Digital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of Vietnam

Digital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of VietnamDigital marketing and its relationship with digital orientation and technological innovation for SME performance in an emerging market: The case of Vietnam

Rational of thestudy

Changes in digital technology development make changes in firm’s reaction

The rapidly evolving digital technology environment has a profound impact on businesses and necessitates continuous adaptation and transformation These changes in the digital landscape can significantly influence firms in various ways Accordingly, companies are progressively embracing digital technologies to optimize their business processes, improve customer satisfaction, and maintain a competitive edge Digital transformation entails the conceptualization and reconstruction of corporate processes and models to harness the potential of digital tools and data In addition, digital transformation facilitates the emergence of novel business models, including subscription-based services, platform-driven ecosystems, and sharing economy platforms (Garzella etal., 2021) To maintain relevance, it is imperative for firms to engage in the exploration and adoption of thesemodels.

According to Khin & Ho (2019), companies that embrace and adapt to digital technology can achieve a competitive advantage by providing innovative products and services, responding rapidly to market changes, and staying ahead of industry trends In addition, digital channels and platforms can be set up and offer opportunities to expand markets beyond geographical boundaries Firms can reach global audiences, creating both opportunities and challenges in terms of localization and competition Overall, digital technology empowers firms to adapt to the changing business landscape, seize opportunities, and overcome challenges When strategically implemented, it can lead to improved firm performance across various dimensions, ultimately contributing to long- term success and growth.

With a fast digital technology system development, channels of e-commerce, networking, and online marketing are considered and interacted with by firm to push up the sales Firms with limited financial capability pay more attention to digital technology to promote its business (Telukdarie et al., 2023), in which digitalmarketing

2 strategies through social media, internet, and e-commerce can help a firm to save cost.

As a result, small and medium sized enterprises (SMEs) often think of how to acquire more customers through various communications, in which integrated digital marketing plays a vital importance Integrated marketing communication is a fundamental and integral part of a company's marketing efforts, which combination of marketing channels, such as e-advertising, social media, public relations, and sales promotions are defined as integrated marketing communication (Ivanov, 2012) By embracing digital technology, SMEs can streamline their processes, improve efficiency, and reduce costs (Ardito et al., 2021) From adopting cloud-based solutions for storage and collaboration to utilizing e-commerce platforms for online sales, these enterprises leverage the potential of technology to facilitate their expansions (Bendig et al., 2023) Asarguments above, the role of digital marketing is quite important for SMEs, they need to embrace newtechnologiesandincorporatethemintotheirbusinessstrategiestostaycompetitive It is essential for SMEs in emerging markets to understand the impact of digital technology development on their industry and be proactive in leveraging these advancements to drive growth and innovation within their organizations As argued by Malesios et al (2021), not only large companies, but also SMEs need a plan of long term investment effectively.

To do that, SMEs often set up a new vision of digital marketing innovation to maintain their market place (Thaha et al.( 2 0 2 1 )

Amidst the digital revolution, enterprises are turning to digital marketing to remain competitive Digital marketing involves employing technologies like e-commerce, social media, and internet media to promote products and services (Thaha et al., 2021) This approach fosters engagement with new and existing customers (Taiminen & Karjaluoto, 2015), and broadband connectivity empowers small businesses (Nasiri et al., 2022) Digital marketing utilizes one-way channels such as websites and emails for information dissemination and two-way channels like social media and chatbots for relationship building (Taiminen & Karjaluoto, 2015) Its effectiveness is enhanced by digital orientation, IT capabilities, and strategic leveraging of channels (Sultoni et al., 2022), driving business growth and competitive advantage (Telukdarie et al., 2023).

Research on digital marketing has surged as businesses seek to improve their understanding of effective strategies (Nuseir & Aljumah, 2020) Digital marketing can be highly impactful when companies possess strong resources such as digital transformation capabilities, CRM, and Chatbots (Abdelkader, 2023) However, SMEs in emerging markets face challenges due to internal and external barriers (Pingali et al., 2023) Emerging markets, defined by rapid economic growth and free market policies (Hoskisson et al., 2000), often present challenges such as market heterogeneity, infrastructure limitations, and informal competition, which can hinder innovation and economic progress for companies.

SMEs However, the challenges are exacerbated when a firm's resources and competencies are lacking in strength.

The firm's deliberation on digital orientation approach and technologicalinnovation

As mentioned by Nasiri et al (2022), digital orientation is a catalyst for technological innovation Firms with a strong digital orientation prioritize the use and integration of digital technologies in their operations, products, and services Once digital orientation is well established, the culture of continuous improvement and adaptation of the firm is maintained, it encourages the exploration of new technologies to enhance efficiency, effectiveness and customer experience Likely, Sultoni et al. (2022) also emphasize digital orientation is an integration of digital tools (e.g big data, digital platform) and technologies to achieve firm efficiency Shortly, digital orientation is crucial in the context of the increasingly digitalized world, where a firm use digital technology to facilitate the development of new products and services (Khin

The current extent to which SMEs employ digital marketing through channels of social media, e-commerce (Su et al., 2023), CRM (Galvão et al., 2018) and Chatbot AI (Artificial Intelligence) (Selamat & Windasari, 2021) and others relevant Although Bruce et al (2023) has an approach on studying digital marketing adoption of Ghana SMEs, this study mainly focuses on firm with intention to use digital marketing and confirm that digital marketing supports firms to improve the sustainable growth of SMEs While Nguyen et al (2022) have a general argument of social media on performance of 180 Vietnamese SMEs, which social media is played as mediator between market orientation and firm performance.

Actually, still some authors state that the strategic orientation is a domain, it can be an effective lever to improve effective development of the company (Chavez et al., 2020), but some SMEs do not seemly specialize in digitalization (Sultoni et al., 2022).

In fact, strategic orientation can be seeing more clearly once the company does market orientation and digital orientation However, in the context when the digital industry hasd e v e l o p e d q u i c k l y , b u s i n e s s w i l l b e m o r e d i f f i c u l t i e s w h e n t h e c o m p a n y l a c k s a digital technology system This can be seen during the Covid-19 pandemic, some companies confuse to transfer the traditional sales to the online trade If the company does not update its online business system, e.g digital technology in business, it will be difficult for the company to promote sales activities Accordingly, Kindermann et al. (2021) discovered the contribution of digital orientation, it significantly supports high performance of firm This finding contributes to expanding the concept of digital orientation, in which digital orientation is one of the key strategies and plays an important role of firms’ business strategy From this standpoint, it gives a rise that this thesis needs to be interested in analyzing the investigation of how firm performance is impacted by the integration of digital marketing and digital orientation From this perspective, we can examine the inquiry regarding the manner in which a company's operational effectiveness is influenced by the amalgamation of digital marketing and digital orientation This attention surely is expounded upon within the context of this scholarly thesis.

Technological innovation plays a critical role in organizational success during crises like the COVID-19 pandemic It allows businesses to leverage resources, gain competitive advantages, and effectively manage remote operations The integration of technological advancements with existing resources is crucial, as it involves digital technology systems and strategies of digital orientation Depending on the sector, firms adopt varying innovation strategies: manufacturing firms focus on enhancing employee skills, while service firms prioritize building competitive advantages through distinctive services This underscores the importance of tailoring innovation strategies to specific industry needs and contexts.

In the era of rapidly evolving technology and consumer demands, digitalization has emerged as a critical imperative for businesses Innovation, a complex and multifaceted process, becomes paramount for the survival and prosperity of organizations (Lohe & Calabrò, 2017) It necessitates the ability to decipher, anticipate, and fulfill customer needs, as well as the capacity for inventive thinking (Subramaniam & Venkatraman, 2001) Innovation requires the harnessing of resources both within and outside the organization (Terziovski, 2010a) Often, innovative concepts arise from the synthesis of existing and emerging ideas, aligning with an appropriate business strategy and leveraging available resources (Lohe & Calabrò, 2017).

In the era of fast learning with fierce competition, the firm needs to develop innovative strategies to be survival The concept of innovation capability is applied to examine and utilize the company’s competitive advantages, in which the essential prerequisite is creations toward efficient ideas of innovation management Thus, creating a favorable environment to exploit innovative ideas of members in the company is essential The nature of innovation itself is the perception of a company that prioritizes the advancement of new ideas that create value across all operations This aspect emphasizes that innovation is not an inherent trait but rather a characteristic perceived within a company As we know, technological innovation affects the sustainable development of businesses, it has drawn increased attention in recent years from academics, corporations, and governments (Alraja et al., 2022) It is impossible to ignore the connection between technological innovation and sustainable development (Omri,2020).

In short, the perception of a firm toward innovativeness depends on its commitment to promoting and implementing new ideas that result in tangible value across different areas of its business Companies that successfully embrace and prioritize innovation are more likely to adapt to changing market conditions, stay competitive, and drive sustainable growth A successful innovation must have an appropriate plan, in which its activities can combine with digital orientation and digital marketing to increase firm efficiency It is not easy for a firm with limited natural resources of digital technology to move towards digitalization At the conceptual level, a company applying a new technology is seen as a display of innovation and has an active role (Koellinger, 2008).

In fact, innovation performance in a company is determined by the market response of customers and competitors.

To address a competitive competency, innovative considerations of SMEs must be concerned in their business plan, such Falahat et al (2020) found significant contributions of product innovation and communication capacities with respect to digital marketing are important for SMEs Once the innovation and digital marketing are concerned well and address a target point of investment, the SMEs can save costs and lead to competitive advantages In addition, Falahat et al (2020) has different arguments about impacts of marketing capacity on the competitive advantage of SMEs in the developed countries such as the U.S and the developing countries such as Malaysia, which they found a non-significant effect of marketing communication capacity on the advantage of competition for SMEs in Malaysia Of which the explaining is SMEs pay attention to product innovation rather than marketing communication programinvestment.

Research background

The notion of digital marketing has evolved over time and is widely recognized as a strategic approach to stimulate the growth of products and services, facilitating the connection between items and customers within various marketplaces The efficacy of digital marketing can be ascribed to the endorsement of digitalization, which has emerged as the foundation for assuming the function of marketing strategy (Kannan &

Digital marketing emerged with the advent of online social media and AI-powered communication, and e-commerce became a primary focus in its early stages (Su et al., 2023) The multifaceted nature of digital marketing involves leveraging modern digital technologies to encompass various activities, organizational structures, and processes (Bala & Verma, 2018) Digital marketing encompasses a wide range of strategies and tactics, and its impact continues to grow as businesses increasingly rely on digital channels to reach and engage their customers.

Due to fierce competition and alterations in consumer behavior during the era of digital transformation, enterprise motivations must be stable in order to achieve growth.

As argued by Rodrigo et al., (2022), intrinsic motivations (e.g voice, responsibility, job characteristics) and extrinsic motivations (e.g management, job conditions, personal relationship) cause companies geared towards digital social innovation However, The success and effectiveness of digital social innovation initiatives can indeed be influenced by the resources available of the firm According to Astuti et al.(2020), the adoption of SMEs’ digital technology is depended on the resources available, in which digital orientation play an important role The dominants of digital technology is depended on digital transformation, once digital orientation is well planned, it helps to reduce difficulties and create business value for firm (Nasiri et al., 2022)

Iflookingbackatpreviousstudies,thecorporatebehavioranditsbusinessstrategy responses are largely explained by the theory of RBV Therefore, İpek (2018) recruited the theory of Resource-Based View (RBV) to find out the connection betweenresources and capabilities of exporting firms in the emerging markets, e.g India, Malaysia Accordingly, İpek argued that firm resources are various, such as: organizational resources; production and R&D resources; managerial resources; experiential resources; financial resources; rational resources, human resources; knowledge-based resources; marketing-related resources; others resources In addition, İpek (2018) argued that prior scholars did not have a clear explanation of the capacity and market oriented resources of enterprises when applying the RBV The study has made an academic contribution the export behavior of firms is affected by existing resources and capacities Similarly, Barca (2003) also emphasized the internal resources of the firm, however the study did no consider resources of informationt e c h n o l o g y

Meanwhile, Barney (1991) argues that strategic resources are important to create competitive advantage However, to do this, firms need to know how to exploit existing technology, equipment and resources to serve business activities effectively Likely,Oduro et al (2023) also employ the RBV to explain how digital technology pays off and argue that a firm has resources that can be categorized into two categories: tangible and intangible values Tangible values encompass physical assets like machinery and equipment, while intangible values encompass non-physical assets such as reputation and company brand Enhancing the utilization of resources can lead to enhanced planning, resulting in increased productivity and operational efficiency Besides, the effective resource utilization is happened, when digital technology resouces and digial skill of employees must be harmoniously combined to improve the efficiency of digital resources According to Marhraoui (2023), digital skills are willing to adopt new technologies, e.g artificial intelligence and platform- based solutions, in which skills of

10 data analysis and information management, e.g CRM are specific As a result, resouces of digital technology and employees’ digital skill are conceptualize in the RBV framework to enhance digital technology systems of the firm, but there is a limitation to study the aspect of coordination between digital technology and other resources, such as resources for digital skills of employees and technological innovation (Oduro et al., 2023) This is seen as a gap of study that is considered in thist h e s i s

As argued by Barney (1991), researchers turned to the RBV as a framework to elucidate the internal and external resources of enterprises Understanding internal resourcesisnotacomplextask,astheyoriginatefrompre-existinginternalsourcessuch as employee’s skill, technology, financial assets, and organizational structure The ability to establish and maintain relationships with external partners can be demonstratedthroughone'snetworkrelationalcapacity(Huggins&Thompson,2013)

Based on previous studies, findings have a limitation in measuring the digital capabilities of enterprises specifically involved in creating digital marketing activation. Therefore, it is imperative to include a supplementary proposition concerning digital resources inside the framework of the RBV theory This is a research gap, because an analysis of the utilization of digital resources by SMEs in emerging markets is not seemly concerned well although the concept of digital marketing has been concerned more recently With positive changes in digital technology, enterprises pay more attention to look for opportunities to communicate with customers and build social media platform to communicate partners and stakeholders (Telukdarie et al., 2023). According to Thaha et al (2021), once a firm enters the business, it needs to clearly define the application of digital marketing to target appropriate customers Although digital marketing plays an important role to open the way entering the market, the technological innovation and digital orientation are indispensable for enterprises. Effects of technological innovation derived by digital technology cannot be ignored and preparation of digital skills of employees are also necessary It has a key role to cause the growth of firm (Sarsah et al.,2020).

It must be said that digital marketing becomes more effective and economical for enterprises Digital marketing belongs to the extra field of marketing and is concerned

1 1 in the firm, also its development is pointed out by the market orientation of firm(Martin & Javalgi, 2016) Digital marketing is a specialized branch of marketing that utilizes digital technologies (Nasiri et al. 2022), such as social media platforms, mobile devices, e-commerce, artificial intelligence Chatbot and other digital channels Digital marketing incorporates various strategies and tactics to reach and engage with target audiences, in which content marketing, social media marketing, email marketing, social media (Kanaan et al., 2023), e-commerce (Su et al., 2023), CRM (Masrianto et al., 2022), and artificial intelligence Chatbot (Abdelkader, 2023) are taken into account Because of digital technology development, digital marketing is seen as impossible to be missed in firms. Due to a new point of marketing strategy during the digital era, academic contributions of digital marketinginthe ground theory of firms are seemly lack of (Kannan & Li, 2017) It is important to note that digital marketing is a dynamic and evolving field, particularly it is a new theory that SMEs must recognize to exploit effectively Bad things can happen if SMEs do not know how to exploit digital marketingbasedonavailabledigitaltechnologyresourcesandemployee’sdataskills.

Although SMEs have tried to comprehend marketing strategies through digital technology, the digital capacity to adopt digital marketing of SMEs seems to be confused, digital skills of employees are remained questions not to be answered Only 9% of the 60 million SMEs in the world are thought to use the internet for marketing (Umar et al., 2020) This indicates that 91% of them are still not making full use of the internet for marketing purposes It can be said that SMEs can benefit and improve their efficiency if they have a good knowledge of how to use digital technology in terms of financial constraints and digital channel capacity Particularly digital marketing is utilized to promote enterprises’ business and reduce acquisition costs Wang (2020) had a research approach on 167 international firms and concluded that the digital capabilitiesofenterprisesgrowwithfirmsize.Thatmeansthelargerfirmswiththe high digital skill, they make the higher performance Accordingly, the results found by Wang (2020) that give us the idea to think about the approach of digital marketing of SMEs and their digital capacity in emerging markets, such Vietnam and this is dominated and focused in thisthesis.

The notions of digital marketing and innovation are intricately linked, as breakthroughs in technology have significantly altered the marketing environment in the era of digitalization (Noyola-Medina et al., 2018) Digital marketing utilizes a range of digital platforms and tools to establish connections with specific target groups, facilitate the promotion of products or services, and ultimately attain marketing objectives Technological innovation assumes a crucial role in influencing the strategies and techniques employed within the realm of digital marketing Although Noyola- Medina et al (2018) conclude that product innovation, process innovation, marketing innovation, and organizational innovation positively cause the digital marketing adoption of SMEs, the finding does not present an interaction between technological innovation and digital marketing Additionally, Azar & Ciabuschi (2017) conducted the research on 218 Swedish export firm ventures and confirm that the relationship between technological innovation and firm performance is significantly existed The research results have given an explanation on the role of organizational innovation and technological innovation to support exporting companies to expand the international market Unlikely, Rosenbusch et al (2011) studied the impact of SME innovation on firm performance, where innovation is determined by the process of internal innovation input (e.g expenditure and experience of R&D) and process of external innovation input (e.g sourcing of external technology and R&D collaboration) Several studies have also shown that the effectiveness of innovation depends on the mindset and dynamism of the business Indeed, Miller & Friesen (1982) conducted innovation research by conservative and entrepreneurial firms, the innovation here is only interested in innovation with respect to product lines, product design and service implementation.

Dynamic firms often have a leading approach with plans of technological innovation A combination between digital technology and market orientation creates innovation in product or service (Quinton et al., 2018) Digital orientation refers to the strategic mindset, while behaviors of an organization or individual emphasize on how to use digital tools to improve firm performance The drivers of innovation by digital orientation are crucial for fostering a culture of innovation and driving thed e v e l o p m e n t of new ideas, products, and processes (Sarsah et al., 2020) Wiklund & Shepherd (2003) applied the theory of RBV to review the capacity of a company and market orientation.

Currently, scholars pay more attention to explore the usage of digital technology capability of enterprises, which they can get more academic contributions with respect to digital capabilities of firm in RBV Evidently, Elia et al (2021) found a study related to the company's use of digital exports in its B2C strategy The results showed that digital competence is the core thing that helps the company to orient and access the export market rather than the previous traditional management Accordingly, the result found brings a contribution to theory of RBV, in terms of export companies, but this study does not specify digital capabilities by size of enterprises As argued by Wang(2020), large companies are no stranger to digital marketing and this issues is interested and published in previous studies SMEs in the emerging markets like Vietnam, digital marketing research is a gap of practice and academic Although there have been a few studies that have paid attention to digital technology and digital marketing (Bruce et al.,2023; Hawaldar e al., 2022; Kannan & Li, 2017), the deep analysis of the impact of digital marketing on SMEs and its interaction with other components, e.g technological innovation and digital orientation has not been popularized.

The research gapof study

SMEs significantly contribute to the economies of developing nations They comprise approximately 90% of global enterprises and account for over half of all job opportunities The World Bank emphasizes their importance in providing employment, thereby playing a crucial role in economic development.

In developing nations, formal SMEs play a significant role by contributing around40%of the national income, as measured by the Gross Domestic Product (GDP) (Thaha et al., 2021).

The rapid evolution of digital technology is directly impacting how SMEs in emerging markets react and adapt to market changes These firms must embrace technological advancements to stay competitive and relevant in today's fast-paced business environment By understanding how digital technology development influences their industries, SMEs can proactively adjust their business strategies, in which digital marketing is indispensable to capitalize on emerging opportunities and overcome potential obstacles According to the findings of Falahat et al (2020), although acknowledging the significance of digital marketing, the authors contend that SMEs prioritize product innovation over investments in digital marketing That means SMEs are willing to pay more cost for innovation rather than digital marketing investment As a result, the efficiency of those two considerations has not been verified, this is a gap of study and chance for this thesis intents to find out In addition, this thesis also aims to elucidate the potential impacts of the simultaneous interaction of digital marketing and technological innovation, and interaction of digital marketing and digital orientation on SME performance.

The current body of scholarly work on digital marketing mostly focuses on the concept of digital transformation and the use of digital platforms by large multinational companies in developed countries (Pingali et al., 2023) Similarly, Wang (2020) also states that digital marketing has been established on the fundamental principles of digital technology According to Sony & Mekoth (2022), to adapt industry 4.0, the firm must be proficient for nine technologies (e.g cloud computing, big data, the internet of things, auto robots, additive manufacturing, integration of system, cybersecurity, simulation, and augmented reality) employees should be equipped in the best way. Comparing to larger companies, the resources and capacity of employees equipped with digital technology skills are more advantages small companies (Heredia et al., 2022).

In fact, many questions about the digital skills of employees working in SMEs need to be found out These questions have not been investigated by previous scholars; it isseen as a research gap in thisthesis.

In recent years, there has been a notable increase of studies to investigate how SMEs use digital marketing to promote their business (Taiminen & Karjaluoto, 2015; Thaha et al., 2021), but theoretical advancements regarding the digital marketing employed bySMEs in emerging nations have not garnered substantial attention Accordingly, this thesis contributes to the literature review on digital marketing by providing context and highlighting trends Besides that, the thesis brings a significant contribution toclarify the doubts and arguments of previous studies about the contribution of digitalmarketing depending on the resources and size of the business to improve SME performance Additionally, this study also wants to compare the finding with the arguments of Halik etal. (2021)withrespecttotheimbalanceinbusinesssizewhenusingdigitalmarketing As a result, the finding of this thesis will fill the research gap in the theory of RBV, which shows how much digital marketing can be applied if SMEs have strongly availableresources.

In fact, there is a lack of comprehensive evaluations and investigations about the limitations in the feasibility of SMEs in emerging markets like Vietnam when using digital marketing strategies While SMEs have made progress in recognizing the importance of digital technology and have started to adopt digital transformation, they have not yet focused on developing the digital skills of their personnel This is also seen a practical gap Once the precise gap is identified, the advantages of assisting small and medium enterprises in their growth will be amplified.

Behavioral theory of firm was develop by Cyert & March (1963), which firm behavior toward using digital technology resources for production and business is not widespread Although it is not strange in terms of digital marketing applications of multinational companies, the behavior of using digital marketing by SMEs is still hidden and has not been exposed This study expects to investigate how digital orientation can influence SME performance through the moderating of employees’ digital skills In addition, once analyzing the application of digital marketing by SMEs for business in emerging markets, it will be an exploration to partly measure how muchSMEs adopt available information technology resources for digital marketing to improveitsperformance.Thisresultisameaningfulcontributiontoenrichingthetheory of RBV and behavioral theory of firm for SMEs in the strategy of applying digital marketing.

Objectivesofstudy

(1) To determine the function of digital marketing and its interaction with technological innovation and digital orientation influencing the performance ofSMEs.

(2) To find out the impact of technological innovation and its interaction with digital orientation on SMEperformance.

(3) To examine the impact of digital marketing, technological innovation, and digital orientation on the performance of SMEs, in the context on the moderating effect of employees’ digitalskills.

Research questions

(1) How does the function of digital marketing and its interaction with technologicalinnovationanddigitalorientationimpactonSMEperformance

(2) How does the role of technological innovation and its interaction with digital orientation impact on SMEperformance?

(3) What is the impact of the moderating variable of employees’ digital skills on the association of digital marketing, technological innovation and digital orientation on SMEperformance?

Scope and limitationofstudy

This dissertation does not employ qualitative methodology The dissertation is mainly focused on the quantitative methodology, utilizing a large sample of Small and Medium Enterprises (SMEs) in Vietnam To overcome the limitation of the absence of a qualitative technique in the study, the dissertation proposes to utilize references from recently published papers with an emphasis on SMEs in both developed and developing nations The building of the research model is based on relevant earlier studies that are related to the survey conducted by the General Statistics Office (GSO) of Vietnam TheGSO questionnaire comprises a multitude of inquiries However, for the sake of this thesis's study model, only the questions pertaining to digital marketing, technological innovation,digitalorientation,andemployees'digitalskillsarechosenandemployed.

Contribution of dissertation

The thesis will provide two major contributions First, the thesis findings will be presented as an academic contribution, with theoretical contributions discussed in detail Second, the research findings will provide a general picture of SMEs inemerging markets, such as Vietnam The research findings are also useful for business owners to reflecto n h o w t h e y h a v e p r e v i o u s l y a p p l i e d d i g i t a l t e c h n o l o g y t o d i g i t a l m a r k e t i n g , allowing them to identify areas for improvement Furthermore, the study's findings serve as a useful reference for relevant scientists and university students who can use them in theirresearch.

Overview ofresearchmethodology

To answer research questions, the thesis employs statistical models to test hypotheses proposed, in which the method of Ordinary Least Square (OLS) is taken into account The database used to run regression models is a source of the GeneralStatistics Office (GSO) of Vietnam, it is defined as a big secondaryd a t a

Structure ofthe dissertation

Chapter I introduces the dissertation and provides background information on prior relevant investigations This serves to demonstrate the research gap and objectives of thestudy.

Chapter II provides a literature review, together with theoretical background and important issues Furthermore, hypothesis statements are also considered.

Chapter III presents the research methodology, emphasizing the database employed and the research model as its foundational elements Chapter IV delves into the data analysis, presenting the extracted findings from the study.

Chapter V provides the final analysis of the study, where the dissertation's findings are examined to demonstrate their academic significance and the originality of the research.

LITERATUREREVIEW

Theoreticalbackground

Thetheoryofthefirmisbasicforaperspectivetothinkoforganizationalobjectives and framework toward analyzing research problems Neoclassical economics' theory of the firm, which is a subset of the broader theory of value, was developed to examine how prices and the distribution of resources among various uses are determined (Barca, 2003) A production function that captures the underlying technology utilized to deploy labor and capital forces for the purposes of producing products and services serves as the firm's representation The common assumption is that this underlying technology will first experience increasing returns to scale, which implies a dropping average cost curve, and subsequently diminishing returns to scale, which will result in an increase in average cost.

The theory of the firm describes how firms are able to sustain competitive advantages in their industries (Hawkins, 1973) The main idea is that firms are bundles of assets brought together with a specific goal in mind The assets can be tangible or intangible, but they combine and form business strategies to better compete with other organizations The theory of firm suggests that firms will invest only if they can get a beneficial return on the investment (Hawkins, 1973) It is possible for organizations to create an internal environment of innovation, so that individuals have the skills and resources necessary to pursue innovative ideas, or firms can adopt an open innovation strategy by acquiring knowledge from external sources like customers, suppliers, and consultants At a time when information technology is developing like today, the theory of firm needs to be extended to the case of companies that have made innovations in approaching digital technology for business The research of this thesis is also a contribution to the expansion of theory of firm how to react the business environment toward organizational agility through adoption of digital model business (Kuusisto,2017).

The theory of the firm has been a major part in understanding how resources are allocated and decisions made in the marketplace It is based on four key concepts: (i) Organizational framework; (ii) managerial hierarchy; (iii) division of labor; (iv) economy of scale Scholars applied the theory of the firm to explain how managers in an organization can help increase profitability by optimizing process and reducing waste The core ideaisthat, in a market economy, an organization might be abletoincrease its performance by performing some tasks more effectively than its competitors The basic premise of the theory is that a person or group of people will establish an organization when it’s more efficient to do so than not The theory has been extensively studied and applied to many fields, especially business firms, but also religiousgroups,laborunions,volunteerorganizations,non-profitsandgovernments.

Using the theory of the firm is seen as a lens to see business strategies based on existing resources There have been beginnings of some research on recognizing the role of technology as an affirmation of the boundaries of the enterprise, the creation of operations, and the management of support Typically, Coase (1937) argued that the core technology of the early phones helped shape the firm boundaries of business. Chandler (1962) also noted that the consolidation of technology-based industries would benefit the industries However, the above statements are still unclear as to how digital engineering dominates the company's strategy as well as its economic, social and behavioral background.

The widespread impact of digitization extends beyond communication, facilitating daily interactions and reducing the need for physical exchanges, allowing for customization within internet networks (Ivanov, 2012) The rise of digital technology has fostered the growth of social networks, leading to the development of e-commerce and mobile devices This, in turn, has sparked discussions about shifts in corporate structures and hierarchies (Foss, 2005) With the emergence of multi-stakeholder ecosystems, the attractiveness of multilateral business models, and the increasing importance of data, the market positioning of businesses is continuously influenced in the digital landscape.

20 analytics As stated by Menz et al (2021), in the era of digitalization, an organization must prioritize three matters: (i) Advantage of corporate; (ii) the extent, boundaries, and scope of the organization; and (iii) the configuration and internal organization of the company.

2.1.2 The Behavioral Theory of theFirm

With arguments on administrative behavior of Simon (1947) and organizations (March & Simon, 1958), Cyert & March (1963) developed the behavioral theory of the firm This development is built on previous publications but explores new organizational frontiers According to Cyert & March (1963), the core research commitment of the behavioral theory of the business is to anticipate the pricing, output, and resource allocation decisions of the firm with "an explicit emphasis on the actual process of organizationaldecision-making."

Simon (1957) criticized the conventional microeconomics theory that an organization's objective is essentially the same as an entrepreneur's desire to maximize profits Instead, he suggested that organizations should be seen as groups of people who have various aims and work within a set of hierarchical power structures The simultaneous limitation of management behavior's capacity happens, it can cause unsuccessfully Similar to Cyert & March (1963), who used organizational goals, expectations, choice, and control to frame the characteristics of the empirical business, they established a positive theory to explain internal organizational behavior as well as the behavior of oligopolistic markets The decision-making process is adaptively rational, with numerous objectives and ongoing organizational learning, when it comes to deciding on prices, outputs, and resource allocation.

The behavioral theory of the firm highlights organizational behavior and decision-making, emphasizing bounded rationality This concept acknowledges that individuals in organizations have limited cognitive abilities and information processing capabilities, leading to decisions that may not appear optimal from a purely rational perspective By understanding this key concept, organizations can better comprehend why decisions sometimes deviate from expected rationality.

Accordingly, Argote & Greve (2007) emphasized the significant impact of early Carnegie school notions on organizational behavior research The behavioral theory of the firm comprises several hypotheses and theoretical mechanisms through which additional hypotheses are generated This thesis is supported by the opportunity to implement the firm's behavioral theory to state the hypothesis regarding the behavior of SMEs, in which digital marketing, technological innovation, and digital orientation are considered While subsequent research has not given them commensurate emphasis, there are certain research traditions that build directly upon the behavioral theory of the firm.

Within the framework of the behavior theory of the firm, the concept of organizational learning is frequently regarded as a cohesive notion that stimulates contemplation regarding the adaptive outcomes of processes formulated in theory and substantiated by practical investigation According to Cyert & March (1963), organizations can be described as "complex systems." They contend that their formal model aligns with this characterization due to its composition of interdependent decision-making rules that are responsive to both external feedback and internal reinforcements, such as the establishment of sales expectations The behavioral theory of the firm posits that an adaptive element of organizational function is the interconnectedness of its components, which contributes to the overall stability of the enterprise The behavioral theory of the firm provides a valuable framework for understanding organizational behavior and decision-making processes Its fundamental concepts shed light on why firms may deviate from traditional economic assumptions and offer alternative perspectives on how organizations operate inp r a c t i c e

By emphasizing the importance of human behavior, this theory recognizes that firms are not static entities, but rather dynamic systems driven by the decisions and actions of their members It highlights that factors such as individual motivations, cognitive biases, social dynamics, and organizational culture play a crucial role in shaping firm behavior This perspective has led to valuable insights into various aspects of firms, including decision-making processes, organizational structure, performance management systems, innovation strategies, and more By considering human behavior as a key driver of change within firms, the behavioral theory provides a comprehensive framework for understanding and predicting how organizations evolve over time Cyert

The development of simulated models based on real-life decisions in 1963 established the validity of organizational theory as a foundation for prediction and synthesis Further simulations were refined to examine the impact of specific theoretical mechanisms on organizational behavior and adaptation, contributing to a series of studies on organizational decision-making (Cohen et al., 1972) and search processes (Levinthal & March, 1981) These investigations clarified the significance of theoretical mechanisms in modeling organizational behavior, shaping subsequent research in organizational theory that drew heavily from behavioral theory.

The behavioral theory of the business has been slow in adopting regression models due to its emphasis on organizational decision-making and changes in events that do not align with the traditional strategy of employing continuously dependent variables and datasets to explain performance The regression approaches have made significant contributions to the examination of the influence of learning curves on costs (Argote & Greve, 2007) The utilization of regression analysis has witnessed significant growth in various fields as the availability of historical-event approaches for discrete and continuous time analysis has expanded Performance feedback studies have been conducted to examine the impact of changing events on a particular sort ofeffectiveness function (Greve,2011).

The behavioral theory of the business has demonstrated remarkable effectiveness in terms of its impact on the advancement of organizational theory and strategic management Despite its abilitytoestablish a robust basis for the conventional neoclassical framework in economics, the notion is widely contested among economists (Cyert & March, 1963) The field of cognitive science encompasses a wide range of research issues, including cognition, habits, talents, attention, strength, and adaptability. These topics are generally studied within the context of a broader framework, which may involve integration with other relevanttechniques.

2.1.3 Theory of Resources-Based Views(RBV)

Mainconcepts

Through social networking networks, the advancement of digital technology allows individuals, individuals, and businesses to meet and exchange information more regularly Typically, the early growth of Web.20 altered human behavior toward information technology in terms of obtaining information, communicating, and experiencing products and services (Chong & Pervan, 2007) Furthermore, the Internet of Things has transformed how people engage with their physicals u r r o u n d i n g s

According to Quinton et al (2018), SMEs will be more interested in digital technology because it will help them collect information, increase competitive advantages, and save costs for marketing tactics However, SMEs may experience challenges adapting to change due to technical limits and a lack of individuals who are knowledgeable about digital marketing One of factors influencing technology adaptation is senior management In the context of small and medium-sized businesses, senior management is often understood by the firm owners, the team, and the behavior that will set off other organized people.

Digital marketing is a novel and captivating notion that has garnered considerable attention among organizations in contemporary times This phenomenon revolutionizes the manner in which customers and businesses engage in communication, exchange information, and engage in commercial transactions (Yaseen et al., 2019) The field of digital marketing has received significant interest from marketers This is mostly due to its ability to promote interactions between firms and customers, as well as foster relationships among customers themselves As a result, digital marketing plays a crucial role in establishing and maintaining emotional and psychological connections between customers and organizations (Thaha et al., 2021).

Digital marketing harnesses digital media to interact with consumers in a timely, personalized, and contextually relevant way (Masrianto et al., 2022) This marketing strategy is often referred to as "online marketing," "internet marketing," or "web marketing."

"digital marketing" has gained widespread usage, particularly after 2013, coinciding with the increasing adoption of communication and information technology.

Digital marketing encompasses any digital technology organizations leverage to market and promote offerings It encompasses diverse online strategies targeting audiences in the digital realm Digital marketing's significance has grown with the integration of technology into daily life This marketing technique primarily utilizes the internet to reach target audiences and provides real-time tracking and adjustment capabilities As technology advances, new digital marketing trends and techniques continue to emerge Moreover, digital marketing has become an essential strategy for Small and Medium Enterprises (SMEs) to enhance their performance in the modern marketing landscape.

It is more leveraged by companies once its digital resources are available For smaller enterprises, digital marketing is a cost –cutting solution Search engines, social media, email, web link are the basic channels for firms to find chances to reach current and potential customers This is also considered online marketing, web marketing, internet marketing.

Because SMEs have an important role to contribute to economic transformation andprogressinacountry,thedigitalmarketingconsiderationofSMEswillundoubtedly haveafavorableimpactoneconomicgrowthinacountry(Daudetal.,2022).According to Khin &

Ho (2019), a company's dedication to supporting product and service innovation through the use of digital technology is known as "digitalorientation."

Accordingly, the idea of digital orientation is focused on the company's technological capabilities and digital adoption to utilize certainty of service and product creation.

In the growing global trend, enterprises do not hesitate to invest in digital transformation to have an internal information technology system Its innovation seems to be more purposeful toward digital technology According to Quinton et al (2018), digital orientation has three main domains, e.g market orientation, entrepreneurial orientation and learning orientation These three components have mutual characteristics to support the company’s business improvement and jointly create advantages of positioning Accordingly, digital marketing is a purposeful strategic positioning for SMEs to capitalize on the opportunities derived by digital technology. This positioning includes the attitude and behavior of supporting the creation and the usage of market insights to address active innovation SMEs can excel in digitized organizational environments and intelligence-gathering technologies, reducing the cost of expanding theiraudience.

Firms agree that digital media have had a significant impact on how a marketer currently approaches a consumer (Smith, 2011) Digital media is the term used to describe electronic forms of media that transmit information in digital formats This encompassesall formsofmediathatcanbeaccessedthroughcomputers,mobiledevices such as smartphones, and other digital devices such as digital billboards Digital marketing is frequently done on the internet Digital advertising is a type of marketing that uses the internet specifically to spread marketing messages Due to the high level of connection, digital marketing makes it possible to communicate with a large number ofpeopleatonce.Itistypicallyusedtomarketgoodsandservicesinatimely,pertinent, more individualized, and economical way (Taiminen & Karjaluoto, 2015) Digital mediaisheavily usedinmarketingactivities,frompromotionsorproductoffers through productsales.

The internet is the advertising medium with the quickest rate of growth Hundreds of millions of dollars are spent by advertisers each year to post their advertising on popular websites (Taiminen & Karjaluoto, 2015) People are more likely to make an online purchase after reading an online advertisement, according to studies Internet

3 1 advertisingbannerscancreateanevenplayingfield forbigandsmallbusinesses(Smith, 2011). The internet allows users to select the material they want to view The consumer is drawing from a wealth of freely available information Before making any purchases, consumers may now quickly access product information and even engage in discussion Customers now have access to a broad audience through platforms like social networks and blogs with whom they may express their opinions and product reviews (Kaynak et al (2005) Customers can have a significant impact on the positioning and sale of products through these channels There is a growing tendency among consumers to place greater trust in consumer opinions as opposed to data generated by businesses Digitization refers to the process of converting value-creating businesses into a digital format (Nasiri et al (2022) Digital technology has an impact on society Some studies show that, once firm implements digitalization, it creates spillovers to organizational innovation, marketing innovation and market-based innovation (Kuusisto, 2017) Digital orientation indicates a firm’s commitment to implementing digital technology realize product innovation, service innovation and solution (Khin & Ho, 2019) According to Gatignon & Xuereb (1997), the concept of digital orientation is based on the idea of technological orientation of enterprises Indeed, a digitally oriented company is capable and will be aware of new digital technologies take advantage of this in product development, innovation, and marketing strategy (Khin and Ho, 2019) Once digital technology is applied to a business, it will contribute to exploiting digital marketing, helping to analyze market information more effectively According to previous studies, different areas of digitalization will shape digital marketing capabilities, such as developing online advertising programs, selling online (Mathews et al., 2016) and adapting e-sales (Kaynak et al.,2005).

Digital marketing is considered as a tool, describing the use of technology in marketing efforts, and practices of business by marketing products, services,information, ideas via the internet, mobile phone, display advertising and other electronic media (Pradhan et al., 2013) Digital marketing also facilitates access and communication with many people, based on which take advantage of opportunities to promote products or services in a time way, in which appropriate and cost-effective manner are enclosed It can be said that the market for digital marketing is borderless, because marketing information can reach further markets and has no time limit Digital marketing is supported by many different channels, such as website channels, search engine marketing, search engine optimization, social media marketing, email marketing, content publishing, digital advertising, mobile marketing action, viral marketing, digital media, affiliate marketing, online public relations (Bala & Verma, 2018).

According to Umar et al (2020), the level of business competitiveness rises, the conversion of offline to internet marketing generates a criterion for corporate success.

A business might flourish thanks to the presence of online commerce, where the marketing target grows Sultoni et al (2022) confirmed that digital marketing is an advantage for SMEs to improve its performance The utilization of the internet allows the public to access and compare information provided by business entities of companies This is a chance for firm to enable digital marketing to facilitatetransactions on a global scale, without any time constraints (Kotler & Keller,2 0 0 6 )

To have a successful digital marketing approach, enterprises must have a good infrastructure of digital system Also, managers of SMEs must learn how to employ these marketing strategies to grow their businesses Once SMEs effectively approach the adoption of digital marketing, its performance can obtain Depending on the level of SMEs that can execute them, there are many different digital marketing concepts. These range from assessing the use of applications like social media or more sophisticated technology like websites and e-commerce to using digital marketing in the marketing process (Umar et al.,2020).

Social media and digital marketing give small businesses the chance to expand their consumer base and communicate with current clients more effectively (Martens et al (2016) According to Shideler & Badasyan (2012), even as the foundational element of digitization, broadband access can provide significant opportunities for SMEs, including the ability to reach new target markets and boost productivity and efficiency as well as growth and competitiveness Furthermore, SMEs can save money by using the internet (Chong & Pervan, 2007), because once online channels are invested,S M E s can get facilitation of internal and external communication (Eriksson et al., 2008) To investigate impacts of social web, Barnes et al (2012) conducted the survey on 12 SMEs in UK and argued that social web is proven to increase efficiency and external communication.

Digital marketing proficiency encompasses a company's ability to effectively leverage digital channels and technologies to engage customers and achieve business objectives It involves the implementation of strategies, utilizing online platforms, and harnessing data to foster customer relationships and gather insights about their preferences and behavior Digital marketing capabilities represent the essential processes, structures, and competencies that organizations require to thrive in today's digital landscape, enabling them to build enduring connections with customers by delivering relevant content and experiences.

Hypothesisstatements

2.3.1 Maineffects a How does digital marketing impact SMEperformance?

Digital marketing is geared towards the success of goals, including increasing customer interaction with the company and raising the consumer’s awareness, growing sales, reducing sales promotion and distribution costs, and improving store customer data Saura et al (2020) have a study to explore how firms can leverage digital marketing technology to enhance firm performance The findings provide valuable guidance for firms and decision makers looking to optimize their digital marketing efforts and drive tangible results In addition, Saura et al also argued that with various techniques of digital marketing, employing digital marketing to meet stable development of the company is not easy, particularly for SMEs in the emergingmarket.

Regular activities now include a lot of digitization and its transformation concerned by SMEs in emerging countries, e.g Vietnam It is reshaping the conventional methods of communication between customers and enterprises. According to Kaplan & Haenlein (2010), digitization, particularly social media, is changing consumer behavior, with significant ramifications for businesses, goods, and brands While Kaplan (2015) argues that consumers are using social media and spending more time online With various linked devices like smart phones, tablets, and laptops, they use online services for browsing, saving, and playing music, e-mailing, and accessing Facebook, Twitter, and apps, which is changing how people use the internet.

As argued by Sultoni et al (2022), digital marketing is a trigger to increase customer interaction with businesses, higher sales revenue, distribution and promotion costs, greater brand awareness, better customer databases, stronger customer relationship management, and improved supply chain capabilities Several factors, such as rising sales volume, promotions, advertising, product quality, price, and others, can be used to gauge firm performance These factors are indispensable for the presence of digital marketing in the current stage of digital technology While Khin & Ho (2019) confirmed an important role of digital technology and digital capability on organizational performance, Djakasaputra et al (2021) and Taiminen & Karjaluoto (2015) show evidence of a significantly positive relationship between digital marketing and firm performance Based on arguments above, the hypothesis is concerned as below

H1: Digital marketing positively influences firm performance. b How does technological innovation impact SMEperformance?

As mentioned in the previous section, technological innovation in an enterprise refers the realization of ideas for the development of new product or new services or the introduction of new elements in the production process and service operation (Evan, 1984) It is not ease to challenge a relationship between technological innovation and firm performance Alraja et al (2022) took an approach on researching how technological innovation affects stable development of firm But his study just stops answering the stage of development to innovate business to meet firm performance. While Azar & Ciabuschi (2017) had a study on 218 Swedish export venture and found that once international firms pay more attention to technological innovation, export performance of firms are increased Because of fierce competition, firms do not want to be late for new strategies toward market competition, their adoption to innovate products and services are seriously considered While Thornhill (2006) found a significant effect of innovation on revenue growth through a study of 845 Canadian manufacturingfirms.

Although if there is a correlation between a dynamic industry and a higher rate of innovation, businesses that are inventive are more likely to see revenue growth regardless matter the sector in which they compete The findings of Thornhill (2006) also indicate that the expertise of the company, the dynamism of the industry, and innovation influences firm performance The dynamism of the industry forces companies to be agile and adaptable, while innovation empowers them to stay ahead of the curve and create unique value propositions Failing to embrace these elements can lead to decreased corporate performance and eventually impact the company's long- term sustainability in the market Conversely, companies that effectively navigate industry changes and drive innovation are more likely to thrive and achieve better performance outcomes Another study on SME’s innovation of Rosenbusch eta l

(2011) also confirmed a significant relationship between innovation and firm performance.

According to Sulistyo & Siyamtinah (2016), there is a hypothesis that innovation capabilities significantly increase performance and competitive advantage Innovation and quality product development can be encouraged to develop only when the organization enhances the good innovation capabilities The result also contributes to the improvement from corporate innovation capabilities to the spirit of entrepreneurship, marketing capabilities, the ability of relational capital, and the empowerment of employees in the organization The higher the organization can increase in the innovation capabilities, the greater the company can improve business performance Thus, companies who can generate finance and marketing performance will ultimately create a competitive advantage Business owners of SMEs should pay attention to establishing a higher entrepreneurial spirit, optimizing the market analysis ability, widening the various stakeholder's network, and providing more opportunities to employees to perform themselves in decision making authority to be able to create more innovation capabilities as a result of competitive advantagea c h i e v e m e n t

To found evidence of a significant relationship between innovation and firm performance, Ezzi & Jarboui (2016) conducted the survey of 96 Tunisian companies and confirmed an impact of innovation on firm performance through the quantitative model of factor analysis However, in which firm performance is measured by financial, social, and environmental performance ROE is included in financial performance. Based on arguments above, the hypothesis is stated asbelow

H2: Technological innovation positively influences firm performance. c How does digital orientation impact SMEperformance?

The digital landscape has become an integral part of the business world, and its impact on small and medium-sized enterprises (SMEs) cannot be overlooked The adoption of digital orientation has the potential to significantly influence the performance of these businesses Accordingly, Sultoni et al (2022) find digital orientation make its significant contribution to achievements of business strategies, in which digital marketing strategy is taken into account.

With the inheritance from Nambisan et al (2019), Kindermann et al (2021) conceptualized digital orientation with four dimensions, e.g digital technology scope, digital capabilities, digital ecosystem coordination, and digital architecture configuration These four factors have common points relevant to the adoption ofdigital technology resources in firms Strategic decision making on digital technology is understood presents as digital orientation Once the investment of digital orientation is good, it causes a positive contribution to firm performance (Kindermann et al., 2021) As defined by Bendig et al (2023), digital orientation is the adoption of big data analytics, 3D printing, modeling technique, Internet of Things, system integration, advanced robotics, etc in the organization Based on the sample of 2,800 firm observation, Bendig et al (2023) found a significant relationship between digital orientation and environmental performance, in which digital orientation calculated through unifying four dimensions of digital technology scope, digital capabilities, digital ecosystem coordination, and digital architectureconfiguration.

Based on arguments above, we can see that when firms embrace digital technologies, they gain access to a wider customer base, allowing them to expand their reach beyond traditional boundaries This increased visibility can lead to higher sales and revenue, ultimately improving SME performance (Quinton et al., 2018; Kindermann et al., 2021) This means digital orientation enables SMEs to streamline their operations and improve efficiency By leveraging technology for tasks such as customer relationship management (CRM), customer relationship management, and marketing automation, businesses can reduce costs and enhancep r o d u c t i v i t y

As arguments mentioned previously, the hypothesis about the impact of digital orientation on SME performance is well-founded as below.

H3: Digital orientation positively influences firm performance. d Interaction between digital marketing and technologicalinnovation

We can imagine that SMEs will have troubles once they don’t know well market situation, in which competitors and consumers are taken into account (Pradhan et al.,2013) Digital marketing encompasses the strategic promotion and dissemination of goods, services, information, and ideas through various electronic platforms such as the internet, mobile phones, display advertising, and other digital mediums Digital marketing has been a subject of interest for many esteemed authors, yet consensus regarding its optimal applications remains elusive This is also a reason this study will take further investigation into the matter.

According to Rosário & Cruz (2019), to stay ahead of other companies as competitors, firms need to continually innovate their digital infrastructure and their technologies The fundamental concept underlying marketing is the creation of persuasive messages that are capable of luring in the target audience In recent times, the exponential growth of digital technology has exerted significant pressure on businesses, particularly SMEs Hence, SMEs are consistently engaged in the process of innovation to effectively engage with the digital technology ecosystem Enterprises must be concerned with innovation as they become aware of the shortening of product life cycles The study of Noyola-Medina et al (2018) on Mexican small enterprises has found that enterprises have rapidly changed their integration with digital media to connect with consumers This shows that digital marketing of SMEs has not stopped trying, but before that, enterprises have to go through the stage of converting traditional marketing strategies into digital marketing According to Khin & Ho (2019), when a firm effectively manages its digital system for both daily operations and long-term strategies, it can potentially centralize its database to predict client behavior, so improving its competitive advantage It may be argued that while research on the adoption of digital technology by SMEs in industrialized nations is quite common, it remains relatively scarce in emerging economies such asVietnam.

As argued by Rothkegel et al (2006), The interaction between digital marketing and technological innovation is profound and continuously evolving Technological advancements have revolutionized the way businesses look at marketing strategies This is a significant motivation for businesses to move towards digital marketing, which happens after the company's technological innovation is consolidated Mandal &Banerjee (2017) demonstrate a positive correlation between social expenditure and digital marketing expenditure, indicating that such investments can lead to improvements in firm In addition, the interaction between digital marketing and technological innovation is a continuous cycle of improvement As technology advances, digital marketers find new ways to leverage it for better targeting, engagement, and results In turn, the insights and data generated through digital marketing help shape future technological innovations to further enhance marketing strategies and customer experiences (Bhattacharya & Sen, 2003) Based on arguments, the hypothesis is taken into account of as below

H4: Technological innovation strengthens the relationship between digitalmarketing and firm performance. e Interaction between digital marketing and digitalorientation

In the study of Sultoni et al (2022), the findings highlight the benefits of embracing digital orientation, such as increased brand visibility, wider audience reach, and improved customer engagement By understanding and implementing these strategies, businesses can stay competitive in an increasingly digital-driven marketplace Another study of Quinton et al (2018) also have arguments which digital orientation as antecedent one improving SME performance These researchers have made significant contributions to the understanding of how digital orientation influences digital marketing strategies Their studies shed light on the importance of aligning a company's digital capabilities with its marketing efforts in order to achieve optimal results.

Although digital orientation is not strange for large companies, it is not so familiar with SMEs Some SMEs need time to adapt A strong digital orientation within an SME is crucial for successful digital marketing efforts The study conducted by Heredia et al. (2022) highlights the significance of digital orientation for SMEs, emphasizing that it goes beyond simply having presence of digital platform and stimulates the growth of digital marketing toward achievements With the arguments just mentioned above, the hypothesis is concerned as below.

H5: Digital orientation strengthens the relationship between digital marketing andfirm performance f Interaction between technological innovation and digitalorientation

Introduction

Digital technology's advancements have enabled businesses to access new market segments through digital business channels, transforming conventional business models (Hirvonen & Majuri, 2020) The rise of digital marketing has empowered businesses to connect with online consumers, capitalizing on the ubiquitous use of technology and the surge in internet access This accessibility has created an opportune moment for companies to engage with potential clients through real-time information access and increased internet consumption.

It is imperative to acknowledge that leveraging digital media is crucial for individuals as well as organizations seeking to promote their brand In order to maintain competitiveness within the market, it is important for SMEs to undertake this powerful tool for growth and success Nevertheless, a considerable number of SMEs appear to underutilize the complete capabilities offered by digital tools, as highlighted by Gilmore etal.(2004).Indeed,therealmofSMEmarketingdifferssignificantly fromthatoflarge firms, as the process of digitization poses greater difficulties for SMEs According to Reijonen (2010), it is contended that traditional marketing theories are not applicable to SMEs Furthermore, it should be noted that the marketing strategies employed by SMEs do not follow a circular pattern when performed in a context-specific and impromptu manner (Gilmore et al.,2004).

According to Reijonen (2010), SMEs are often characterized by their limited resources, which can present unique obstacles when it comes to marketing, finance,operations, and overall business management However, they also possess distinct advantages such as flexibility, agility, and close customer relationships Taiminen &

Karjaluoto (2015) say that the marketing operations of SMEs are often characterized by a lack of organization and a lack of planning in their implementation While Hill (2001) argues that the adoption of formal marketing planning by SMEs may see an upsurge due to the younger generation of business owners with a good level of education. However, using digital marketing of SMEs is not well-adapted (Nuseir & Aljumah, 2020) This is realized as a significant disadvantage for both SMEs and the country’s socio-economy As known, Vietnam is an emerging market and SMEs account for more than 90% in total Most SMEs are seemly facing confusion of digital technology adoption toward business strategies; however, this has not been found in recentstudies.

Binh et al (2022) has conducted a study on SMEs in the Mekong Delta, in whichSMEs’ adoption of information technology (IT) systems in administration model are concerned in the quantitative model The work of Binh et al sheds light on the use of information technology tools and systems in areas such as decision-making,communication, data analysis, and process automation Their research also highlights the challenges and considerations that need to be addressed when implementing IT solutions in corporate management This comprehensive approach ensures that their findings are not only relevant but also practical for organizations seeking to leverage technology for better management outcomes.

Previous studies andtheirapproach

The evolution of digital technology drives the growth of relevant research Some authors also suggest that the usage of digital technology represents a significant shift in the manufacturing and commercial processes As argued by Sultoni et al (2022) and Gandarzella et al (2021), digital technology is a significant factor in corporate strategy and efficiency Due to the rapidly advancing digital landscape, employees' digital skills have become more important than ever before Companies are recognizing the need to invest in upskilling their employees to ensure they can effectively navigate and leverage digital tools and platforms From basic computer literacy to more advanced skills such as data analysis, coding, and social media management, employees with strong digital skill sets are invaluable assets to any organization By equipping employees with the right digital skills, businesses can streamline processes, improve productivity, and stay competitive in an increasingly digitized world Moreover, these skills empower individuals to adapt to technological advancements and embrace new opportunities for growth within their careers.

With a study on project managers’ digital skills, Marhraoui (2023) found that employees who are proficient in using digital tools and platforms are more likely to be productive, adaptable, and efficient in their roles Additionally, these skills enable individuals to effectively communicate, collaborate, and problem-solve in a digitally driven work environment As argued by Van Laar et al (2019) , the21 st century is the century of the digital technology, organization’s recruitments can consider potential employees who are proficiency of skills of digital technology adoption Findings of Marhraoui (2023) and Van Laar et al (2019) partly show positive correlation between level of digital skills in a firm and its overall performance Firms with employees who possessadvanceddigitalskills arebetterequippedtonavigatethecomplexitiesofonline marketing, data analytics and technology integration This enables them to leverage emerging technologies effectively and make informed decisions that drive business success With arguments as mentioned, we can see that digital skills cause a significant contribution to moderating firm performance through digital marketing use offirm This is employed as the hypothesis that employees’ digital skills are a potential influence to stimulate development and crease motivation to improve business performance therefore being considered as a novelty in thisthesis.

Studies summarized in table 3.1 are representative research to present changes in firm performance and competitive competency once they are influenced by digital marketing, technological innovation, digital orientation, and digital skills of employees. The utilization of digital technology not only serves the digital marketing strategy (Thaha e tal, 2021) but also assists SMEs in improving the effectiveness of their technical innovation While Astuti et al (2020) consider an impact of digital technology on firm performance, their research delves into how digital technology can enhance various aspects of a firm's operations and ultimately contribute to its overall performance Their findings highlight the positive influence that digital tools and platforms have on key performance indicators such as revenue growth, cost reduction, customer satisfaction, and market competitiveness As a result, digital technology is not only a good tools for large firms, but also an indispensable one for SMEs Garzella et al (2021) have a confirmation through their study of verifying the significance of boundary size and capabilities in the development and execution of innovative business models within the context of small and medium-sized Also Radicic & Petković (2023) discovered that the usage of digital technology had a beneficial effect on innovation results in micro enterprises, small firms, and medium firms This finding is based on the quantitative methodologies, in which the bivariate probit models are taken into account.

Although the resources available of digital technology are quite important, knowing how to use this is more important, in which digital skills of employee is the most important In the study of Van Laar et al (2019), they discovered that employees with strong digital skills help firms to use a full of advantage of digital technology resources amiable to main customers and compete against competitor.

Author Name of journal with ranking

Digital skills and digital technology adoption

International Journal of Entrepreneurs hip

The survey based on random sampling conducted on of 298 SMEs in Indonesia

Organizational readiness toward innovation; Firm characteristics; Strategic orientation; Persuasion of innovation; Digital technology for innovation adoption

Digital technology causes innovation adoption impacting on SME performance

The survey was conducted on250SMEs.

Technological management; Cultural management; Relational management; Boundary size

The study verifies the significance of boundary size and capabilities in the development and execution of innovative business models within the context

Author Name of journal with ranking

Independent variable Finding of small and medium-sized enterprises (SMEs) and boundary management.

Data based on thewaveconducted in

2016, which the sample of study is 2,854 SMEs Germany firms The binary probit model is employed Firm types:

Digital connection, digital value chain, and big data analytics;

Productivity, exports, graduate, firm size, and industry.

The moderating of internalR&D for digitalization and technological innovation is confirmed

Author Name of journal with ranking

Online survey conducted in 2017 on 1,222 respondents,whoare engineers, designers, and project managers

Hypotheses are tested by the quantitative method of confirmatory principal component analysis andregression

These skills enable easy digital navigation, technology adaptation, and online communication and collaboration

Author Name of journal with ranking

Sustainability The survey conducted on 533 SMEs inGhana(158 SMEsowners,

125 IT managers,and75 other department

Attitude toward digital marketing, perceived behavioral control, subjective norm;

Mediators: Behavioral intention to use digital marketing, actual behavioral use of digital marketing

The findings show that perceived behavior control and subjective norms affected digital marketing intentions, but attitudes did not Finally, the association between digital marketing use and SMEs' sustainable growth shows that digital marketing greatlyincreasedSMEs' sustainable growth in developingnations.

Author Name of journal with ranking

The survey conducted on 167 firms in 29 countries, who are internal firms of overseas Chinese.

Structural Equation Modeling is applied

Control variables: firm age, country, industry, % revenue abroad, family firm, number of markets, Munificence, Dynamism, Heterogeneity;

Main effects: Digital marketing capacities, Firm Size

Digital marketing capabilities (DMC) and market orientation impacting on firm performance

International Journal of Data and Network Science

Structural Equation Modelling applied on

Digital marketing, Digital orientation, Marketing capability, information technology capability

Digital marketing boosts SME marketing performance significantly Digital orientation affects SMEs' marketing performance Marketing capabilities and IT

Author Name of journal with ranking

Independent variable Finding capabilities positively and significantly affect SMEs' marketing performance.

The survey on 1968 SMEs across 13 Caribbean SIDS during 2020-2021 The quantitative method is used by Tobit model

Goods innovation, Service innovation, process innovation, organizational innovation, social media, digital technologies for collaboration, firm size, firm age, export intensity, top management experience, foreign

Although many types of innovation are concerned, innovation of goods and process are significant enhancement for sales growth, while innovationofservices and organization are not matter for sales growth

Author Name of journal with ranking

Daud et al International The survey is Finance Independent variables: The findings demonstrate (2022) Journal of conducted on 180 performance of Digital finance, digital that digital marketing,

Data and SMEs Testing Indonesian marketing, digital digital finance, and digital Network hypotheses is based on SMEs, measured payment payment indicators all have

Science the quantitative model in Likert scale a statistically significant of Structural Equation impact on financial

Modeling performance The findings also confirm that as Micro SME actors pay attention to digitalization, their benefits improve.

Wu et al Technological Panel data under China Firm Main effects: Innovation, The results, based on a (2022) Forecasting & National Intellectual performance State owned enterprise, broad sample of Chinese

Social Property measured in business group affiliation, enterprises, confirmed Change Administration during export subsidy, financial slack; technological innovation

1998-2007, which the performance, in with the presence of patents

Author Name of journal with ranking

Independent variable Finding probit regression is employed on 219,599 firms with the total sample of 418,300 observations which export propensity, export intensity and export intensity in terms of sales are employed

Recoverable slack, Potential slack, Productivity, Capital intensity, Human capital, Size, Private Owned enterprise to influence exports However, this progress is hampered by a barrier in government institutions.

Based on the survey conducted on 573 Swedish export firms

The statistical model of SEM is employed

Control variables: Firm size, R&D expenditure, extent of development

Technological innovation and organizational innovation have a significant impact onexportperformance, in which the presence of organizational innovation playsa significant role in

Author Name of journal with ranking

Independent variable Finding influencing the occurrence of technological innovation.

Innovation surveys conducted by Statistics Finland in 1996 and

2000 The statistical model based on probit models

Product innovation, process innovation, market innovation

Firm size, sales revenue, R&D expenditure, Cooperation, acquisition of labor, population density

Small firms have been found to be more conducive to fostering innovation compared to their larger counterparts R&D collaboration and labor acquisition make substantial contributions to the advancement of innovation.

The survey conducted on 264 SMEs in Finland Logistic

Nine independent variables: Internal, Network, Regional knowledge organization,

New products and market innovations seem to be linked to freei n f o r m a t i o n sources Results showt h a t

Author Name of journal with ranking

Innovation Management regression model is applied

Regional support organizations, Financial organizations for innovation, National support organizations, external information sources, Firm’s growth, firm’s profitability new products, process, and market innovations favorably impact business growth None of the forms of innovation investigated increased corporate profitability.

Database selected from 6,498 shareholder letters of 634 firms listed in during 2001-

2016 Testing the relationship between digital orientation and

Digital orientation based on calculation of four dimensions, such as Digital technology scope;

There is a significant relationship between digital orientation (of both current time and previoustime).Findings expand strategic orientation literatureand unite strategy and

Author Name of journal with ranking

Independent variable Finding firm performance is based on regression model architecture configuration; Control variables: firm age; firm size, industry concentration, and industry sales growth information systems The novel digital orientation concept and validated measurement device provide several study opportunities.

International Journal of Operations and

The sample is 331 large companies in Finland.

Hypotheses tested are based on 15 models of regression

Financial success: Net profit and operating profit

Main effects: Digital orientation, Digital intensity; Mediation effect: Digital maturity;

Control variables: firm size, revenue change, industry, and ownership

A significant relationship between digital orientation and financial success is verified In addition, the interaction of digital orientation and digital intensity

The sample of 515 firms listed during 2009-2019 is

Environmental performance defined as the

Main effect: Digital orientation consists of four dimensions, such as

The hypothesis of “digital orientation is positively related to an organization’s

Author Name of journal with ranking

Independent variable Finding and Social

Change employed Equivalent to 2,800 firm observations Hypotheses testing are based on logistic regression models dependent variable, its measure is “0 negative” and

Digital ecosystem coordination; Digital architecture configuration.

Control variables: Firm size, firm age, firm profitability, financial leverage, capex, industry concentration environmental performance” is accepted This means once a gooduseof digital technology scope, digital capabilities, digital ecosystem coordination, and digital architecture configuration, environment performance of organization is more effective

Research model

The authors of earlier studies have indicated that there is less research on the association between digital marketing and its effectiveness for SMEs in emerging economies (Pingali et al., 2023; Sultoni et al., 2022) Numerous authors have made references to the examination of the relationship between digital marketing and firm performance, technological innovation and firm performance, and digital orientation and firm performance Nevertheless, there has been limited exploration of the impact of digital marketing on the performance of enterprises in the emerging market based on their enterprise size Furthermore, scholarly literature has not extensively explored the interplay between digital marketing and technological innovation, digital marketing and digital orientation, and technological innovation and digitalorientation.

Based on arguments, the proposed research model is generally drawn in figure 3.1, its development is based on reviews on previous studies Hypotheses in the model will be tested through the quantitative models, e.g multiple regression model Notably, testing models is based on sub-models, it means the model will employ demographic information, such as age and education of managers, size ofenterprises (e.g labor), type of sector (microenterprises, privateenterprises).

The research model with independent variables in figure 3.1 is divided into groups points: (i) group of variables as main effect path: digital marketing (DM), technological innovation (TI), and digital orientation (DO); (ii) group of variables as interaction between digital marketing and technological innovation, between digital marketing and

DO, and between technological innovation and DO; (iii) group of variables as control path: age and education of owner/director, firm size (labor).

According to the research model drawn, nine hypotheses concerned as follows.

H1: Digital marketing positively influences firm performance.

H2: Technological innovation positively influences firm performance.H3: Digital orientation positively influences firm performance.

H4: Technological innovation strengthens the relationship between digitalmarketing and firm performance.

H9 (+) H7 (+)SME performance in the emerging market

Sales revenue performance Technological innovation (TI)

Age of owner/director Education

H5: Digital orientation strengthens the relationship between digital marketing andfirm performance.

H6: Digital orientation strengthens the relationship between technologicalinnovation and firm performance.

H7: The relationship between digital marketing and firm performance ismoderated by employees’ digitalskills.

H8: The relationship between technological innovation and firm performance ismoderated by employees’ digitalskills.

H9: The relationship between digital orientation and firm performance ismoderated by employees’ digitalskills.

Source: Own proposing compiled on prior studies i i i i i i i i i i

Statistical models are utilized to validate hypotheses in the research model Sales and productivity performance serve as dependent variables, transformed to the natural logarithm for regression analysis Regression models are employed, including a regression with FP_Rev (revenue performance) as the dependent variable.

• DM, TI, DO are main effect variables employed as independentvariables.

• a11, a12, a13, a21, a22, a23, a24, a31, a32, a33, a34, a35, a41, a42, a43, a44, a45,a51,a52,a53, a 5 4 , a55, a61, a62,a63,a64, a65,a66,a 6 7 , a71, a 7 2 , a73, i i i i i i i i i i a74, a75, a81, a82, a83, a84, a85, a91, a92, a93, a94, a95, a10, a20, a30, a40, a50, a60, a70, a80, a90, a00: Unknown parameters of coefficients in equations of (1.1)(1.9),respectively.

• Ciis control variables (Age, Education, Size,Industry) b Regression with FP_Pro (productivity performance) the dependentvariable

• Digital marketing (DM), technological innovation (TI), and digital orientation (DO) are main effect variables as independentvariables.

• b11, b12, b13, b21, b22, b23, b24, b31, b32, b33, b34, b35, b41, b42, b43, b44, b45,b51,b52,b53,b54,b55,b61,b62,b63,b64,b65,b66,b67,b71,b72,b73, b74, b75, b81, b82, b83, b84, b85, b91, b92, b93, b94, b95: Unknown parameters of coefficients in equations of (1.1)(1.9), respectively.

• b10, b20, b30, b40, b50, b60, b70, b80, b90, b00 are constant of equations of (2.1)(2.9),respectively.

Ciis control variables (Age, Education, Size,I n d u s t r y )

Variables employed in theresearchmodel

Based on prior research summarized in Table 3.3, the proposed research model includes digital marketing, technological marketing, digital orientation, and employees' digital skills as main effects Additionally, firm performance and control variables included in the model are also supported by previous studies, as detailed in Table 3.3.

ToSMEperformance,itreferstotheevaluationandassessmentofhowwellafirm expect and gains to meet its goals Actually, firm performance encompasses numerous dimensions, including financial, operational, strategic, and competitive aspects, and it is essential for comprehending the business's overall health, efficiency, and effectiveness (Lucia-Palacios et al., 2014) Utilizing a variety of indicators and metrics to evaluate the company's success and potential improvement areas is required for measuring SME performance As demonstrated in the preceding section, there exists a comprehensive array of around 80 distinct measures that can be utilized for the purpose of evaluating firm performance (Griffin & Mahon,1997).

In this thesis, two potential indicators are candidates selected for the purpose of measuring firm performance The indicator of sales revenue performance is based on Katsikeas et al (2016) and Watson (2007) While productivity performance is drawn through arguments of Morikawa (2010) and Radicic & Petković (2023).

To the growth of labor cost, it is defined as the firm growth (Jones, 2010), because it is used to evaluate the enterprise size The firm will expand its size as well as economic scale, the labor force is improved and increased It means the larger sizeSMEs, the more labor recruited, and the more facilities, this positively influences training programs to the labor force to strengthen its competitive advantages.

Digital marketing, technological innovation, and digital orientation significantly impact SME performance in emerging markets Despite the common use of Structural Equation Modeling to assess their individual influences, previous studies have overlooked the interactions among these factors This gap in research necessitates an investigation into how these variables interact and influence SME performance.

Table 3.2: Summary of variables’ measures from previous researches

Components Statistical model Argument and finding Author

Quantitative models such as ordinary least square (OLS)/ regression, binary logistic, probit

Firm performance measured by sales revenue and productivity.

Katsikeas et al (2016);Mohamad (2011);Morikawa (2010); Radicic& Petković (2023); Binh & Tien (2019);Johansson

-Multiple regression models or Ordinary Least Square (OLS) -Structural equation modelling (SEM)

- A positive relationship between digital marketing capabilities and firm performance;

Digital marketing of different firm sizes gives a different orientation.

Components Statistical model Argument and finding Author

- SMEs have not completely use full potential of digital marketing to derive benefits

-Based on SMEs surveys during 2005-2015, which regression model is employed -Structural equation modelling applied to investigate 218 Swedish export ventures

- SMEs pay attention to innovation and its innovation has a positive contributiontoprofitmar gin.

- Higher considerationontechnolo gical innovation improves firm performance

Alraja et al (2022); Pham et al (2021);

- The survey conducted on 6,498 shareholders letters from 2001-2016,in which 634firmsareidenti fied.

- Digital orientation consists of dimensions of digital technology scope, digital capacities, digital ecosystem coordination, and digital architecture configuration The study confirms a positive relationship between digital orientation andfirm performance

Components Statistical model Argument and finding Author

The study has an approach on literature review of previous scholars relevant to digital technology, innovation and digital skills The study offers components of digital technology, innovation and digital skill of employees.

Digital skills for employees are the combination of skills in software, cloud computing, big data analytics, and AI Studies suggest a strong link between digital technology and innovation, where employees' digital abilities play a crucial role These skills contribute to the implementation and utilization of digital technologies, fostering innovation within organizations The development and enhancement of employees' digital skills are essential for businesses to stay competitive and drive growth in the rapidly evolving digital landscape.

Negative relationship between age of business executives with performance

Hambrick & Mason (1984); Salthouse (2009); Zhang (2017) Education Quantitative method

Positive relationship between education of business executives and business performance

Firm size -Employee amount -Employee amount as firm

- Employee size contributes to a firm’s profit and digital maturity.

Ganotakis et al (2023); Radicic & Petković (2023); Wang (2020)

Components Statistical model Argument and finding Author size employed regression model

- Firm size impacting on firm performance

Industry Impact of digitalization on technological innovations measured through the bivariate probit model, in which a panel sample ofGerman firms isemployed

- Industry is concerned in the quantitativemethod.

- Industry variable played as a control variable is not found its impact on firm performance

Age:As argued by Zhang (2017), the age of the enterprises executives is related to the capacity for integration and information processing According to findings from studies on aging, there appears to be a deteriorating connection between one's age and their cognitive capacity Memory, the ability to multitask, and the rate at which one can process information all go down with age In particular, elderly executives may lack the physical and mental fortitude required to make organizational changes (Child, 1974) or may struggle more than younger executives to understand new concepts and pick up new behaviors (Hambrick & Mason, 1984) This suggests that older top managers lose the comparative advantage in assimilating and applying current, rapidly evolving technical knowledge as the quality of some cognitive skills and information processing abilities declines more quickly (Salthouse, 2009) This is especially true for the rapidly evolving technology-driven software and IT servicessector.

Education:Successful management of the enterprises is impossible if the managerial ties are not involved However, a leader of firm is expected to have higher education to manage the firm effectively (Gao et al., 2008) Accordingly, education plays a crucial role in the dissemination of cutting-edge research Due to universities' concentration on fundamental and basic research initiatives, the manager/director’s insights gained through partnerships with them are more likely to have a substantial, beneficial effect on inventive performance in the long run It has been found that informal ties between corporations and educational institutions increase the likelihood of technical innovation andproduction.

Firm size:It is measured through employee numbers working in a firm and used as a control variableinthe econometric model (Ganotakis et al., 2023; Radicic & Petković, 2023), which Ganotakis et al (2023) employ employee numbers as firm size, and played as a control variable A positive relationship between firm size and sales growth is confirmed While Wang (2020) verifies the role of employee number to moderate digital marketing capabilities and firm performancere la ti on sh ip

Industry:To measure the impact of SMEs’ digitalization on technological innovations, Radicic & Petković (2023) concern industries, in which 20 sectors are employed in bivariate probit models Baláž et al (2023) employed the variable of industry as the control variable to estimate 170 firms in European countries and do not find a significant relationship between the industry and firm performance Likely, Binh

& Tien (2019) do not found statistically existed impact of sectors on firm performance through the quantitative method of logit model.

The thesis utilizes a data source administered by the General Statistics Office (GSO) to perform a survey in all 63 provinces throughout the country The poll conducted a thorough examination of 553,644 enterprises nationwide In parallel, the digital technology survey on 8,868 enterprises was also conducted to gather insights on the utilization of technology in the business sector As a result, these two surveys have merged each other, in which the tax code of enterprises is used as the common indicator to combine those two surveys After merging two sources of database and cleaning, the final sample is 7,708 enterprises Applying statistical model is estimated through the pool sample of 7,708 enterprises and the different firm sizes, e.g micro-enterprises,small enterprises, and medium enterprises The details of the two surveys are asfollows.

For the survey of enterprises as the first survey, it was regarded as the 2021 Economic Census for enterprises applied in 63 provinces and cities, in which economic establishments are concerned to meet objectives, such as, Assessment of the development in quantity, scale and labor of economic facilities; Business production results; The level of information technology application, structure, used facilities, and labor by sector, by economic sector and by form ownership.

The subjects under investigation are territorial economic entities The units that are the subject of investigation must satisfy the subsequent criteria: (i) They must have operational bases within the territory of Vietnam where they directly manage or conduct activities in the economic sectors; (ii) They must have professional labor and owners and heads accountable for managing and operating the units; (iii) Their operating periods must be consistent with the seasons or business practices; (iii) Each base unit must be situated exclusively in a single municipality, branch, or town, and conduct operations for a singletype.

The scope of the investigation encompasses various business entities, including enterprises' production facilities, non-agricultural, forestry, and fisheries businesses, household units, and government-related organizations Specifically, the investigation includes business manufacturing facilities managed by administrative authorities, career units engaged in business production activities under the supervision of administrative agencies, and public business entities.

Employed variables andtheirmeasure

This section is going to describe variables and their measure employed in the research model proposed.

(1)Measure of digital marketing(DM):

As defined by Kanaan et al (2023), digital marketing consists of technique tools to attract customers, which employing social media to facilitate marketing strategies is defined as digital marketing Similarly, Masrianto et al (2022) also state that digital marketing includes activities related to elements, such as digital CRM, commerce, digital analytics, content marketing, digital advertising, online newsletter, mobile marketing and display advertising Additionally, Su et al (2023) also defined digital marketing is the process of employing digital technologies to attract customers, e.g e- commerceplatformsandsocialmediatopromotefirm’sbrandtowardsalesgrowth.

In the study of Dimitrios et al (2023), these authors stated that digital marketing support firm to directly get personalized communication As a result, automatic transaction system with partners and customers as a tool of Chatbot system is seen as a tool of digital marketing (Abdelkader, 2023) to provide and exchange product and service information with customers

Based on the above arguments, the measure of digital marketing in this study is summarized in Table 3.3 Accordingly, there are four items concerned: (i) Social medial for marketing; (ii) E-commerce to sell products or/and services; (iii) Customer relationship management (CRM); (iv) Automatic transaction system defined as Chatbot

AI to communicate customers Accordingly, these four items come from the question No.8 mentioned in the questionnaire in Appendix 1, Form No 1.10/DN-VĐT.

The effectiveness of digital marketing campaigns is determined by measuring the value (in millions of VND) of four key components: social media, e-commerce, CRM, and ChatbotAI Therefore, the overall measure of digital marketing success is the sum total of these individual investments.

Table 3.3: Items of digital marketing

Social mediatoserve marketing activities employing social media to facilitate marketing strategies is defined as digital marketing

8 belong the questionnaire in appendix 1, Form

E-Commerce to sale products andservices

Defined as a digital marketing tool to promote business

8 belong the questionnaire in appendix 1, Form

CRM as a tool to leverage technology in digital marketing is digital marketing.

The question No.8 in the questionnaire enclosed in appendix 1,FormNo 1.10/

Defined as digital marketing helps firms obtain personalized communication.Thisi s Chatbot toprovide

The question 8 belong the questionnaire in appendix 1, Form

MillionVND and exchange information with clients.

(2) Measure of technological innovation(TI):

As argued by Wang & Chung (2020), the term of technological innovation refers to the creation of something novel Accordingly, technological innovations encompass advancements in technology, design, manufacturing, and management In fact, measuring technological innovation is defined broadly, it includes product innovation, production process innovation (Azar & Ciabuschi, 2017; Wang, 2019), and R&D (Omri, 2020; Moen et al., 2018) This thesis draws the measure of technological innovation on the point of view of Azar & Ciabuschi (2017), Omri (2020), Moen et al. (2018), and Wang (2019) Accordingly, three items of product innovation, production process innovation, and R&D are employed in the research model The measure ofthree items is ordinal of five-point scale mentioned in the question A5.3 of Form No 1/DN- TB in Appendix 1, in which 1 being not at all and 5 being extremely using are applied in three items justmentioned.

The final measure of three items belong to the factor of technological innovation is calculated through the method of principal component analysis (PCA) (Hair et al., 2017) Definition and measure of items are summarized in table3 4

Table 3.4: Measure of technological innovation

Product Technological Azar & The questionnaire Ordinal: innovation innovation Ciabuschi in appendix 1, Likert scale encompasses (2017), with question of 1 being innovation of A5.3 of “How did not at all to 5 products/services Wang the enterprise being an innovation (2019) make extremely process innovation?” in using

Production Production Azar & The questionnaire Ordinal: process process Ciabuschi in appendix 1, Likert scale innovation innovation is (2017); with question of 1 being seen as Wang A5.3 “How did not at all to 5 technological (2019) the enterprise being innovation make extremely process innovation?” in using

Research and R&D is defined Omri The questionnaire Ordinal: development as innovation (2020); in appendix 1, Likert scale

(R&D) Moen et al with question of 1 being

(2018) A5.3“How did the not at all to 5 enterprise make being innovation?” in extremely Form No 1/DN- using TB

(3) Measure of digital orientation(DO):

Bendig et al (2023) and Kindermann et al (2021) have the same points of digital orientation, which they argue that digital orientation encompasses of dimensions of digital technology scope, digital architecture configuration, digital capabilities.Particularly, Ardito et al (2021) confirm that various areas of digital technology adopted by the company to serve the process of business Accordingly, Ardito et al.(2021)employdigitalorientationintheresearchmodelbasedonthenumberofcounting of digital technology systems or platforms related to information systems,h u m a n resource management, production system, customer management system, and online business Based on this, the digital orientation of this thesis is measured by items of (i) Cloud computing technology; (ii) advanced robotics; (iii) Progressive manufacturing technology (Print 3D), (iv) Augmented reality (AR); (v) Modeling techniques; (vi) Internet of Things; (v) Cybersecurity; (vi) Big data application; (vii) system integration. These seven items are presented in question No.3 belong the questionnaire in Appendix

2 in Form No 2/ĐTDN-CMCN, measured by Liker scale (Table 3.5) The measure of digital orientation is calculated through the method of principal component analysis (PCA) (Hair et al., 2017).

Table 3.5: Measure of digital orientation

Digital orientation Definition Author Source Measure

Based on items: (i) Digital Ardito et al The question is Ordinal: Cloud computing orientation (2021), No.3 in Form Likert scale technology; (ii) encompasses Bendig et al No 2/ĐTDN- of 1 being advanced robotics; variety of (2023), CMCN unlikely to

(iii) Progressive digital Kindermann enclosed in 5 being manufacturing technology et al (2021), Appendix 2 likely technology (Print areas that are Nasiri et al The question of

3D), (iv) adopted in (2022) No.3 is “How

Augmented reality firm does the

Modeling digital techniques; (vi) technology

Internet of Things; (Industry 4.) to

(vi) Big data business?” application; (vii) system integration

Sony & Mekoth (2022) conceptualize employees’ digital skills as knowledge of employee using information technology, e.g internet of things, cloud computing, big data, information security, and application of support systems Similarly, Ciarli et al. (2021) describe the process of digital technology development and show the relationship between digital technology and skill capacity of employees, which these authors define digital skills as the convergence of skill characteristics of big data analytics, cloud computing, critical thinking/generation, and artificial intelligence. While Van Laar et al (2019) state that employees’ digital skills in21 st century include critical thinking of system, information digital skills, communication digital skills, problem-solving digital skills Shortly, digital skills of employees are measured by employees’ capability using new and advance technologies, such as 3D printing, cloud, automatic technology, data analysis, and artificial intelligence (Marhraoui, 2023) Based on arguments above, the digital skills of employees are used in the thesis consist of information technology adoption skills: (i) Basic information technology; (ii) Automatic technology, (iii) Data analytics; (iv) Cybersecurity; (v) Support system application; (vi) Collaboration software; (vii) System critical thinking and process understanding These items with scales are summarized in Table 3.6 and mentioned in the question no 7 “How does the company rate digital skills of employees?” in Form No 2/ĐTDN-CMCN enclosed in Appendix2.

Table 3.6: Measure of employees’ digital skills

Digital skills Definition Author Source Measure

Employees’ digital Digital skills as Sony & The questionnaire in Ordinal: skills as the knowledge of Mekoth appendix 2 The Likert convergence of employee (2022); question is no.7 “How scale of skill characteristics related to Ciarli et al does the company rate 1 being such as: (i) Basic digital (2021); digital skills of unlikely information technology, Marhraoui employees?” in Form to 4 technology; (ii) such as: (2023); No 2/ĐTDN-CMCN being automatic Internet of World Bank with items: (i) Basic likely technology, (iii) Things, cloud (2020) information data analytics; (iv) computing, big technology; (ii)

Cybersecurity; (v) data analytics, Automatic technology, support system information (iii) Data analytics; application; (vi) security, (iv) Cybersecurity; (v) collaboration application of support system software; (vii) support application; (vi)

System critical systems Collaboration thinking and software; (vii) System process critical thinking and understanding process understanding

(5) Variables and measure of SME performance and controlvariables:

As depicted in table 3.7, two indicators of sales revenue and productivity are employed as firm performance to test hypotheses Their measures are continuous variables In parallel, control variables are entered in the statistic models, which variables of age of owner, gender of owner, education of owner, firm size, and industry are enclosed, their measures also presented in the table.

Table 3.7: Variables and their measures

Variables Question in the questionnaire Measure Author

Sales revenue The questionnaire is Form No Continuous Katsikeas et al. (FP_Rev) 1/DN-TB enclosed in appendix variable measured (2016);

1 The question is asked as in million VND It Watson

“total net revenue from sales is converted to (2007); Binh and services” natural logarithm & Tien (2019)

Variables Question in the questionnaire Measure Author

The questionnaire is Form No

1/DN-TB enclosed in appendix

- Question No A2.2 is“thenumber ofemployees.”

- Question No A4.4 is“totalnet revenue from sales and services”

Productivity is defined as labor productivity; it is the ratio between total sales revenue and the number of employees It is converted to natural logarithm

Owner age The question No A1.6 in the

Form No 1/DN-TB enclosed in Appendix 1

Education The question No A1.6 in the

Form No 1/DN-TB enclosed in Appendix 1

Ordinal variable Gao et al.

Firm size The question No A2.2 in the

Form No 1/DN-TB enclosed in Appendix 1

Ganotakis et al (2023); Radicic & Petković (2023); Wang (2020)

Industry The questionnaire in Appendix

2, with the question main industry based on VSIC – level

5 in Form No 1.10/DN-VĐT

Dummy variable (1 being food processing sector, otherwise being 0)

Enterprises anditssize

In the period 2016-2020, the average number of enterprises increased by 7.9% per year(averageincreaseof8.7%intheperiod2011-2016),inwhichnumberofemployees increased by 1.2%, lower than the growth rate of 5.1% in the period 2011-2016 At the same time of

2020, the whole country had 15.3 thousand cooperatives with 169.6 thousand employees, it is an increase of 17.5% in the number of cooperatives and a decrease of 15.6% in the number of employees compared to 2016 The number of individual production and business establishments (individual production and business establishments)in2020isnearly5.2millionestablishmentswith8.5millionemployees, thereisanincreaseof5.7%inthenumberofunitsandanincreaseof3.0%ofemployees compared to2016.

The average number of employees in units decreased slightly from 4.5 employees in 2016 to 4.3 employees in 2020 Of which, enterprises decreased from 27.2employees to 21 employees; cooperatives reduced from 15.1 to 11.1 employees; individual production and business establishments decreased slightly from 1.7 to 1.6 employees The industry-construction sector accounted for 18.0% of the total survey units under GSO, while the agriculture, forestry, and fishery sector accounted for 0.2%, with 14.8 thousand units The service sector accounted for nearly 4.9 million units, or 81.8% (compared to 80.8% in2016).

Regarding the number of employees, the service sector has more than 14.2 million employees, accounting for 53.8%, up 4.9% compared to 2016; the industry - construction sector was 11.4 million people, accounting for 44.8%, increasing by 0.8%; the agriculture, forestry and fishery sector was 349.7 thousand people, accounting for 1.4%, down 0.6%As mentioned, as of December 31, 2020, the whole country has 683.6 thousand enterprises with production and business results and the number of employees is 14.7 million, an increase of 2.3% in number of enterprises and a decrease of 3.1% in the number of employees compared to 2019, this is the lowest increase in the 2016-

2020 period due to the impact of the Covid-19 epidemic The average growth rate of enterprises in the period 2016-2019 is 9.8% per year; the growth rate of labor in the

101 enterprise is 2.6% per year In the period 2016-2020, the average growth rate of enterprises is 7.9%; the labor growth rate in the enterprise is 1.2% per year.

The non-state enterprise sector accounted for 96.5% of the total number of enterprises in the country, a 1.8% increase compared to 2019 and a 35.0% increase compared to that of 2019 In comparison to the year 2016, there was a notable increase in the number of foreign-invested firms, reaching a total of 22,200 These enterprises constituted approximately 3.2% of the overall enterprise count, seeing a growth rate of 18.4% and 58.6% in terms of quantity Conversely, the number of State-owned enterprises witnessed a decline, with roughly 2,000 such enterprises accounting for around 0.3% of the total This decline amounted to a decrease of 5.5% and 25.6% in terms of quantity The observed alterations could potentially be attributed to the implementation of governmental laws pertaining to the corporation equalizationp o l i c y

Regarding labor, the State-owned enterprise sector attracted more than 1 million labors, accounting for 6.9% of the total labor force of enterprises, down 8.9% compared to 2019 and down 21.5% compared to 2016; the non-state enterprise sector was 8.6 million labors, accounting for 58.4%, down 5.5% compared to 2019 and down 0.01% compared to 2016; the foreign-invested enterprise sector was 5.1 million labors, accounting for 34.7%, up 2.6% compared to 2019 and up 22.7% compared to 2016In terms of economic sector, the economic structure has shifted in a positive direction, reducing the proportion of enterprises in the agriculture, forestry and fisheries sectors, and increasing the proportion of enterprises in the industry- construction and service industries Service sector enterprises are 465.6 thousand enterprises, accounting for 68.2% of the total number of enterprises, an increase of 3.1% compared to 2019 and an increase of 31.4% compared to 2016; enterprises in the industry-construction sectorare 211.5 thousand enterprises, accounting for 30.9%, increasing by 0.9% and increasing by 44.5%; enterprises in the agriculture, forestry and fishery sector were 6.5 thousand,accounting for 0.9%, down 13.6% and up 45.2%Labor in industry - construction enterprises accounted for the highest proportion with the number of employees was 9.3 million people, accounting for 63.4% of the total number of employees in theenterprise,

102 down 3.1% compared to the total number of employees in the enterprise With 2019 andup2.3%comparedto2016;thelaborforceofenterprisesintheservicesectorwas 5.1 million people, accounting for 34.9%, down 3.5% and up 9.7%; enterprises in agriculture, forestry and fishery were 253 thousand people, accounting for 1.7%, increasing by 1.5% and increasing by 0.8%.

Non-agricultural, forestry and fishery individual production units

As of 2020, Vietnam has witnessed a significant increase in individual business establishments and employees since 2016 The Red River Delta remains the economic powerhouse, hosting the highest number of establishments, while the Southeast has experienced a notable surge in both establishments and employees The service sector dominates the economy with over 4.3 million establishments, followed by industry and construction Despite a decline in the latter sector, the service industry has continued to thrive, demonstrating the country's economic diversification and growth potential.

According to Vietnam GSO’s survey, SMEs now account for about 98.1% of all businesses in Vietnam The number of active SMEs in Vietnam accounted for more than 560,000 enterprises and gained over 100,000 of the annual growth ratee nt er pr is es

However, the contribution to the economy of SMEs is not commensurate because many barriers are affecting their development.

Vietnam is a developing country when the business opportunities are very high as well as the competitions from outside and inside of Vietnam Thus, innovation development is the key factor to help the SMEs develop and seize the competitive advantage in the market Besides, to support for the business of SMEs in Vietnam, the Vietnamese Government issued resolutions No 19/NQ-CP on improving the business environment, improving national competitiveness; Resolution No 35/NQ-CP dated 16/5/2016 and Directive No 26/CT-TTg on support and development DN until 2020; Resolution No 75/NQ-CP on reductions in fees and expenses for enterprises; Resolution No 98/NQ-CP on Government action program implementing Resolution

No 10-NQ/TW on 3/6/2017 of the party on private sector development At the same time, the Government also promoted the implementation of solutions to create a favorable and transparent business environment for all economic components, focused on assisting the development of SMEs To further enhance the legal effect, promote the implementation of SME support policies, at the 3rd session of XIV, Congress adopted SME support Law (Law No 04/2017/QH14) The law is enforceable from 01/01/2018, with a series of basic support policies for SMEs such as access to credit, information, human resource development, consultancy, technology, and so on It has made an important step forward in the work of improving the positive support policy for SMEs to grow stronger.

Based on Decree No 80/2021/ND-CP, issued on August 26, 2021, SMEs are classified by size, including microenterprises, small, and medium enterprises Criteria to be different sizes to classify enterprises is presented in Table 3.8 Popular indicators to measure firm size are based on the number of employees As defined by Radicic &Petković (2023), firm size with employee is smaller than 10 employees as micro firms,firm with employee range > 10 and < 50 employees defined as small sized firms, and firm with the employee rand > 50 and < 250 employees defined as medium sized firms.Likely, three enterprise sizes in this thesis is also based on the number of employees,but a little bit from Radicic & Petković (2023) to meet the Decree No.80/2021/ND-CP.

Accordingly, micro-enterprises are defined as firm with the range of employee number

≤ 10 employees, small enterprises with the employee number is the range of >10 - 100 employees, and medium enterprises with the employee number is the range of >100 -

200 employees As a result, three firm sizes are used in this thesis.

Table 3.8: Size of enterprises based on criteria of labor and capital

Small sized enterprise Medium size enterprise

Source: Decree No 80/2021/ND-CP

Over the decades, the emerging economic growth in Vietnam has been largely based on investment and labor The number of employees is increasing, and companies are investing more and more in machinery and equipment Business growth has been no longer in the traditional way In the future, the Vietnamese economic growth will mostly have to rely on the increase in labor productivity The most important driving force of productivity is innovation and digital marketing, namely driven by technology.SME's business in Vietnam is more and more developed According to GSO statistics,more than 50% of the economic growth comes from the profitability of SMEs.However,accordingtoexperts,includinglargeenterprisessuchaseconomicgroupsor

To flourish in the competitive landscape, SMEs must embrace adaptability and innovation Leveraging digital technologies in their marketing strategies is crucial Digital transformation serves as the bedrock for growth, fostering an environment that encourages healthy competition and stimulates innovation By embracing these principles, SMEs can position themselves for success in the digital age.

In sum, the main content of Chapter III presents a general picture of actual situation of SMEs in Vietnam Based on previous arguments, the research model is proposed with attachment of hypotheses To test hypotheses, two database surveys are merged In addition, the measure of variables enclosed in the research model is defined and informs that variables are extracted from the relevant questions designed in the questionnaires Two groups of variables concerned are main effects and control variables The main effects are defined as factors of digital marketing, technological innovation, digital orientation, and digital skills of employees.

Overviewabout SMEs

Based on the 2023 white book of GSO, Vietnam currently has 895,876 active firms, which represents a 4.5% increase compared to 2021 and a 37% increase compared to 2017 (Figure 4.1) In 2022, firms are mostly dominant in three sectors The service sector holds the largest share at 67.8%, followed by the industrial and construction sector at 30.9%, and finally the agriculture, forest, and fisheries sector at 1.3%.

Figure 4.1: Number of enterprises in Vietnam from 2017-2022

In 2022, the average number of firms with more than 1000 employees is 18.6 enterprises, which is higher than the values in prior years such as 2017, 2018, 2019, and

2020 (Figure 4.2) Vietnam is divided into 63 provinces and cities Among these, 7 provinces have a significant number of operating enterprises with over 1,000 employees These cities are Ho Chi Minh City with 61.8 enterprises, Hanoi with 48.5 enterprises, Da Nang with 42.1 enterprises, Binh Duong with 22 enterprises, Hai Phong with 20.5 enterprises, Ba Ria-Vung Tau with 20.2 enterprises, and Bac Ninh with 18.2 enterprises Khanh Hoa has a total of 18.6enterprises.

201720182019202020212022 Figure 4.2: Intensity of enterprises per 1000 employees

In 2022, there were 148,533 newly founded firms, which represents a 27.1% increase compared to 2021 (Figure 4.3) This is an encouraging indication of Vietnam's economic recovery following the Covid-19 pandemic Among these industries, several sectors are experiencing a significant increase in the number of newly founded businesses For instance, service activities have a growth rate of 73.8%, accommodation and food services have a growth rate of 66.3%, health and social assistance have a growth rate of 65.5%, and arts, entertainment, and recreation have a growth rate of 65.5% In terms of the economic framework, the industrial and construction sector witnessed the establishment of 36,288 new firms, reflecting a growth rate of 16.1% In the agricultural, forest, and fisheries sector, there has been a decrease of 2% in the number of newly founded firms, with a total of 1,959.

Despite SMEs in Vietnam accounting for a significant proportion of overall firms and contributing 60% of the GDP, along with employing 30% of the entire workforce nationwide, they appear to have challenges related to personnel skills and financial resources Only a limited number of businesses are able to mitigate the adverse effects caused by competitors and market fluctuations.

Figure 4.3: Number of new enterprises established from 2016 - 2022

From 2021 to 2022, businesses have witnessed positive shifts in their outlook, embracing digital transformation and adopting digital technologies to enhance their operations SMEs, while prioritizing digitalization, implement new technologies and software incrementally due to budget restrictions Despite their efforts, they often lack a well-defined goal, hindering their progress.

Overall, SMEs in Vietnam have made significant advancements in integrating digital technology into their marketing strategies, distribution methods, and customer support systems This includes implementing omni-channel approaches to enhance the customer experience and ensure effective customer service In addition, digital technology is also involved in SMEs for the purpose of managing sales, inventory, and procurement Numerous enterprises have transferred their data into digital format and implemented standardized procedures to achieve digital transformation on a bigger and more standard level Nevertheless, the utilization of digital technology in numerous firms, particularly small and medium-sized enterprises (SMEs), remains limited and fragmented due to the absence of well-defined objectives, plans, and strategies for implementing digital technology from the beginning Hence, the efficacy of SMEs' investment in digital transformation for achieving optimal performance remains questionable and will be examined in this study.

Introduction

As mentioned in the previous chapter, the database used is the source of the Vietnamese General Statistics Office (GSO), who conducted the survey on enterprises in 63 provinces and cities in nationwide Vietnam Accordingly, two surveys are conducted and merged with each other, in which the first one is called as “enterprise survey” conducted on 553,664 active enterprises The second one is called “digital technology survey” conducted on 8,624 active enterprises As a result, those two surveys are merged through the common indicator of tax code of enterprise After merging and cleaning data, the final sample is 7,708 SMEs employed in this study, in which micro-enterprises, small enterprises and medium enterprises account for 40.4% (equivalent to 3,114 micro-enterprises), 39.1% (3,011 small enterprises), and 8.5% (655 medium enterprises)respectively.

The two mentioned surveys both have their separate questionnaires enclosed in Appendix 1 and Appendix 2 Consequently, two surveys are developed, each including hundreds of questions However, the questions used in the dissertation are extracted and displayed in Table 4.1.

Table 4.1: Information of variables used in the research model

Variables Questions extracted from questionnaires

The questionnaire is Form No 1/DN-TB enclosed in appendix

1 The question is asked as “total net revenue from sales and services”

The questionnaire is Form No 1/DN-TB enclosed in appendix

- Question No A2.2 is “the number ofemployees.”

- Question No A4.4 is “total net revenue from sales and services”.

The ratio between the number of employees and total sales revenue as labor productivity

Social media: The question No.8 belong the questionnaire in appendix 1, Form No.1.10/DN-VĐT

E-commerce: The question No.8 belong the questionnaire in appendix 1, Form No.1.10/DN-VĐT

CRM: The question No.8 in the questionnaire enclosed in appendix 1, Form No.1.10/DN-VĐT

Chatbot AI: The question 8 belong the questionnaire in appendix 1, Form No 1.10/DN-VĐT

Production innovation: The questionnaire in appendix 1, with question A5.3 of “How did the enterprise make innovation?” in Form No 1/DN-TB The Production process innovation: The questionnaire in appendix

1, with question A5.3 “How did the enterprise make innovation?” in Form No 1/DN-TB

R&D: The questionnaire in appendix 1, with question A5.3“How did the enterprise make innovation?” in Form No. 1/DN-TB

The question is No.3 in Form No 2/ĐTDN-CMCN enclosed in Appendix 2 The question of No.3 is “How does the company orient digital technology (Industry 4.) to serve business?”

Digital skills of employees (DS)

The questionnaire in appendix 2 The question is no.7 “How does the company rate digital skills of employees?” in Form

No 2/ĐTDN-CMCN with items: (i) Basic information technology; (ii) Automatic technology, (iii) Data analytics; (iv) Cybersecurity; (v) support system application; (vi) Collaboration software; (vii) System critical thinking and process understanding

Owner age The question No A1.6 in the Form No 1/DN-TB enclosed in

The question No A1.6 in the Form No 1/DN-TB enclosed in Appendix 1

Firm size The question No A2.2 in the Form No 1/DN-TB enclosed in

Appendix 1 Industry The questionnaire in Appendix 2, with the question main industry based on VSIC – level 5 in Form No 1.10/DN-VĐT

Result ofdescriptivestatistics

As presented in table 4.2, the statistical model applied is regression model, which sales performance and productivity performance of SMES are dependent variables. Accordingly, two different dependent variables are entered the regression function with the same independent variables, e.g main effects and control variables The main effects consist of independent variables of digital marketing (DM), technological innovation (TI), digital orientation (DO), and digital skills of employees (DS) The control variables encompass independent variables of age of owner, education ofowner, firm size, andindustry.

The variables utilized in the research model are taken from the questions that GSO designed in the questionnaire The selection and definition of dependent and independent variables are grounded on the work of earlier researchers These variables were already defined in Chapter III They are entered in the statistical model through previous arguments as findings.

Descriptive statistics in table 4.2 present an overall picture of dependent and independent variablesemployedinthestatisticalmodels.Theaveragesalesof60billion VND per year is not high, due to the high proportion of SMEs in the whole sample In addition,the labor productivity is 2.2 million VND per year, this means that each employee produces2.2 million VND per year onaverage.

Variables Obser vation Mean Standard deviation Min Max

Education (1 = Training