Luận văn Thạc sĩ Quản trị kinh doanh: Challenges in internationalisation for Vietnam SME

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To explore current export barriers of SMEs in comparing with those faced by state owned enterprises (“SOEs”); to examine support policies and activities such as export promotion activities from the government and professional association for SMEs; to explore solutions or strategies that SMEs (in general and by group such as PSMEs and SOEs) are using to resolve their barriers and the effectiveness of their strategies.

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Nội dung Text: Luận văn Thạc sĩ Quản trị kinh doanh: Challenges in internationalisation for Vietnam SME

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- ĐINH NGUYỄN BÍCH LÊ CHALLENGES IN INTERNATIONALISATION FOR VIETNAM SME NHỮNG THÁCH THỨC TRONG QUÁ TRÌNH QUỐC TẾ HÓA ĐỐI VỚI CÁC DOANH NGHIỆP VỪA VÀ NHỎ Ở VIỆT NAM LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2020
ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- ĐINH NGUYỄN BÍCH LÊ CHALLENGES IN INTERNATIONALISATION FOR VIETNAM SME NHỮNG THÁCH THỨC TRONG QUÁ TRÌNH QUỐC TẾ HÓA ĐỐI VỚI CÁC DOANH NGHIỆP VỪA VÀ NHỎ Ở VIỆT NAM Chuyên ngành: Quản trị kinh doanh Mã số: 8340101.01 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. HOÀNG ĐÌNH PHI HÀ NỘI - 2020
DECLARATION The author confirms that the research outcome in the thesis is the result of author‟s independent work during study and research period and it is not yet published in other‟s research and article. The other‟s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given. The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration. Date………………………….. i
ACKNOWLEDGEMENT This research is dedicated to all people who are directly or indirectly supporting me to successfully complete this work. I would like to take this opportunity to extend my sincere thanks to Vietnam National University, Hanoi/Hanoi school of business and management (“HSB”) for their perfect and successful organization of this post graduate course. My great thank also convey to the professors and all administrative staff of HSB for their valuable lectures and generous support during the course. I am grateful to Assoc. Prof - PhD Hoang Dinh Phi for his valuable guidance from the beginning to the end of this work. Finally, I am especially thankful for the love, encouragement, support and patience of my partner throughout the research and writing process. Hanoi, Date………………………….. ii
TABLE OF CONTENT DECLARATION ......................................................................................................... i ACKNOWLEDGEMENT .......................................................................................... ii ABBREVIATIONS AND ACRONYMS..................................................................... v LIST OF TABLES ......................................................................................................vi LIST OF FIGURE ................................................................................................... viii CHAPTER 1: INTRODUCTION ................................................................................1 1. Background and Problem Statement....................................................................1 2. Objectives of the Study........................................................................................2 3. Scope of the Study ...............................................................................................2 4. Thesis Structure ...................................................................................................3 CHAPTER 2: LITERATURE REVIEW ....................................................................4 1. Conceptual Definitions of Internationalization ..................................................4 2. Internationalization and Competitiveness ..........................................................4 3. Internationalization and Resource-based View to Create Competitiveness ........6 4. The Role of Government in the Internationalization of SMEs ............................9 5. Government – Business Relations Models ........................................................10 5.1. Basic models of government-business relationship....................................11 5.2. Partnership Model of Organizing the Relationship between the Government and Business .................................................................................12 6. Summary............................................................................................................14 CHAPTER 3: RESEARCH METHODOLOGY .......................................................15 1. Research Approach ...........................................................................................15 1.1. Induction or Deduction...............................................................................15 1.2. Qualitative and quantitative method...........................................................15 2. Research Strategy ..............................................................................................16 3. Literature Research ...........................................................................................17 4. Data Gathering ..................................................................................................17 4.1. Primary data of the research .......................................................................17 4.2. Secondary sources of data ..............................................................................18 iii
CHAPTER 4: FINDINGS AND DISCUSSION ........................................................19 1. Data Collection Description ..............................................................................19 2. Sample Description ............................................................................................20 3. Internationalization Process ..............................................................................21 3.1 Export activities ...........................................................................................22 3.2. Export and Import organization .................................................................24 3.3 Partnerships .................................................................................................25 3.4 Partnership content ......................................................................................28 4. Export Information and Assistance ...................................................................29 4.1 Utility provision ..........................................................................................32 4.2 Transportation facilities ...............................................................................33 4.3 Export promotion network support..............................................................34 5. Policy and Institutional Environment ................................................................36 5.1 Inspection visits received by firms ..............................................................38 6. Key Factors in Internationalization ...................................................................39 6.1 Impact of Ownership (SOEs and Private SMEs on all other factors) ..........39 6.2 Impact of Industry on all other factors .......................................................42 6.3 Factors impact on export shares ..................................................................45 6.4 Factors impact on International competitiveness .......................................48 6.5 Impact of key factors on effectiveness after international cooperation ......50 7. Summary............................................................................................................52 CHAPTER 4: CONCLUSION AND RECOMMENDATIONS ................................54 1. Reforming the credit system and developing the capital market ......................54 2. Reforming the trade policies to assist export activities by SMEs .....................56 3. Reforming further the customs procedures ......................................................58 4. Recommendations on technology policies ........................................................60 5. Recommendations on the operation of the organizations supporting SMEs .....60 6./ LIMITATIONS ................................................................................................62 Appendix I .................................................................................................................63 Appendix II................................................................................................................66 iv
ABBREVIATIONS AND ACRONYMS CIEM Central Institute for Economic Management MPDF Mekong Project Development Facility ASEAN Association of Southeast Asian Nations AFTA Asian Free Trade Association WTO World Trade Organization ADB Asian Development Bank UNDP United Nation Development Programme VCCI Vietnam Chamber of Commerce and Industry UNCTAD United Nation Conference on Trade and Development LESAFO Leather and Footwear Association VITAS Vietnam Textile and Apparel Association VASEP Vietnam Association of Seafood Exporters and Producers VIETTRADE/MOT Ministry of Trade EU European Union VINAFRUIT Vietnam Fruit Association FDI Foreign Direct Investment SOE State-owned Enterprise SME Small and Medium Enterprise PSME Private Small and Medium Enterprise BOT Building, Operating and Transferring VND Vietnam Dong US$ United States of Dollars v
LIST OF TABLES Table 2.1: Roles and Models of Government in an Economy ..................................11 Table 3.1: Relevant situations for different research strategies ................................16 Table 4.1: Register capital and economic sector.......................................................20 Table 4.2: Distribution on industry ...........................................................................21 Table 4.3: Export motives of the SMEs ....................................................................22 Table 4.4: Export share ............................................................................................23 Table 4.5 ....................................................................................................................25 Table 4.6: Export channel ........................................................................................27 Table 4.7: Support from partners ..............................................................................28 Table 4.8: ...................................................................................................................28 Table 4.9: ...................................................................................................................29 Table 4.12: .................................................................................................................30 Table 4.13: Reasons for not using E-Commerce ......................................................31 Table 4.14 ..................................................................................................................32 Table 4.15: Difficulties in transportation ..................................................................33 Table 4.16 ..................................................................................................................34 Table 4.17 ..................................................................................................................35 Table 4.18 ..................................................................................................................36 Table 4.19 ..................................................................................................................37 Table 4.20 ..................................................................................................................38 Table 4.21 ..................................................................................................................39 Table 4.22 ..................................................................................................................42 Table 4.23 ..................................................................................................................42 Table 4.24 ..................................................................................................................44 Table 4.25 ..................................................................................................................45 Table 4.26: Correlation between export shares and other key factors (regression) ..45 Table 4.27: Correlation between International competitiveness and other key factors (Regression) ..............................................................................................................48 vi
Table 4.28: Correlation between effectiveness after international cooperation and other key factors (Regression) ..................................................................................50 Table 4.29 ..................................................................................................................52 Table 4.30 ..................................................................................................................53 vii
LIST OF FIGURE Figure 2.1 ....................................................................................................................7 Figure 4.1 ..................................................................................................................24 Figure 4.2 ..................................................................................................................26 Figure 4.3: Application of E-Commerce ..................................................................29 viii
CHAPTER 1: INTRODUCTION 1. Background and Problem Statement Small and Medium Enterprises (SMEs) of Vietnam play an important role in the country's industrialization and modernization. The process of economic reform in Vietnam, during the last few years, has directly impacted and resulted in the growth of SMEs which has promoted the development and diversification of trade, organization form and business areas through internationalization. There is a plenty of reasons why small and medium business should go international (VCCI, 2017), for example bigger markets leading to bigger profits, cheaper supplies leading to more effective production process. Most of them are market related, but one key factor is not being, the type and quality of management. Managers of exporting enterprises show a higher degree of education and foreign language fluency than those of non-exporting enterprises and are more dynamic when the enterprises take the first step to the international market (MPDF, 2017). In Vietnam, the development of SMEs towards internationalization, however, is still limited (VCCI, 2017) due to market constraints and the SMEs' competences. There are barriers such as capital shortage, old and slowly renewed equipment, outdated technology, poor diversification of product sample and lack of good skills and management experience. More importantly, the lack of specific policies from the support institutions and Government in promoting the internationalization of SMEs, enhancing competitive advantages for SMEs apparently restricts their international integration (VCCI, 2017). Given this fact, there is an increasing body of studies and research conducted by various international and local organizations, among whom MPDF, UNDP, CIEM, VCCI and the World Bank are main actors. However, 1
while most of the studies on SMEs have put emphasis on general policy recommendations, very few researches have focused on typical issues faced by SMEs such as government support in export promotion. Therefore, the purpose of this study is to point out obstacles faced by SMEs in international activities and recommend strategy changes to answer the question: “How can SMEs in Vietnam achieve effectiveness when engaging in internationalization?” 2. Objectives of the Study  To explore current export barriers of SMEs in comparing with those faced by state owned enterprises (“SOEs”);  To examine support policies and activities such as export promotion activities from the government and professional association for SMEs;  To explore solutions or strategies that SMEs (in general and by group such as PSMEs and SOEs) are using to resolve their barriers and the effectiveness of their strategies;  To provide recommendation for both SMEs, Government and other related stakeholders The findings will be the basis for a possible model of government- business relations in Vietnam and overall strategy by the Government towards internationalization to achieve the most competitive advantages for SMEs. 3. Scope of the Study Content: The author focuses on the group of SME in the field of export of garment products. Timing: hard data collected from reports released during 2015-2018, soft data collected during 2019 Space: the study and surveys were conducted within Hanoi, Bac Ninh, Hai Phong. 2
4. Thesis Structure  Chapter 1: Introduction  Chapter 2: Literature Review  Chapter 3: Research Methodology  Chapter 4: Data Analysis and Finding Discussion  Chapter 5: Conclusion and Recommendations  Appendices 3
CHAPTER 2 LITERATURE REVIEW 1. Conceptual Definitions of Internationalization Internationalization can be described as the process leading to a company's increasing involvement in cross-border or international operations. Internationalization is an organic process, but, at any given point in time, a company‟s degree of Internationalization may be measured. Typical measurements are export quota; number of markets; foreign investment quota; number of foreign subsidiaries, and management orientation. (Meyer, 2016). Internationalization of a company refers to the increase of all cross- border business activities. These include exports but also link to foreign supplies of raw materials, components, machinery, donors, and international financial institutions. Small and medium enterprises have many disadvantages compared with large enterprises even in the domestic market. Management skills and technology are limited to their knowledge, and understanding about different cultures and effects of institutions is also limited. Moreover, they do not have many advantages of assets, resources, co-operations with partners both domestic and foreign ones. It can be seen that the competitive advantages of a firm are influenced by the interaction of the business community of the country and the industry which the firm belongs to. 2. Internationalization and Competitiveness Internationalization is an important way to gain and maintain competitiveness in an open economy. The benefits that Vietnamese late followers will get are the shortcut to upgrade technology through international technology import and international linkages. Cooperative partnership relations between firms can be an effective vehicle to get access to scarce 4
resources for the local firm. Upgrading through own research and development efforts will both be costly and time consuming. Unless human capital and skills are upgraded, production may be limited to exploiting comparatively low cost labor. Domestic savings alone cannot finance necessary investments in technology development and human capital. Tapping into international resources for capital, technology and human skills is an important option. How to do that effectively and gain competitiveness is, however, not simple and require carefully framed strategies both at country and firm level (Lall, 2009; UNCTAD, 2008). While different kind of mechanisms both at country and firm level can be thought of to strengthen competitiveness, the linkages that are forged in a cooperative partnership between firms can transfer scarce resources and benefit all partners in the alliance. While competition between firms stimulates competitiveness and upgrading it is also possible through cooperation between firms (Porter, 2008). International linkages are voluntary inter-firm agreements aimed at achieving competitive advantage for the partners (Das, 2008). When international linkages are formed between firms across borders, it opens the possibilities to exchange resources that are difficult to obtain in the domestic environment or to acquire internationally on commercial terms. An important element for going into cooperative arrangements for the firms is the notion that it will save transaction costs compared to other forms of exchange. Internationalization through such international linkages like strategic alliances can, however, also be seen from a resource based perspective where the firm is essentially understood through the resources it has at its disposal. International linkages are driven by the need for resources through cooperative interaction and integration between firms (Das, 2008; Faulkner, 2012). In alliances it may however not only be a question of 5
obtaining but also of retaining resources. This leads to considerations of the learning organization as important for the rationale and sustainability of strategic alliances (Faulkner, 2012). Furthermore, elements of strategic behavior models and game theory; social relations and network theory; and power-dependency theory add additional perspectives to understand strategic alliances and how they work. The strategies pursued in cooperative ventures may take various paths: a. Market development and expansion; b. research and development partnerships; c. international production sharing/sub-contracting and d. counter-trade alliances (Culpan 2011). These strategies can also be combined and shaped in relation to the needs of the parties. While large multinational firms may join into alliances of a horizontal nature, the vertical cooperation between a producer and its sub-supplier may often involve quite different firms with respect to size and resources and thereby power in the relationship. 3. Internationalization and Resource-based View to Create Competitiveness Creating sustainable private sector development can be hypothesized to hinge significantly on the ability of Vietnamese industry to foster international linkages. The importance of internationalization is emphasized by the industrial organization literature on competitive advantage. Vietnam has chosen a development strategy based on an open economic regime. Free flows for international trade and capital flows will increasingly be part of the conditions under which policies are formulated and firms are operating. Regionally, the integration will increase not the least in relation to ASEAN/AFTA and the huge neighboring economy of China. Internationally the bilateral trade agreement with USA is in place as a likely forerunner for Vietnam membership in WTO (World Bank/ADB/UNDP, 2017). All these constitute important opportunities for Vietnamese firms, but they also 6
represent critical challenges for these firms to participate in international competition and achieve competitiveness. Therefore, the question is how to build up competences for Vietnamese firm especially SMEs which account for more than 90% of all the Vietnamese firms of all sizes (Ministry of Planning and Investment, 2017). It can be seen that, with such small scale in size and activities scope, SMEs in Vietnam really need the support from the government in building up overall strategies as per industry. The role of the Government is hypothesized as adhering and categorizing all the SMEs based on their different resources and competences so that it can create policies accordingly aiming at the highest international competitiveness for the firms. In this part, the resource-based theory and activities of the firm along the value chain are discussed as a basis to group the firms‟ resources. Figure 2.1 Firm Resources to be grouped (Resource–based theory) Categorizing and grouping Resources owned in Resources owned in Upstream activities Downstream activities Upstream internationalization Downstream internatiolization Procurement & Logistic & Production........Marketing & Services Value chain (self-constructed) FIRM RESOURCES AND INTERNATIONAL COMPETITIVE ADVANTAGES 7
Understanding sources of sustained competitive advantages for firms has become a central issue in strategic management. Most of the theories suggest that firms obtain sustainable competitive advantages by implementing strategies that exploit their internal strengths through responding to environmental opportunities while neutralizing external threats and avoiding internal weaknesses (Hofer & Schendel, 1997). Recently, most of the work has tended to focus primarily on analyzing firm‟s opportunities and threats in its competitive environment. As Porter‟s (2008) five forces model describes the attributes of an attractive industry and thus suggests that opportunities will be greater and the threats less. However, Porter‟s model has been criticized for its neglect of the competencies and other internal conditions that influence the development of firms‟ competitiveness. Critics claim that externally focused orientation cannot be a secure basis for developing non-imitable resources and competitive advantage (Grant, 2015 and Barney, 2015). The problem is that the Porter diamond appears to conceive competitiveness as exogenously conditioned thereby ignoring the internal conditions (e.g. firm level resources) that promote competitiveness of firms. This critique is in particular voiced by the “resource-based view” of the firm (Foss, 2015). The resource-based view has recently emerged as an alternative approach understanding industrial organizations and their competitiveness strategies. The resource- based view of competitive advantage focuses more on internal factors and examines the link between firm‟s internal characteristics and performance, that obviously can not build up only on external factors (Barney, 2015). It suggests that the rationale for international linkages is the value creation potential of firm resources that are pooled together. Firm resources here include all assets, capabilities, organizational 8
processes, firm attributes, information, knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness. The resource based view of firms assumes that firms within an industry (or group) may have the same resources with respect to the strategic resources they control and these resources may not be perfectly mobile across the firms and thus they can be built up as competitiveness. 4. The Role of Government in the Internationalization of SMEs According to Porter (2016), the development of competitiveness is influenced by government policy in that facilitates the conditions within each of the four facets of the diamond as well as their interaction. The role of Government in adhering all the businesses and creating industrial competitiveness and national competitiveness is important more than ever in fewer developing countries. Trade policy issued by the Government thus should not passively respond to complaints or to those industries that can muster the most political clout but must seek to open markets wherever a nation has competitive advantages. Government policies and measures are particularly important in developing countries, where private sector development often is in its infancy (Esser, 2014 and Whitley, 2014). What should be done is to identify such programmes and instruments that have facilitated competitiveness enhancing linkages between local enterprises and foreign partners in developing countries. For instance, as the type, strength and effects of local-TNC linkages to a large extend depend on technological, financial and other resource capabilities of local industry, it is essential to identify instruments and programmes that have succeeded in nurturing such capabilities. Or, as the competitiveness of local industry in an international context largely depends on industrial clusters and chains becoming integrated internationally, it will be essential to identify those government policies and 9
programmes that facilitated successful collaborations. Obviously, the analysis of these specific programmes must take into account overall economic conditions and frameworks, by controlling for the effect of factors such as macro economic stability and degree of openness of trade and investment regimes. Regional experiences in Asia have shown that the balance between the role of the state and the SMEs is very crucial for expansion in an export- oriented strategy. Most experiences point at the crucial role of the state. However, it is also evident that this role has taken different directions in the export-oriented countries around Vietnam. 5. Government – Business Relations Models In this study, the concept of „businesses‟ or „business community‟ refers to all commercialized and profit-making oriented entities including either private firms or stated-owned enterprises (SOEs). In contrast, „government‟ refers to policy and law making agencies, government‟s facilitating and implementing institutions and the public administrative apparatus. This distinction aims at excluding SOEs from the policy making and facilitating body of Vietnamese Government, which is subject to many recommendations of this research. By relationship between government and business, it means some degree of dependency or interdependency between the two actors. The relationship can be looked upon from a structural point of view, i.e. how is the relationship organized, or from a behavioral point of view, i.e. how do the actors interact. Both views are relevant but within a government-business framework, the interaction and the activities are of primary interest. It is through the action and interaction that the relationship between government and business develops and a learning process is put in motion. 10