The Role Of Family Involvement In A Firm’s Performance.pdf

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM –NETHERLAND PROGRAMME FOR MA IN DEVELOPMENT ECONOMICS THE ROLE OF FAMILY INVOLVEMENT IN A[.]

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM –NETHERLAND PROGRAMME FOR MA IN DEVELOPMENT ECONOMICS THE ROLE OF FAMILY INVOLVEMENT IN A FIRM’S PERFORMANCE Academic Supervisor: DR LE VAN CHON Student: NGUYEN QUOC KHANH HO CHI MINH CITY, OCTOBER 2013 ACKNOWLEGDEMENTS During doing research, I have received the supports, helps and guidance from my supervisor, committee members, friends and family First of all, I really appreciate and thank to the enthusiastic help of my supervisor - Dr Le Van Chon I always get clearly instructions, heartfelt encouragements and enthusiastic assistances from him during my thesis I also would like to thank Dr Pham Khanh Nam to suggest me the ideas for my thesis and supply the data source for the analysis in my research I would like to express my great appreciation to Associate Prof Dr Nguyen Trong Hoai – Vice Principal of the University of Economics & Director of Vietnam – Netherlands Programme for MA in Development Economic who oriented and facilitated me during two years learning this master course Finally, I would like to express my heartfelt gratitude to my family, my friends and my colleagues who supports, and encourage me to finish this research Ho Chi Minh City, October 2013 ii ABSTRACT This paper investigates the difference in performance between family businesses and non family businesses of small and medium enterprises (SMEs) in Vietnam It focuses on the differences in how the use of capital and labor and in total factor productivity (TFP) between the two types of firms The study used statistics on small and medium enterprises in Vietnam over the years 2005, 2007 and 2009.This paper also gives a number of policy implications for small and medium businesses to improve their performance and for the policy-maker to support the Vietnam small and medium enterprises Based on the Cobb-Douglas production function, we apply the methods OLS, GLS and panel model to estimate It finds that there are significant differences in the contribution of the two inputs that are labor and capital to output – the value added- between family businesses and non family businesses in Vietnam On labor, its contribution to output in the family businesses was significantly higher than non-family businesses In terms of capital, the contribution of this factor in the family business is low compared to their counterparts Moreover, there are no bases to conclude which kind of firm is more productivity iii TABLE OF CONTENTS ACKNOWLEDGEMENTS………………………………………………………………………ii ABSTRACT…………………………………………………………………………………… iii TABLE OF CONTENTS……………………………………………………………………… iv LIST OF TABLES……………………………………………………………………………….vi LIST OF FIGURES…………………………………………………………………………… vii CHAPTER I INTRODUCTION 1.1 Problem statement…………………………………………………………………………….1 1.2 Research objectives……………………………………………………………………… .2 1.4 Scope of study and data………………………………………………………………………2 1.5 Thesis structure……………………………………………………………………………….2 CHAPTER II LITERATURE REVIEW 2.1 What is family business? …………………………………………………………3 2.2 Differences between family and non-family businesses ……………………… 2.3 The performance of family and non-family firms……………………………………………7 2.4 The importance of the family firm………………………………………………………… 13 2.5 The other determinants of firm's performance………………………………………………14 2.6 Conceptual framework………………………………………………………………………15 CHAPTER III RESEARCH METHODOLOGY 3.1 The development of Domestic Private sector and Small and Medium Enterprises in Vietnam………………………………………………… 16 3.2 The recent performance of Small and Medium Enterprises in Vietnam………… ………19 3.3 Sources of data………………………………………………………………… …………20 3.4 Research methodology…………………………………………………………………… 21 3.5 Variable treatment……………………………………………………………………… 22 iv CHAPTER IV EMPIRICAL RESULTS 4.1 Descriptive statistics……………………………………………………………………….22 4.2 Empirical Results ………………………………………………………………………….34 CHAPTER V CONCLUSION…………………………………………………………… 41 REFERENCES APPENDIX v LIST OF TABLES Table 2.1: Summary of Empirical Review on the performance difference between family firms and their counterparts……………………………………………………………… Table 3.1: Number and ownership structure of Vietnamese enterprises 2000-2008…………….16 Table 3.2: Vietnamese SMEs’ share in different ownership type ………………… ………… 17 Table 3.3: The number and ownership structure of Vietnamese Small and Medium Enterprises period 2000-2008……………………………………………………………………………… 18 Table 3.4: Variables used in the Production Function……………………………………… 25 Table 4.1: Summary Statistic for SMEs sample (2005-2009)………………………………… 32 Table 4.2: Correlation Table…………………………………………………………………… 33 Table 4.3: The firm production function by OLS and GLS method with homogenous input 34 Table 4.4: The firm production function by OLS and GLS method with heterogeneous input…………………………………………………………35 Table 4.5: The firm production function estimation in pool data……………………………….37 Table 4.6: The firm production function estimation in panel fixed-effects…………………… 37 Table 4.7: The firm production function estimation in panel random-effects………………… 38 Table 4.8: Hausman Test for Fixed or Random Effects……………………………………… 39 vi LIST OF FIGURES Figure 2.1: The long-term view of family-business performance……………………………… Figure 2.2: Empirical framework……………………………………………………………… 15 Figure 4.1: The probability density function histogram of variables through years Log Value Add………………………………………………………………………………….27 Figure 4.2: The scatter-plot of log value add on variables of family and non-family firms through years…………………………………………………………………28 vii CHAPTER I INTRODUCTION 1.1 Problem statement The impact of the family involvement on the firm performance has been debated in many researches for a long time Many scholars have concerned the difference between family and non-family business performance However, the results of researches are not congruent due to the difference of the family firm definition, performance measurement or the samples So the issues about the “family effect” or “family involvement” impact on the productivity and firm performance are continued The role of the small and medium-sized enterprises (SMEs) is crucial in the developing economy for the goal of economic growth and integration like Vietnam The issues concerning to SMEs have received increased attention of several economists For example, CIEM (2010) investigates the characteristics of the SMEs, the government policies and the business environment in Vietnam The significance of innovation for exporting of SMEs has been studied by Nguyen Ngoc Anh et al (2008) In addition, Le Van Khoa (2006) considers the environment pollution problems caused by the SMEs in the Ho Chi Minh city In 2009, the firm recognized as family firm in the total number of the SMEs in Vietnam is large that more than 60 percent (CIEM, 2010) However, there is lack of studies investigating the differences of family and non-family firms More specifically, no research on the impact of the family ownership on the firm productivity for the case of Vietnam has been established In this paper, we consider how the family ownership impacts to the firm productivity in Vietnam, making it different to the non-family ones The Cobb Douglas is usually utilized to evaluate the firm output between family and nonfamily counterpart such as work by Bosworth and Londes (2002), Barth et al (2005), Martikainen (2009) that indicate ambiguous relationship To interpret to the difference, F Barbera, K Moores (2011) argued that assuming the homogeneity of factor elasticity lead to different result, then two main factors in the production function-labor and capital- contribute to the output differently 1.2 Research objectives The objective of this study aims to find out how the difference, between family and nonfamily firms, in using labor and capital affects the SMEs’ output and the difference in the total factor productivity (TFP) between two types of firms In addition to this, the paper also examines the other determinants that influence to the SMEs’ output and suggests some recommendations for firms to improve their performance 1.3 Research question This study tries to answer whether the family involvement has any impacts on the performance of the small and medium sized enterprises for the case of Vietnam 1.4 Scope of study and data Based on the production function Cobb-Douglas, this study applies the OLS and panel data to examine the factors affecting the firms’ output The panel data is utilized to solve the heterogeneity problem and to control the omitted variables of each individual It uses the data of small and medium enterprise surveys for the year 2005, 2007 and 2009 by the World Institute for Development Economics Research, the University of Copenhagen and some government agencies and bodies of Vietnam It contains the information of more than 2000 SMEs concerning the characteristic of the Vietnam business environment and of the firms 1.5 Thesis structure Following the introduction chapter, the paper is organized as followed Chapter Two gives some literature reviews and empirical studies that provide the rational for the firm performance difference between family and non-family firms Chapter Three presents the research methodology Chapter Four provides the descriptive statistics and the result The last discuss the conclusion and some recommendations CHAPTER II LITERATURE REVIEW This chapter by reviewing previous studies firstly provides the most frequently used definition of the family business Then it indicates the difference between family and non-family firm in using resources Next it points out the differences in performance between the two types of firms and the importance of family businesses in the economy In addition to using the resources and family involvement that impact to the firm performance, a number of other factors are also considered to build the conceptual framework for the next chapter 2.1 What is family business? Recent researchers have paid much attention on the difference in performance between family and non-family firm such as Gallo, (1995); McConaughy et al., (1999); Westhead et al., (1998) and Anderson et al., (2003) However, what is the family business? It has been the controversy issue for many authors to find out the clarity definition, although they have agreed on the view that the family business involvement is the factor make the firm different from others (Miller & Rice, 1967) Westhead et al., (1998), reviewing and investigating previous researches on the family firms, found that there are differences in the family definition used in studies According to Chrisman et al., (2003b), the work for family definition is continued Diversified definitions are given basing on different methods Shanker et al., (1996) gave two definitions for family-firm, the narrow one concerning to the daily business and the broad one regarding to strategic decision Astrachan et al., (2002) used factors regarding to experience, power and culture to measure the influence level of family on the firm Some authors based on the essence of the a family firm such as Davis et al , (1989); Shanker et al., (1996) to investigate the impact of family on making decision The concept “familiness” was first introduced by Habbershon et al., (1997) concerning to the resources of a family firm that originated in the systems of business, of family or individuals in family Habbershon et al., (2003) state that “familiness” can bring competitive advantage to the family firm CHAPTER III RESEARCH METHODOLOGY This chapter indicates the development and the recent performance of small and medium enterprises in Vietnam Then it presents the sources of data used for the analysis of SMEs in Vietnam Based on previous studies and this data sources, the next presents the research methodology and variable treatment used in the econometric estimation 3.1 The development of Domestic Private Sector and Small and Medium Enterprises in Vietnam Since the implementation of Doi Moi 1986, Vietnam has moved from centralized economy to market economy Due to the impact of the new regime, there has been a structural shift quite markedly in the types of companies The most notable is the dramatic reduction of the state sector and the significant increase of the non-governmental sector It can be seen by looking at Table 3.1 that shows the proportion of state sector clearly decreased about 8.5 times from 13.62 % to over 1.60 % Conversely, the non-governmental companies increased significantly and continuously from about 82% in 2000 to reach more than 95% in 2008 In addition, the business of foreign investment sector is in the range of 3% over the year Table 3.1: Number and ownership structure of Vietnamese enterprises 2000-2008 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 42288 51680 62908 72012 91756 112950 131318 155771 205689 -State enterprise (%) 13.62 10.36 8.53 6.73 5.01 3.62 2.82 2.24 1.60 -Non-state enterprise (%) 82.78 85.75 87.81 89.60 91.55 93.11 93.96 94.57 95.67 3.61 3.89 3.67 3.67 3.44 3.27 3.21 3.18 2.74 Ownership Structure -Foreign investment enterprise (%) Source: GSO 2010 16 The reason for the development of the non-governmental firms is the introduction of the Enterprise Law in 2000 that has created advantage conditions for the non-state sector developing strongly According to Vo Tri Thanh and Nguyen Tu Anh (2006), the Enterprise Law has created a better business and investment environment for the business and a more transparent legal mechanism to ensure good relations between businesses and government The private sector contains mostly small and medium enterprises, seeing table 3.2 and table 3.3 Hence the strong growth of this sector has the significant contribution of small and medium enterprises Through the year 2000 to 2008 the number of SMEs increased about five times, and its ratio reached to more than 97% in non-state enterprise and about 95% in total enterprises The last three lines in table 3.2 give the ratio of SMEs in each type of business ownership The share of the state sector sees the reduction and at about 50% in all businesses The group of foreign investment SMEs is accounted for about 75% of the total Moreover, there are the significant changes in the structure of SMEs through years Table 3.3 provides the data on the proportion of different types of ownership in the small and medium business sector Similar to general trends of enterprises are now the apparent decline of the state sector and the astonishing rise of nonstate sector In proportion, the state sector fell more than 10 times and the non-state sector increased rapidly over 1.1 times The businesses of foreign investment sector remain slightly at around 2.5% Table 3.2: Vietnamese SMEs’ share in different ownership types By capital size Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 96.71 96.87 96.85 96.82 96.92 97.03 97.06 96.39 96.33 -State enterprise (%) 85.57 82.63 79.27 75.52 70.50 65.86 62.52 59.47 55.52 -Non-state enterprise (%) 99.57 99.50 99.37 99.21 99.08 98.92 98.78 97.94 97.64 73.18 76.83 77.38 77.62 78.04 77.93 77.13 76.62 74.48 Ownership Structure -Foreign investment enterprise (%) 17 By employee size Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 91.94 92.84 93.24 93.73 94.8 95.61 96.05 96.4 97.09 -State enterprise 61.75 58.06 55.32 52.49 52.16 53.60 53.75 54.52 54.49 -Non-state enterprise 97.69 97.73 97.72 97.66 97.92 98.00 98.06 98.10 98.39 74.10 77.72 74.31 73.31 73.70 74.11 74.27 74.98 76.50 Ownership Structure -Foreign investment enterprise Source: GSO 2010 Table 3.3: The number and ownership structure of Vietnamese Small and Medium Enterprises period 2000-2008 By capital size Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 40898 50062 60928 69723 -State enterprise 12.05 8.84 6.98 5.25 3.64 2.46 1.82 1.38 0.92 -Non-state enterprise -Foreign investment enterprise 85.22 88.07 90.09 91.81 93.59 94.92 95.63 96.08 96.96 2.73 3.09 2.93 2.94 2.77 2.63 2.55 2.53 2.11 Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total 38883 47980 58660 67494 9.15 6.48 5.06 3.77 2.76 2.03 1.58 1.27 0.90 87.95 90.26 92.02 93.36 94.57 95.43 95.94 96.25 96.95 2.91 3.26 2.92 2.87 2.67 2.54 2.48 2.48 2.16 88934 109600 127460 150153 198152 Ownership Structure By employee size 86981 107989 126127 150154 199710 Ownership Structure -State enterprise -Non-state enterprise -Foreign investment enterprise Source: GSO 2010 See appendix to understand how Vietnam government classifies the micro, small, medium and large enterprises based on the “Criteria for a small and medium enterprise, according to the Decree No 56/2009/ND-CP dated 30 June 2009 of the Government” 18 With such strong growth like that, the small and medium enterprises have played an important role in the economy of Vietnam Harvie (2004) and Harvie (2007) state that SMEs in the private sector ensures stable and sustainable economic growth, creates jobs, attracts a large number of FDI, increase export, utilizes personal and social resources in economy, and ensures the rural and regional development The next part indicates the recent performance and characteristics of SMEs in Vietnam 3.2 The recent performance of Small and Medium Enterprises in Vietnam Cao Si Kiem (2012) pointed out that small and medium enterprises dominate significantly in the Vietnam economy They create jobs, improve income, help to develop social resources for investment development, and reduce poverty In fact, according to the statistics of the General Statistics Office of Vietnam, every year it generated more than half a million new jobs, employ about 51% of the workforce and contributes 40% to national GDP After 10 years the amount of taxes and fees paid from private SMEs to the government have increased by 18.4 times The recently SMEs businesses have not reached the high efficiency, and especially in the context of the global crisis impact Survey of CIEM (2010) on SMEs and the business environment in Vietnam has launched a number of key points about the operations of SMEs as follows Global Crisis caused disadvantage impacts to more than two thirds surveyed enterprises, and the impact is only in temporary Besides, the business environment is getting worse, and the majority of enterprises is facing financial problem and difficult to get access to loans from credit institutions In addition, labor productivity increases with firm size and found higher in urban areas than in rural ones Moreover, many business activities cause the bad impacts on the environment, and their knowledge of the law as well as the awareness of the issues related to the environment are low In general, the report of CIEM (2010) concludes that issues of the financial crisis was well prepared to confront, but there are some facing structural challenges to be compatible with the Socioeconomic Development Strategy for Vietnam for the next ten years Cao Si Kiem (2012) pointed out some weaknesses of small and medium enterprises of Vietnam Firstly, small and medium enterprises still not have access to the support programs 19 of government easily and effectively The reasons due to the enterprise resource constraints, lack of preparation or not in accordance with the priority of supported sectors, lack of information, or complicated procedures Secondly, the business loan access is difficult due to the lending procedures obstacles, low or unsuitable mortgage, or high interest rate Thirdly, the space for production deals with the difficult access, complex procedures, not transparent information, or large unofficial costs Lastly, the Vietnam SMEs are located outside the global manufacturing chain, that lead to difficulties in developing industry support, or becoming providers of services and product inputs for foreign businesses and large state-owned enterprises Followed by the decision number 1231/QĐ-TTg of the prime minister on September 7th 2012-Approving the plan for developing medium and small enterprises 2011 – 2015, the Vietnam small and medium enterprises are supported from the government by groups of solutions They are to improve the legal framework for entrances, activities and exits from the market (1); support finance and credit access, and improve the efficiency of capital use (2); support for technological innovation and new technologies application (3); develop human resources, focusing on capacity building for administrator (4); develop industry clusters and increase land access (5); provide information to support and promote to expand markets (6); build organizational systems to support SME development (7); and manage plan for the implementation of SME development (8) 3.3 Sources of data To investigate the Vietnam SMEs, this research uses the data of the small and medium enterprise (SME) surveys, taken for every two years in 10 selected provinces of Vietnam, by the World Institute for Development Economics Research, the University of Copenhagen and some government agencies and bodies of Vietnam It contains the information of more than 2000 SMEs concerning to the characteristic of Vietnam business environment as well as of the SMEs The 10 provinces selected in the SME survey are Hanoi, Phu Tho, Ha Tay, Hai Phong, Nghe An, Quang Nam, Khanh Hoa, Lam Dong, HCMC and Long An The data used in our research is of the year 2005, 2007 and 2009 20 According to the data of the surveys, the number of firms is 2800 for the year 2005; 2600 for the year 2007 and 2600 for the year 2009 Extracting for the balanced panel data used in our research, the number of firms is 1748 They are the firms that repeat in all three surveys and have the sufficient information needed for analyze The household firms or family firms in the surveys include the registered and nonregistered firms based on the Enterprise Law of Vietnam The non-family firms embrace the private firms, collectives, partnerships and joint stock companies The standard for distinguish the firm size used in the SMEs survey based on the World Bank definition The micro firm is from to employees, the small is from 10 to 49 employees and the medium is from 50 to 299 employees 3.4 Research Methodology This paper uses the concept "Total factor productivity" (TFP) to measure the productivity of the firm, as Palia and Lichtenberg (1999) used It has the advantage that can help us measure the labor and non-labor productivity TFP is defined by the ratio of output to weighted sum of all inputs used in the business TFP can be rewritten like as follows A = Y/f (L, K), (1) Where A is the TFP, Y is the actual output, f(.) is the weighted sum of all the inputs , L is the labor input and K is the capital input Assuming that the weighted sum of inputs used is Cobb-Douglas production function so f(L, K) = Lα Kβ Substitute it into the two sides of the equation and taking logarithms we get Ln(Y) = Ln(A) +α ln(L) + β ln(K) (2) To measure the contribution of input to output, this production function is usually used, so we can investigate how labor and capital affect to the total output, the total factor productivity as well as the impact of the family involvement, as Wall (1998); Bosworth and Loundes (2002), Barth et al 2005) F Barbera, K Moores (2011) Rewrite the equation (2) we have: Ln(Yi) = Ln(Aij) +α ln(Li) + β ln(Ki) (3) (α, β) >0; j =1,2 21 Where i present to the firm ith firm, Y is the homogenous total output of ith firm L is the homogenous labor input of ith firm K is the homogenous capital input of ith firm A is the total factor productivity α, β are the unknown parameters that can be estimated if we have the data of output and the inputs In the equation (3), Barbera, K Moores (2011) indicates that the contribution of the two inputs- labor and capital- is homogenous and the only difference of family and non-family firm involvement is explained by j in the intercept It states that the family involvement also impact to the labor and capital, or the labor and capital contribution to the total output of family and nonfamily firm is different Then this study suggests the modified equation as following: Ln(Yi) = Ln(Aij) +αj ln(Li) + βj ln(Ki) +λXi +ei (4) (α, β) >0; j =1,2 In the equation (4), F Barbera, K Moores (2011) shows that the contribution of labor and capital is heterogeneous that explained by j So the difference between family and nonfamily firm in using input is estimated by observing the αj and βj Some control variables Xi are applied In the production function Coub-Douglass, Y is the total physical output, but the SMEs survey does not contain the data for the output Following to the work of Kenneth Arrow (1974), Barth et al (2005) and F Barbera, K Moores (2011), the “value added” is measured by taking the value of production or manufactured output less total indirect cost less value of raw materials used The value added in the economic account was collected at the end of the surveyed year 3.5 Variable treatment The total output In the equation and 4, Y represents the total output, but in the SME survey does not contain data on it So instead of using the total output, we use the Value Added (VA) for the proxy The Value-Add information is calculated and can be found in the Economic Account part 22 in the survey of SMEs The VA equals to “the value of production or the manufactured output” minus "the total indirect cost" minus “the value of raw material used” Following the research of Arrow, K.J (1974) and Sato (1976), using the Value-Add has the advantage of helping us to observe and analyze the output and factor inputs regardless of tangible or intangible ones The economic accounts are statistically calculated and at the end of the year Labor input and capital input Used as a proxy for the labor factor, the number of total labor force at the end of the year was utilized This number is asked in question 73 of the survey: "What was the total work force number at the end of the year." This figure includes the regular labor force (full time and part time) and the casual the labor force Used as a proxy for capital factor, we use the sum of physical and financial assets at the end of the year This data can be found in the Economic Account part of SME survey Labor and capital inputs are expected to be positive significantly with the total output Family involvement Martikainen et al (2009) and F Barbera, K Moores (2011), using the production function Cobb- Douglas to estimate, found that the family involvement has the positive impact to the total output Thus the family firms are more productive or higher TFP than non-family ones In this study, the family involvement is based on extracting the information for the firm structure from the question 12 about the ownership or legal status of the SMEs survey The family-firms are confirmed when legal status registered by the government is Household establishment or business The non-family firms embrace Private or sole proprietorship , Partnership, Collective or Cooperative , Limited liability company , Joint stock company with state capital , Joint stock company without state capital, Joint venture with foreign capital , State enterprise (central) and State enterprise (local) The dummy variable is used, that equal to if the firm is household or equal to if it is otherwise It is expected that the family involvement has the positive relationship with the total output 23 Family labour and family capital F Barbera, K Moores (2011) stated that the there is the difference in the contribution of labor and capital to the total output between two types of firm Two dummy variables- family labor and family capital- that show the difference between capital and labor contribution in the two types of businesses, are created by multiplying the dummy variable "family involvement" to two variables "labor input and capital input." Family labor is expected to be positively correlated with output, and family capital is expected to be negatively correlated with output Control Variables To control heterogeneity among firms, we apply some controls variables on location, machinery using level, year, exports, sex and age of the respondent For the location, eight dummy variables are used for nine provinces surveyed that are Ho Chi Minh city, Ha Noi, Phu Tho, Ha Tay, Hai Phong, Nghe An, Khanh Hoa, Quang Nam, Lam Dong and Long An The firms in Ho Chi Minh city are expected to be more productive than in other provinces We also apply dummy variables for some industry sector There are apparel, fabricated, textile and furniture The firms in the traditional sectors of Vietnam such as apparel, textile and furniture are expected to be more productive Year is the number of firm’s operating year from the beginning year, taking by the surveyed year minus the beginning year, expected to be negatively correlated to the output Exports variable indicates that if the firm export or not, taking the value of if yes and if otherwise The export firms are expected to be more productive than non-export ones Table 3.4 below presents summary of the variables used in the regression models, definitions, units and expected signs 24 Table 3.4: Variables used in the Production Function Variables Definition Unit Expected Sign The dependent Variable VA The value added The independent Variables Labor The total number of labor at the end of the persons + year Capital The total of physical and financial asset Million + VND Family_involvement Dummy variable equals if the firm is the or + family firm, equals to if others F_Labour The number of labor that family firm uses persons + that equal to Family_involvement multiply by Labor F_Capital The capital that family firm uses that equal Million to Family_involvement multiply - by VND Capital No_year The number of operational year equals to UNIT - the existing years minus to the starting year Export The firm exports or not, dummy variable or + equals to if export, equals to if not 25 CHAPTER IV EMPIRICAL RESULTS This chapter analyzes the differences in performance between the two types of enterprises First, it provides some descriptive statistics to get an overview of the data Then, two methods of estimating OLS and panel data are used to examine the effects involvement family to total output Based on results, some recommendations are suggested on Chapter V 4.1 Descriptive statistics Figure 4.1 shows the probability distribution of the labor, capital and value-add variable over the years In general, the probability distribution functions of the variables are relative evenly through years Table 4.1 gives us an overview of the descriptive statistics of the sample and the two sub-samples, family and non-family firms The survey is taken every two year In general, we see that the family businesses are much more than the non-family businesses, accounted for approximately 70 percent of the total However, looking at the three variables are value-add, capital and labor through the years, notice that non-family businesses are larger than the family businesses Compared to the family business, the value added of non-family business more than 10 times, capital is more than about to times, and labor is more than about times It is found that in terms of size based on labor and capital and the value-added, the non-family businesses outperformed than the family business One thing to note is that over the years the number of employees is relatively stable In average, there are about workers in family businesses and 35 in the non-family businesses In contrast, the 2009 statistics show that the two types of businesses have a critical decline in capital and value added The statistics shows that capital and value add decreased by 50% compared to the statistics in the previous years In general, there are significant differences in using labor and capital between the two types of enterprises The question is whether the differences that have led to the difference in the output value of each type of business Table 4.2 shows the relationship of the variables in the Cobb-Douglas function as labor, capital and value added Looking through the years, two important variables that labor and 26 capital are positively related to the output Figure 4.2 gives insight conjectures about the relationship between the inputs to output It indicates that there are differences in the relationship of capital and labor to output over the years between family and non-family firm To clearly see how different, a greater detail regression estimates are applied in the next parts -5 log_VA 10 0 1 Density Density Density 2 3 Figure 4.1: The probability density function histogram of variables through years of Log Value Add Year 2005 Year 2007 Year 2009 15 10 log_VA Log Labor Year 2005 10 log_VA Year 2009 0 2 4 Density Density Density 6 8 Year 2007 6 log_Labor log_Labor log_Labor Tải FULL (65 trang): https://bit.ly/3JE8hXZ Dự phòng: fb.com/TaiHo123doc.net Year 2007 Year 2009 05 05 Density 15 Density 15 05 -5 log_Capital 10 0 Density 15 2 25 25 Log Capital Year 2005 log_Capital 10 12 log_Capital 27 10 Figure 4.2: The scatter-plot of log value add on variables of family and non-family firms through years Family labor year 2005 Non-family labor year 2005 Family capital year 2005 Non-family capital 2005 Tải FULL (65 trang): https://bit.ly/3JE8hXZ Dự phòng: fb.com/TaiHo123doc.net Family Labor year 2007 Non-family Labor year 2007 28 Family capital year 2007 Non-family capital 2007 Family Labor year 2009 Non-family Labor year 2009 Family capital year 2009 Non-family capital 2009 29 Table 4.1: Summary Statistic for SMEs sample (2005-2009) Source: SMEs surveys by CIEM year 2005-2007-2009, calculated by author 32 6678830 ... Variable VA The value added The independent Variables Labor The total number of labor at the end of the persons + year Capital The total of physical and financial asset Million + VND Family_ involvement. .. The family involvement in the family- businesses brings them some competitive advantage that the others cannot have easily The advantages in resource acquisitions come from the combination of family. .. reflect the essence of family business that are the firm’s vision and the intention to shape and pursue that vision of the family, small group of family or across the generation of the family Since