Factors Influencing International Joint Ventures’ Performance An Investigation into the Telecommunication Industry in Laos

ACKNOWLEDGMENT I would like to express my sincere appreciation to all the people who helped me during my doctoral research course First of all, I am forever indebted to my supervisor Associate Professor Dr NGUYEN THI TUYET MAI (National Economics University – Vietnam) with her fantastic personality and unbelievably supportive approach, and my colleagues Without their guidance and continuous support this dissertation could not have been completed I have learned a great many insights from all of them during the dissertation project They really helped me as a team, and I also consider them not only as my teachers, but also as my friends Thank you! I am also grateful to my office in encouraging me to achieve higher education at National Economics University, Vietnam Besides, my dissertation will not be completed without the honestly help of interview team and interviewees from International telecommunication ventures in Laos I greatly appreciate the help and the time these people have spent on me Last but not least, I would not have been able to pursue my studies without the help of my family: thanks to my parents, my brother, my wife, and my children who have been giving me the endless love with supports and strength i Table of Contents Acronyms iii Table of Figures v List of Tables vi CHAPTER 1: INTRODUCTION 1.1 Research Motivation 1.1.1 International Joint Ventures (IJVs) in Telecommunication industry in Laos 1.1.2 Factors influencing IJVs’ Performance in Telecommunication Industry in Laos .4 Theoretical Background Research Methodology Contribution of the Study Organization of the Study 10 CHAPTER 2: LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK 12 2.1 Literature review on International Joint Ventures’ Performance 12 1.2 1.3 1.4 1.5 2.1.1 Survival and Longevity 14 2.1.2 Financial Output Measures 15 2.1.3 Overall Satisfaction 16 2.1.4 Goal Achievement 17 2.1.5 Learning 18 2.2 Literature Review on Factors Influencing IJVs’ Performance 19 2.2.1 Control of the IJV 21 2.2.2 Trust 22 2.2.3 Cooperation and Commitment 24 2.2.4 National Culture and Corporate Culture Differences 26 2.2.5 Goal Compatibility 30 2.3 Conceptual Framework 31 CHAPTER 3: RESEARCH METHODOLOGY 34 3.1 An overview of Research Approach and Research Design 34 3.2 Case Study Method 36 3.2.1 Secondary Research 37 ii 3.2.2 Primary Research 37 CHAPTER 4: RESEARCH FINDINGS 47 4.1 The Current Status of IJVs’ Performance in the Telecommunication Industry in Laos 47 4.1.1 The Telecommunication Industryin Laos 47 4.1.2 Performance of the IJVs in the Telecoms Industry in Laos 65 4.2 Factors Influencing IJVs’ Performance in the Telecommunication Industry in Laos 73 4.2.1 Identification of Factors Influencing IJVs’Performance 73 4.2.2 The Impact of Several Factors on IJVs’ Performance - Regression Findings from Individuals’Perception 86 CHAPTER 5: CONCLUSIONS AND DISCUSION 96 5.1 Conclusions 96 5.2 Discussion 97 5.2.1 Research Implications 98 5.2.2 Limitations and Future Research Directions 103 REFERENCES 106 APPENDICES 121 Appendix 1: Information about all key service providers in telecom industry in Laos122 Appendix 2: GUIDELINE FOR IN-DEPTH INTERVIEWS 124 Appendix 3: QUESTIONAIRE 125 iii Acronyms ADSL Asymmetric Digital Subscriber Line ADB Asia Development Bank ASEAN Association of South East Asian Nations ARPU Average Revenue Per User BMI Business Monitor Investment BTA Bilateral Trade Agreement BTS Base Transceiver Station CDMA Code Division Multiple Access EDGE Enhanced Data Rates for GSM ETL Enterprise of Telecommunication Laos FDI Foreign Direct Investment GDP Gross Domestic Product GMS Greater Mekong sub-region GPRS General Packet Radio Service (GSM) GSM Global System for Mobile Communications GOL Government of Laos ICT Information and Communication Technologies IJVs International Joint Ventures ISPs Internet Services Providers ITU International Telecommunications Union Lao PDR Lao People’s Democratic Republic LANIC Lao National Internet Committee LAK Laotian Kip LTE Long term Evolution iv LTC Lao Telecommunication Corporation Limited MCTPC Ministry of Communication Transport Post and Construction MDGs Millennium Development Goals MNEs Multiple National Enterprises MIC Ministry of Information and Culture MPT Ministry of Post and Telecommunications NAPT National Authority on Post and Telecommunications PCs Personal Computers PM Decree Prime Minister Decree PSTN Public Switched Telephone Network ROI Return on investment ROE Return on equity ROA Return on assets SIM Subscriber Identification Module SMS Short Message Service STL Star Telecom USAID United States Agency for International Development VoIP Voice over Internet Protocol WLL Wireless Local Loop WiMAX An air interface standard for fixed broadband wireless access (BWA) systems employing a point-to-multipoint architecture v Table of Figures Figure 1: A Conceptual Model for Studying Factors influencing International Joint Ventures’ Performance 33 Figure Research Design 35 Figure 3: Secondary Data and their sources 38 Figure 4: Laos Mobile Sector 2010 – 2017 50 Figure 5: Laos Mobile ARPU 2010 – 2017 52 Figure 6: Laos Fixed-Line Sector 2010 – 2017 56 Figure 7: Laos Broadband sector 2010 – 2017 59 Figure 8: Laos internet Market growth 2003 – 2011 61 Figure 9: Laos Broadband Market growth 2005 – 2011 62 vi List of Tables Table 1: Interview summary 41 Table 2: Demographic Profile of Respondents 44 Table 3: Telecoms sector in Laos – Historical Data and Forecasts 49 Table 4: Key players in Laos’ telecoms sector 66 Table 5: Perception of performance of LTC (N = 31) 67 Table 6: Perception of performance of Unitel (N = 26) 69 Table 7: Financial performance of Tigo/Beeline in the period 2010-2013 71 Table 8: Perception of performance of Beeline (N = 30) 72 Table 9: Perception of performance of the IJVs (N = 87) 73 Table 10: Perception of control mechanism at the IJVs (N = 87) 75 Table 11: Perception of Trust at the IJVs (N = 87) 78 Table 12: Perception of cooperation and commitment at the IJVs (N = 87) 79 Table 13: Perception of goal compatibility at the IJVs (N = 87) 82 Table 14: Perception of cultural differences at the IJVs (N = 87) 85 Table 15: Summary of descriptive statistics of IJVs and ANOVA results………86 Table 16: Performance measures and factor loading results (N = 87) 88 Table 17: IDVs’ measures and factor loading results (N = 87) 90 Table 18: Descriptive Statistics and Correlations (N = 87) 922 Table 19: Regression results (N = 87) DV: Financial Performance 93 Table 20: Regression results (N = 87) DV: Overall Satisfaction 93 Table 21: Regression results (N = 87) DV: Goal Achievement 94 Table 22: Regression results (N = 87) DV: Learnings 95 CHAPTER 1: INTRODUCTION 1.1 Research Motivation 1.1.1 International Joint Ventures (IJVs) in Telecommunication industry in Laos Lao People Democratic Republic (Lao PDR) is located in the central part of the Indochina peninsula The country covers about 236,800 KM2 and has a population of just over 6.5 million (2012 census) Lao PDR shares borders with countries: Vietnam to the East, China to the North, Union of Myanmar to the Northwest, Thailand to the West, and Cambodia to the South Since 1986 when the new Economic mechanism was adopted, the government of Lao People’s Democratic Republic (Lao P.D.R) has been promoting social and economic development under the policy of a market oriented economic During 2001-2005, Lao PDR had an average annual GDP growth rate of 6.2 percent, and it has increased to 8.1% in 2012.During 2006 – 2008 he average GDP per capita was approximately USD 700, and in 2011 it grew to over USD 1,300 (World Bank 2012) The service sector contributed to 26 percent of Laos’ GDP In 2008, the telecommunications sector accounted for approximately 1.6 percent of the total GDP and is considered one of the fastest growing sectors in Laos For example, since 2000, competition in the telecommunications boosted investment in the sector dramatically Investment per year jumped from USD 19 million in 2000 to USD 154.9 million in 2008 (USAID, 2009) Telecommunication technology plays a significant role for the flow of information It is an extremely useful tool to spread knowledge and new ideas, which can reduce infrastructure development gap between people in rural and urban area Furthermore, it can improve education, health care services, and encourage business activities In addition, it also plays the crucial role to the national economic development, especially to the developing country like Laos Therefore, telecommunication technology development is one way that Lao government uses to generate revenue and create job opportunity for people In addition, Lao government aims to improve people living standard and increase the ability to compete in global trade of Lao business by giving priority to the development of telecommunication technology with the intention to promote sustainable development of the nation In line with the new Economic mechanism, the Telecommunication sector in Laos was privatized at the year 1996 as a joint venture with a Thai investor (Shinawana International Public Company Limited) However, this telecom privatization policy has been revised due to the importance of a national telecommunication development strategy which is able to resolve keen issues such as digital divide among regions and the frequent telephonic traffic congestion caused by a deficiency in the nation-wide telecommunication facilities (eg switching and telephone line capacity and human resources) (MCTPC, 1982; MCTPC, 1990 &1995; MCTPC, 1990 – 2007) Besides, Lao P.D.R has a responsible position for promoting telecom development programs planned for the Greater Mekong sub-region (GMS) This development concept of GMS proposed by Asia Development Bank (ADB) and is applied to an area or regional development approach to GMS, promoting networks among the six Mekong riparian countries, including supporting activities for a common standard of telecom services availability which is increasing in Laos Telecommunication increased steadily from 2007 to 2011 (MCTPC, 2007 – 2011) There are some communication policy studies undertaken by scholars and media and political organization, but research on International Joint Ventures (IJVs) in Telecommunication industry in Laos has been limited Especially, it seems that very modest attention has been given to investigateIJVs’ performance and factors influencing it in the industry in Laos Thus, these issues will be the focus of this research Regarding telecommunication service policies in Laos, National Authority of Posts and Telecommunication (NAPT) was established on 22nd October 2007 by the PM Decree No: 375/PM NAPT is an organization under the Prime Minister office, dealing with policy, strategy and its implementation and administrative issues on Posts and Telecommunication sector and the Information and CommunicationTechnologies (ICT) in Laos NAPT is responsible for both the policy making and regulatory function for Telecommunication and ICT sectors On 15th June 2011, NAPT has been upgraded to Ministry of Posts and Telecommunications (MPT) (MCTPC, 1990 – 2007; MCTPC, 2011) Moreover, Telecommunication Act was passed and entered into force in 2011 Telecom sector policy 2004 of Laos government has stake in all the operators Based on ASEAN framework agreement on science, for value addedservicesthe new entry can only take place into Laos through a joint venture with Lao’s service provider or acquisition of existing operators Under BTA with America, Laos has made commitments to provide unrestricted market access and full national treatment for the whole range of basic fixed and mobile (on the facilities basic or by resale, through any mean of technology, as value-added telecommunication service) (MCTPC, 2004) Related to telecommunication providers in Lao P.D.R, there are five authorized enterprises which are providing fixed and mobile telecommunication services in Laos All these providers have the government ownerships, including: Lao Telecommunication Corporation Limited (LTC) with Government of Laos (GOL) and Shinawatra (Thailand) share 51% and 49% of possession respectively; Enterprise of Telecommunication Laos (ETL) with GOL 100% but currently become to ETL public; Star Telecom (STL): GOL 51% and Viettel Global 49% (now has been renamed to Unitel); Milliom international cellular SA (now has been transferred to Vimpelcom Russia (Beeline): GOL 22% and Vimpelcom 78%; and SKY communication Laos (SKY) withGOL 100% (since 2010) (before 2010 – foreign private owner) The number of internet service providers (ISPs) 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How about in Laos? How can you evaluate performance of your IJV over the past few years? - General evaluation of the IJV performance - Explore some key dimensions of performance: + Financial performance + Goal achievement + Satisfaction with the IJV in general, and satisfaction with the partner + Learning from the partner What factors influence your IJV’s performance Explore some factors based on the theoretical framework: - Cultural differences (describe experience in working with the partner; the feeling each time of working with the partner, etc - Trust in the partner - Cooperation and commitment of the partner - Control mechanism in the IJV - Goal compatibility 125 Appendix 3: QUESTIONAIRE Answer 1.1 How long have your IJVs been established? 1.2 How long is your license? 1.3 The commitment between your venture and Laos government is strong or weak? Strongly Disagree 2.1 The venture achieved its target sales volume(last year) 2.2 The venture achieved its target market share (last year) 2.3 The venture achieved its target profits (last year) 2.4 The venture have high rate of ROI (last year) 2.5 The venture have high rate of ROE (last year) 2.6 The venture have high rate of ROA (last year) 2.7 Overall, the venture achieved its planned goals (last year) 2.8 There is a trend in increasing sales of the venture over the last years 2.9 There is a trend in increasing market share of the venture over the last years 2.10 There is a trend in increasing profits of the venture over the last years 2.11 The venture has achieved a great performance overall 2.12 Overall, partners and the parent firm are satisfied with the IJV’s performance 2.13 Overall, partners and the parent firm are satisfied with the co-operation and partnership in the IJV 3.1 Laotians have learned a great deal of technological expertise from the partner(s) 3.2 Laotians have learned a great deal of manufacturing processes from the partner(s) 3.3 Laotians have learned a great deal of new knowledge about product development expertise from the partner(s) 3.4 Laotians have learned a great deal of marketing expertise from the partner(s) 3.5 Laotians have learned a great deal of new knowledge Strongly Agree 126 about foreign culture and tastes from the partner(s) 3.6 Laotians have learned a great deal of managerial techniques from the partner(s) 4.1 Generally, we considered our partner trustworthy 4.2 In our opinion, our partner is reliable 4.3 Our partner generally meets the negotiated obligations 4.4 Our partner cares about our problems, feelings and concerns 5.1 In this joint venture, partners express interest in the longterm relationship 5.2 In this joint venture, partners are willing to act on their promise 5.3 In this joint venture, partners show commitment of significant resources to the venture 5.4 In general, partners of the venture show good cooperation 6.1 In my joint venture, it is important that partners can monitor results and intervene when necessary 6.2 In my joint venture, partners can take steps to ensure (through legal, physical & administrative means) that certain desirable actions are taken 6.3 In my joint venture, partners can take steps to ensure that IJV personnel are able to perform well 6.4 Overall, in my joint venture, the control mechanism is proper 7.1 Our national culture is very different from the partner’s 7.2 Language differences are a major obstacle in communicating with, and understanding the partner 7.3 Our problem solving methods are very different from that of the partner(s) 7.4 Our management style is very different from that of the partner’s 8.1 In my joint venture, partnershave similar strategic objectives about the venture 8.2 In general, partnerssharethe direction of the venture development 127 Personal information (of the interviewee): Name of joint venture where are you working: Age: …………… Gender: Position: Nationality: How long have you been working in this JV: Female Male Top manager Middle Senior manager Laotian Other years