The role of corporate social responsibility in the process of startup of small and medium enterprises (smes) in the mekong delta region, vietnam

Nội dung text: The role of corporate social responsibility in the process of startup of small and medium enterprises (smes) in the mekong delta region, vietnam

1. THE ROLE OF CORPORATE SOCIAL RESPONSIBILITY IN THE PROCESS OF STARTUP OF SMALL AND MEDIUM ENTERPRISES (SMES) IN THE MEKONG DELTA REGION, VIETNAM Nguyen Thi Ngoc Phuong PhD Student of Can Tho University Doan Minh Nguyet Tien Giang University Dinh Thi Nhu Quynh , Vo Kim Nhan Student Ph.D of Economics University Ho Chi Minh City Abstract The purpose of this paper is to identify factors that are affecting startup performance of small and medium enterprises (SMEs) in the Mekong Delta Region, in which this paper also analysis the important role of corporate social responsibility affecting firm’s startup performance. The study results indicate the suitability of the research model with data’s research as well as the acceptance of the hypothesis in corporate social responsibility (CSR). The intention of this study is to provide the understanding on how people should start their business by looking at all the factors affecting business success hence help to reduce the risk of failure and increase chances of success. The study examined five factors that influence the SMEs business success. The result has shown that startup performance concept is measured by two key factors in the case of the Mekong Delta Region, Vietnam such as the study results indicate the suitability of the research model with data’s research as well as the acceptance of the hypothesis in corporate social responsibility and startup ecosystem. Both of them are affected by four variables as the government policy, financial capital, social factors, and human capital. However, the research subject has certain limitations: (i) due to limited resources in conducting research, the sample size consisted of 320 small and medium business in of the Mekong Delta Region, Vietnam, (ii) This study conducted the sampling technique of using direct interview methods from respondents. The theoretical framework has been drawn out and questionnaire was designed based on the factors chosen. The entire hypotheses were successfully tested with SPSS and some hypotheses were accepted. Keywords: corporate social responsibility, startup ecosystem, startup performance, SMEs 1. Introduction Small and Medium Enterprises (SMEs) play a key role in any the development of economy, especially in some developing countries. Local advantages and market 999
2. demand of the Mekong Delta Region, Vietnam is a great opportunity for start-up performance. In general, compared to the whole country, enterprises in the Mekong Delta Region are lower than the national average of 16%, the number of enterprises on average per 1,000 people in the country is 6.05 enterprises in 2017, while in Mekong Delta Region is 2.7 enterprises (General Statistics Office of Vietnam, 2017). These enterprises create jobs, contribute to global Gross Domestic Product (GDP) and most importantly, they are fundamental in driving innovation. A startup is an entrepreneurial venture which is a newly emerged business venture that aims to meet a marketplace need, want or problem by developing a viable business model around products, services, processes (Riitta Katila et al, 2012). Some of researches have addressed successful entrepreneurs but others looked at the failure small business managers. All these studies were addressing if there are any clear characteristics, which distinguish small business barriers to find out which one is more important for policy makers. In all these studies the main question remain that why some of the small and medium business is successful but other is failed. This situation has caused great concern, as a productive economy is reliant on the startup of substantial business numbers and the growth of such firms. Although the concept of social capital has been in use since at least 1961 (Jacobs 1961), it has only recently become applicable in the discourse on networks and relationships in small businesses. Similarly, the work of Bordieu has started to be recognized in the field of small business and entrepreneurship research (De Freyman et al. 2005; Shaw et al. 2005; Southern 2000). It is important to analysis some key factors affecting the firm’s startup performance beside the government determined that during the social and economic development planning move toward more small business. Establishment of small business also provides more job opportunities for the unemployed people in of the Mekong Delta Region, Vietnam. Therefore, results of this research will help the policy makers in Vietnam with the same economic situation to develop reasonable planning to get advantage of development of small and medium business. 2. Literature review Startup performance A startup is a new business venture designed to effectively develop and validate a scalable business model (Riitta Katila et al, 2012). This is particularly the case of SMEs focused on providing products and services through startup performance. Startup performance by creating new businesses is a driving force for economic development. International studies by Radas and Bozic (2009), Zain and Kassim (2012) show that there is a close relationship between business start-ups and regional and local economic growth. 1000
3. According to Audretsch and Keilbach (2004), there are four effective factors on business start-up such as material capital, human capital, knowledge and entrepreneurial capital affecting business performance. According to author’ study, there are two main factors including entrepreneurial ecosystem startup ecosystem into entrepreneurs’ startup performance of small and medium business in the Mekong Delta Region, Vietnam in terms of spatial dimension. Social capital and corporate social responsibility (CSR) in small and medium enterprises is relatively recent (Spence et al. 2003). The mainstream discourse on CSR is orientated towards large firms. The interaction of the personal and social with the business in family and owner-managed firms is key to understanding responsible behavior in SMEs. In linking responsibility to entrepreneurship strategy, Wickham (2004) identifies standard constraints operating on the actions of the business, such as legal and economic constraints and suggest that the entrepreneur also has discretion over the responsibility it sets for products or the way it manages the impact on the environment. This perspective implies that individual enterprises will vary in the nature of responsible actions in direct relation to the noble purposes of the entrepreneur. An understanding of social responsibility in small enterprise as being bound to the owner of the business is not the full story. Graafland et al. (2003) found that small firms rely relatively more on a dialogue strategy in which they try to learn from stakeholders which aspects of corporate social responsibility are most important to realize. Thus, social interaction with stakeholders appears to form part of the shaping of responsible behavior by SMEs, which is consistent with a social constructionist theory of modern society. As Spence et al point out “business ethics does not operate in a vacuum disconnected from the rest of the world” (Spence et al. 2003, p 19). Social control is a powerful form of governance on smaller networked enterprises (Larson 1992; Leifer & White 1986), and development of social capital provides the small enterprise with power. Startup Ecosystem (SE) The concept of startup ecosystem has been recently widely used in the context of innovation and entrepreneurship. Although there is no single official definition for a startup ecosystem and the term is used in different ways, typically it refers to a specific geographic area with high density of startup companies and entrepreneurs. (Herrmann et al 2015; Szerb et al, 2013). Recently Mason & Brown (2014), have highlighted the important role of entrepreneurs within the ecosystem and introduced the concept of entrepreneurial ecosystem instead, to startup ecosystem. Mason and Brown (2014) define that entrepreneurial ecosystem is a set of interconnected 1001
4. entrepreneurial actors both potential and existing, entrepreneurial organizations such as firms, venture capitalists, business angels, banks, institutions and entrepreneurial processes (e.g. the business birth rate, numbers of high growth firms, levels of ‘blockbuster entrepreneurship’, number of serial entrepreneurs, degree of sell-out mentality within firms and levels of entrepreneurial ambition) which formally and informally coalesce to connect, mediate and govern the performance within the local entrepreneurial environment’. According to Mitchell (2002), entrepreneurial startup is measured by groups of factors such as relevance (satisfaction of internal and external customer management, the involvement of human resource management in the process of implementing the strategic plan, other parts involved in human resource management); the effectiveness (in the leadership style, the strategic management, the relationship between the efficiency of profit and labor growth, between business growth and labor cost) and financial investment (investment in infrastructure and technology issues, investment in human resources); organizational culture, size of workforce, training, retraining. These groups of these factors are influenced by internal and external environment of the business. Another approach to the success factors of ecosystems is provided Isenberg (2011), who has identified six different domains of entrepreneurship ecosystems such as the policy of leadership and government, finance (financial capital), culture (success stories, societal norms), supportive factors (infrastructure, support professions, non-governmental institutions) and market networks. Social capital (SC) The term ‘social capital’ initially used in community studies, appears firstly in the Jacobs’s The Death and Life of Great American Cities (1961), to explain the survival and function of neighborhoods where the development of personal relationships provides the basis for collective cooperation in such communities (Sorheim 2003). After Jacobs, the theory has been used to examine the development of human capital (Coleman 1988), and is being increasingly surfaced in the entrepreneurship field, for example, intensive knowledge (Neergaard & Madsen 2004), venture creation (Liao & Welsch 2005), family business (De Freyman et al. 2005; McKeever et al. 2005). Human Capital (HP) For many years, there are some studies in relation to the factors affecting the startup performance Elfring & Hulsink (2007), Gilbert, McDougall & Audretsch (2006). The most prominent of these studies is the important role of human capital in the development of enterprises, in particular of SMEs (Coleman, 2007). In addition, Ahmad, & Hoffman. (2008), based on resource-based theory, argues that human 1002
5. resources can create a competitive advantage for startups. At another point, Samad (2013) defines human capital as the ability to manage a business and argues that a business that possesses effective management skills will stay in business as well as exploit business meeting. In short, human capital contributes significantly to improving the performance of startups. Similarly, recent research by Hisrich & Drnovsek (2002) shows that management capacity, expressed by education level, management experience, entrepreneurial experience and knowledge business, positive impact on the performance of newly established small and medium enterprises. In contrast, some studies do not provide evidence of a positive relationship between human capital and performance (Appuhami, 2007). In addition, the study by Subramony et al. (2016), Schwarz (2017) agree that human capital is a direct factor affecting business performance of enterprises. Financial capital (FI) The financial capital of a start-up company usually comes from debt or comes from the own company (Marshall & Samal, 2006). However, SMEs or businesses in the agricultural sector have limited access to finance from financial organizations. Therefore, the financial capital of these enterprises is mainly based on debt and equity (Van Praag, 2003). Pretorius & Shaw (2004) divide financial resources either inside or outside the business. The majority of SMEs’ financial capital depend on internal resource, but this source is often not enough to provide the business to survive and develop, especially as they face fierce competition in the global market. Therefore, external financing becomes very necessary for SMEs. Bollingtoft, Ulhoi, Madsen & Neergaard (2003), Wiklund & Shepherd (2005) argue that financial shortfalls are one of the major causes of failure in the operation of SMEs. In general, most of the research argue that the financial capital plays a very important role in fostering startup performance, especially in the case of SMEs. Cultural factors (CF) According to Gudmundson et al., 2003, the culture has a profound impact on the success of a company or an organization. Possession of positive cultural characteristics provides the organization with the necessary ingredients. Culture has several elements that may serve to enhance or inhibit the tendency to startup performance. Also, according to another recent research, there exists a strong positive relationship between participative management practices and cultural factors in small companies. Hurley et al (1998) emphasize the critical role that a culture of any businesses can play in improving the ability of a successful firm. Cultural factors can encourage or discourage a variety of behaviors and decisions, including those related to startup performance. 1003
6. Government Policy (GP) It has been established that entrepreneurship is a very vital ingredient for job creation as well as economic development as the success of income generation for the major group of both rural and urban inhabitants without recognized paid job highly depends on entrepreneurship (Ihugba et al, 2014). Kumar and Liu (2005) study reveal that entrepreneurial sector contribution to employment and GDP is on the increase. For this reason, governments should minimize the constraints on entrepreneurship. In the case of government support policies, it is assumed that since government is in the lead for entrepreneurial development, it should provide the much-needed resources within its capability. Such resources include provision of environment conducive to business that will highly promote entrepreneurship. Government policy in this context is any course of action which aims at regulating and improving the conditions of SMEs in terms of supportive, implementation and funding policies by the government. Based on government policy as it relates to entrepreneurial practice is targeted at encouraging entrepreneurship by making a favorable environment for the entrepreneurs. Furthermore, government needs to enact policies that would be user friendly to the entrepreneurs. Pals (2006) argued that there is a need for government policies as they relate to entrepreneurship to be successfully implemented irrespective of which administration is in power in order to achieve the goals of the guideline which often times is always lacking. Government of most countries especially developing countries have in the past invested so much efforts and resources in establishing policies intended to uplift startup performance by the study of Oni, E.O. and Daniya, A. (2012). Figure No.1 Model and some hypotheses of authors’ study 1004
7. 3. Methodology of the Research Research process: This study has combined qualitative and quantitative research methods. Qualitative research method has been conducted by focus group discussions with 10 chief executive officers of SMEs in the Mekong Delta provinces in 05/2018 at meeting room of Statistics Offices to modify observational variables that have been used to measure research concepts. The result has shown that startup performance concept is measured by 02 variables including entrepreneurial ecosystem and startup ecosystem. In addition, both of them are affected by five variables as the government policy (GP), financial capital (FC), cultural factors (CF), social capital (SC), human capital (HC). All items were measured by using 5 - point Likert scale, anchored by 1 = strongly disagree, and 5 = strongly agree. Quantitative research has been conducted through direct interviews (face - to - face interviews) based on a random sampling 320 small and medium business in the Mekong Delta Region, Vietnam with eight local provinces in this region collected from 05 06/2018 to 09/2018 using a detailed questionnaire to test model and research hypotheses. Data processing techniques: Cronbach’s Alpha reliability analysis, Exploratory Factor Analysis (EFA), and Confirmatory Factor Analysis (CFA) were used to assess the scales. And the structural equation modeling (SEM) was used to test model and research hypotheses. 4. Result and discussion Description of research sample Among 350 respondents, 30 people were declined because of too many inappropriate respondents. Data is used by SPSS software 20.0 with 320 valid respondents with 91.5% in all questionnaires. Table No. 1 Types of surveyed entrepreneurs Valid Cumulative Frequency Percent Percent Percent Limited Liability Company 223 69.7 69.7 69.7 Private company 43 13.4 13.4 83.1 Other 54 16.9 16.9 100.0 Total 320 100.0 100.0 Table No. 2 Fields of business Frequency Percent Valid Percent Cumulative Percent Commerce 122 38.1 38.1 38.1 Service 100 31.3 31.3 69.4 Valid Tourism 28 8.8 8.8 78.1 Other 70 21.9 21.9 100.0 Total 320 100.0 100.0 1005
8. Table No.3 Results of the reliability analysis of independent variables Cronbach's Alpha N of Items .909 30 (Source: author’s survey data, 2018) Table No. 4 The results analysis of dependent variable’ reliability Scale Corrected Cronbach's Scale Mean if Variance if Item-Total Alpha if Item Item Deleted Item Deleted Correlation Deleted SE1 10.1273 4.024 .701 .845 SE2 10.0901 3.777 .761 .820 SE3 10.1180 3.980 .711 .841 SE4 10.1087 3.997 .725 .835 (Source: author’s survey data, 2018) The results presented in Table No. 3 and No.4 show that of the 04 observed variables and 26 independent variables used to measure startup performance concepts are satisfied with the Cronbach’s Alpha coefficient (Cronbach’s Alpha coefficient > 0.6 and correlation coefficient – total > 0.3, Nunnally & Burnstein, 1994). The results of EFA Table No. 5 KMO and Bartlett's Test KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .901 Approx. Chi-Square 4602.057 Bartlett's Test of Sphericity df 4355 Sig. .000 (Source: author’s survey data, 2018) 1006
9. Table No. 6 Rotated Component Matrixa Component 1 2 3 4 5 6 7 HC3 .814 HC2 .791 HC5 .791 HC1 .743 HC4 .735 GP4 .782 GP2 .762 GP3 .751 GP5 .751 GP1 .736 CF3 .824 CF1 .798 CF4 .789 CF2 .750 SC3 .802 SC2 .797 SC4 .780 SC1 .735 CSR4 .796 CSR2 .768 CSR3 .748 CSR1 .711 FC4 .804 FC2 .778 FC3 .752 FC1 .734 SE4 .735 SE2 .721 SE3 .673 SE1 .669 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations. (Source: author’s survey data, 2018) 1007
10. The results of EFA presented in Table No.5 and Table No.6 show suggested scales which have satisfied the standard. EFA factors affecting the startup ecosystem are respectively extracted into 02 factor groups corresponding to observe variables from 05 concepts. EFA startup performance results have been extracted into 1 factor with an extracted variance of 65.13% at the Eigenvalue of 1.196. The EFA results are analyzed by Varimax rotation method. The results of the testing model Figure No.2 The results of the SEM model (Source: author’s survey data, 2018) 1008
11. The results of the testing model presented in Figure No.2 showing that the model has Chi2 =822.865, Df = 517, and Cmin/df = 1.592 with p-value = 0.000 (< 0.05) was appropriate due to the size of the sample (only 350 respondents surveyed). In addition, other appropriate measures such as TLI = 0.936, CFI = 0.941 are consistent. Thus, it is still possible to conclude that this model is consistent with data collected from the market. Table No.7 The results of the test hypotheses Estimat S.E. C.R. P Results e CSR < SC .434 .065 6.626 Acceptable CSR < HC .447 .066 6.816 Acceptable SP < CSR .808 .079 10.206 Acceptable SE < CSR -.011 .081 -.132 .895 Rejected SE < SP .434 .068 6.348 Acceptable SE < HC .175 .053 3.321 Acceptable SE < FC .177 .042 4.208 Acceptable SE < SC .172 .052 3.292 Acceptable SE < CF .207 .048 4.311 Acceptable The results of the test hypotheses presented in Table No.7 show that all hypotheses are acceptable, except hypotheses H3. 4. Discussion and conclusion of the research The results testing indicates the suitability of the research model with data's research as well as the acceptance of the hypothesis in this research model has shown the practical meaning for startup performance as follows: Firstly, the is affected by five variables as the government policy, financial capital, cultural factors and social capital. The research results have identified the priority of the components in the research model. Specifically, corporate social responsibility is the strongest factor effecting on the entrepreneurial performance which might be suitable for the actual situation in the Mekong Delta Region, Vietnam with estimate beta 0.808. Besides, the government has not yet positive measures and effective measures to encourage and support the entrepreneurs so the perceptional people about startup performance. Government policy also should continue to 1009
12. improve the business environment to create more credibility for enterprises; develop some oriented programs to support start-up performance in priority areas with a higher international dimension; improve start-up ecosystems. Government should intensify the information to build a network of consultancy services to support the start-up projects. Secondly, the research results have solved the research gap when there is a combination of the corporate social responsibility on the startup performance of small and medium enterprises in Mekong Delta Region, Vietnam. Besides, the government has not yet positive measures and effective measures to encourage and support the entrepreneurs so the perceptional people about startup performance. Government policy also should continue to improve the business environment to create more credibility for enterprises; develop some oriented programs to support start-up performance in priority areas with a higher international dimension; improve start-up ecosystems. Government should intensify the information to build a network of consultancy services to support the start-up projects. The policymakers have now come up with the programs to boost the startup ecosystem in Vietnam. The success of startup performance must be incorporated in policy set up as well. The startup policymaking too will have to follow the same standards that are expected from the entrepreneurs in the case of Vietnam. References 1. Ahmad, & Hoffman. (2008). A framework for addressing and measuring entrepreneurship. OECD Statistics Working Papers, 2008/02, 1–31. 2. Audretsch D. B. and Keilbach M. (2004) Entrepreneurship capital and economic performance, Regional Studies, 38, 949-959. 3. Atieno, R. (2009). Linkages, Access to Finance and the Performance of Small - Scale Enterprises in Kenya. Research Paper, 2009/06, 1–15. 4. Appuhami, B. A. R. (2007). The Impact of Intellectual Capital on Investors’ Capital Gains on Shares: An Empirical Investigation of Thai Banking, Finance & Insurance Sector. Management Review, 3(2), 14–25. 5. Basu, A. and Gosawami, A. (1999), “South Asian enterprenuership in Great Britain factors influencing grownth”. International Journal of Enterpreneurial Behavior & Reseach, 5 (5), 251-275. 6. Bosma, N., Praag, V. M., Thurik, R., & Wit, de G. (2004). The Value of Human and Social Capital Investments for the Business Performance of Startups. Small Business Economics, 23(3), 227–236. Retrieved from 1010
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