(Luận văn) the role of family involvement in a firm’s performance

t to UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ng INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS hi ep w n lo ad ju y th yi VIETNAM –NETHERLAND PROGRAMME pl n ua al FOR MA IN DEVELOPMENT ECONOMICS va n THE ROLE OF FAMILY INVOLVEMENT ll fu oi m IN A FIRM’S PERFORMANCE at nh z z k jm ht vb NGUYEN QUOC KHANH an Lu Student: om l.c gm Academic Supervisor: DR LE VAN CHON n va ey t re th HO CHI MINH CITY, OCTOBER 2013 t to ACKNOWLEGDEMENTS ng hi ep During doing research, I have received the supports, helps and guidance from my supervisor, committee members, friends and family w n lo ad First of all, I really appreciate and thank to the enthusiastic help of my supervisor - Dr Le Van y th Chon I always get clearly instructions, heartfelt encouragements and enthusiastic assistances ju yi from him during my thesis I also would like to thank Dr Pham Khanh Nam to suggest me the pl ideas for my thesis and supply the data source for the analysis in my research I would like to al ua express my great appreciation to Associate Prof Dr Nguyen Trong Hoai – Vice Principal of the n University of Economics & Director of Vietnam – Netherlands Programme for MA in va n Development Economic who oriented and facilitated me during two years learning this master ll fu course oi m nh at Finally, I would like to express my heartfelt gratitude to my family, my friends and my z colleagues who supports, and encourage me to finish this research z k jm ht vb om l.c gm an Lu Ho Chi Minh City, October 2013 n va ey t re th ii t to ng ABSTRACT hi ep This paper investigates the difference in performance between family businesses and non w family businesses of small and medium enterprises (SMEs) in Vietnam It focuses on the n lo differences in how the use of capital and labor and in total factor productivity (TFP) between the ad two types of firms The study used statistics on small and medium enterprises in Vietnam over y th the years 2005, 2007 and 2009.This paper also gives a number of policy implications for small ju and medium businesses to improve their performance and for the policy-maker to support the yi pl Vietnam small and medium enterprises Based on the Cobb-Douglas production function, we ua al apply the methods OLS, GLS and panel model to estimate It finds that there are significant n differences in the contribution of the two inputs that are labor and capital to output – the value va added- between family businesses and non family businesses in Vietnam On labor, its n ll fu contribution to output in the family businesses was significantly higher than non-family oi m businesses In terms of capital, the contribution of this factor in the family business is low at more productivity nh compared to their counterparts Moreover, there are no bases to conclude which kind of firm is z z k jm ht vb om l.c gm an Lu n va ey t re th iii t to TABLE OF CONTENTS ng hi ACKNOWLEDGEMENTS………………………………………………………………………ii ep ABSTRACT…………………………………………………………………………………… iii TABLE OF CONTENTS……………………………………………………………………… iv w n LIST OF TABLES……………………………………………………………………………….vi lo ad LIST OF FIGURES…………………………………………………………………………… vii y th ju CHAPTER I INTRODUCTION yi 1.1 Problem statement…………………………………………………………………………….1 pl al 1.2 Research objectives……………………………………………………………………… .2 n ua 1.4 Scope of study and data………………………………………………………………………2 n va 1.5 Thesis structure……………………………………………………………………………….2 ll fu CHAPTER II LITERATURE REVIEW m oi 2.1 What is family business? …………………………………………………………3 at nh 2.2 Differences between family and non-family businesses ……………………… z 2.3 The performance of family and non-family firms……………………………………………7 z 2.4 The importance of the family firm………………………………………………………… 13 vb jm ht 2.5 The other determinants of firm's performance………………………………………………14 2.6 Conceptual framework………………………………………………………………………15 k om l.c 3.1 The development of Domestic Private sector and gm CHAPTER III RESEARCH METHODOLOGY Small and Medium Enterprises in Vietnam………………………………………………… 16 an Lu 3.2 The recent performance of Small and Medium Enterprises in Vietnam………… ………19 n 3.4 Research methodology…………………………………………………………………… 21 va 3.3 Sources of data………………………………………………………………… …………20 t re ey 3.5 Variable treatment……………………………………………………………………… 22 th iv t to CHAPTER IV EMPIRICAL RESULTS ng 4.1 Descriptive statistics……………………………………………………………………….22 hi ep 4.2 Empirical Results ………………………………………………………………………….34 w CHAPTER V CONCLUSION…………………………………………………………… 41 n lo ad REFERENCES ju y th APPENDIX yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re th v t to LIST OF TABLES ng hi Table 2.1: Summary of Empirical Review on the performance difference between family firms ep and their counterparts……………………………………………………………… Table 3.1: Number and ownership structure of Vietnamese enterprises 2000-2008…………….16 w n Table 3.2: Vietnamese SMEs’ share in different ownership type ………………… ………… 17 lo ad Table 3.3: The number and ownership structure of Vietnamese Small and Medium Enterprises y th period 2000-2008……………………………………………………………………………… 18 ju Table 3.4: Variables used in the Production Function……………………………………… 25 yi Table 4.1: Summary Statistic for SMEs sample (2005-2009)………………………………… 32 pl ua al Table 4.2: Correlation Table…………………………………………………………………… 33 Table 4.3: The firm production function by OLS and GLS method with homogenous input 34 n va Table 4.4: The firm production function by OLS and n GLS method with heterogeneous input…………………………………………………………35 fu ll Table 4.5: The firm production function estimation in pool data……………………………….37 m oi Table 4.6: The firm production function estimation in panel fixed-effects…………………… 37 nh Table 4.7: The firm production function estimation in panel random-effects………………… 38 at z Table 4.8: Hausman Test for Fixed or Random Effects……………………………………… 39 z k jm ht vb om l.c gm an Lu n va ey t re th vi t to ng LIST OF FIGURES hi ep Figure 2.1: The long-term view of family-business performance……………………………… Figure 2.2: Empirical framework……………………………………………………………… 15 w n Figure 4.1: The probability density function histogram of variables through years lo ad Log Value Add………………………………………………………………………………….27 y th Figure 4.2: The scatter-plot of log value add on variables of family and ju non-family firms through years…………………………………………………………………28 yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm an Lu n va ey t re th vii t to ng CHAPTER I hi ep INTRODUCTION w n 1.1 Problem statement lo ad The impact of the family involvement on the firm performance has been debated in many ju y th 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 yi pl to the difference of the family firm definition, performance measurement or the samples So ua al the issues about the “family effect” or “family involvement” impact on the productivity and n firm performance are continued va n The role of the small and medium-sized enterprises (SMEs) is crucial in the developing fu ll economy for the goal of economic growth and integration like Vietnam The issues oi m concerning to SMEs have received increased attention of several economists For example, nh CIEM (2010) investigates the characteristics of the SMEs, the government policies and the at business environment in Vietnam The significance of innovation for exporting of SMEs has z z been studied by Nguyen Ngoc Anh et al (2008) In addition, Le Van Khoa (2006) considers vb the environment pollution problems caused by the SMEs in the Ho Chi Minh city In 2009, ht jm the firm recognized as family firm in the total number of the SMEs in Vietnam is large that k more than 60 percent (CIEM, 2010) However, there is lack of studies investigating the gm differences of family and non-family firms More specifically, no research on the impact of l.c the family ownership on the firm productivity for the case of Vietnam has been established om In this paper, we consider how the family ownership impacts to the firm productivity in an Lu Vietnam, making it different to the non-family ones family counterpart such as work by Bosworth and Londes (2002), Barth et al (2005), to the output differently th different result, then two main factors in the production function-labor and capital- contribute ey Barbera, K Moores (2011) argued that assuming the homogeneity of factor elasticity lead to t re Martikainen (2009) that indicate ambiguous relationship To interpret to the difference, F n va The Cobb Douglas is usually utilized to evaluate the firm output between family and non- t to ng hi 1.2 Research objectives ep The objective of this study aims to find out how the difference, between family and non- w family firms, in using labor and capital affects the SMEs’ output and the difference in the n total factor productivity (TFP) between two types of firms In addition to this, the paper also lo ad examines the other determinants that influence to the SMEs’ output and suggests some ju y th recommendations for firms to improve their performance yi pl 1.3 Research question ua al This study tries to answer whether the family involvement has any impacts on the n n va performance of the small and medium sized enterprises for the case of Vietnam ll fu oi m 1.4 Scope of study and data at nh Based on the production function Cobb-Douglas, this study applies the OLS and panel z data to examine the factors affecting the firms’ output The panel data is utilized to solve the z heterogeneity problem and to control the omitted variables of each individual It uses the data vb jm ht 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 k gm government agencies and bodies of Vietnam It contains the information of more than 2000 1.5 Thesis structure om l.c SMEs concerning the characteristic of the Vietnam business environment and of the firms an Lu Following the introduction chapter, the paper is organized as followed Chapter Two performance difference between family and non-family firms Chapter Three presents the ey th discuss the conclusion and some recommendations t re research methodology Chapter Four provides the descriptive statistics and the result The last n va gives some literature reviews and empirical studies that provide the rational for the firm t to CHAPTER II ng hi ep LITERATURE REVIEW w n This chapter by reviewing previous studies firstly provides the most frequently used lo ad definition of the family business Then it indicates the difference between family and non-family y th firm in using resources Next it points out the differences in performance between the two types ju of firms and the importance of family businesses in the economy In addition to using the yi resources and family involvement that impact to the firm performance, a number of other factors pl va 2.1 What is family business? n ua al are also considered to build the conceptual framework for the next chapter n Recent researchers have paid much attention on the difference in performance between fu ll family and non-family firm such as Gallo, (1995); McConaughy et al., (1999); Westhead et al., m oi (1998) and Anderson et al., (2003) However, what is the family business? It has been the nh controversy issue for many authors to find out the clarity definition, although they have agreed at z on the view that the family business involvement is the factor make the firm different from z vb others (Miller & Rice, 1967) Westhead et al., (1998), reviewing and investigating previous jm ht 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 k gm l.c Diversified definitions are given basing on different methods Shanker et al., (1996) gave om 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, an Lu power and culture to measure the influence level of family on the firm Some authors based on the impact of family on making decision The concept “familiness” was first introduced by th “familiness” can bring competitive advantage to the family firm ey systems of business, of family or individuals in family Habbershon et al., (2003) state that t re Habbershon et al., (1997) concerning to the resources of a family firm that originated in the n va the essence of the a family firm such as Davis et al , (1989); Shanker et al., (1996) to investigate