Summary of the thesis Business Administration: Study the impact of outsourcing on the performance of small and medium enterprises in the Mekong delta

MINISTRY OF EDUCATION AND TRAINING CAN THO UNIVERSITY

SUMMARY OF THE THESIS

Major: Business administration

Code: 62340102 DINH CONG THANH STUDY THE IMPACT OF OUTSOURCING ON THE PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN THE MEKONG DELTA Can Tho, 2021

THE THESIS ARE COMPLETED AT

CAN THO UNIVERSITY

Supervisors:

- Le Tan Nghiem, Ph.D.

- Nguyen Hong Gam, Ph.D.

The dissertation is defended in front of the doctoral thesis committee at university level

Meeting at: …………………………….

At ... hour ... day ... month ... year ...

PhD dissertation reviewer 1: ………………………………….

PhD dissertation reviewer 2: ………………………………….

PhD dissertation reviewer 3: ………………………………….

The dissertation can be found at the library:

Learning Resource Center, Can Tho University.

Vietnam National Library.

LIST OF PUBLISHED ARTICLES

1. Dinh Cong Thanh, Le Tan Nghiem, 2016. Examining factors affecting level of outsourcing of companies in Can Tho city. Can Tho University Journal of Science. Vol 46: 1-11.

2. Dinh Cong Thanh, Le Tan Nghiem, 2017. Examining the influence of benefits and risks of outsourcing on attitude of business managers towards outsourcing service and level among companies in Can Tho City. Journal of Science Ho Chi Minh City Open University. Vol 52 (1): 93-104.

3. Dinh Cong Thanh, Le Tan Nghiem, 2017. Factors influencing human resources outsourcing decisions: the case of the enterprises in Tra Vinh province. Journal of Science and Technology - Industrial University of HCMC. Vol 26(2): 32-43.

4. Dinh Cong Thanh, Le Tan Nghiem, 2018. Factors influencing the outsourcing decisions and the importance of outsourcing on financial performance of SMEs in Can Tho city. Journal of Science Ho Chi Minh City Open University. Vol 63(6): 88-104.

5. Dinh Cong Thanh, Le Tan Nghiem, Nguyen Hong Gam, 2020. The effect of outsourcing on the non-financial performance of SMES in the Mekong Delta. Journal of Trade Science. 8(1): 62 – 72.

CHAPTER 1: INTRODUCTION

1.1 BACKGROUND

Outsourcing is understood as an enterprise hiring an outside service provider to perform part or all of the work instead of the business itself, having to perform those parts (Yang et al., 2007). The current service areas include outsourcing information technology, part-time employees, pay outsourcing, outsourcing accounting, tax reporting, medical services, healthcare, and office cleaning services, 24/24 security, full package office transportation, network installation/administration, or maintenance of office computers/equipment, and translation services. Today, businesses worldwide use it to gain benefits and competitive advantages (Wekesa and Were, 2014). Outsourcing is also known as a solution to help enterprises cut costs for businesses (Gilley et al., 2004; Handley, 2012; Sani et al., 2013; Gerald et al., 2013; Yıldız et al., 2014), increasing profits (Elegbede, 2013), simplifying the corporate structure, saving time in management (Sadi and Ahmed, 2011; Gerald et al., 2013). With those benefits, businesses around the world have increasingly used outsourcing. In Vietnam, outsourcing is also widely used by companies (Hong, 2012). In the challenging economic context and fierce competition of enterprises, especially SMEs, enterprises must have the most effective business strategy by reducing business costs reasonably to survive on the market. One of those solutions is to use outsourced services (Hafeez and Andersen, 2014; Isaksson and Lantz, 2015; Montaseb et al., 2018). Despite facing many difficulties, SMEs in Vietnam in general and the Mekong Delta in particular have made significant progress, making generous contributions to socio-economic development, contributing to economic restructuring, significantly Solving employment problems (using 50% of the labor force), increasing income for workers, contributing to poverty reduction and contributing more than 40% of GDP1. By 2018, the entire Mekong Delta region has 97.16% of which are SMEs2. Most of them still face many difficulties and limitations in the operation process such as management skills, lack of capital, unbalanced output, and increased operating costs. It isn't easy to compete with other domestic and foreign enterprises. Those are also the reasons for more than 4,500 enterprises in the Mekong Delta to dissolve and suspend operations in 2019, an increase of more than 30% compared to 20183. Therefore, the orientation for SMEs in the Mekong Delta to effectively use outsourced services is essential to promote operational efficiency and increase competitiveness for businesses.

However, outsourcing also has potential risks for businesses. Indeed, research by Milena et al. (2011) has shown some disadvantages from outsourcing such as: (1) Enterprises may lose control from service providers; (2) The enterprise will be at a disadvantage if the service provider ends its operation; (3) it is not easy to keep information confidential of enterprises; (4) the lack of motivation of the service provider's

1 The banking conference - business connection in the Mekong Delta was held by the State Bank of Vietnam on August 29, 2019, in Can Tho City. 2 The data is recalculated from The White Book on Vietnamese Businesses 2020 of the Ministry of Planning and Investment, according to the Government's Decree No. 39/2018 /ND-CP. 3 Data are compiled from The White Book on Vietnamese Businesses 2020.

staff will adversely affect the progress of completing the job. It is this that negatively affects the business performance of businesses.

Many studies show that outsourcing has affected the performance of businesses. There are conflicting arguments about this effect. Most studies show that outsourcing positively affects enterprises' financial performance (Bin et al., 2006; Kroes and Ghosh, 2010; Gilley and Rasheed, 2000; Bustinza et al., 2010; Kamyabi and Devi, 2011; Agburu et al., 2017). However, some studies show that outsourcing does not improve or even negatively affect enterprises' financial performance (Isaksson and Lantz, 2015). It is also suggested that outsourcing only affects non-financial performance but does not affect financial performance (Gilley et al., 2004). Some studies have also shown that outsourcing affects financial and non-financial performance (Gilley and Rasheed, 2000; Elmuti, 2003; Bustinza et al., 2010; Kamyabi and Devi, 2011; Elegbede, 2013). Besides, it is argued that there is no relationship between outsourcing and efficiency (Leiblein et al., 2002). Practical research shows that each author has a different approach to outsourcing and various indicators to measure the performance of enterprises because each research has a different approach in terms of theory. Most of the studies have not generally presented the impact of factors affecting outsourcing and have not generally evaluated the indicators to assess a business's performance compared to the theory.

With the above arguments, research on the impact of outsourcing on the performance of SMEs in the Mekong Delta is conducted to understand better the situation of using outsourcing resources of SMEs in the Mekong Delta, research Factors affecting outsourcing, and studying the effects of outsourcing on the performance of SMEs in the Mekong Delta is necessary.

1.2 RESEARCH OBJECTIVES

(1) Analyze the outsourcing situation of SMEs in the Mekong Delta; (2) Investigate factors affecting the degree of outsourcing of SMEs in the Mekong

Delta;

(3) Analyze the impact of outsourcing on the performance of SMEs in the Mekong

Delta; (4) Propose managerial implications to improve the efficiency of outsourcing for

SMEs in the Mekong Delta.

1.3 SCOPE OF STUDY

1.3.1 The scope of space

The survey was conducted in 6 provinces of the Mekong Delta: Bac Lieu, Soc Trang,

Dong Thap, Vinh Long, Tra Vinh, and Can Tho City.

1.3.2 Time scope

Secondary data from the General Statistics Office of Vietnam, Statistical Yearbook of Vietnam 2017 – 2018, and data on the number of SMEs was collected in 2018 from the White Book on Vietnamese Businesses 2020 of the Ministry of Planning and Investment. Primary data was interviewed and collected from the beginning of 2018 to April 2019.

1.3.3 Research object

The research object is to study the impact of outsourcing on SMEs' performance in

the Mekong Delta.

1.3.4 Survey Subject

thesis also approaches

to collect

the

The investigation object is the senior administrators or the heads of functional departments in enterprises that use the service. In addition, to evaluate an overview of information from outsourcing activities, administrators and employees of enterprises providing outsourced services to enterprises.

1.4 THEORETICAL AND PRACTICAL CONTRIBUTIONS

- Theoretical contributions: Firstly, the thesis has made contributions to the research methodology. Measurement scales for concepts (factors affecting outsourcing levels, outsourcing attitudes, outsourcing levels, and performance) are designed, adapted, and reliable. In addition, the thesis also adds a scale system to measure the concept of perceived benefits and supplement the concept of the relationship between stakeholders in outsourcing activities; Secondly, the theoretical contribution: this study builds a theoretical model of the impact of SMEs on the performance of SMEs in the Mekong Delta based on the theory of integration between Transaction Cost Economics Theory - TCE, Resource-Based Views - RBV, Core Competency Theory - CCT, Relationship Theory - RT, Social Capital Theory - SCT and Balanced Scorecard theory - BSC. Thereby, the research has added to the system of theory related to outsourcing efficiency.

- Practical contributions: The thesis also makes an essential contribution in providing practical value to businesses and outsourced units to improve operational efficiency. The topic also offers practical value for organizations/individuals specialized in providing services to capture information and meet outsourced businesses' needs, thereby improving customer service efficiency.

1.5 THE STRUCTURE OF THESIS

The thesis consists of 166 pages with five chapters: Introduction, theoretical basis and research model, research method, research results and discussion, conclusions and managerial implications.

CHAPTER 2: THEORETICAL FRAMEWORK

AND RESEARCH MODEL

2.1 THEORETICAL FRAMEWORK

2.1.1 Definition of outsourcing

Outsourcing is an arrangement in which a firm transfers part of its operations to a firm/partner through an outsourced service contract (Yang et al., 2007). It transfers part of a company's internal functions to an external supplier (Ketler and Walstrom, 1993). To explain more about this concept, Murem (1997) defines outsourcing as transferring part of enterprises' workload (can be core activities or ancillary activities) to suppliers. Then enterprise administrators will focus all resources on implementing core activities. There is also a definition that outsourcing is the decision of a company to choose one or several functional processes/activities to entrust an external organization or individual to perform the enterprise's replacement (Jan, 1999). Therefore, enterprises need to consider and determine clearly which functions they should perform by themselves and which parts should be outsourced (Bhagat et al., 2010). Quinn and Hilmer (1995) pointed out that enterprises need to compare costs and assess benefits and risks factors to decide on outsourcing activities. Beaumont and Sohal (2004) point out that if enterprises have all the resources to perform their functions, they do not need to outsource; on the contrary, businesses should hire better. Handley (2012) thinks that the decision to outsource or not in enterprises depends on the work's nature. Accordingly, the enterprise should not perform the core and essential functions, should not be transferred to outside organizations/individuals for implementation.

2.1.2 The theoretical framework for outsourcing

According to the Transaction Cost Economics Theory (TCE) proposed by Coase (1937), saving spending is an essential goal for any business. TCE theory clearly states that companies need to take advantage of opportunities from external organizations and individuals to realize this benefit. Williamson (1975) also added that enterprises might face risks of arising expenses, negatively affecting their operations. Therefore, outsourcing also depends on the attitude of the business managers towards this activity.

Besides, according to the Resource-Based Views (RBV) and Core Competency Theory (CCT), each organization has specific internal resource strengths. Meanwhile, businesses should not outsource core activities. Based on developing CCT theory, Aron and Singh (2005) also argued that considering the use of external resources depends on: (i) outsourcing benefits; (ii) the business strategy of the business; (iii) the service provider's ability to respond to requests.

In addition, based on Relationship Theories (RT) of Klepper (1995) shows the role of economic cooperation and organizations' exchange. RT theory focuses on building an agreement where each side considers the motivation for relationship building and maintenance to achieve organizational effectiveness out of this relationship. Thus, RT

theory can be applied in outsourcing because having relationships in outsourcing is an essential factor affecting the decision to use services and business performance.

Thus, according to theories, the use of external resources depends on the following factors: (1) perceiving the benefits of outsourcing; (2) risks of outsourcing; (3) functional characteristics of organization; (4) enterprise strategy; (5) standards for suppliers; (6) attitude towards outsourcing and (7) relationship between enterprises.

2.1.3 The theoretical framework for performance

Enterprise performance is a multidimensional concept; depending on the operational context, time factors, and research objectives, the term approach to performance is also different. Richard et al. (2009) pointed out that efficiency reflects using elements of an enterprise's available resources. It is the process of converting enterprise inputs into output factors. In addition, there are also opinions that operational efficiency is an indicator reflecting the process of achieving the level of business indicators of enterprises compared to businesses in the same business field (Gilley and Rasheed, 2000; Gilley et al., 2004; Kroes and Ghosh, 2010). Most studies are based on the Balanced Scorecard (BSC) theory to determine the indicators to measure performance. According to BSC, the effectiveness of an organization is assessed from 4 aspects: (1) financial performance, (2) customer efficiency, (3) internal process, and (4) innovation and development. Based on using the BSC theory of Kaplan and Norton (1992), Marr (2005) built and developed the Business Performance Measurement (BPM) scale and added the efficiency of using the human factor because people are an essential factor determining the success of every organization.

2.2 LITERATURE REVIEW

Many experimental studies have demonstrated the impact of outsourcing on the performance of enterprises. Specifically, Gilley and Rasheed (2000) study the effect of using outsourced services on enterprises' performance in the US. Research shows that outsourcing positively affects both financial performance and non-financial results of businesses. Elmuti (2003) also studied the impact of using outsourced resources in US firms. Accordingly, the business performance is assessed in the following aspects: (1) productivity; (2) rate of error in work; (3) customer satisfaction with service quality; (4) internal work handling and (5) market efficiency. In addition, based on Core Competency Theory and Transaction Cost Theory, Bustinza et al. (2010), Kamyabi and Devi (2011) also demonstrate the impact of outsourcing on the performance of Enterprises in the service sector in Spain. Research results show that feeling outsourcing benefits substantially impact perceptions of the importance of outsourcing in enterprises. Research also indicates that outsourcing affects businesses' business performance, especially non- financial efficiency (such as reducing customer complaints, ensuring timeliness in customer service, shortening the time to meet customer needs, and improving customer loyalty and satisfaction with enterprises enterprise market share). Besides, outsourcing also impacts financial performance, such as revenue growth, improved return on assets, and equity return.

In summary, the review of related studies shows that there are significant differences in the argument that affects factors on outsourcing and the impact of outsourcing on the performance of firms. The reason is that each author uses other background theories when studying outsourcing activities. However, for related studies on the factors affecting outsourcing, most of them are based on two fundamental theories, Transaction Cost Economics Theory (TCE) and Core Competency Theory (CCT). Therefore, each study can usually only explain a particular part of the research model and does not fully generalize the factors affecting outsourcing, specifically as follows:

- Firstly, studies using the theory of transaction costs (TCE) emphasize two essential factors affecting outsourcing: benefits and risks when outsourcing. Accordingly, studies using TCE theory especially highlight the role of cost-saving for enterprises such as research by Kroes and Ghosh (2010), Bhagat et al. (2010), Yang et al. (2007), Jain and Natarajan (2011), Bustinza et al. (2010), Kroes and Ghosh (2010), Hafeez and Andersen (2014). In addition, according to TCE theory, outsourcing depends on the considerations and attitudes of enterprises towards this activity (Jain and Natarajan, 2011; Hafeez and Andersen, 2014). However, studies using TCE theory ignore the influencing role of functional characteristics, the suitability of outsourcing with the strategic direction of enterprises, and the service provider's ability to meet the outsourcing decision's requirements.

resources

- Secondly, studies using Resource-Based Views (RBV), Core Competency Theory from external the benefits of utilizing (CCT) also emphasize organizations/individuals (Bustinza et al., 2010). Also, RBV, CCT theory mentions the influence of functional characteristics, outsourcing strategy, and suppliers' ability to meet requirements (Kroes and Ghosh, 2010; Hsiao et al., 2010; Kamyabi and Devi, 2011; Hafeez and Andersen, 2014). However, researches based on RBV, CCT theory are limited because they ignore the influence of the attitude factor in managers on outsourcing and risk factors when outsourced. This can be considered as the most significant limitation of RBV, CCT theory.

- Thirdly, through the review, most of the above studies evaluate operational efficiency when outsourced enterprises are still limited in determining the criteria to measure performance compared to the Balanced Scorecard theory (BSC). Therefore, the above studies only focus on evaluating the efficiency of outsourced enterprises in a few indicators, but there is no comprehensive assessment of analytical criteria.

Therefore, based on finding gaps of the above theories and research, the thesis proposes an Integrated model between Transaction Cost Economics Theory (TCE), Resource-Based Views (RBV), Core Competency Theory (CCT), and Balanced Scorecard theory to generally study the impact of concepts in the research model.

2.3 RESEARCH MODEL

Gewald and Dibbern (2009) affirmed that the perception of benefits and risks to outsourcing would directly affect managers' attitude towards activity. The attitude towards outsourcing of enterprises will significantly affect the level of outsourcing. Gewald and Dibbern (2009) also demonstrated that the factor of perceived benefits and outsourcing risks indirectly affects the outsourcing of firms through the intermediary variable is outsourcing attitude. Thus, in addition to managers' attitude towards outsourcing, which impacts outsourcing, the factors that perceive benefits and risks also directly affect the outsourcing level. Tania and Faiza (2013) argue that the nature of outsourcing always contains risk factors, the important thing is how firms can control those risks.

Research by Hafeez and Andersen (2014) further confirmed that outsourcing depends on many other factors such as (1) the frequency of transactions; (2) the asset element of the enterprise; (3) trust in partners to provide services; (4) the firm's size, then the smaller the firm is due to the higher tendency to outsource. Accordingly, Hafeez and Andersen (2014) pointed out that the outsourcing of enterprises depends mainly on: (1) the functional characteristics of the business, and (2) the standard for the supplier. In addition to Kroes and Ghosh (2010) also researched and pointed out that the use of an enterprise's resources also depends on the enterprise's business strategy because the outsourcing decision must be appropriate with the business objectives of the enterprise.

The practice shows that the above studies are still limited in determining the factors that affect outsourcing compared with the theory. Therefore, the author proposes a general model of the impact of factors on outsourcing. In general, it can be seen that the extent of outsourcing depends on factors: (1) perceived outsourcing benefits, (2) ability to control risks, (3) attitudes towards outsourcing, (4) outsourcing strategy, (5) functional characteristics, and (6) supplier standards. In addition, based on the Relationship Theory (RT) and Social Capital Theory (SCT), combined with expert interviews, it shows that outsourcing SMEs in the Mekong Delta depends on the relationship between stakeholder factors, especially the relationship you know other.

Thus, based on summarizing theories, reviewing the related studies and through expert interviews, the study proposes a model of the impact of outsourcing to performance of SMEs in the Mekong Delta as follows:

H1b +

Benefits of outsourcing

H1 a+

Control variables: - Business size - Years of operation - Years of outsourcing - Areas of work - Type of outsourcing - Activities auxiliary, core

Attitude towards outsourcing

H2b+

H2a+

H3+

Control outsourcing risks

H7a+

H4 +

Level of Outsourcing

H5+

a: Financial a: Hiệu quả tài chính

Characteristics of the organization Standards for suppliers

H8 +

H6+

H9b,9c,9d,9e+

Strategy of the business

Non-financial b: Customers c: Internal d: Innovation & development e: Employees

P E R F O R M A N C E

Relationships in outsourcing

Figure 2.1: Research model of the impact of outsourcing on the performance of SMEs in the Mekong Delta

Source: Author proposed

The research hypotheses are summarized as follows: H1a: There is a positive impact on the benefits of outsourcing on the level of

outsourcing.

H1b: There is a positive impact on the benefits of outsourcing on the attitude

towards outsourcing.

H 2a: There is a positive impact of control outsourcing risks on the level of

outsourcing.

H2b: There is a positive impact of control outsourcing risks on the attitude towards

outsourcing.

H3: There is a positive impact of the attitude towards outsourcing on the level of

outsourcing.

H4: There is a positive impact of organizational characteristics on the level of

outsourcing.

H5: There is a positive impact of standards for suppliers on the level of outsourcing H6: There is a positive impact of strategy of the enterprise on the level of

outsourcing

H7: There is a positive impact on the level of outsourcing on performance

(financial and non-financial).

H8: There is a positive impact of relationships between stakeholders on the level

of outsourcing.

H9: There is a positive impact of relationships between stakeholders on the

performance (financial and non-financial).

Table 2.1: Describe the variables in the research model

Observed variables Citation Variable 1. Perceived benefits of outsourcing BEN1

BEN2

BEN3

Gewald and Dibbern (2009); Gewald (2010) BEN4

BEN5

BEN6 Outsourcing saves costs more for our businesses Outsourcing helps reduce fixed costs, increase variable costs for businesses Outsourcing helps us to spend more time and effort focusing on performing important activities Outsourcing helps us to share part of the risk from leveraging the expertise of suppliers Outsourcing helps us solve difficulties due to lack of resources (human, material, financial) Outsourcing helps to free up a part of the work that is not important Interview the experts 2. Control outsourcing risks

Enterprises can limit dependence on service providers Enterprises have reasonable control over outsourced activities Enterprises can effectively control the service delivery process

Gewald and Dibbern (2009); Hafeez and Andersen (2014) ORM1 ORM2 ORM3 ORM4 Outsourcing costs decreased as expected by businesses ORM5

ORM6 Enterprises have reasonable control over the arising costs Enterprises well manage their secrets, and internal information is not exposed to the outside

3. The characteristics of the organization ORG1 We outsource activities/functions that are not important

ORG2 We outsource due to a lack of resources (property, people, facilities) to perform the enterprise's operations

ORG3 We outsource because we cannot do the activities well ORG4 Hafeez and Andersen (2014); Kamyabi and Devi (2011)

ORG5 The size of the business is small, so we outsource it The work needs to be solved too much, so companies have to outsource 4. Strategy of the enterprise STR1

STR2 Outsourcing is an inevitable trend for businesses We outsource to aim to increase competitive advantage in the long term Kroes and Ghosh (2010) STR3 We outsource to improve products/services

STR4 We outsource to focus all resources on business diversification strategy 5. Standards for suppliers

SUP1 SUP2

SUP3 Kroes and Ghosh (2010); Hafeez and Andersen (2014) SUP4 The supplier has a reasonable pricing policy The service provider has a good reputation The service provider always ensures a good plan under the contract The supplier has many preferential services for businesses The supplier has cultural similarities with enterprises SUP5 Interview the experts 6. Relationships in outsourcing

REL1

REL2 Interview the experts

REL3 The company has a friendly relationship with the outsourced service provider. The company has built a long-term partnership with outsourced service providers. Enterprises believe in the introduction of suppliers from business partners.

Observed variables Citation

Variable 7. Attitude towards outsourcing

ATT1 We have the right attitude towards outsourcing ATT2 Outsourcing is very suitable for business goals ATT3 We believe that the benefits of outsourcing outweigh the risks ATT4 Gewald et al. (2006); Gewald (2010)

ATT5 Outsourcing is the right choice for businesses In general, outsourcing has created many positive changes in the business operations of enterprises 8. Level of outsourcing

LVE1 Outsourcing rate of core activities

Gilley and Rasheed (2000); Everaert et al. (2006) LVE2 Outsourcing rate of auxiliary activities

LVE3 Gulla and Gupta (2012) Annual cost ratio for outsourcing: 1: less than 20%; 2: from 20 - less than 30%; 3: from 30 - less than 40%; 4: from 40 - below 50%; 5: over 50%

LVE4 Enterprises will further strengthen outsourcing activities Gewald and Dibbern, 2009; Gewald, 2010

9. Performance 9.1 Non-financial performance 9.1.1 Attracting and retaining customers

CUS1

CUS2

Gilley et al. (2004); Bolat and Yılmaz (2009); Bustinza et al. (2010) CUS3 CUS4 Customers are more satisfied with the quality of the products/services of the company. The number of customer complaints has been significantly reduced Customers are more loyal to the company's products/services The market share of enterprises has been significantly improved. 9.1.2 Employee performance

EMP1

Gilley et al. (2004); Bolat and Yılmaz (2009) EMP2 EMP3 Employees are more satisfied with the working environment at the enterprise Employees are more positive at work The employee completes the task well 9.1.3 Efficiency of internal processes

INT1

INT2 Elmuti (2003)

INT3 Enterprises focus their time and effort on performing important parts The progress of work at the enterprise is always guaranteed well Ineffective activities in enterprises have been improved for the better 9.1.4 Innovation and organizational development Gilley et al. (2004)

GRO1 GRO2 GRO3 Enterprises have significantly improved and innovated internally Enterprises have better competitiveness than their competitors Enterprises have better sustainable growth

9.2 Financial performance

ROS Return on net sales (ROS) has grown over the years

Source: References from related studies and expert interviews

ROE Return on equity (ROE) has grown over the years Return on assets (ROA) has grown over the years ROA Gilley and Rasheed (2000); Kroes and Ghosh (2010); Bustinza et al. (2010); Kamyabi and Devi (2011)

CHAPTER 3: RESEARCH METHODS

3.1 RESEARCH FRAME

Draft scale

Interview the experts (20 enterprises) THEORETICAL FRAMEWORK REVIEW OF LITERATURE

LARGE SCALE SURVEY

Cronbach’s Alpha EFA analysis

Discuss scales PILOT STUDY (115 enterprises)

Outsourcing situation

Influencing factors

Performance Level of outsourcing

CFA analysis

- Check the suitability of the model - Eliminate variable with small CFA weights - Calculate the Composite reliability - Calculate the variance extracted - Check the unidimensionality, convergent validity, discriminant validity

SEM

CONCLUSIONS AND MANAGERIAL IMPLICATIONS

- Check the theoretical model relationship - Testing the hypotheses - Re-estimate the model - Analysis of the structure of multiple groups

SECONDARY DATA

Figure 3.1: Research framework

3.2 DATA COLLECTION METHODS

Secondary data on SMEs' number and business performance in the Mekong Delta collected from the Statistical Yearbook 2017 - 2018 of the General Statistics Office of Vietnam and The White Book on Vietnamese Businesses 2020 of the Ministry of Planning and Investment.

Primary data was collected from: (1) 20 experts to formulate and/or supplement the scale of the study (Flick, 2009); (2) 427 SMEs use outsourced services in 6 localities including Bac Lieu, Soc Trang, Dong Thap, Vinh Long, Tra Vinh, and Can Tho City. A convenient non-probability sampling method is used in combination with the snowball sampling method (Baltar and Brunet, 2012).

3.3 ANALYTICAL METHODS

- For expert interview data: the thesis uses a three-level coding method (Saldaña, 2015). Documented interview data will be coded sentence by sentence to determine codes. The codes are then considered for differences and similarities to be grouped into categories. Finally, the groups are analyzed to identify the research problem's topic/concept (Theme/concept).

- For interview data: the thesis uses analytical methods: (1) Cronbach's alpha's test to test the reliability and evaluate the quality of the scale; (2) Exploratory factor analysis (EFA) to identify groups of factors that affect outsourcing levels and test the appropriateness of the scale for outsourcing and performance; (3) Confirmatory factor analysis (CFA) to determine the suitability of research data with theoretical models; (4) Structural equation modeling (SEM) through AMOS software to test the relationship between concepts in the research model; (5) Bootstrap test to evaluate the reliability of the estimates in the research model; (6) Multi-group analytics to evaluate whether there is a moderation effect of control variables (such as the size of the enterprise, time of establishment, time of outsourcing, business sector, types of services, operating outsourcing rate) to the extent of outsourcing and the performance of the business is not.

CHAPTER 4: RESULTS AND DISCUSSION

4.1 THE OUTSOURCING SITUATION OF SMES IN THE MEKONG DELTA

4.2.1 General information about SMEs in the Mekong Delta

Interview results of 427 SMEs in 6 provinces/cities in the Mekong Delta show that most enterprises are limited enterprise (accounting for 57.14%), joint-stock enterprise accounts for 21.78%, and private enterprise accounts 19.91%. Meanwhile, cooperatives only account for a tiny proportion (only 1.17%). Most companies operate in commerce - services (accounting for 50.59%) and the industry - construction (accounting for 36.77%). The majority of outsourced enterprises are micro-enterprises (accounting for 68.85%) and are small businesses (accounting for 28.57%), while medium enterprises account for a tiny proportion (only 2.58%). Most companies outsource to solving immediate problems, especially newly established businesses with high outsourcing demand. Most companies outsource to solving immediate problems, especially newly established businesses with high outsourcing demand. Outsourcing firms from 2 to 5 years accounted for 44.73%, while outsourced companies after ten years only accounted for 17.10%.

4.2.2 The types of outsourcing

Services used by businesses in the Mekong Delta are quite diverse. However, mainly focus on labor outsourcing, professional security services and supply, labor resources management, and asset outsourcing. Details of the services outsourced to SMEs in the Mekong Delta are shown in the following table:

Table 4. 1: Summary of services outsourced by SMEs in the Mekong Delta

Types of outsourcing

Sample

Frequency Micro Small Medium

219 51.29 164 38.41 158 37.00 114 26.70 109 25.53 56 13.11 49 11.48 44 10.30 7.26 31 7.03 30

70 16.39 7.03 30 125 29.27

A. Labor Outsourcing - Accounting service - Security service - Labor supply and management - Cleaning service - Machine maintenance services - Marketing/customer care/sales support - Economic consulting & construction consulting - Training service - Inventory of inventory - Management consulting, HR management B. IT outsourcing - Website design, system maintenance - Data C. Asset outsourcing D. Other services - Logistics - Legal

61 14.29 6.09 26

82.65 17.35 59.76 39.02 68.99 31.01 54.39 43.86 59.63 38.53 71.43 28.57 57.14 42.86 59.09 36.36 61.29 32.26 68.99 31.01 70.00 28.57 60.00 40.00 68.80 30.40 44.26 47.54 61.54 38.46

- 1.22 - 1.75 1.83 - - 4.55 6.45 - 1.43 - 0.80 8.20

Source: Results of data processing from 427 enterprises

4.2.3 The reason for outsourcing

Most of the SMEs in the Mekong Delta outsource because of the reduced investment costs. Outsourcing helps managers focus all resources on performing essential activities and simplifying the operation apparatus. The following some of the main reasons for the SMEs' decision to outsource the Mekong Delta:

Unit: %

51,82

44,28 43,80

36,98

33,58

27,49

22,87

20,68

16,06

12,90 12,90

4,62

Reduce investment costs Enterprises focus on important activities Simplified operation apparatus Lack of labor Take advantage of professional service Lack of facilities (warehouse, workshop ...) Enterprises are not performing well Increase competitive advantage Build relationships with your suppliers Lack of equipment and machinery Reduce risks in business Other reason

Figure 4.1: Reason for outsourcing Source: Results of data processing from 427 enterprises

4.2.4 The difficulty of outsourcing

The most significant limitation of using external resources is that service delivery partners do not guarantee as committed. In addition, the risk of disclosing information and know-how is a problem that businesses may encounter. Survey results from 427 SMEs in the Mekong Delta show some problems when outsourced as follows:

Unit: %

26,93

25,76

30,00

23,65

22,95

21,08

25,00

17,33

15,46

20,00

12,41

15,00

6,79

10,00

3,28

5,00

Figure 4.2: The difficulty of outsourcing Source: Results of data processing from 427 enterprises

IMPACT OF

4.2 FACTORS AFFECTING OUTSOURCING AND OUTSOURCING ON PERFORMANCE

4.2.1 Testing the reliability of the scale Cronbach's Alpha test shows that the scale of the concepts achieved good reliability because Cronbach's Alpha is greater than 0.60, and the corrected item-total correlation is higher than 0.3. However, variables such as BEN1, BEN2, and BEN4 (the perception of outsourced benefits); ORM4 (ability to control outsourced risks); variables include ORG3 and ORG4 (haracteristics of the organization); the variables SUP3 and SUP4 (the standard supplier); ATT5 measures the concept of outsourced attitudes that have corrected item- total correlation is less than 0.3, so these variables are excluded from the research model (Hair et al. 2014). The second Cronbach's Alpha test result for the following table:

Table 4.2: The results of testing the reliability of the scales

No. Variable name Variable code Cronbach

1 Benefits of outsourcing Number of items 3 0.852

2 Control outsourcing risks 5 0.871

3 Characteristics of the organization Strategy of the business 4 5 Standards for suppliers 6 Relationships in outsourcing 7 Attitude towards outsourcing 8 Level of outsourcing 3 4 3 3 4 4 - Non-financial performance

+ Customers + Employees + Internal + Innovation and development BEN3, BEN5, BEN6 ORM1, ORM2, ORM3, ORM5, ORM6 ORG1, ORG2, ORG5 STR1, STR2, STR3, STR4 SUP1, SUP2, SUP5 REL1, REL2, REL3 ATT1, ATT2, ATT3, ATT4 LVE1, LVE2, LVE3, LVE4 CUS1, CUS2, CUS3, CUS4 EMP1, EMP2, EMP3 INT1, INT2, INT3 GRO1, GRO2, GRO3 ROA, ROE, ROS 0.832 0.733 0.827 0.730 0.866 0.834 0.915 0.827 0.794 0.841 0.878 - Financial performance 4 3 3 3 3 Source: Results of data processing from 427 enterprises

4.2.2. Exploratory factor analysis The EFA analysis of the concept of factors affecting the level of outsourcing shows that achieving the standards. The KMO coefficient is 0.774 (satisfying the condition of 0.501 shows that scales of concepts are grouped into 6 factors. The EFA results are summarized as follows:

Table 4.3: EFA analysis results of scale factors affecting the level of outsourcing

Factor loadings 0.898 (ORM1) 0.906 (BEN6) 0.910 (SUP5) 0.809 (ORG2) 0.762 (STR4) 0.794 (REL2) 0.809 (ORM2) 0.795 (BEN3) 0.757 (SUP2) 0.787 (ORG5) 0.673 (STR2) 0.713 (REL1) 0.772 (ORM3) 0.739 (BEN5) 0.693 (SUP1) 0.774 (ORG1) 0.594 (STR3) 0.572 (REL3) 0.659 (ORM5) 0.668 (ORM6)

Control outsourcing risks Benefits of outsourcing Standards for suppliers Strategy of the business Relationships in outsourcing Characteristics of the organization

Source: Results of data processing from 427 enterprises

0.535 (STR1) KMO = 0.774; Sig. = 0.000; Eigenvalue = 1.543 > 1; Total Variance Explained = 56.91%

Variable name

Eigenvalue

KMO

Similarly, the author analyzed EFA on the attitude and outsourcing level. The analysis results show that the market data is consistent with the theoretical scale, the results are as follows: Table 4.4: EFA analysis results for the scale of attitude and level of outsourcing Bartlett's test

Total variance explained (%)

Number of groups

0805 0.000 71.57% 2.863 1

Attitude towards outsourcing Level of outsourcing

Source: Results of data processing from 427 enterprises

0.752 0.000 67.50% 2.700 1

Next, the EFA analysis for the performance scale of SMEs in the Mekong Delta. EFA results show that the study has a suitable model. The Eigenvalue index> 1.0 shows that performance scales are grouped into three factors: Table 4.5: EFA analysis results for the scale of performance Non-financial performance

Efficiency on customers & employees Efficiency of internal & development

Financial performance

Factor loadings

0.920 (ROA) 0.842 (ROE) 0.759 (ROS)

0.830 (GRO2) 0.764 (INT2) 0.744 (INT3) 0.716 (GRO1) 0.706 (GRO3) 0.672 (INT1)

0.895 (CUS3) 0.845 (CUS1) 0.794 (CUS4) 0.784 (CUS2) 0.791 (EMP2) 0.708 (EMP1) 0.675 (EMP3)

Source: Results of data processing from 427 enterprises

KMO = 0.891; Sig. = 0.000; Eigenvalue = 2.115 > 1; Total Variance Explained = 61.84%

4.2.3. Confirmatory factor analysis

According to Byrne (2001), the research model is appropriate when indicators such as TLI, CFI ≥ 0.9; CMIN/df≤3; RMSEA≤0.08. The results of the CFA saturated model showed that the Chi-square test had P=0.000. Indicators such as CMIN/df=1.747≤2; TLI=0.921, CFI=0.929≥0.9 and RMSEA=0.044≤0.08 showed that the model fit with market data.

Chi-square = 1525.040; df = 890; P = 0.000; Chi-Square/df = 1.714 CFI = 0.936; TLI = 0.928; RMSEA = 0.041

Figure 4.3: Saturated model (standardised parameters) Source: Results of data processing from 427 enterprises

In theory, to ensure reliability, the composite reliability and the total variance extracted must be 0.5 or more. However, the total variance extracted can still accept value from 0,4 but must ensure composite reliability greater than 0.6 (Fornell and Larcker, 1981). The summary results are shown in Table 4.6:

Table 4.6: Summary results of testing the reliability

Variable name

Conclusion

Number of items

Cronbach’ s alpha

Composite reliability

3 5

Total variance explained 0.663 0.587

0.852 0.871

0.855 0.875

0.622

0.832

Reliable

4 3 3 4 4

0.417 0.623 0.527 0.605 0.598

0.733 0.827 0.730 0.866 0.834

0.738 0.832 0.765 0.859 0.855

0.920

0.917

0.616

internal &

0.880

0.553

1. Benefits of outsourcing 2. Control outsourcing risks 3. Characteristics of the organization 4. Strategy of the business 5. Standards for suppliers 6. Relationships in outsourcing 7 Attitude towards outsourcing 8. Level of outsourcing 9. Performance 9.1 Non-financial performance - Efficiency on customers & employees - Efficiency of development 9.2 Financial performance

0.878

0.880

0.771

Source: Results of data processing from 427 enterprises

The results in the table above show that all the concepts are satisfactory in terms of value and reliability. Thus, the scale that is very suitable for SEM analysis, and the model to evaluate the impact of outsourcing on the performance of SMEs in the Mekong Delta is adjusted as follows:

H1b +

Benefits of outsourcing

H1 a+

Control variables: - Business size - Years of operation - Years of outsourcing - Areas of work - Type of outsourcing - Activities auxiliary, core

Attitude towards outsourcing

H2b+

H2a+

H3+

Control outsourcing risks

+ c ,

, a 7

H4 +

Performance: -Financial - Customers &

Characteristics of the organization

employees

Level of outsourcing

H5+

- Internal & development

Strategy of the business

H8 +

H6+

H9a,b,c+

Standards for suppliers

Relationships in outsourcing

Figure 4.4: Theoretical model after adjustment

4.2.4. A theoretical testing model with SEM

SEM results show that the model with Chi-square is 1514.932 with p = 0.000. The indicators CMIN/df=1.976<3; TLI=0.902>0.9; CFI=0.908>0.9 and RMSEA=0.048<0.08 meet the analysis requirements. This shows that the model is well suited to market data. The research has found the relationship between the concepts in the model, as the following table:

Financial

Non- financial

Chi-square = 1837,798; df = 930; P = 0,000; Chi-Square/df = 1,976 CFI = 0,908; TLI = 0,902; RMSEA = 0,048

Figure 4.5: SEM analysis results

Source: Results of data processing from 427 enterprises

Note: : Shows the impact at the statistical significance level of 5%

: Shows no impact at the statistical significance level of 5%

The study has evaluated the reliability of the estimates in the SEM model, the thesis conducted a Bootstrap test with the number of repeated observations N = 1,000 times. The test results can be concluded in the 15 hypotheses mentioned; at the 5% statistical significance, there are ten accepted hypotheses (including H1b, H2a, H2b, H3, H4, H7a, H7b, H8, H9b và H9c), and five hypotheses rejected (including H1a, H5, H6, H7c, H9a)

4.2.5. Analysis of the multi-group structure

The goal of multi-group structure analysis is to test differences in the effects of control variables on statistically significant relationships in the research model. According to Hafeez and Andersen (2014), Dinh Cong Thanh and Le Tan Nghiem (2016), outsourcing in enterprises differ in size of enterprises, time of operation, time of outsourcing, business sectors and type of outsourced enterprise. In addition, Gilley and Rasheed (2000) also stated that there is a difference in the level of outsourcing between ancillary activities and core activities:

The use of external resources in SMEs in the Mekong Delta has brought effects to businesses. However, small and medium-sized enterprises achieve higher efficiency. Specifically, outsourcing affects the efficiency of attracting and retaining customers and the effectiveness of employees' work. Not only that, outsourcing also affects efficiency in handling internal affairs and developing organizations. In particular, outsourcing has the most substantial impact on customers' and employees' efficiency in microenterprises in the Mekong Delta.

Efficiency brings businesses operating in the field of commerce - services higher than firms in the area of agriculture - forestry - fisheries, and industry - construction. Accordingly, outsourcing affects both financial and non-financial efficiency in these enterprises, especially effective in attracting and retaining customers and employees' work efficiency. In the four groups of services outsourced by enterprises, logistics and legal outsourcing firms have achieved efficiency in both financial and non-financial aspects, especially in handling internal affairs and development. In addition, the group of businesses outsourcing labor also achieved non-financial efficiency, especially in terms of customers and employees.

Outsourcing efficiency also has a difference in operating time. Although at the 95% confidence level, the study has not enough evidence to prove this effect, thanks to the relationship between the parties, it has helped enterprises operating for more than nine years to improve their non-financial performance significantly. Operational efficiency also differed over time outsourced. Accordingly, enterprises that have used external resources for more than seven years are more effective and correlated with operational efficiency than businesses that have outsourced less than seven years. Because Bolat and Yılmaz (2009) believe that outsourcing is often useful for companies in the long term, at least two years of using the service, all enterprise activities can be stable.

The test also shows that SMEs in the Mekong Delta outsource supporting activities with relatively higher efficiency than outsourcing core activities. At that time, businesses that hire ancillary services with a high rate (more than 40% of operations) bring efficiency in the non-financial aspect and the business's financial efficiency. The inspection results are shown in the following table:

Table 4.7: Summary of the results of testing the impact of the control variables on the relationships in the research model Control variables

Sizes of enterprise

H1b H2a H2b H3 H4 H7a H7b H8 H9b H9c    

 

X 

 X

(1) Micro (N = 294) (2) Small and medium (N = 133)

Time of operation

 

(1 Less than 9 years (N = 246) (2) More than 9 years (N = 181)

 X

X X

 X

Time of outsourcing

 

(1) Less than 7 years (N = 258) (2) More than 7 years (N = 169)

Type of outsourced enterprise

(1) Labor outsourcing (N = 409) (2) IT outsourcing (N = 93) (3) Asset outsourcing (N = 125) (4) Others (N = 77)

 X  

   

X X X 

   

  X X

 X  X

   X

Kinds of economic activity

(1) Agriculture, forestry & fishing (N = 54) (2) Industry & construction (N = 157) (3) Trade & service (N = 216)

X  

  

X  

X X 

X  

 X 

X  

 X X

Core and auxiliary activities

 

(1) Core activities (N = 403) (2) Auxiliary activities (N = 427)

Rate of outsourcing ancillary activities

X  

  

(1) Less than 30% (N = 121) (2) From 30% to less than 40% (N = 167) (3) More than 40% (N = 139)

X  

X X 

X  X

  X

X X X

Rate of outsourcing core activities

(1) Less than 12% (N = 125) (2) From 12% to less than 18% (N = 140) (3) More than 18% (N = 162)

  

X X X

   Source: Compiled from test results of multi-group model

Note: : impact at 5% statistical significance level

X: no impact at 5% statistically significant

4.3 DISCUSS RESEARCH RESULTS

4.3.1 Factors affecting the level of outsourcing For hypothesis H2b: research results show the impact of the factor of ability to control risk when outsourcing on the level of outsourcing in enterprises (Hypothesis H 2b has a statistical significance of 5%). This shows similarities with studies of Gewald and Dibbern (2009), Hafeez and Andersen (2014). Thereby, it can be seen that although outsourcing activities always have certain risks, this does not limit the need to use services in enterprises, especially when enterprises control risks well. Thanks to that, outsourcing will create a significant motivation for businesses to increase outsourcing activities similar to the research of Tania and Faiza (2013).

For hypothesis H1b and H2b: Once again affirmed, managers' attitude towards outsourcing has a positive and significant impact by two factors: (1) the benefits of using resources provided by external organizations/individuals (Hypothesis H1b has a statistical significance of 5%); (2) the ability to control the risks when using enterprises' service services (Hypothesis H2b has a statistical significance of 5%). The results of this study show similarities with the studies of Gewald et al. (2006), Gewald and Dibbern (2009), Gewald (2010). Indeed, outsourcing helps the managers of SMEs in the Mekong Delta to offload less important jobs and spend more time and effort focusing on performing essential jobs. Using external resources also helps businesses solve a part of the difficulties due to a lack of necessary human, material, and financial resources. In addition to perceived benefits affecting outsourcing, similar to previous studies by Gewald et al. (2006), Gewald and Dibbern (2009), outsourcing firms may encounter some difficulties such as dependence on suppliers. In addition, the supply process may be interrupted, outsourcing costs may arise, the possibility of disclosing confidential, inside information of companies. Therefore, if these risks are well controlled, it will positively affect managers' attitude towards using outsourced resources at enterprises.

factor positively

the use of

influencing

resources

For hypothesis H3: The impact of managers' attitudes towards outsourcing on outsourcing levels of SMEs in the Mekong Delta (Hypothesis H3 has a statistical significance of 5%) is similar to that of Gewald et al. (2006), Gewald (2010). The study also confirmed a positive correlation between the attitude factor in using outsourced resources and the increase in outsourcing activities. Gewald et al. (2006), Gewald (2010) affirmed that enterprises appreciate the suitability, attractiveness, and positive attitude to outsourcing, the more businesses increase the level of outsourcing. This is considered the essential from outside organizations/individuals of SMEs in the Mekong Delta..

Hypothesis H4: The impact of the functional characteristics on the outsourcing level of SMEs in the Mekong Delta is similar to the study of Kamyabi and Devi (2011), Hafeez and Andersen (2014) (Hypothesis H4 has a statistical significance of 5%). Because according to Kamyabi and Devi (2011), Hafeez and Andersen (2014), businesses tend to increase the level of using resources from outside organizations/individuals for non-core activities, especially activities that do not require genuinely confidential information.

For super small enterprises, the functional characteristics significantly affect the level of outsourced firms more than larger firms. Thereby, it can be confirmed that the smaller the enterprise's size, the more likely it is to outsource to solve business difficulties. This result is similar to the study of Hafeez and Andersen (2014), Isaksson and Lantz

(2015). At 95% reliability, the functional characteristics of enterprises impact the increase in outsourcing activities for enterprises outsourcing labor and IT services. Meanwhile, enterprises' characteristics factors do not affect the extent of outsourcing the remaining areas such as asset, logistics, and legal services outsourcing. The reason is that most of the SMEs in the Mekong Delta outsource mainly their employees (up to 95.78% of them hire outside workers).

Hypothesis H8: The impact of the relationship between parties on the level of outsourcing (Hypothesis H8 has a statistical significance of 5%). Unlike previous studies, the thesis based on Relationship Theory (RT) and Social Capital Theory (SCT) has discovered the relationship factor's influence between the parties on the increased level of outsourcing activities. Managers of enterprises tend to increase outsourcing activities because they have built up long-term cooperation relationships with supply partners. In addition, the research also shows that SMEs in the Mekong Delta tend to outsource organizations/individuals because they trust referrals from business partners.

Particularly hypothesis H1a: the perceived benefit from the use of outsourced resources does not directly affect the increase in outsourcing (Hypothesis H1a is not statistically significant at 5%). This result is different from the studies of Gewald and Dibbern (2009), and Gewald (2010). The reason may be that outsourcing is still a relatively new model for SMEs in the Mekong Delta (because nearly 45% outsource from 2 to 5 years). Therefore, businesses may not be aware of the many benefits of outsourcing. Although there is no direct impact on the increase in outsourcing of activities, for the SMEs in the Mekong Delta, the perceived benefit factor has an indirect effect on outsourcing through attitudes of managers for outsourcing are similar to those of Gewald and Dibbern (2009), and Gewald (2010).

With hypothesis H5: the study has not enough evidence to prove the impact of the standard factor on service providers on the outsourcing level of enterprises (Hypothesis H5 is not statistically significant at 5%) as studied by Kroes and Ghosh (2010), Hafeez and Andersen (2014). The reason may be that the supplier's standard requirement is the basis for SMEs in the Mekong Delta to choose service providers without affecting the level of outsourcing in enterprises. Besides, it is possible that companies focus more on the familiar relationship factor with service providers but do not pay much attention to the standards of supply as the studies of previous authors. Survey results show that more than 50% of SMEs in the Mekong Delta decided to choose a service provider through a relationship of acquaintance and trust. Because this can help managers feel more secure when transferring a part of their operations to a supplier for implementation, so the company does not pay much attention to this standard when outsourcing.

Regarding hypothesis H6: the study is not enough to confirm the impact of strategic outsourcing factors on the level of outsourcing in SMEs in the Mekong Delta (Hypothesis H6 is not statistically significant at 5%) is similar to the study of Kroes and Ghosh (2010). This can also be explained that the SMEs in the Mekong Delta have no orientation for outsourcing. Enterprises have not seen the use of external resources to improve products/services and diversify their business. This shows that the SMEs in the Mekong Delta does not have a long-term strategic direction for outsourcing. Outsourcing is mainly aimed at solving problems as well as immediate difficulties and temporary needs. This is similar to Hafeez and Andersen (2014) that companies can use external resources to solve problems, temporary jobs arising in the process of operation.

4.3.2 The impact of outsourcing on performance Regarding financial performance (Hypotheses H7a and H9a): at the statistical significance level of 5%, the study shows that outsourcing in SMEs in the Mekong Delta has an impact on the financial performance of enterprises. Accordingly, outsourcing affects the growth of ROE, ROA as studies by Gilley and Rasheed (2000), Kroes and Ghosh (2010), Kamyabi and Devi (2011), Bustinza et al. (2010) (Hypothesis H7a is statistically significant at 5%). However, the relationship between outsourcing and financial performance is not strong. The research results show that outsourcing affects the financial performance of enterprises with the correlation coefficient R2 = 1.30%. This result is similar to research by Isaksson and Lantz (2015) that outsourced enterprises have a modest impact on financial performance. Isaksson and Lantz (2015) explain that the performance of a company depends on many different factors, and outsourcing only affects the financial performance of the company very low (this correlation is 3.40%).

For the non-financial performance of enterprises (Hypotheses H7b, H7c, and H9b, H9c): non-financial efficiency in SMEs in the Mekong Delta can be divided into two groups: (1) effective group in attracting and retaining customers employees and employees' work efficiency; and (2) effective internal work handling and organizational development. The results show that the level of outsourcing in enterprises and the relationship between the parties have a positive and significant impact on the efficiency of attracting and retaining customers and the performance of employees in the enterprise (Hypothesis H7b and H9b have a statistical significance of 5%), the correlation level R2 is 24.9%. This result is similar to the studies of Gilley et al. (2004), Bolat and Yılmaz (2009), Bustinza et al. (2010), and completely consistent with RT theory and SCT theory. Accordingly, businesses can utilize resources from relationships with organizations/individuals that provide specialized services outside to improve operational efficiency. The study has not enough evidence to confirm that outsourcing in SMEs in the Mekong Delta affects the efficiency of internal work handling and organizational development (Hypothesis H7c has no statistical significance of 5%) as research by Gilley et al. (2004) and Elmuti (2003). However, thanks to the relationship between stakeholders when outsourcing enterprises has improved the efficiency of internal work handling, as well as the efficiency of organizational innovation and development.

CHAPTER 5: CONCLUSIONS AND MANAGERIAL IMPLICATIONS

5.1 CONCLUSIONS

The study on the impact of using outsourced services on the performance of SMEs in the Mekong Delta shows that the outsourced services of SMEs are quite diverse. Accordingly, there are four main groups of services, including (1) outsourcing labor services, (2) IT services, (3) property leasing, and (4) other services such as logistics and legal outsourcing. In particular, labor outsourcing is a group of services used by SMEs in the Mekong Delta quite commonly, especially outsourcing accounting services, tax declaration, security, part-time workers, and cleaning. Outsourcing brings many benefits for businesses such as reducing costs for businesses, helping administrators focus on core work, streamlining the apparatus. In addition, SMEs in the Mekong Delta also face some difficulties and limitations such as the quality of outsourced work is not as committed as the original commitment, the risk of disclosing enterprise secrets. Moreover, businesses also depend on suppliers, the outsourcing costs are not as expected, and in some cases, the costs may be higher than originally expected. also

confirmed

resources

using

study

from

The

external that organizations/individuals positively affects the performance of SMEs in the Mekong Delta. Accordingly, outsourcing affects the financial performance of businesses. Specifically, outsourcing affects indicators such as return on sales (ROS), return on equity (ROE), and return on assets (ROA) of companies. However, the correlation between outsourcing and financial performance is very modest. In addition, enterprises using outsourced services also have a positive impact on non-financial efficiency, of which the most impact on customer attraction and retention as well as employee's work efficiency. 5.2 MANAGERIAL IMPLICATIONS

Based on the results of empirical research on the impact model of outsourcing on the performance of SMEs in the Mekong Delta, the study proposes some managerial implications as follows:

(1) Strengthen risk management when outsourcing: Enterprises need to develop a process of checking and controlling the activities of service providers. Establish a clear plan, record, and archive regular reports to ensure the plan and quality of outsourced activities. Enterprises need to carefully learn the supply partner's information, especially legal documents proving the capacity of the lessor. In addition, when outsourcing, businesses need to specify with their partners which items to charge and which items are free. Enterprises also need to estimate fully and in detail the items related to costs when outsourcing to limit costs. In addition, businesses need to pay attention to the agreed principles in outsourcing contracts, ensure the strictness and completeness of the contract; specifies the specific responsibilities of the parties. The outsourcing contract should clearly define confidential information, stipulating the obligations of the parties in confidentiality.

(2) Proposal to outsource according to the characteristics of the enterprise: Enterprises should not outsource in the following cases: first, for activities or jobs that enterprises have all appropriate resources to perform; Second, the activities in which enterprises themselves have advantages in expertise, skills, and qualifications superior to their partners; Third, strategic and important activities, jobs or stages can affect the existence of enterprises; Fourth, limit outsourcing core business functions and activities, increase outsourcing of supporting activities. Research results also show that businesses should focus on outsourcing auxiliary activities with appropriate rates. It is recommended that the rate of outsourcing supporting activities in enterprises is more than 30%. Especially outsourced enterprises with a rate of more than 40% showed that outsourcing impacts not only non-financial performance but also financial efficiency.

(3) Managing relationships between stakeholders: Enterprises need to establish good relationships with suppliers to improve efficiency in using outsourced resources. In addition, businesses also need to build and maintain relationships with strategic partners in order to take advantage of opportunities and benefits from cooperation, helping businesses eliminate weaknesses and difficulties in the process of operation. In addition to maintaining cooperative relationships with suppliers, in the long run, businesses should also define and build specific and clear standards for suppliers to serve as the basis for selecting partners. At the same time, businesses can avoid depending too much on them. Because partners not only provide services, they also provide resources and tools that can help companies improve business performance. 5.3 LIMITATIONS AND DIRECTION FOR FUTURE RESEARCH

Although the thesis has achieved the set objectives, there are still certain limitations: Firstly, the thesis focuses on analyzing the efficiency of outsourcing in small and medium- sized enterprises, so the efficiency cannot be compared with larger enterprises; Secondly, the services outsourced by businesses in the Mekong Delta are quite diverse. Accordingly, the analysis topic is general for all different services, so some aspects may not be analyzed in depth. Therefore, the next studies can analyze a service type/group combined with expanding the research scope of the impact of outsourcing on the performance of the larger enterprises. Thereby, the authors can compare the efficiency of outsourcing according to the size of the business operations.

Besides, outsourcing in enterprises depends on many different factors, Mazzucato and Kattel (2020) point out that the COVID-19 crisis affects the need to use external resources in enterprises. Meanwhile, this thesis has not analyzed this impact because the information was collected in enterprises before the COVID-19 pandemic occurred. Therefore, further studies can see the influence of this factor on outsourcing.