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MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY PHAM MINH VU SOCIAL CAPITAL’S ROLE IN AIDING SUCCESS FOR SMEs IN VIETNAM THE DISSERTATION OF ECONOMIC DOCTOR Ho Chi Minh city – 2022 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY PHAM MINH VU SOCIAL CAPITAL’S ROLE IN AIDING SUCCESS FOR SMEs IN VIETNAM Major: Business Administration Code: 9340101 THE DISSERTATION OF ECONOMIC DOCTOR Academic Advisors: Assoc Prof Dr TU VAN BINH Assoc Prof Dr NGUYEN TUAN KIET Ho Chi Minh city - 2022 CHAPTER 1: INTRODUCTION 1.1 Research background This dissertation explores the social capital concept and its endogenous effect on the relationship between innovativeness, Entrepreneurial Orientation (EO), and E-business to SME performance in Vietnam Since 1980, scientists and researchers all around the world have started to dig in to the concept of social capital, thanks to the work of Bourdieu (1986), Coleman (1988), and Putnam (2001) In which, Bourdieu (1986), the first person to develop the term social capital, described it as a collection of total nodes in a social network that can lead to actual or potential resources Based on that foundation, Coleman (1988) arguing that the form of social capital arises from changes in inter-personal relationships that allow productive activity He also noted that social capital is less tangible than physical capital, but it stimulates productive activity, particularly in the case of SMEs SMEs are not smaller versions of larger companies, they are disadvantaged by being less financially secure, facing shortfalls in human capital and access to information, and often being less experienced in managing strategic decision-making Nevertheless, SMEs gain some competitive advantages from more superficial organisational structures offering flexibility, practical and open communication channels, and lower resistance to change They could leverage those advantages and turn them into real resources by appropriately creating and managing social capital As a result, increasing a firm’s social capital can help it establish intangible values and foster innovation By doing so, the company can expand horizontal collaboration with multiple channels such as the banking system, government departments, consultancy firms, business associations, and so on The value of social capital is becoming more widely recognized in the literature on SMEs (Anderson, Park and Jack, 2007; De Carolis and Saparito, 2006; Lee and Jones, 2008; Liao and Welsch, 2005; Neergaard, Shaw and Carter, 2005; Ramos-Rodríguez et al., 2010; Tötterman and Sten, 2005) 1.2 Gap of Study and Research Objectives 1.2.1 Gap of study Various studies have discussed the relationship between social capital and the firm’s performance (Augusto Felício, Couto and Caiado, 2014; Pratono, 2018; Clarke, Chandra and Machado, 2016; Cantner and Stuetzer, 2010; Ndofor, 2011; Patel and Terjesen, 2011; Brink, 2011) However, very few in-depth studies have been carried out to analyze the endogeneity of social capital The ignorance of the endogeneity problem can cause biased estimates of the firm performance Endogeneity concerns arise in situations where an explanatory or “independent” variable correlates with the error term (residual) of a specified model, rendering estimates inconsistent (Kennedy, 2008; Wooldridge, 2002) Let’s take a straightforward example of the causal effect of social capital and education achievement For example, it is plausible that people with good relations with parents and friends in their childhood may obtain better education and have higher social capital in adulthood However, these interactions in childhood usually become unobservable to researchers Jackman and Miller (1998) suggested that scholars wrongly recast the view of social capital from endogenous to exogenous They argued that endogenous and exogenous models are based on incompatible premises and have fundamentally different implications In their study, they reported that empirical tests of the exogenous social capital approach are deficient For that reason, they urged a return to the treatment of SC as endogenous Moreover, Lee and Law, (2017); Knight and Yueh, (2008); Bartolini and Bonatti, (2008) also shared this view of social capital as endogenous variable In the circumstance of considering the effect of innovativeness, Ebusiness and entrepreneurial orientation on SME’s performance, usually, the role of social capital is ignored By developing a model that conceptualizes social capital as an endogenous variable contributes to the relationship between innovativeness, e-business, entrepreneurial orientation and firm performance, this thesis adds to the understanding of the role of structure and content of social capital in the SME The proposed framework offers a scaffolding of propositions that have value for research and practice Based on arguments above, the thesis provides three contributions First, we add to the theoretical body of knowledge by emphasizing the significance of social capital As a result, we incorporate not only chosen social capital components but also present a comprehensive picture based on existing social capital theory Second, we expand social capital research by viewing social capital as an endogenous variable that influences the relationship of innovativeness, E-business, and entrepreneurial orientation to company performance rather than an independent variable that influences distinct outcomes Organizations increasingly depend on e-business innovations in their search for agility (Nissen & von Rennenkampff, 2017) Ebusiness capabilities provide new opportunities to implement newer business models swiftly and initiate novel platforms of organizational agility (Nafei, 2016) Studies (e.g., Seethamraju & Sundar, 2013; Nissen & Vonrennenkampff, 2017) have emphasized the idea that advanced e-business capabilities are intended to provide the requisite agility for businesses Those literatures confirmed the important of E-business and it couldn’t be ignore in nowaday volatile environment especially in the emerging economy like Vietnam This is attached into this study Accordingly, once E-business is chosen as a candidate in the model, it is associated with other two variables of innovation and entrepreneurial orientation to measures how much their association cause influences to firm performance Most of the previous research has applied structural equation modelling (SEM) tool (Pratono, 2018; Augusto Felício, Couto and Caiado, 2014) or meta-regression (Stam, Arzlanian and Elfring, 2014), even some of them thinks of networking as a mediator in the research model (Agyapong, Agyapong and Poku, 2017) and (Dai et al., 2015) However, this study is a different approach to previous studies, in which social capital are recruited as the endogeneity and this will be tested through the quantitative method of the Extended Regression Models (ERMs) developed by Drukker (2017) 1.2.2 Research questions The research aims to answer those questions as below: ü Whether innovativeness positively affects firm performance? ü Whether entrepreneurial orientation positively affects firm performance? ü Whether E-business positively affects firm performance? ü How much the association of innovation, entreprenurial orientation and E-business impact on firm performance when social capital is involved as an endogenous variable ü Whether social capital has an endogenous contribution to the relationship between innovativeness, entrepreneurial orientation, E-business and firm performance? CHAPTER 2: LITERATURE REVIEW 2.2 Research constructs 2.2.1 Social capital The term “social capital” was created in scientific literature around 100 years ago, but until the 1980s, that concept was developed and applied in the organisational context Bourdieu (1986) and then Coleman (1988) was the two pioneer to develop the theory of social capital, and their idea inspired the application of social capital in the study of actors who are pursuing interest-driven goals With Foundations of Social Theory- Gibbs and Coleman (1990) ignited a basement for studies of applying social capital theory Five years later, Lazega and Burt (1995) were exploiting the concept with the aim of corporate actors They was also the first to introduce a quantitative measure for social capital This study mainly used the term of “social capital” In contrast, many other social network studies, which didn’t use the word “social capital”, have also proven vital in developing social capital theory For example, the study of The Strength of Weak Ties (Granovetter, 1973), as well as the studies of Lin et al (1981) and Laumann (1973) are influenced significantly by the growth of social capital theory The concept of social capital has become increasingly popular in a wide range of education, economy, social science, and psychological Social capital could be understood roughly as the goodwill generated from the social relations that could lead to facilitating action Bourdieu (1986) produced the original concept He stated that social capital is the accumulation of actual and potential resources linked to a network that can create mutual acquaintance or recognition (Bourdieu, 1986) Then it is further discussed and implementation of business application of social structure by Coleman (1988) Later on, the significance of utilizing the social relationship as valuable resources in business activity is reviewed by Nahapiet and Ghoshal (1998) The literature review shown that social capital could be approached in different dimensions and levels However, in practice, those different dimensions and levels have interrelationship with each other, support for each other For this dissertation, corporate social capital is defined as the combination of total social capital sources (including the structure firm level and structure individual level), and it has been studied in both dimension: network structure and network quality For the social capital in individual level, the dissertation aims to analyze the social capital of the business owner because previous studied proved that business owner has contributed a significant role for business’s operation For the corporate social capital, network structure and network quality are both investigated 2.2.2 Entrepreneurial Orientation Entrepreneurial orientation (EO) was first characterized by (Miller, 2011) as follows:”an entrepreneurial firm is one that engages in product-market innovativeness, undertakes somewhat risky ventures and is first to come up with “proactive” Innovativeness, beating competitors to the punch” He also suggested three dimensions to characterize and evaluate entrepreneurship: “innovativeness”, “proactiveness” and “risktaking” Proactiveness is defined as “seeking new opportunities which may or may not be related to the present line of operations, introduction of new products and brands ahead of competition, strategically eliminating operations which are in the mature or declining stages of the life cycle” (Venkatraman, 1989) To sustain its competitive advantage, the company must stay up-to-date with customer tastes Social capital would be an exceptional instrument for gaining access to information from various sources regarding customer demand, industry trends, government new policies, and so on, which are the foundation for SMEs to work ahead of the market and catch up Risk-taking is defined as “the degree to which managers are willing to make large and risky resource commitments i.e those which have a reasonable chance of costly failures” (Miller and Friesen, 1978) Entrepreneurs may have a distinct perspective on risk Where others perceive risk, an entrepreneur sees opportunity, and the level of confidence with which he takes that risk is determined by the amount of information he has So, the greater the business owner's social capital, the more confident he is in dealing with risk in business decision making According to this point of view, when the entrepreneur receives the information, he determines whether it is a risk worth taking As a result, when information flows through the entrepreneur, it is not only because of the entrepreneur's social capital, but also because he knows what type of information he is looking for and where to find it Indeed, Casson (2003) defined characteristics of an entrepreneur is depends on how good he could take judgmental decisions We are all aware that making judgmental actions would be considerably easier if the person making them had complete information about the scenario Given the importance of knowledge to the entrepreneur, there is no doubt that social capital is crucial to the entrepreneur's activities For assertiveness, once an opportunity is identified, the entrepreneur must decide how best to capitalize on it, and he must act swiftly before it slips away This will necessitate access to resources such as labor, financial, and physical capital The social network will assist the entrepreneur in contacting a trustworthy individual who may be in possession of such capital Depending on the entrepreneur's network range and network intensity, the process of accumulating resources may be accelerated or slowed This is especially significant for SMEs because they are insufficient of resources (Parida et al., 2017; Miller and Friesen, 1983) and there are numerous analysts have utilized and further built up these definitions crosswise over nations, cultures, and industries 2.2.3 Innovativeness Consumer preferences are evolving with breakneck speed in the digital age They have easier access to information from many sources, more alternatives, more recommendations, and are, of course, more demanding Firms have little option but to strengthen their capacity to adapt to the business climate, client tastes, and competitive pressure In such case, innovation is a critical core engine for organizations to sustain their competitive advantages Innovativeness is neither cheap nor safe or simple, but it is a must for the survival, development and re-structure of any organizations (Lohe and Calabrò, 2017; Subramaniam and Venkatraman, 2001) It’s about how good the firm can understand, capture and forecast the customer’s demand as well as the creative ability of the firm Innovativeness can also be understood as the introduction and application of new products, technologies, business processes, business models and ideas in the marketplace Over the past time, the Vietnamese government has issued many policies to support SMEs, including those related to innovation and value chain access (OECD, 2021) The notion of creative capacity is used to assess and use a company's competitive advantages, whereas the fundamental precondition generates efficient management ideas and innovativeness management According to Dr Jens-Uwe Meyer (Dannenberg and Burgard, 2015), a so-called innovativeness capability means the ability of a firm to capitalize on its employees' unique creativity by creating social conditions in which to create and implement ideas with varying degrees of innovativeness The organizational level, management level, employee, team level, and environment level are all useful markers of innovativeness potential Thus, the firm can apply to identify hidden problems or obstacles impeding employee performance; determine the company's level of innovativeness skill; leverage the firm's ...MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY PHAM MINH VU SOCIAL CAPITAL’S ROLE IN AIDING SUCCESS FOR SMEs IN VIETNAM Major: Business Administration... by being less financially secure, facing shortfalls in human capital and access to information, and often being less experienced in managing strategic decision-making Nevertheless, SMEs gain some... greater the business owner''s social capital, the more confident he is in dealing with risk in business decision making According to this point of view, when the entrepreneur receives the information,