Effectiveness of inter organizational relationships between vietnamese travel companies and their tourist partness

EFFECTIVENESS OF INTER-ORGANIZATIONAL RELATIONSHIPS BETWEEN VIETNAMESE TRAVEL COMPANIES AND THEIR TOURIST PARTNERS In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In International Business Major By Ms. Le Thi Thuy Linh ID: MBA04020 International University - Vietnam National University HCM Sep 2013 EFFECTIVENESS OF INTER-ORGANIZATIONAL RELATIONSHIPS BETWEEN VIETNAMESE TRAVEL COMPANIES AND THEIR TOURIST PARTNERS In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In International Business Major By Ms. Le Thi Thuy Linh ID: MBA04020 Business School, International University, Vietnam National University, HCMC Sep 2013 Under the guidance and approval of the committee, and approved by all its members, this thesis has been accepted in partial fulfillment of the requirements for the degree. Approved: ---------------------------------------------Chairperson --------------------------------------Advisor: Dr. Mai Ngoc Khuong ---------------------------------------------Committee member --------------------------------------Committee member ---------------------------------------------Committee member --------------------------------------Committee member Acknowledgement My dissertation would have not been completed without the enthusiastic support and assistance from many people. On the first line, from the bottom of my heart, I would like to express my grateful thanks to International University – National University as a whole, especially the School of Business where I‟ve spent almost two years studying this MBA program from which I have accumulated a lot of knowledge as well as many skills that I had not ever possessed before. During this time, I‟ve also received the useful assistance and prompt feedback from teaching staff and officers as well. Moreover, I‟ve made friends with many others student not only in my class but also senior and junior intakes. I also would like to express my special thanks to my advisor – Dr. Mai Ngoc Khuong for all his enthusiastic instruction, consultancy and especially his inspiring and encouraging me during the time for my final thesis. My gratitude is dedicated to my classmates and friends who always stand beside me and give me the valuable support and recommendation. Last but not least, my special thanks convey to my sweet family – my parents, my sister, my brother in-law and my husband who have always encouraged and facilitated me in further study. Their love and care are my big motivation to successfully complete my MBA program in IU – VNU. Le Thi Thuy Linh Ho Chi Minh 2013 i List of Abbreviation Abbreviations Equivalence IOR(s) Inter-organizational relationship(s) COMMITIR Commitment in the relationships COMUNIR Communication in the relationships COORDIR Coordination in the relationships DV(s) Dependent variable(s) EFOFIOR Effectiveness of IORs FIBEN Financial benefit from the relationships FORMIR Formalization in the relationships FREINTER Frequency of interaction in the relationships IDV(s) ORGCOM Independent variable(s) Organizational compatibility in the relationships REMASA Relationship marketing support satisfaction ii Plagiarism Statements I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions. I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Ho Chi Minh City. iii Copyright Statement This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author‟s prior consent. © Lê Thị Thúy Linh / MBA04020 / 2011 -2013 iv Table of Content Contents Chapter One - Introduction ...................................................................................... 1 1.1 Background Of The Study .......................................................................... 1 1.2 Tourism In Viet Nam .................................................................................. 1 1.3 Problem Statement ...................................................................................... 3 1.4 Main Research Question And Hypothesis................................................. 4 1.5 Objectives Of The Study ............................................................................. 5 1.6 Scope And Limitation Of The Study ......................................................... 6 1.7 Structure Of The Study .............................................................................. 7 1.8 Chapter Summary ....................................................................................... 8 Chapter Two - Literature Review .......................................................................... 10 2.1 Motivation For Setting Up Iors ................................................................ 10 2.2 Effective Iors .............................................................................................. 11 2.3 Determinants Of Iors Effectiveness ......................................................... 13 2.4 Intervening Factors To Ior Effectiveness ................................................ 18 2.5 Conceptual Framework ............................................................................ 19 2.6 Chapter Summary ..................................................................................... 20 Chapter Three - Research Methodology ................................................................ 21 3.1 Unit Of Analysis, Population And Sample Size ...................................... 21 3.2 Research Instrument ................................................................................. 21 v 3.3 Data Collection .......................................................................................... 22 3.4 Data Analysis Techniques ......................................................................... 22 3.5 Reliability Test ........................................................................................... 25 3.6 Validity Test ............................................................................................... 27 3.6.1 Factor analysis for dependent variables (DV) ................................... 28 3.6.2 Factor analysis for DVs ...................................................................... 33 3.7 Chapter Summary ..................................................................................... 35 Chapter Four - Research Findings ......................................................................... 37 4.1 Introduction ............................................................................................... 37 4.2 Characteristics Of The Sample Companies ............................................ 37 4.2.1 Profile of sample companies ............................................................... 37 4.2.2 Descriptive statistics of variables ........................................................ 40 4.3 Factors To Iors ........................................................................................... 42 4.3.1 Multiple regression.............................................................................. 42 4.3.2 Factor affects relationship marketing satisfaction ............................ 45 4.3.3 Factor affects financial benefit........................................................... 50 4.3.4 Factor affects relationship effectiveness ............................................ 53 4.3.5 Effect of marketing support satisfaction and financial benefit on effectiveness of iors ............................................................................................ 58 4.3.6 Direct and indirect effects on relationship effectiveness ................... 61 4.3.7 Path diagram of direct and indirect effects on effectiveness of iors . 64 4.3.8 Summary of path analysis ................................................................... 65 vi 4.4 Chapter Summary ..................................................................................... 66 Chapter Five - Conclusion And Discussion ........................................................... 67 5.1 Summary And Discussion Of The Findings ............................................ 67 5.1.1 Relationships between IDVs and the effectiveness of IORs .............. 67 5.1.2 Direct effect on overall IORs effectiveness ........................................ 71 5.1.3 Indirect effect on overall IORs effectiveness ..................................... 73 5.2 Implication Of The Study ......................................................................... 75 5.3 Chapter Summary ..................................................................................... 78 vii List of Tables Table 3.1: Interpreting Strength of Path Coefficients ............................................... 25 Table 3.2: Reliability of dependent variables ........................................................... 26 Table 3.3: Reliability of independent variables ........................................................ 27 Table 3.4 KMO and Bartlett's Test for IDVs ............................................................. 29 Table 3.5: Total Variance Explained for IDVs .......................................................... 29 Table 3.6: Rotated Component Matrix of IDVs......................................................... 30 Table 3.7: Summary of Independent Variables with Reliability Coefficients ........... 32 Table 3.8: KMO and Bartlett's Test for DVs ............................................................. 33 Table 3.9: Total Variance Explained for DVs ........................................................... 33 Table 3.10: Rotated Component Matrix of DVs ....................................................... 34 Table 3.11: Summary of Independent Variables with Reliability Coefficients ......... 35 Table 4.1: Profile of Vietnamese travel companies in the central region and southern region (N = 256). ........................................................................................................ 37 Table 4.2 Descriptive statistics of independent variables .......................................... 41 Table 4.3: Univariate descriptive statistics of dependent variables ........................... 42 Table 4.4: Interpreting strength of Pearsons correlation ............................................ 43 Table 4.5 - Correlation Coefficients between Independent Variables ....................... 44 Table 4.6: Descriptions and Variables‟ Correlations of the REMASA Model .......... 47 Table 4.7: Coefficients between IVs and REMASA ................................................. 48 Table 4.8: Descriptions and Variables‟ Correlations of the FINBEN Model ............ 51 Table 4.9: Coefficients between IVs and FINBEN .................................................... 52 Table 4.10: Descriptions and Variables‟ Correlations of the EFOFIOR Model ........ 55 Table 4.11: Coefficients between IVs and EFOFIOR ............................................... 56 Table 4.12: Descriptive statistics and correlations between DVs .............................. 59 viii Table 4.13: Coefficients between DVs ...................................................................... 60 Table 4.14: Direct, Indirect, and Total Causal Effects ............................................... 65 ix List of Figures Figure 2.1: Conceptual Framework of Direct and Indirect Effects On EFOFIOR .... 19 Figure 4.1: Path Diagram of the Direct and Indirect Effects on EFOFIOR ............... 64 x Abstract This study was targetted to identify the factors affecting the IORs effectiveness which was defined as the generation of satisfaction by the parties involved in it as a result of the achievement of performance expectations. In the conceptual framework model, it was hypothesis that there were senven determinants to the effectiveness of IORs including trust, commitment, coordination, formalization, frequency of interaction, communication and organizational compatibility. Relationship marketing support satisfaction and financial benefit as intervening variables were also hypothesized to affect IORs effectiveness. The targert population for this study was the Vietnamese travel companies in the central region and in the south of Viet Nam. Researcher applied quantitative approach as the major method to conduct the study with main statistic technique consisting factor analysis, multiple regression and path analysis. The finding from the study suggested that in order to have effective IORs with other tourist partners, Vietnamese travel companies should pay priority on such issue as financial benefit from the IORs, frequency of interaction in the IORs, coordination in the IORs and commitment to the IORs. The empirical evidence from this study also identified that effectiveness of the IORs between Vietnamese travel companies and their tourist partners were directly affected by trust, commitment, coordination, frequency of interaction, formalization, communication and organizational compatibility. Besides, these IORs were also indirectly affected by relationship marketing support satisfaction and financial benefit from the relationships. Keywords: effectiveness of IORs, financial benefits, relationship marketing support satisfaction, coordination, trust, commitment, communication, frequency of interaction, formalization, organizational compatibility. xi xii Chapter One - Introduction 1.1 Background Of The Study As a matter of fact, the macro environment always presents many uncertainties for organizations due to increasing competition, sophisticated demand of customers, rapid globalization, technological development etc. Therefore, an org may form relationships with other orgs to reduce uncertainty and to gain greater control over the aspects of the macro environment that are critical for the organization‟s survival (Hodge and Anthony, 1998). Galaskiewicz (1985) found that greater environmental uncertainty prompted organizational administrator to seek out inter-organizational partners whose executives had similar backgrounds to their. Similarly, in the context of fierce competition and the increasing requirements from the customers, especially in the service sector like tourism, in order to offer the best service to the customers along with minimizing the cost, travel companies also have to set up relationships with many other partners such as restaurants, hotels, transportation companies and tourist attractions. This establishment of inter-organizational relationship and accordingly its effectiveness are crucial for organizational performance and survival of tourism organization. 1.2 Tourism In Viet Nam Viet Nam has a potential tourism such as many beautiful sightseeing, famous historic relics, natural and cultural heritages and a diversified geography with many water fall, valleys, rivers and especially a coastal lines along the country with more than 3000 km length. Besides, Viet Nam has a long-standing history and typical culture with many festivals and traditional craft village. Vietnam has emerged itself as a new tourist destination in Southeast Asia and on is now on lists in magazines 1 worldwide. The tourism offerrings have been increasingly diversifying. Local and international tour operators offer tours to ethnic minority groups, walking and bicycle tours, kayak trips and multi-country trips in particular in connection with neighboring Cambodia, Laos and Thailand. In the period from 1990 to 2007, visitor growth kept increasing. Volume of international visitors rose 17 times, from 250.000 turns in 1990 to approximately 4,253 mil turns in 2008. Number of domestic travelers was reported to increase 20 times from 1mil turns in 1990 to 20.5 mil in 2008. Vietnamese people tend to prefer travelling oversea days by days with the average of 30.000 people per year in the time from 2000 to 2008 and this figure has kept going up so far. Concerning income from tourism, it can be said that tourism industry has created great benefits for society. Tourism activities have appealed the participation from all the classes and economic backgrounds, benefiting not only the ones who directly have the business in field of tourism but also relating industry. In 1990, the income from tourism was only 1.350 bil VND, but to 2009, this reached 70.000 bil. Tourism development has significantly contributed to the GDP growth in service industry. Tourism activities has boosted on-site consuming for both goods and services; promoted other field to move ahead; restored many traditional festivals and crafts; intensified economic structure transferring; upgraded income; created jobs; removed poverty and strengthened cultural and economic exchanges between regions, inside the country and oversea. Tourism activities have created a financial source to restore and embellish the national heritages and boost the responsibility to maintain and develop material and immaterial heritages, old-aged festivals and craft villages in order to attract more domestic and foreign visitors. The very important point is that tourism is 2 the bridge for the development of many fields including agriculture, aquiculture, transportation, construction, telecommunication etc. Chairman of Bureau of Tourism stated that in the past year Viet Nam‟s tourism industry has witnessed a positive growth rate. To be more detailed, there were 5 mil turns of international visitors in 2010, increased 34.8% compared to the previous year; 6 mil in 2011, rose 19.1% and in 2012 we served 6.8 mil, increased 13.8 % in comparison with that of 2011. Income from tourism in 2012 reached 160 thousand bil VND, accounting for 5% total GDP. However, global financial crisis and economic recession have made much negative impact on the world‟s tourism in general and Viet Nam tourism in particular. Given that context, tourism industry has to find out strategic direction. According to the plan approved by Prime Minister on Jan 1st 2013, Viet Nam‟s tourism is aimed to speed up, becoming a critical industry, inspiring other field to move ahead. Besides, tourism‟s stable development has to be closely connected with restoring and improving national traditional culture; protecting sightseeing and environment; guaranteeing national defense and security. (Source: http://www.vietnamtourism.gov.vn) 1.3 Problem Statement Despite the fact that tourism industry in Viet Nam has attained a significant development, so far it is facing some tough challenges, as it is not growing or developing in the way that one generally assumed, hoped or forecasted. While the potential to be a worthwhile destination is there, competition from other ASEAN countries is fierce and some of the characteristics of the people, infrastructure, as 3 well as some of regime‟s policies are not conducive to make Viet Nam a more competitive destination. Thus, many tourists come to VN once, out of curiosity, but thereafter might prefer other destinations. Looking around our neighbors, we can see that some countries are really successful in tourism such as Thailand, Singapore. Then there imposes a question is that why does Vietnam‟s tourism industry has not developed as expected? In reality, one of the main determinants of the success in tourism activities is the effectiveness of inter-organizational relationships between travel companies and their tourist partners. However, most of the relationships have fallen short of success. Therefore, finding out direct and indirect factors affecting inter-organizational relationships between travel companies and their tourist partners is an important issue for the development of Viet Nam travel and tourist industry. More importantly, understanding the effectiveness level of inter-organizational relationship is an essential reference for important decisions in operation and management of Vietnamese travel companies and their tourist partners. From the above reasons, I decided to choose the topic for my thesis as follows: “Effectiveness of inter-organizational relationships between vietnamese travel companies and their tourist partners.” 1.4 Main Research Question and Hypothesis Research question From problem statement, the study raises the following research question: “To what extent the effectiveness of the inter-organizational relationships between Vietnamese travel companies and their tourist partners is affected by trust, 4 commitment, coordination, communication, formalization, organizational compatibility, frequency of interaction, relationship marketing support satisfaction, and financial benefits?” Research hypothesis H1: Factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction positively affect and predict the organizational relationship marketing satisfaction. H2: Factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction positively affect and predict the financial benefits from the inter-organizational relationships. H3: Factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction positively affect and predict the effectiveness of inter-organizational relationships. H4: Factors of relationship marketing satisfaction and financial benefits positively affect the effectiveness of inter-organizational relationships. H5: The effectiveness of inter-organizational relationshipsis directly and indirectly affected by factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction through the intervening factors of relationship marketing satisfaction and financial benefits. 1.5 Objectives Of The Study General Objective Generally, this research is to evaluate the effectiveness of inter-organizational 5 relationships between Vietnamese travel companies and their tourist partners. The specific objectives of the study were: - To identify factors that have direct and indirect impact on the inter- organizational relationships between Vietnamese travel companies and their partners - To measure the effectiveness of the inter-organizational relationship through intervening variables: relationship marketing satisfaction and financial benefits from the relationship. - Basing on empirical research findings, this study provides practical improvement and development suggestions boosting cooperation effectiveness between Vietnamese travel companies and their tourist partners. 1.6 Scope And Limitation Of The Study Inter-organizational relationships (IORs) take place in three main different arenas: resource procurement and allocation, political advocacy, and organizational legitimating. Research within each of these has been done at the level of the dyad (e.g. Reid 1964, Hall et al 1977, Galaskiewicz & Marsden 1978), action set (e.g. Stem 1979, Hirsch 1972, Alford 1975), and network (Van de Ven et al 1979, Galaskiewicz 1979a, Knoke & Rogers 1979, Burt 1983) (Galaskiewicz, 1985). There are three distinct levels of analysis associated with the study of IORs. The simplest level is the dyadic relationship in which two organizations or several pair wise sets of organization are examined (Molnar, 1978; Paulson, 1976; Van de van & Walker, 1984). The second approach is the study of relationships between a focal organization and its organization-set (Loy & Sage, 1978; Pfeffer & Nowak, 1976; Schmidt & Kochan, 1977). Finally, there‟re many studies focusing on inter- 6 organizational network itself as a unit of analysis (Galaskiewicz and Marsden, 1978; Knoke & Roger, 1979; Van de ven, Waler & Liston, 1979; Raelin, 1982; Provan, 1983). This research focuses studying on the organization-set level in which the focal organizations are Vietnamese travel companies who have the relationships with other tourist partners including hotels, restaurants, transportation companies and tourist attractions. Another limitation of this study is that the data collected from this study‟s survey is the subjective evaluation of Vietnamese travel companies only. 1.7 Structure Of The Study This study included 5 chapters. Chapter 1 comprised some very first issues of the study such as some general information about the background of the study. This chapter also answered the question what motivates me to carry out this research. Researcher made clear about the scope and the limitation of the study as well. The objectives, main question and main hypothesis were also clarified so that researcher could base on as a framework to follow up. Chapter 2 comprised the review of literature relating to IORs beginning with theoretical background on IORs and IORs succeed. In this part, researcher listed the reasons for organizations to set up IORs and IORs classification was mentioned as well. After reviewing all the literature, researcher identified determinants and intervening factors to the successful IORs. Finally, a conceptual framework was build to evaluate the effectiveness of IORs between Vietnamese travel companies and their partners in Ho Chi Minh City. Chapter 3 presentedthe way that this study will be conducted. Researcher decided to choose quantitative approach. In this section, questionnaire design, unit of 7 analysis, population, sample size and measurements were clearly indicated. A large section in this chapter was to explain whatstatistic techniques were used to analyze the collected data and why they were useful for the study. Researcher saved the main concern for the finding from the study which had been mentioned in chapter 4 after the raw data had been input and analysized by such statistical techniques as descriptive statistics, reliability, explanatory factor analysis, correlation, multiple regression and path analysis. Finally, chapter 5 presented the discussion about the findings in the previous chapter and implication on management strategy for travel companies as well. This part provided a closer view about current situation of inter-organizational relationships between Vietnamese travel companies and their partners in Ho Chi Minh City. Those empirical findings will be the background for important decisions in tourism management in Ho Chi Minh City. Last but not least, once research questions had been answered and research hypothesis had been testified, researcher gave some suggestion for future development in tourism industry. 1.8 Chapter Summary Being the first part of the study, chapter one is definitely very important that it provide the overview of the dissertation. It starts with background relating to IORs and then the introduction about tourism industry in Viet Nam in the recent years with many achievements as well as obstacles and shortcomings it‟s facing. This chapter also defined clearly the objective of the studythat was to identify the factors that had direct and indirect impact on the inter-organizational relationships between Vietnamese travel companies and their partners and measured the effectiveness of the inter-organizational relationship through intervening variables (relationship 8 marketing satisfaction and financial benefits from the relationship). Finally it provided practical improvement and development suggestions boosting cooperation effectiveness between Vietnamese travel companies and their tourist partners. The last part of the chapter presented the focus of study is at the organization-set level in which the focal organizations are Vietnamese travel companies who have the relationships with other tourist partners including hotels, restaurants, transportation companies and tourist attractions. 9 Chapter Two - Literature Review In order to address the ways in which Vietnamese travel companies and their tourist partners could establish satisfactory business relationships, the literature on successful evolution of IORs was reviewed. The result, a comprehensive theoretical model of the characteristics of IOR success, were tested to examine the relationship between Vietnamese travel companies and their tourist partners. At the next step, the findings of this study may provide Vietnamese travel companies with important information from which to make strategic decisions. For example, the findings should be useful in deciding what are the most important factors to focus and whether or not to create or continue a relationship is strategically advantageous, as well as in improving the success of ongoing relationships between the Vietnamese travel companies and their partners. 2.1 Motivation For Setting Up Iors Oliver (1990) presents six reasons as a set of critical contingencies that motivate organizations to enter into relationships with others and set conditions around those relationships. These include necessity (the need to meet legal or regulatory requirements), asymmetry (the potential to exercise power over another organization or its resources), reciprocity (the pursuit of common or mutually beneficial interests), efficiency (the need to improve internal cost-benefit ratios), stability (the need to reduce environmental uncertainty) and legitimacy (a need to demonstrate or improve reputation or prestige). From another point of view, collaboration helps organizations to manange dependencies and secure resources. Collaboration is one way to for organizations to gain access to critical resources including industry and/or geographical information, 10 legal and technical advice, research and development capability, as well as knowledge and learning (Kogut 1988; Inkpen and Crossan 1995; Larsson et al. 1999; Dyer and Nobeoka 2000; Tsang 2002). Another motivation for organizations to form inter-organizational relationships is to tackle mutual concern (Gray 1985). Collaboration is „a process of joint decision-making among key stakeholders of a problem domain about the future of that domain‟ (Gray 1989:11). 2.2 Effective Iors IOR effectiveness refers to the overall evaluation of the relationship. It can thus be defined as the generation of satisfaction by the parties involved in it as a result of the achievement of performance expectations. However, there are two distinct approaches to the concept of IOR effectiveness. One approach (Anderson 1990; Van de Ven and Ferry 1980) associates the term IOR effectiveness with participants' overall satisfaction with the relationship. Satisfaction refers, in this case, to an organization's positive experience as regards its partners' ability to obey rules and fulfill performance expectations (Anderson and Narus 1990; Biong 1993). A second approach (Johnston and Lawrence, 1988; Narus and Anderson, 1987), defines IOR effectiveness as a quantitative measure of the mutual benefit that participants reap from the relationship. Specially, an IORis considered effective according to how fully its objectives have been satisfied. Robert W. Palmatier, Pajiv P. Dant, and Dhruv Grewal (2007) stated that there‟re four theoretical perspectives currently dominate attempts to understand the driver effective inter-organizational relationships performance: (1) commitmenttrust, (2) dependence, (3) transaction cost economics and (4) relational norms (Heide and John, 1990; Hibbard, Kumar and Stern,2001; Morgan and Hunt, 1994; Siguaw, 11 Simpson and Baker, 1998). Each of these perspectives suggests different key drivers of exchange performance. For example, Morgan and Hunt (1994) propose commitment and trust, “not power” or dependence, are key to promote “efficiency, productivity and effectiveness” in inter-organizational exchange. They also found that inter-organizational communication contributes to trust and commitment. Other researchers suggest that the exchange dependence structure determines performance (Bucklin and Sengupta, 1993; Hibbard, Kumar and Stern, 2001). Another school of thought argues for the consideration of the direct effect of rational norms (Lusch and Brown, 1996; Siguaw, Simpson and Baker, 1998). Mohr and Spekman (1994) developed a more precise model which sets out those IOR characteristics which make them successful. Besides, Mohr and Spekman (1994) suggested three sets of behavioral characteristics as effectiveness determining factors: attributes of the IOR (commitment, trust, coordination, and interdependence), communication behaviors (communication quality, information exchange, and participation in decision making), and techniques utilized to resolve conflicts. Most recently, Mai Ngoc Khuong (2012) proposed model of factors affecting successful inter-organizational relationship in the context of travel and tourism between Viet Nam and Thailand. The empirical finding of this study shows that in order to achieve overall successful IOR, Vietnamese travel companies and Thai partners should have a high level of commitment and high frequency of interaction. To be more, factors of marketing support, financial benefits and business success were the main motivation to establish the international relationship. Besides, the factors of trust and communication in the IOR indirectly have small negative effects on overall IOR effectiveness through marketing support and business success of the IOR. 12 2.3 Determinants Of Iors Effectiveness Frequency of interaction Frequency of interactions was suggested by Hall (1991). It was defined as the amount of contacts or exchanges between organizations, to be measured in relation to an organization‟s total contact with other (Mayhew‟s, 1971; Hall, 2005). Hall et al. (1977) found that frequent of interactions were related to high levels of coordination. Casey (2006) noted different types of interaction between the members and between the organizations and concluded that interactions between members and between organizations were limited by the lack of partnership strategy to align initiatives and ineffective communication mechanisms. Palmatier et al. (2006) summarized in their meta-analysis that the influence of interaction frequency on trust is relatively higher than that on other measures, which may imply that frequent interactions give customers more information, reduce uncertainty about future behaviors, and improve trust, even if they have no effects on the customer‟s satisfaction with or desire to maintain the relationship. Commitment Generally speaking, an organization's commitment towards an IOR may be defined as its desire to make an effort to maintain the relationship, which is perceived as being sufficiently worthwhile (Anderson and Weitz, 1992; Morgan and Hunt, 1994). Essentially, commitment implies sacrifice on the part of the partners and IOR durability, in the sense that committed partners show a long-term orientation, including a desire to make sacrifices in the short term with a view to obtaining benefits in the long term (Dwyer et al, 1987). By doing so, they believe that the relationship will be stable and will last long enough to provide them with long-term 13 benefits. To the extent service firms can take advantage of reduced uncertainty and more efficient collaboration through long-term, committed relationships (Cannon and Homburg 2001; Fang et al. 2008; Palmatier et al. 2007), Firms consequently might be able to dedicate more resources to the development of new services and ser-vicerelated processes. Relationship commitment, through frequent and trusting interactions, can enable firms to better assess their exchange partners‟ resources, capabilities and needs (Anderson and Weitz 1992). Moreover, commitment between exchange partners may be argued to help a firm gain deeper knowledge of exchange partners‟ needs and thus facilitate access to valuable resources for the successful development and marketing of new service offerings and processes (Bell and Eisingerich 2007; Lovelock and Gummesson 2004; Shah et al. 2006; Tuli et al. 2007). Medina-Munoz and García-Falcón (2000) also found that the more successful the relationships that hotels have with their travel agents, the higher the levels of commitment they put into the relationships. Trust Trust reflects the extent to which IOR negotiations are fair and commitments are satisfied (Anderson and Narus, 1990), as well as the belief that participants will fulfill their commitments (Anderson and Weitz, 1989). Getting to know the partner is crucial to success (Ring & Van De Ven 1994, Stonehouseet al. 1996, Ahuja 2000) and the importance of valuing the partner, developing trust, a sense of ownership and a sense of belonging, as critical aspects for the success of the partnership (Jarillo 1988, Levinthal & Fichman 1988, Sharkie 2005, Casey 2006). Trust and honesty are at the core of good management practices which are a necessary requirement to developing a partnership relationship (Thorelli 1986, Bytheway & Dhillon 1996, Gardener 2003). “When the level of trust is low, people are gripped by worry and 14 fear and use their energies to protect themselves and limit personal involvement” (Sharkie 2005, p. 40). Therefore, a lack of trust can act as a barrier to effective collaboration (Powell et al. 1996, Boddy et al. 1998) and indeed may cause dissolution of the partnership (Ring & Van De Ven 1994) and a low level of involvement from the partners (Engstrom et al. 2002). Co-ordination Inter-organizational coordination, defined as the process by which participants in an IOR seek to work together in a joint effort, was found by Narus and Anderson (1987) and Morgan and Hunt (1994) to be a positively related factor, in as far as the most successful IORs demonstrate the highest levels of coordination in the activities carried out by IOR participants. Mohr and Spekman (1994), Frazier et al. (1988), and Medina-Munoz and García-Falcón (2000) have also suggested in their studies that a high level of coordination is associated with the success of inter-organizational relationships. Casey (2006) identified the lack of role clarity and designated responsibilities within the partner organization as a limitation to partnership development and concluded that there is a need for a coordinating role between organizations. Communication Communication refers to the amount, frequency and quality of the information shared between exchange partners and positively affects customers‟ trust in and commitment to a seller (Mohr, Fisher and Nevin 1996). Waddock (1988) stresses communication and feedback as essential to ensure that problems are addressed quickly and emphasizes the necessity that each partner 15 views the particular issue as important, sees the actual or potential benefit to each partner has a sense that integration with the other partner is necessary for a solution. Lasker et al. (2001) stated that partnership behavior and ability to respond quickly to changing customer needs is influenced by communication. H However, there is little distinction in the literature between the process of collaboration and partnership, but the latter has been the preferred term for a relationship between organizations (Steele 1986, McEwen 1994). “The growth of inter-organizational relationships is fostered by frequent communications to formalize the relationship and build consensus about the terms of the relationship among the parties involved.” (Van De Ven & Walker 1984, p.598). Etgar (1979) further pointed out that conflict is a consequence of inefficient inter-organizational communication, which generates misunderstandings, incorrect inter-organizational strategies, and frustrations. Recently, Antony Paulraj, Augustine A. Lado and Injazz J. Chen (2008) stated that inter-organizational communication can be viewed as a relational competency that yields strategic advantage for the collaborating firms. Formalization Formalization of IOR was suggested as an essential predictor of overall IOR success by Bresser (1988), Bucklin and Sengupta (1993), Heide (1994), and Medina-Munoz and García-Falcón (2000). It refers to the degree to which rules prescribing behavior are formulated, as well as the extent to which role responsibilities are prescribed (Scott, 1987; Dahlstrom and Nygaaard, 1999). According to Vlaar et al. (2006), formalization is as a process of codification and enforcement, which is inextricably linked with outcomes, such as contracts, rules and procedures. Vlaar et all (2006) also established a framework of how formalization affects mechanisms that enables sense-making that correspondingly diminishes 16 problems of understanding in the IOR. Through the formalization mechanisms the participants can “make sense of their partners, the relationships in which they are engaged and the collaborative contexts in which these are embedded”. Compatibility Organizational compatibility was suggested by Bucklin and Sengupta (1993). It is considered as domain similarity and goal compatibility have been found to enhance the effectiveness of inter-organizational dyads (Ruekert and Walker, 1987; Van De Ven and Ferry, 1980). Besides, inter-organizational compatibility refers to the sharing of common experiences, values, principles, and business strategies between business partners (Kanter, 1994). Organizational compatibility reflects complementarities in goals and objective, as well as similarity in operating philosophies and corporate culture (Bucklin and Sengupta, 1993). Interorganizational compatibility refers to the sharing of common experiences, values, principles, and business strategies between busi-ness partners (Kanter, 1994). Partnering organizations with compara-ble products and services as well as similar objectives and cultures can easily achieve successful business-to-business partnerships and inter-organizational integration (Rich, 2003). Compatibility can arise from existing work practices, and values of the partnering organiza-tions (Karahanna, Agarwal, & Angst, 2006), and can simplify the shar-ing of business information across partnering organizations (Ngai etal., 2010). Inter-organizational compatibility also creates synergy across partnering organizations (Sarkar et al., 2001) Partnering organizations with comparable products and services as well as similar objectives and cultures can easily achieve successful business-to-business partnerships and inter-organizational integration. (Rich, 2003). 17 2.4 Intervening Factors To Ior Effectiveness Relationship marketing support satisfaction Marketing support satisfaction, which refers to supports all marketing activities directed toward establishing, developing, and maintaining successful relationships (Morgan and Hunt, 1994). Morgan and Hunt also found that commitment and trust are key mediating elements for successful relationship marketing. The roots of marketing and relationship marketing theory stem from economics. When Wroe Alderson (1958, pp. 27, 28) extended the institutional economics view that exchanges are driven by value maximization and market efficiency, he argued that because people are involved, marketing thought must include the sociological factors of “power structure” and “two-way exchange of commitments,” as well as the social psychological factors of “communication” and “emotional reactions.” Financial benefits Financial benefits from the relationship which refers to the actual economic value of the success of the relationship (Medina-Munoz and Garcia-Falcon, 2002). Financial benefit is an important indicator of business performance. Financial indicators have been used in many IOR studies and include such measures as sales growth (Lee and Pennings, 2001), hotel occupancy rates (Ingram and Roberts, 2001), firm growth (Powell et al., 1996), market share (Rowley et al., 2004), profitability (Geringer and Hebert, 1991), stock market value (Kale, Dyer, and Singh, 2002), relational rents (Dye r and Singh, 1998), transactional value (Zajac and Olson, 1993), and revenue growth (Baum, Calabrese, and Silverman, 2000). 18 2.5 Conceptual Framework A comprehensive examination of the models presented previously, together with other studies related to determining factors for the successful evolution of IORs (Biong, 1993; Devlin and Bleackley, 1988; Dwyer, Schurr and Oh, 1987; Ganesan, 1994; Gyenes, 1991; Shamdasani and Sheth, 1995; Wray, Palmer and Bejou, 1994), lead to identify several factors as contributors to successful IOR evolution: trust, commitment, coordination, communication, participation, formalization, flexibility, organizational compatibility, frequency of interaction, relationship marketing satisfaction and financial benefits. COORDIR TRUSTIR REMASA ORGCOM H1 H4 H3 EFOFIOR COMUNIR H5 FORMIR H2 H4 FINBEN COMITIR FREINTER Figure 2.1: Conceptual Framework of Direct and Indirect Effects OnEFOFIOR 19 2.6 Chapter Summary Most of the content of this chapter provides the literature review on IORs success. The chapter begins with some points of view explaining why organizations form the collaboration together. After some literature on IORs are reviewed, researcher come up with seven determinants of IORs (trust, commitment, coordination, organizational compatibility, frequency of interaction, communication and formalization) and two intervening factors to IORs success (marketing support satisfaction and financial benefits) and finally a conceptual framwork of direct and indirect effect on IORs is set upwith five hypothesises. 20 Chapter Three - Research Methodology This study applies quantitative approach as the major method. The quantitative analysis of this research was conducted by using SPSS software version 20.0 with important statistical techniques including reliability and factor analysis, statistic descriptive analysis of the data, multiple regression analysis and path analysis. 3.1 Unit Of Analysis, Population And Sample Size The analysis unit of this study was at the corporate level. The target population for this study was travel companies in Viet Nam from middle region to the south in such following cities: Dong Ha, Hue, Da Nang, Hoi An, Nha Trang, Mui Ne, Vung Tau and Ho Chi Minh. These travel companies were holding the relationships with other tourist partners such as hotels, restaurants, transportation companies and tourist attractions. In term of determining sample size of the study, Gorsuch (1983, p.332) and Hatcher (1994, p. 73) recommended that a minimum subject to item ratio of at least 5:1 in EFA. The conceptual model of the study consists of seven independent variables with six items for one, then totally there‟re 42 items (6x7). Accordinglythe required minimum number of respondents for this study is 210 cases (42x5). 3.2 Research Instrument In this research, the most effective tool was the questionnaire that was built based on major concepts and variables used for this research. Questionnaire design was firstly started with developing a sound theoretical framework. From secondary data, theories were gathered and analyzed. After theoretical basis had beenalready at hand, questionnaire was established. Suitable questions were raised to ensure the 21 reliability and validity of all scales of the research. All of the questions were formulated on a five-point Likert-scale ranging from 1 to 5, equivalent to strongly disagree, disagree, neutral, agree and strongly agree respectively, except for the first question: “How often does your company interact with your travel partners?” in which 1 = not at all, 2 = seldom, 3 = sometimes, 4 = often, 5 = very often. 3.3 Data Collection Primary data for this research was collected from the questionnaires. Researcher planned to deliver the questionnaires to at least 210 travel companies in Viet Nam in three following ways. Firstly, the questionnaires were sent through email. Secondly, the questionnaires, enclosed with postage paid pre-addressed return envelopes, were mailed and filled by the representatives of companies. Thirdly, researcher came to travel companies, directly delivered the questionnaire and kindly asked for their cooperation in providing the information. The questionnaires were sentto travel companies in main cities in the central and southern region of Viet Nam from the end of March to the end of June 2013. Totally, researcher received the responds from 256 companies including 62 responds from the Google docs and 194 hard copies. 3.4 Data Analysis Techniques Several statistic techniques were applied in order to have the most precise findings for the research. Questionnaires were coded, computerized, and screened for errors before any statistical analysis. Software and statistical techniques used in this study included: 22 Descriptive statistics Percentage and frequency were firstly used to get the general information about the respondents. One way to display data is in a frequency distribution, which lists the values of a variable (e.g., for the variable occupation: professional, manager, salesperson, etc.) and the corresponding numbers and percentages of participants for each value. Data entry errors were checked by running descriptive and frequency procedures to look for outliers through the valid maximum and minimum values of each variable, and any reported value outside this range indicated a data entry error that needed to be corrected for further analysis. Besides, the mean of a set of numbers is the arithmetic average of those numbers. The mean summarizes all of the units in every observed value, and is the most frequently used measure of central tendency for numerical variables. Standard deviation is common measures of variability, providing information about the amount of spread or dispersion among the variables. Factor analysis Factor analysis is a data reduction technique. For instance, factor analysis can be used to identify the underlying components (factors) that explain the correlations among a set of variables. In this way, it is possible to employ a smaller set of measures (the factors) to explain a substantial portion of the total variance that is explained by all original variables. Multiple regressions Multiple regression is a family of techniques that can be used to explore the relationship between one continuous dependent variable and a number of continuous independent variables or predictors.Statistically, this technique provide research with 23 information about the model as a whole (all subscales), and the relative contribution of each of the variables that made up the model (individual subscales). As an extension of this, multiple regressions will allow research to test whether adding a variable contributes to the predictive ability of the model, over and above those variables already included in the model (Pallant, 2005). Path analysis Path analysis is a straightforward extension of multiple regressions. Its aim is to provide estimates of the magnitude and significance of hypothesized causal connections between sets of variables. This is best explained by considering a path diagram. In this regard, by considering the literature review, possible different paths will be identified to shows theoretically strong relationship towards explaining the overall IOR success as a whole. In this research, path analysis will be performed between overall IOR success as a dependent variable and independent variables of marketing support, financial benefits, business success, and relationship performance success. This procedure will be performed using SPSS (version 20). Further, Path Analysis is done to identify the most powerful predictor of organization performance and how much will be the direct and indirect contributions of the factors of marketing support, financial benefits, business success, and overall IOR success. 24 Table3.1: Interpreting Strength of Path Coefficients Coefficients 0 Strength of Relationship No association 0.01-0.09 Trivial relationship 0.10-0.29 Low to moderate relationship 0.30-0.49 Moderate to very strong 0.50-0.69 Substantial to very strong 0.70-0.89 Very strong relationship 0.9 Nearly perfect relationship Source: Adapted from De Vaus, 2002: 259 3.5 Reliability Test In some testing books, there‟re three strategies for estimating reliability including test-retest reliability (calculating a reliability estimate by administering a test on two occasions and calculating the correlation between the two sets of scores); equivalent (or parallel) forms reliability ( calculating a reliability estimate by administering two forms of a test and calculating the correlation between the two sets of scores) and internal consistency reliability ( calculating a reliability estimate based on a single form of a test administered on a single occasion using one of the many available internal consistency equation). Obviously, internal consistency strategy is the easiest technique because it does not require administering the test twice or having the form of the test. Alpha was developed by Lee Crobach in 1951 to provide a measure of the internal consistency of a test or scale which is expressed as a number between 0 and 1. Internal consistency describes the extent to which all the items in a test measure the same concept or construct and hence it‟s connected to the inter-relatedness if the 25 item within the test. Internal consistency should be determined before a test can be employed for research or examination purposes to ensure validity. Basing on the literature review and discussion with the experts in statistics, researcher decided to apply the Cronbach‟s alpha coefficient to measure the reliability of the dependent and independent variables of this study. There‟re different reports about the acceptable values of alpha ranging from 0.7 to 0.95. The higher Cronbach‟s alpha, the greater reliability (Nunally & Burnstein, 1994), however, if the alpha is too high it may suggest that some items are redundant as they are testing the same question but in a different guise (Mohsen Tavakol, Reg Dennick 2011). In conclusion, the acceptable value of alpha for this study is higher than .7 and maximum alpha value of .9 was recommended. The table 3.1 and 3.2 below present the values of Cronbach Alpha of seven independent variables and three dependent variables that all of them are above .7. These results of Cronbach Alpha showed thatall variables of this study had a good internal consistency. Table3.2: Reliability of dependent variables Variable N No of item Cronbach alpha FIBE 256 5 0.708 MASU 256 5 0.701 RELEF 256 6 0.718 26 Table 3.3: Reliability of independent variables Variable N No of item Cronbach alpha COMMIT 256 6 0.742 COMU 256 6 0.803 CORD 256 6 0.832 FORM 256 6 0.761 FREINTER 256 5 0.720 ORCOM 256 6 0.740 TRUST 256 6 0.754 3.6 Validity Test The term validity refers to whether or not the test measures what it claims to measure. On a test with high validity, the items are closely linked to the test‟s intended focus. After testing the reliability of each variable, researcher conducted data analysis. Factor analysis is a data reduction technique. For instance, factor analysis can be used to identify the underlying components (factors) that explain the correlationsamong a set of variables. In this way, it is possible to employ a smaller set of measures (the factors) to explain a substantial portion of the total variance that is explained by all original variables.Factor analysis makes us not only cover valid variables into relevant group and delete invalid variables but also check correlation or reliability of the variables in the same scale. After deciding which variables to include for each factor a composite score for each observation on each identified factor can be generated. Two basic approaches in doing this include calculation of factor scores and construction of factor-based scales (Pett et al., 2003). A factor score for a case is estimated by 27 using a linear combination of the items that load on the factor. In the factor-based scale approach, on the other hand, scores on each factor are obtained by adding or taking the average of the variables that have been selected for inclusion in a given factor. The advantage of this approach is the fact that the items that load very low on a factor ([...]... In reality, one of the main determinants of the success in tourism activities is the effectiveness of inter- organizational relationships between travel companies and their tourist partners However, most of the relationships have fallen short of success Therefore, finding out direct and indirect factors affecting inter- organizational relationships between travel companies and their tourist partners... development of Viet Nam travel and tourist industry More importantly, understanding the effectiveness level of inter- organizational relationship is an essential reference for important decisions in operation and management of Vietnamese travel companies and their tourist partners From the above reasons, I decided to choose the topic for my thesis as follows: Effectiveness of inter- organizational relationships. .. Effectiveness of inter- organizational relationships between vietnamese travel companies and their tourist partners.” 1.4 Main Research Question and Hypothesis Research question From problem statement, the study raises the following research question: “To what extent the effectiveness of the inter- organizational relationships between Vietnamese travel companies and their tourist partners is affected by trust, 4... inter- organizational relationships H4: Factors of relationship marketing satisfaction and financial benefits positively affect the effectiveness of inter- organizational relationships H5: The effectiveness of inter- organizational relationshipsis directly and indirectly affected by factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction... the intervening factors of relationship marketing satisfaction and financial benefits 1.5 Objectives Of The Study General Objective Generally, this research is to evaluate the effectiveness of inter- organizational 5 relationships between Vietnamese travel companies and their tourist partners The specific objectives of the study were: - To identify factors that have direct and indirect impact on the inter- ... obstacles and shortcomings it‟s facing This chapter also defined clearly the objective of the studythat was to identify the factors that had direct and indirect impact on the inter- organizational relationships between Vietnamese travel companies and their partners and measured the effectiveness of the inter- organizational relationship through intervening variables (relationship 8 marketing satisfaction and. .. improvement and development suggestions boosting cooperation effectiveness between Vietnamese travel companies and their tourist partners The last part of the chapter presented the focus of study is at the organization-set level in which the focal organizations are Vietnamese travel companies who have the relationships with other tourist partners including hotels, restaurants, transportation companies and tourist. .. affecting successful inter- organizational relationship in the context of travel and tourism between Viet Nam and Thailand The empirical finding of this study shows that in order to achieve overall successful IOR, Vietnamese travel companies and Thai partners should have a high level of commitment and high frequency of interaction To be more, factors of marketing support, financial benefits and business success... in which Vietnamese travel companies and their tourist partners could establish satisfactory business relationships, the literature on successful evolution of IORs was reviewed The result, a comprehensive theoretical model of the characteristics of IOR success, were tested to examine the relationship between Vietnamese travel companies and their tourist partners At the next step, the findings of this... trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction positively affect and predict the financial benefits from the inter- organizational relationships H3: Factors of coordination, trust, organizational compatibility, communication, formalization, commitment, and frequency of interaction positively affect and predict the effectiveness of inter- organizational .. .EFFECTIVENESS OF INTER- ORGANIZATIONAL RELATIONSHIPS BETWEEN VIETNAMESE TRAVEL COMPANIES AND THEIR TOURIST PARTNERS In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS... one of the main determinants of the success in tourism activities is the effectiveness of inter- organizational relationships between travel companies and their tourist partners However, most of. .. that have direct and indirect impact on the inter- organizational relationships between Vietnamese travel companies and their partners - To measure the effectiveness of the inter- organizational