment" only.
Practical meaning
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The dissertation shows the relationship between developed investment
and informal costs on the SMEs performance. Accordingly, this impact
relationship is different over time. Specifically:
- Developed investment (including investment in fixed assets, investment
in human resources, R & D investment) in the short term generally does not
affect or negatively affect the SMEs performance. In the longer term, the impact
of investment on the SMEs performance is good, is positive, or in other words
developed investment is conducive to the development of the business in the
long term .
- Informal costs have an impact on SMEs performance in the opposite
direction: No short-term impact and long-term negative impact.
From the research results, the thesis proposes the following
recommendations:
- For SMEs: The first and most important thing that SMEs need to do is
changing their mindset. SMEs need to identify the necessity and the effect of
developed investment on enterprises, This is the activity that helps businesses
achieve long-term sustainable business results. As for informal costs for bribes
and smuggling, SMEs should not do it, as it does not bring the same benefits as
expect, even negatively impacting businesses in long-term. Secondly, with its
limited resources, SMEs should exploit it more effectively by corporate
governance. The third is to increase access to resources. Finally, it is also
important to review your investment and do it in a way that is most effective.
- For state management agencies: Corruption or informal costs harm the
development of SMEs, thereby adversely affecting the business investment
climate and reducing growth and development national economy. Therefore, the
State should strengthen measures to prevent informal costs to facilitate SMEs
and businesses in general. The dissertation proposes some recommendations for
solving informal costs in a thorough manner.
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CHAPTER 1: RESEARCH SUMMARY, MODELS AND
RESEARCH THEORY
1.1. Studies on development investment and its impact on firm performance
1.1.1. Development investment impacts firm performance
Research focus primarily on the impact of investment on the firm
performance. Investment affects the firm performance in many ways, such as
productivity and growth speed (Power, 1998; Bessen, 1999; Huggett and
Ospina, 2001; Nilsen, 2009; Shima, 2010), employment growth (Asphjell,
2010), sales growth (Licandrol, 2004) or other factors of production (Sakellaris,
2004; Nilsen, 2009). Investments add value to companies, shareholders and
increase wealth (Penman, 2010).
On the direction of impact over time, according to Power L. (1998),
Huggett M. and Ospina S. (2001), Shima K. (2010), some studies take the view
that the effect of investment on growth performance is negative in the short run;
in the long run, the impact is positive. Grazzi et al. (2013) argue that the higher
the investment, the better the investment will be, and the faster it will grow than
the other.
Thus, the research is consistent in view of the investment impact on firm
performance. It can affect various aspects of results such as growth, market
share, value... The dimension of impact is positive or negative depending on
time: in short is negative, the longer term is positive.
1.1.2. Investment in fixed assets affects the firm performance
Oiv et al. (2008), Xiao (2009), Duchin et al. (2010), Piris (2010), Umutlu
(2010), Geng and N'Diaye (2012), O'Reilly (2015) have studied and
demonstrated that fixed investment is a decisive factor for the firm's growth. De
Long and Summers (1991) found a link between investment in equipment and
growth: high investment in equipment led to rapid growth and low investment in
equipment led to slow growth. Doms and Dunne (1998), Nilsen (2009) also
investigated the impact of tangible asset investment on firm performance. Grazzi
et al. (2013) found that firms with higher levels of investment, after an
investment period, would be more efficient and grow faster than others.
Investing in assets after an extended period of investment, for example opening
a new factory, will negatively affect profitability but will have a positive impact
on sales and employment: higher sales and higher employment levels. Then
businesses with rapid growth, high profitability and productivity will be more
likely to invest.
Fundamentally, investing in tangible assets will have a positive impact
on firm performance, and this impact will manifest in the long term.
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1.1.3. Human resources investment (humman resourse investment)
affects the firm performance
Clarke M (2010) and Segal G (2009), Clarke (2010), Marimuthu (2009);
Ukenna et al. (2010) and many other authors examine the direct relationship
between human capital investment and firm performance. These findings
suggest that human resource efficiency is a particularly important factor for
businesses. Therefore, businesses will benefit from investing in employees with
their skills and knowledge. Moreover, research also suggests that human capital
investment is the strongest influence on financial firm performance. According
to studies conducted by Segal et al. (2009), investment in human capital has had
a positive impact on sound financial performance. Both education and industry
management experience is needed to improve financial performance.
As such, research has shown the content often in the investment of human
resources in the firm. The impact of human resource investment on firm
performance is that most studies have shown a positive effect. However, the
research has not found the link or impact it is negligible.
1.1.4. Investing in research and development (R & D investment) affects
firm performance
Economists have noted that investing in R & D facilitates innovation,
creates new knowledge and new technology. Studies by Sougiannis (1994),
Zantout and TSetsekos (1994), Green (1996), Goodacre and McGrath (1997)
also show similar results. The authors find that investing in R & D has a positive
effect on the value of the enterprise (Chauvin and Hirschey, 1993; Bae and Noh,
2001), R & D is a determinant of long-term productivity and well-being (Jones
and Williams, 2000), although the assessment may vary by firm size and
industry. The study by Lev and Sougiannis (1996) shows the existence of a
direct and positive correlation between R & D spending and economic growth,
resulting in increased productivity and productivity. Investment costs for R & D
allow businesses to earn more than normal or average returns (Erickson and
Jacobson, 1992). R & D investment in new products creates competitive
advantage and enhances company performance (Aboody and Lev, 2000). R & D
investment is considered as an investment in intangible fixed assets, contributing
to the long-term development of the company (Chan, 2001). A successful R & D
investment in a new product and service allows companies to increase the value
of intangible assets, thereby distinguishing them from other firms (Ehie and
Olibe, 2010). In addition, spillover effects from R & D are beneficial not only
for businesses but also for the economy (Bednyagin and Gnansounou, 2012).
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Thus, the impact of R & D investments on businesses is not consistent.
Basically it is a positive effect, is linear. But there is research that shows that it
is a nonlinear relationship and a positive or negative impact at different times.
1.2. Studies of informal costs and their impact on firm performance
Researchers show different perspectives on the positive or negative
impact of informal costs on business outcomes, most of which are still negative.
Corruption raises operational costs, creating uncertainty and thus discourages
investment (Shleifer and Vishny, 1993; Wei, 1997; Campo, 1999). Corruption
has a negative impact on productivity, sales growth, (Gaviria, 2002, Seker and
Yang, 2012, De Rosa, 2010) and return on investment (O'Toole and Tarp, 2014).
Corruption has a negative impact on the level of human resources (Mo, 2001).
Businesses can lose more of what they can get from corruption because of the
invisible barriers to corruption that will arise and ultimately hurt the business: A
business that is engaged in corruption is often describing is ineffective and
embarrassing in the organization (Ashforth and Mael, 1989; Hogg and Terry,
2000), the danger of corruption may not be reflected in a direct result in a
particular transaction, but it will turn into a series of obstacles in the overall
operation of the business later.
From a positive point of view, some studies have validated the positive
but conditional effects on firm earnings (Dreher and Gassebner, 2013) and sales
growth (Mendoza et al. , 2015). Bribes increase trust and establish a reciprocal
shared belief (Graeff, 2005), from which entrepreneurs gain favorable
conditions to increase sales (as it allows them to win the projects or to obtain a
loan). However, afterwards, firm will suffer "imminent damage" (Nguyen Van
Thang et al., 2014) in that: the opportunity to expand is no longer difficult to
reach new customers or localities; quality pressures (as the business focuses on
building relationships that lose competitive motivation by quality, there is no
creative motivation, these effects are implicit and slow, but there are This
reduces the competitiveness of enterprises.
As such, there are quite a number of studies on informal costs that affect
the results / performance of a firm. Impacts are found to be quite different,
divided into positive and negative impacts, short-term and long-term.
1.3. Case studies on the use of analytical models of impact between
variables in the short and long term
The relationship between variables that need to be differentiated in the short
and long run is very specific, not simply linear or nonlinear regression models,
simple variables or multivariable ones. There are two common methods used to test
- short-term and long-term relationships, namely the two-step Engle-Granger
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method and the Johansen method. These methods have been applied by many
authors in the world and in Vietnam for use as Sung and Urrutia (1995); Taghvaee
and Hajiani (2014); Kasperowicz (2015); Nguyen Minh Kieu et al. (2013); Truong
Minh Tuan (2013); Le Quang Canh (2011); Le Thanh Tung (2014) ...
1.4. Study space
Based on the theoretical foundations and published studies, author founds
that there are many gaps that can be approached:
- The studies on impact relationships of each pair of factors (investment in
fixed assets, human resources, R & D) to the firm performance are not
consistent with each other, different subjects, scope of research, research
context. From here opens the opportunity for research on different subjects (be it
different businesses in the field of business, type of business), or different
research areas and contexts (different countries, different localities ...).
- There have been no research studies on the simultaneous effects of
developed investment and informal costs on the firm performance. There are no
authors who consider informal costs as an investment of the enterprise
(underground investment) besides developed investment (informal investment),
comparative analysis and evaluation of the level of impact. The effect of the two
contents on the firm performance.
- There have been no research topics and fully quantified contents of
developed investment in enterprises (including fixed asset investment, human
resources investment, investment in R & D research) . Research only stops at the
general impact of investment on the business or study the individual impact of
each content on the business. In these studies there are also some shortcomings
such as: short study period, major studies conducted abroad, rare research in
Vietnam (not to mention local specific), especially research for SMEs. Studies
also use qualitative methods rather than quantitative methods to quantify the
level of impact, building models that reflect the relationship.
- There are no research topics at the same time both developed investment
and informal costs affect the results of business production.
- There are no topics using short-term and long-term relationship
estimation methods as Engle-Ranger or Johansen apply to relations between
developed investment factors, and firm performance.
In summary, the gap that author found through the review process is the
simultaneous study of the impact of the two factors: Developed investment and
Informal Costs to Firm Performance, studying with Vietnamese firms and using
the short-term and long-term relationship estimation and control methods of
Engle-Ranger or Johansen.
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CHAPTER 2: THEORETICAL BASIC OF DEVELOPMENT
INVESTMENT AND INFORMAL COSTS IN SMALL & MEDIUM
ENTERPRISES
2.1. General concepts
2.1.1. Investment and development investment in the firm
- Investment in fixed assets: including tangible fixed assets and intangible
fixed assets. Tangible fixed assets include material assets such as machinery,
land, buildings, tools, raw materials, transport means, or technological
equipment. Inventions, inventions, copyrights, trademarks (including branding
marketing), trademarks, licenses, contracts, methods, programs, systems,
forecasts, estimates, numbers technical details ...
- Investment in human resources: including investment in recruitment,
training, payroll, health care, improvement of working environment.
- Investment in research and development (R & D) of science and
technology: including research, development and application of new products,
new processes, new methods ... for production and business. of the business.
2.1.2. Informal costs in firm
2.1.2.1. Concept
"Informal costs are expenditures of enterprises for State officials for the
purposes of bribery and lubrication, which are not recognized by Vietnamese
law." This study identifies informal costs with corruption and bribery.
2.1.2.2. Classify
The informal cost divided by Nguyen Van Thang et al. (2014) consists of
two types: lubrication corruption and competitive corruption. informal costs for
lubrication: These are costs to promote administrative procedures, including the
cost of hand-washing for tax officers, the cost of hand-washing for customs, the
cost of administration other state agencies such as fire safety, social workers,
food safety, market management, natural resources and environment,
construction, public security, treasury, banking, insurance. Informal costs to
compete is the cost of competing for business opportunities with competitors
(other businesses), including the cost of obtaining a paper business licenses in
conditional businesses; The cost of accessing information about business
opportunities; expenses for applying for land use right or exploitation of natural
resources; eosts for funding sources; eost to win the contract / win the right to
supply goods; eosts to withdraw the project gut in the course of contract
performance / contract settlement.
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2.2.3. Firm performance
Firm performance is known as its efficiency, efficiency and
effectiveness... and is used by researchers to use a variety of measures /
indicators to measure.
2.2. The theory of development investment and informal costs in SMEs
2.2.1. SME characteristics
SMEs have the following characteristics: SMEs have limited resources:
low capital, low manpower, less material assets, less developed technology;
compact SME management machine, management capacity is limited; SMEs are
usually private sector enterprises; SMEs have a very diverse sector / sector
structure, covering the economy, but often focus on sectors close to consumer
goods such as apparel - food - small - industrial auxiliary ... those sectors do not
require too much resources for development.
2.2.2. Advantages and disadvantages of SMEs
Advantage: Easy to start up, easy to choose the industry / field of
operation, ie easy to insert and fill the market gap; Flexibility in business
transformation, adaptation to market changes, shocks to the economy; The
machine is compact, facilitating the operation; Easily make management
decisions to keep up with changes in demand, prices, supply, customers ...;
Easily access supporting areas to participate in the global production chain; Can
be linked together to create value chains, for example value chains in agriculture
Disadvantages: Difficult access to important resources is capital and land;
Difficulties in developing human resources; Difficult to approach and innovate
advanced production technology, friendly with the environment; Difficulties in
investing in R & D to improve and upgrade the production process, research and
find new ways to improve the quality of products and services; Difficulties in
transaction and implementation of state administrative procedures; Greater
dependence on the business environment, partners and customers; Competitive;
High operating costs due to the lack of economies of scale; Difficulties in export
and integration; Difficulties when expanding the market, expanding the field of
activity; Great risk
2.2.3. Developed investment in SMEs
Developed investment in SMEs: investment in fixed assets, investment in
human resources, R & D investment (like in big firms)
The difference of development investment in SMEs with other firms:
- Ownership: Large firm are associated with ownership of resources when
they invest, while SMEs often consider renting or borrowing resources.