Antecesdents and consequences of dimensions of human resource management practices in vietnam ok

Int J of Human Resource Management 16:10 October 2005 1830– 1846 Antecedents and consequences of dimensions of human resource management practices in Vietnam Le Chien Thang and Truong Quang Abstract The purpose of this study is to extend the empirical research concerning the impact of human resource management (HRM) practices on organizational effectiveness into the context of developing and transitional economy countries From a survey of 137 cross-sector companies, it was discovered that there are five dimensions of HRM practices currently in use in Vietnam Variation in the application of these dimensions can be partly traced to several organizational characteristics, but most salient is the perception of management on the value of human resources In some dimensions, this variation constitutes a source of the difference in the perceptual company performance These findings break new ground to propose a process for implementing HRM practices in Vietnam Keywords HRM practices; firm performance; HR value; Vietnam Introduction When change is constant and competition is compulsory, companies have few choices but to search for sources of sustainable competitive advantage To so, the resourcebased theory suggests companies develop and utilize rare, valuable, inimitable, and nonsubstitutable resources (Barney, 1991; Barney et al., 2001) The power of this idea, in tandem with the recent realization that people working in the company are the source and also the basis for utilization of both human and other resources, has led to the examination of this theory for human resources The theoretical analysis shows that human resources (Wright et al., 1994) and human resource management practices as a system (Lado and Wilson, 1994) match the condition of this theory and thus can confer sustainable competitive advantage There comes a new reality that human capital has gradually gained increasing ground as a more intangible source of competitive advantage over other traditional sources such as product technology, process, market regulation, and access to sources of capital (Pfeffer, 1999) Empirical evidence abounds to confirm the ‘success contributing’ role of HRM practices Numerous studies in the West (mainly in the US and the UK) point out that the system of HRM practices helps to increase firm performance (Huselid, 1995; MacDuffie, 1995; Delery and Doty, 1996; Delaney and Huselid, 1996; Youndt et al., 1996; Ichniowski et al., 1997; Ramsay et al., 2000) What is noticeable is HRM practices were Le Chien Thang, Shinawatra University, Pathum Thani, Thailand (e-mail thang@shinawatra.ac.th) Truong Quang, Asian Institute of Technology, Bangkok, Thailand (e-mail qtruong@ait.ac.th) The International Journal of Human Resource Management ISSN 0958-5192 print/ISSN 1466-4399 online q 2005 Taylor & Francis http://www.tandf.co.uk/journals DOI: 10.1080/09585190500298420 Thang and Quang: Human resource management practices in Vietnam 1831 found to vary across countries (e.g Bae et al., 1998) and the variation was hypothesized to be attributable to cultural values (Ngo et al., 1998) This contextual influence explains a growing proliferation of research of this kind in a wide diversity of non-Western settings such as in Hong Kong (Ngo et al., 1998), Israel (Harel and Tzafrir, 1999), Korea (Bae and Lawler, 2000), Russia (Fey and Bjorkman, 2001), Taiwan (Chang and Chen, 2002), and New Zealand (Guthrie et al., 2002) In the main, these studies consistently find a positive direct relationship between HRM practices and firm performance On closer examination, it is also apparent that the way companies blend HRM practices and the impact of those bundles on firm performance differs across studies Hence, the generalization of these results into other contexts, such as developing and transitional countries, may confront the question of validity Remarkably, for the majority of countries belonging to the developing or transitional world, where recent economic, political, and social changes offer different challenges as companies implement HRM practices (Napier and Vu, 1998), there has been little research effort on the impact of HRM practices on firm performance to delineate this issue To fill this void, this study aims to extend the emerging non-Western literature on the firm-level impact of HRM practices into this less charted area In this vein, Vietnam emerges as an interesting test base for this purpose given its enormous ethnic, religious and cultural diversity (McLeod and Nguyen, 2001) Due to geographic conditions, the Vietnamese in the north are believed to be most industrious and politically ambitious, while southerners are seen to be more easy going and receptive to new ideas and methods The ethnic Chinese are, in particular, recognized for their high sense of business and entrepreneurship, whereas other ethnic groups (53 in total) are still lagging in many aspects of the fast moving society Thanks to their well established clan networks and community solidarity, the Chinese have played an active role in the economic landscape of Vietnam throughout consecutive political changes, yet they still form the backbone of the recently reviving private enterprises, which are concentrated in Cho Lon – the Chinatown of Vietnam in the south The locus of power is practically in the hands of the Kinh (the Vietnamese) in the north, where the siege of the government and a large number of state-owned enterprises (SOEs) are located Besides a high degree of ethnic diversity, Vietnam carries along in its history a notable complexity of religious influences, such as Confucianism, Taoism, Buddhism, Christianity, Hinduism, Islam and even locally founded religious sects (e.g Cao Dai and Hoa Hao) They have, surprisingly, co-existed and developed with one another without much conflict, as ‘the Vietnamese hardly ever accepted beliefs or practices completely as presented to them; instead they adopted and adapted foreign traditions, blending them with indigenous beliefs and with each other’ (McLeod and Nguyen, 2001) Typically, as a product of the country’s socio-cultural idiosyncrasy, HRM practices in Vietnam reflect the slow and cautious evolution of a complex system in an attempt to address the concerns and benefits of all stakeholders Against this backdrop, this study aims to: (1) identify the dimensions of HRM practices currently in use in Vietnam which represents one of the ethnically and culturally diversified developing economies in transition; (2) trace the determinants of these dimensions from the organizational characteristics; and (3) examine the impact of the dimensions of HRM practices on organizational effectiveness The conceptual framework for the research is presented in Figure 1832 The International Journal of Human Resource Management Figure Conceptual framework of the study Theoretical background and hypotheses The ready imitability of individual HRM practices prevents companies from relying on such practices per se for competitive advantage (Wright et al., 1994) However, the system of HRM practices (set of interrelated practices used in combination) can bring a source of competitive edge (Lado and Wilson, 1994; Wright et al., 2001), thanks to the complexity of combination and synergistic nature among HRM practices Empirical research adopting this systemic view has shown a positive relationship between systems of HRM practices and various indicators of organizational effectiveness (e.g Huselid, 1995; MacDuffie, 1995) Under the systemic view, recent studies either examine predetermined combinations of HRM practices (some even narrow it down to a single index to represent a total system of HRM practices) or develop and empirically verify key dimensions of a company HRM system by factor analysis (Becker and Huselid, 1998) The latter approach is more appropriate to capture variations in the formation of dimensions of HRM practices due to contextual influences This study adopts the same approach by first identifying some primary HRM dimensions from the literature and then conducting an exploratory factor analysis to pinpoint precisely the dimensions of HRM practices arising in companies currently operating in Vietnam Dimensions of HRM practices and organizational effectiveness Previous research relying on factor analysis did not render uniform dimensions of HRM practices, in part due to the inclusion of different practices to reflect the contexts under study Early research by Huselid (1995) anticipated that HRM practices could be grouped into dimensions that augment employee skills, motivate employees, and organize the workforce, but such practices have been consolidated in two factors One factor concerns compensation while the other is a blend of development and organizational structure Other research undertaken in Hong Kong identified two slightly different reliable factors: ‘structural training and development’ and ‘retention-oriented compensation’ (Ngo et al., 1998) Although the two studies resulted in closely related dimensions of compensation, that of the latter tied also to retention Fey and Bjorkman (2001) reviewed the literature and came to expect four factors of training and development, employee pay system, employee feedback, and workplace organization, but their empirical evidence from Russia revealed three factors including ‘development’, ‘feedback’, and ‘pay/organization’ This outcome created a clearly defined factor of development (which was very similar to but clearer than Ngo et al (1998)) and a feedback factor (which contained items on up –down communication), but combined items related to payment and organization into a single factor Thus, the literature suggests that although some of the dimensions in previous studies are mixed together, there exist at least four dimensions of HRM practices: training and development, information exchange, compensation, and workforce structure One possible source for this variant application of HRM practices is the influence of cultural values on the practices of HRM (Ngo et al., 1998) This stresses the need for identifying the HRM dimensions in context Thang and Quang: Human resource management practices in Vietnam 1833 Our factor analysis for the sample of Vietnamese companies revealed five dimensions of HRM practices, namely information exchange, performance management, training and development, group orientation, and retention management (Table 1) The theoretical analysis of each dimension is given below The first dimension of HRM practices is composed of six practices, which are mainly related to the exchange of information within the companies Communication across departments is an important ingredient of the information exchange process since it helps to facilitate the coordination of efforts among different parts of the organization (Robbins, 2003) At the individual level, companies may also give employees opportunities to participate (an intrinsic reward) in decision making so as to account for the opinions of those who will often be in closer touch with implementing decisions later on Such participation is expected to increase the commitment of employees to the decisions because they have a share in them Empirically, employees’ Information exchange Table Rotated factor solution for HRM practices Factor loadings 1 Information exchange (a ¼ 828) Interdepartmental communication Participation in decision making Information sharing programmes Employee attitude surveys Complaint resolution systems Job analysis for training demand Performance management (a ¼ 785) Result-emphasized performance appraisals Job security Job analysis to set realistic job performance standard Performance vs seniority based promotion Company profit/sales in bonus Training and development (a ¼ 748) Management training Technical/professional training Employees transfers used as developmental activities Assistance in career planning Group orientation (a ¼ 582) Seniority-based compensation Teamwork Group performance in pay Retention management (a ¼ 627) Retention-intended pay and bonus Industry-attractive pay level Non-entry jobs filled within the firms Variance Cumulative variance 736 695 671 564 546 524 169 137 253 057 294 362 2.007 308 096 293 061 361 055 081 109 218 032 218 232 295 030 255 422 2.207 149 2.049 217 809 800 643 121 074 057 091 129 153 117 209 218 488 311 595 575 2.012 157 007 096 2.011 151 219 2.107 479 012 234 132 865 808 572 042 004 153 057 160 2.085 380 016 495 412 2.023 2.029 085 437 024 095 167 062 2.067 097 758 678 581 215 2.112 088 070 308 397 17.44 17.44 261 217 250 14.35 31.79 197 2.001 2.089 11.47 43.26 242 239 212 9.07 52.33 753 633 459 8.75 61.08 Notes n ¼ 137; bold type indicates the factor to which HRM practices best loaded 1834 The International Journal of Human Resource Management participation in decision making has been proven to have a positive influence on employee productivity, motivation, and job satisfaction, though the impact is modest (Robbins, 2003: 195) Similarly, the sharing of information on company activities from the upper levels helps employees keep abreast of what is going on in the company so that they can best align their efforts with company activities Furthermore, the arrangement of employee attitude surveys and complaint resolution systems offers employees a channel to voice their ideas, opinions, concerns, desires, grievances, or needs to the upper levels in the organization for their perusal and action It is critical to have timely information on these issues so that responsive measures can be taken Finally, companies can conduct job analysis to seek information from the employee side about training demands for mutual benefit This will provide more insightful knowledge on how employees should be prepared to perform better on the job All these methods, if used in appropriate combination, will facilitate and accelerate the downward, upward and sideward flow of information within the organization Well-channelled information will help people to make good decisions and to implement them more effectively, thus contributing to the company performance in the end Therefore, it would be expected that: H1: The utilization of information exchange within the company is positively related to firm performance in Vietnam Performance management A variety of practices was used by companies in Vietnam to reward their employees The application of result-emphasized performance appraisals will direct employees’ effort into what is valued by the company and provide objective criteria to improve fairness in recognizing employees’ contributions To begin this process, the companies may conduct job analysis to set realistic job performance standards in order to compensate jobholders fairly (Werther and Davis, 1996) Empirical evidence for the activation theory confirms that optimized performance of employees is achieved at a realistic intermediate job demand (one that is neither too low nor too high) and that fairness perception moderates the curvilinear relationship between job demand and job performance (Janssen, 2001) Also, as a part of the performance management, the sharing of the financial success, which employees’ efforts help to generate, in the form of a bonus contingent to company profit or sales will motivate employees to work harder since they know their effort will be paid off In addition, companies that provide job security for employees convey to them a signal of commitment toward employees and opportunities for long-term career development in these companies This practice, if used together with a promotion policy that is based on performance instead of seniority, will likely encourage employees to perform at their fullest potential to be promoted on their way to build a long-term career in a company Hence, the following hypothesis is proposed, H2: Companies exercising more performance-based management have higher performance Companies in Vietnam utilized four HRM practices in association in their efforts to develop their human resources Companies which invest in both technical and management training seem to benefit from the enhanced skills and knowledge of their human capital In fact, training and development are indispensable as a performance enhancer in a variety of settings (Harel and Tzafrir, 1999; Delaney and Huselid, 1996) Obviously, training and development are particularly pertinent to companies, start-up or established alike, in Vietnam as an effective tool to fix Training and development Thang and Quang: Human resource management practices in Vietnam 1835 the performance gaps, given the chronic shortage of skilled labour caused by the failure of the country’s education system to meet the human resources requirement of companies (Quang, 1997; Kamoche, 2001) As pointed out in a recent report, only about one third of the companies in operation are satisfied with the qualifications of their new recruits (Saigon Times Weekly, 2002) Companies may also rotate employees across different jobs as an alternative for training and development Employee transfers used as developmental activities allow employees to broaden their skills and avoid the boredom of work repetition (Herzberg, 2003) After all, providing employees with assistance in career planning, if done properly, will encourage employees to take responsibility for their personal development and at the same time direct these efforts in harmony with the company’s strategy This practice has been included as an important part of high performance HRM practices in many studies (e.g Huselid, 1995; Fey and Bjorkman, 2001; Guthrie et al., 2002) It has also been shown that a manager’s support for career development explained significant variance in employees’ willingness to participate in development activities and developmental behaviours (Noe, 1996) Thus, we put forward that: H3: There is a positive association of training and development with firm performance Group orientation This factor reflects the Vietnamese culture rather well In this aspect, China, Japan, Korea and Vietnam are considered part of the same cultural region, which has been influenced by a common Confucian heritage (Hung et al., 1999) The Confucian value highly respects seniority, which comes into play in the form of seniority-based compensation in the work setting In addition, the high collectivism of the cultural values in Vietnam (Ralston et al., 1999) harmonizes with the preference for teamwork in organizations As one study illustrated, teamwork is positively associated with organizational commitment and work satisfaction among Vietnamese employees (Hung et al., 1999) Concurrently, the egalitarianism practice resulting from socialist ideology puts group performance in pay as a standard to reward group effort To a certain degree, the blend of these practices could be a reflection of a mentor system, which can be observed in many Vietnamese companies The underlying feature of this system is that a senior person who is more experienced and competent is designated as a group leader to sponsor and guide other less senior persons in the group work arrangement Group work, if arranged properly, will stimulate members to pool innovative ideas, solutions, and suggestions that can only come as a result of synergistic collective wisdom, and thus contribute to performance improvement As a result, it is hypothesized that: H4: Companies with more group orientation will achieve higher performance The serious shortage of skilled labour in Vietnam (Quang, 1997; Kamoche, 2001) and the more flexible employment opportunities among the younger generation in the Vietnamese workforce at present (An, 2002) have made employee retention an important issue for HRM practices of Vietnamese companies The three building practices of this dimension were also identified as salient ingredients of HRM practices in other Asian research (Ngo et al., 1998) First, a policy of pay and bonuses that intends to promote retention will likely help to tie employees voluntarily to the company since the general standard of living in Vietnam is still low The reported gross national income (GNI) per capita in 2000 was US$390 or Retention management 1836 The International Journal of Human Resource Management US$2,000 in PPP equivalent (World Bank, 2002: 20) In fact, monetary reward is found to positively relate with employee job satisfaction in Vietnam (Hung et al., 1999) Second, in combination, companies may package their compensation more attractively compared to the industry average to retain people Better compensation conveys a message that the company values its people In return, employees can view the surplus income as a gift and hence work more industriously (Pfeffer, 1999) Finally, promotion from within is one of the effective HRM practices as in most studies (for example, Huselid, 1995; Ngo et al., 1998; Fey and Bjorkman, 2001; Guthrie et al., 2002) The availability of internal promotion opportunities binds workers who seek career advancement to companies offering such chances At the same time, it creates an incentive for employees to perform well so as to earn the monetary and status rewards brought by promotion (Pfeffer, 1999) On this basis, we propose that: H5: Higher firm performance is found in companies emphasizing more on retention management Influence of manager’s perception of HR value on the HRM practices Previous case studies or research on the adoption of HRM practices among companies in Vietnam have usually been based on types of company ownership, the size of the company (the number of employees), the degree of exportation, and union status (Zhu, 2002), leaving unexplored the interesting aspect on what, if any, is the role of a company’s top management Management philosophies and core values certainly affect the managerial practices of a company If the management of a company considers HR an important source of productive capabilities to achieve efficiency and effectiveness in its operation, the company is likely to adopt HRM practices to utilize the human capital as fully as possible Empirical evidence in other countries (Lewin and Yang, 1992; Bae and Lawler, 2000) supports this analysis However, the relevance of this analysis remains a question for the context of Vietnam Under the pressure of increasing competition, the criticality of HR in business success has been underscored by companies in Vietnam (Quang and Thang, 2004) In the face of such a pressing need for HR, companies are expected to take action to improve their human capital Hence, we extend the hypothesis that: H6: The higher the value top management gives to human resources, the higher the extent of dimensions of HRM practices is likely to be found in a company Research methods Measures HRM practices were adapted from Ngo et al (1998) and Fey and Bjorkman (2001) and pilot tested with companies operating in Vietnam for content validity As in Fey and Bjorkman (2001), the use of HRM practices was measured on five-point Likert scales from ¼ ‘to a little extent’ to ¼ ‘to a great extent’ Measuring firm performance by ‘bottom line’ measures such as ROE, ROA is always desired by both business practitioners and academics However, getting Asian companies to disclose reliable financial data is often difficult and the data are not comparable across firms (Bae and Lawler, 2000) In addition, though not as strong, subjective measures of firm performance have been shown to correlate well with objective measures (Geringer and Hebert, 1991; Powell, 1992) Hence, analogous to many prior studies Thang and Quang: Human resource management practices in Vietnam 1837 (to name but a few, Delaney and Huselid, 1996; Ngo et al., 1998; Fey and Bjorkman, 2001), this study used perceived organizational and market performance adapted from Delaney and Huselid (1996) Respondents were asked to compare how their firms have been performing regarding market share, sales growth, profitability, quality of products/services, development of new products/services, employee satisfaction, ability to retain essential employees, and ability to attract critical employees to other organizations that the same kind of work (where ¼ significantly lower, and ¼ significantly higher) The first three measures were averaged to form a composite measure for perceived market performance, while the rest was used for perceived organizational performance The management perception of human resource value was measured with items adapted from Lewin and Yang (1992) on a five-point Likert scale to reflect the prioritization of human resources, the valuation of human resources relative to financial resources, and the management belief about human resources as a strategic asset and a critical contributor to the firm’s overall performance Sample and data collection A mail survey was conducted during February and March 2003 to collect data A list of 1,486 identifiable companies with at least 100 employees was compiled from the Business Directory in Ho Chi Minh City The city was chosen for data collection because it is the major economic centre of the country where business activities are most dynamic and concentrated Contacts via mail were initially made with a HR manager, head of personnel department, general manager, or those who are in charge of HRM aspects of the company A two-step mailing approach was taken to create a favourable response In the first mailing, two sets of questionnaires, a sympathy provoking cover letter with confidentiality assurance and two postage-paid return envelopes were directed to target respondents to boost the willingness to participate With the same intention, a formal letter of introduction from the Ho Chi Minh University of Technology was attained and included The targeted mail receivers were asked in the cover letters to fill in the first questionnaire seeking information on HRM policy and practices and forward the second questionnaire asking about perceptual firm performance to one appropriate member of the board of directors Such an approach to gathering information on one company from separate sources aimed to address the problem of common source bias; that is, raters tend to relate the degree of utilizing HRM practices with firm performance if they are asked for both After two weeks, a reminder letter was sent to non-responsive managers as another follow-up attempt to engage their response Finally, 137 valid pairs of questionnaires were returned making for a yield rate of 9.4 per cent This falls in the range 6–28 per cent in similar kinds of research (Guthrie et al., 2002: 187) The sample consisted of 42.3 per cent state-owned enterprises (SOEs), 27 per cent foreign-invested companies, 15.3 per cent equitized companies (partially privatized), and 15.4 per cent local private companies By industry, companies split into 54 per cent in manufacturing, 19 per cent in service, 3.6 per cent in transportation, 8.8 per cent in construction, and 15.3 per cent in commerce Considering the usually low habit of taking part in survey research in Vietnam, the response rate was considered statistically acceptable and valid Data analysis This study used three main multivariate data analysis procedures: (a) factor analysis to identify the dimensions of HRM practices; (b) hierarchical multiple regression which 1838 The International Journal of Human Resource Management controlled for a series of variables comprising firm size, firm age, industry, ownership, union status and exportation to test the proposed hypotheses; and (c) general linear model to investigate the variations of dimensions of HRM practices due to organizational characteristics In addition, reliability analysis procedure and general linear model were also applied to assess scale reliability and potential non-response bias Potential non-response bias The low response rate might raise concerns about whether the companies in the sample provided sufficient representation for those non-responding companies To account for this issue, this study followed Guthrie et al (2002) approach to analyze the potential nonresponse bias The sample was divided into two sub-groups according to the time of response One group included companies which responded before, while the other group consisted of companies which did so after receiving the reminder letter The latter was assumed to be similar to non-response companies A general regression model was performed to compare the two groups in terms of HRM dimensions, HR value, and perceived firm performance No significant difference was found between the two groups Thus, though the threat of non-response bias could not be totally removed, the result built up confidence that the sample was representative Results Factor analysis with varimax rotation reveals five dimensions of HRM practices in Vietnam (Table 1) A summary of means, standard variations, bivariate Pearson correlations, and Cronbach’s alphas for the main variables is presented in Table Nearly all constructs have alpha values above the suggested reliability level of Group orientation and retention management, however, have only marginal levels of reliability The results indicate that significant positive correlations ( p , 01) were found between either market or organizational performance and all dimensions of HRM practices, except for group orientation In addition, the management’s perception on HR values correlates positively with all dimensions of HRM practices ( p , 01) These findings are preliminarily supportive of almost all of the hypotheses However, more robust analysis to test these hypotheses will follow To examine whether or not the application of HRM practices affects firm performance, a series of linear regression models was estimated (Table 3) Factor scores for the dimensions of HRM practices were regressed on the measures of market and organizational performance along with a number of control variables including firm size (log of the number of employees), firm age (the number of years in operation), industry, type of ownership, union status and exportation On top of the control variables in the restricted model (Model 1), the inclusion of HRM practices (Model 2) accounted for an additional 14 per cent of the variance in perceived market performance (F ¼ 4.70; p , 001) Overall, Model explained 27 per cent of that variance (F(16,120) ¼ 2.74; p , 001) Dimensions of information exchange, performance management, and training and development were significantly positively related with perceived market performance The other two dimensions were not significant Similarly, 45 per cent of variance in perceived organizational performance was explained in Model (F(16,120) ¼ 6.15, p , 001), of which, the addition of dimensions of HRM practices accounted for an extra 32 per cent of variance (F ¼ 13.76, p , 001) relative to the restrictive control model (Model 3) Again, the three identical dimensions were found to have positive associations with perceived organizational performance Thus, consistent with Hypotheses 1, and 3, the more the companies Market performance Organizational performance Information exchange Performance management Training and development Group orientation Retention management Perceived HR value Log of no employees Firm age Union presence Export product Mean SD (.84) 75** 39** 30** 33** 08 28** 24** 26** 21* 05 2.04 3.65 86 (.85) 49** 42** 45** 10 38** 32** 23** 14 2.01 2.01 3.55 81 Notes **p , 01; *p , 05; Cronbach’s alphas are in parentheses 10 11 12 Variables (.83) 56** 52** 39** 54** 49** 14 21* 19* 11 3.27 94 (.79) 33** 28** 54** 42** 25** 14 25** 2.08 4.18 78 (.75) 22** 26** 26** 14 09 03 14 2.65 90 Table Means, standard deviations, correlations and Cronbach’s alphas (n ¼ 137) (.58) 29** 32** 07 11 23** 01 3.46 1.02 (.63) 40** 23** 35** 19* 09 3.66 88 (.75) 03 23** 14 01 4.30 57 24** 32** 12 2.53 49 23** 09 13.5 9.67 10 03 93 25 11 61 49 12 Thang and Quang: Human resource management practices in Vietnam 1839 1840 The International Journal of Human Resource Management Table Human resource management practices and company performance (n ¼ 137) Variables Step 1: Controls Firm size Firm age Service Manufacturing Transportation Construction Foreign Equitized Private Union Export Step 2: Independents Information exchange Performance management Training and development Group orientation Retention management DR Model R Market performance Organizational performance Model Model Model 27** 22* 07 08 02 10 10 07 13 06 01 18ỵ 17 01 2.17 01 03 08 02 14 2.06 07 124 24** 20* 24** 2.04 06 143*** 268*** 27** 24* 14 05 08 17 26* 02 15 2.09 03 135ỵ Model 14ỵ 17ỵ 05 08 03 10 27** 03 17ỵ 12 11 35*** 39*** 27*** 02 11 315*** 450*** Notes Commerce and SOEs are two omitted benchmark industry and sector variables respectively Standardized regression coefficient presented R values are unadjusted ỵ p , 1; *p , 05; **p , 01; ***p , 001 engage in information exchange, performance management, and training and development, the higher both market and organizational performance the companies can expect, while no significant relationship was held for group orientation and retention management with both market and organizational performance Next, a general linear model was performed to trace antecedents for HRM practices (Table 4) The results indicate that group orientation escapes the explanation of organizational characteristics However, all organizational variables account for more or less the variation in the remaining dimensions of HRM practices As shown in Table 4, foreign-invested companies and local private companies apply less information exchange than state-owned enterprises, while the foreign-invested companies, local private companies, and equitized companies are more involved in training and development than the latter Union status and exportation only have some impact on training and development Unionized and export companies showed a lower degree on this dimension than their respective counterparts Moreover, the results revealed that the larger the companies, the higher the degree of application of performance management and training and development, and the longer the companies had been in operation, the more they use training/development and retention management Most prominently, the higher extent of all dimensions of HRM practices is associated with the higher value management assigns to human resources Therefore, this result highly supports Hypothesis Thang and Quang: Human resource management practices in Vietnam 1841 Table Antecedents of human resource management practices (n ¼ 137) Ownership Foreign Equitized Private Union status Export Firm size Firm age HR value Model R Information exchange Performance management Training and development Group orientation Retention management 2.60* 2.24 2.50ỵ 54 2.26 2.15 2.01 44** 200*** 07 25 2.02 28 2.01 37ỵ 2.01 54*** 150** 94*** 42ỵ 48ỵ 77* 31ỵ 50** 02ỵ 31* 195*** 2.49ỵ 2.27 2.20 51 10 2.16 2.01 32* 095 09 05 43 06 13 28 03** 271ỵ 160** Notes State-owned enterprises are the omitted benchmark sector variable ỵ p , 1; *p , 05; **p , 01; ***p , 001 Discussion Vietnam stands out as one of the rare countries where the imprint of cultural values from different parts of the world co-exists since the country inherited the peculiar heritage of long periods of colonization, external intervention, and internal conflicts These cultural and historical legacies have left clear bearings on all types of organizations in terms of leadership and management styles, and managerial practices Notably, a blend of such ‘good’ behaviours and practices as ‘the noble man’, ‘hierarchy’, ‘mandarin career’, ‘respect for seniority’, ‘middle of the way’ (Chinese); ‘divide and rule’, ‘elite system’ and ‘individualism’ (French); ‘grassroots democracy’, ‘merit system’ and ‘delegation’ (American); and ‘egalitarianism’ and ‘collective decision and responsibility’ (socialism) can still be seen ubiquitously in all organizations throughout the country (Quang and Thang, 2004) All of these mean that Vietnam provides a unique test laboratory to investigate empirically the firm-level impact of HRM practices On initiating the idea of conducting such an empirical test in Vietnam, this study relies on the central premise that key dimensions of HRM practices and their impacts on organizational effectiveness differ accordingly with regard to the country settings In this vein, the discovery of five idiosyncratic dimensions of HRM practices in the Vietnamese sample of companies confirms to some extent the distinctiveness in the way HRM is practised in this context relative to those found in the literature Thus, this justifies the need to first identify dimensions of HRM practices for a specific context before proceeding to examine their implication for firm performance Concerning the derived dimensions of HRM practices, the results pointed out that companies in Vietnam show a varying emphasis on the acting out of the dimensions of HRM practices Part of this variation can be attributed to such organizational characteristics as ownership form, firm size, firm age, union status and export or not While the influence of these variables is quite modest as a whole, it is interesting to reveal that management’s perception on the value of human resources is the single prominent controllable element It is natural to ask what, then, is the implication of these variations for organizational effectiveness? As part of the answer, it is found that those companies putting a premium on HRM practices that help foster information exchanges within companies that link performance 1842 The International Journal of Human Resource Management to compensation, and that aim to develop the pool of human capital, can expect to earn higher perceived market and organizational performance The findings also suggest that companies in Vietnam can turn to these HRM practices as one of the sources for performance enhancement In contrast, retention management appears useful as indicated by its positive correlations with both perceived market and organizational performance However, in a more robust model to control for other influences, retention management loses its significance Possible explanations could be that the companies fail to make visible their sincere intention to retain employees, fail to provide significant extra income above the average, or to offer attractive promotion within the companies All these factors may integrally contribute to the lack of motivation for employees to perform at their discretionary efforts By the same token, the implementation of HRM practices that focus on group orientation exerts no significant influence on both perceived market and organizational performance Some speculations can be made to offer possible explanations The failure of group orientation as a performance enhancer could first be attributable to a recent clash of old and new values in the country, which blend between a growing individualism and the conventional collectivism (Ralston et al., 1999) The emergence of more individualistic behaviours/attitudes of a workforce may render group-promoting practices less effective and practical as a stimulus for better performance In addition, the ineffective group orientation dimension may stem from the lack of a sense of goal congruence among group members in the Vietnamese workforce, which is one of the basic requirements of group success (Tuan and Napier, 2000) In conclusion, regardless of the contextual peculiarity, HRM practices overall remain consistent to establish a positive relationship with firm performance in a developing and transitional economy like Vietnam as elsewhere in previous research While the findings lend more support to the prevailing universal school of thought about the direct impact of HRM practices on firm performance, it should be emphasized that the configuration of the HRM system in Vietnam remains contextually unique with its distinct dimensions of HRM practices and, equally important, that not all those dimensions would contribute to the enhancement of firm performance The final theme for discussion here is the generalizability of the above findings On this point, it is necessary to bring up the fact that our survey results are derived from a crosssectional sample of companies from different industries and ownership forms, culled information on HRM practices and firm performance from separate sources, and control for a wide range of organizational characteristics As a result, confidence has strengthened the argument that the relationships found in this study are sufficiently robust to extend well beyond those companies in the sample Admittedly, the study is similar to many others of this kind in the limitations faced First, perceptual performance was used instead of hard data Although previous research showed a positive association between hard performance and perceptual performance, the latter is not able to reflect the real impact of HRM practices on the performance of the companies Second, data on HRM practices and performance were collected at the same point in time Consequently, the direction of causality between the two cannot be specified definitely It may be the case that better performing companies are in a better position to invest in HRM practices Certainly, the nature of the causal relationship between HRM practices and firm performance is of particular importance for managerial implication Arguably, the two-way direction of causality can innocuously coexist in a mutually enhanced loop A better-performing company is better positioned to capitalize on HRM practices, which in turn help it to bring about improved performance, upon Thang and Quang: Human resource management practices in Vietnam 1843 which further investment on HRM practices is based To verify this dynamic, future research is urged to collect longitudinal data to confirm the casual relationship between HRM practices and firm performance as well as to investigate the mutually enhanced nature of HRM practices and firm performance Performance data at two different points in time with data on HRM practices in between or the other way around can provide much insight into the relationship thereof In addition, future research can be directed to investigate the mediating effects of HR outcomes in the relationship between HRM practices and firm performance Conclusion The study provides another piece of evidence to extend the overall universal relationship between HRM practices as system and firm performance into one reconstructing economy with no identical duplication, where there is an on-going flux between tradition and modernity, between capitalism and socialism (McLeod and Nguyen, 2001) However, it has also confirmed the idiosyncratic features of both the dimensions of HRM practices and the influence of these dimensions on firm performance across studies from different countries An important implication that follows is that the quest for competitive advantage through the effective management of people should be put in the operating context of companies Therefore, future study into firm-level impact of dimensions of HRM practices in other contexts is still needed to guide the development of HRM practices in other particular contexts In addition, the results suggest that it is crucial first to win the management’s commitment if the company intends to turn to HRM practices for performance enhancement because management perception on the value of human resources is proven to have a definitive influence on the adoption of HRM practices Finally, the findings lay a foundation to propose a preliminary process for companies to pursue in the quest for competitive advantage through HRM practices (Figure 2) It is critical to start with the cultivation of awareness among managers of a company that human resources are one of the most critical ingredients to utilize and that HRM practices can help the company to seek better firm performance via the effective management of its people Without this awareness, management commitment is not likely to be secured and the role of HRM practices is not to be seen on the strategic investment agenda of the company Once such awareness gains a firm foothold, a favourable perception about the value of human resources should be expected to develop among top management of the company When this value acquires considerable momentum, it could lead to the desire for adopting effective HRM practices in the hope of deriving better firm performance from the human Figure Proposed process for implementing effective HRM practices 1844 The International Journal of Human Resource Management capital As a consequence, the company will start searching for effective practices (e.g through benchmarking and consultancy) and then go on planning the application of those appropriate practices in the company At the first stage, the implementation of HRM practices, which are found universally effective, is recommended to retain a sufficient degree of effort and focus to render a higher chance of success so as to build up confidence on the workability of HRM practices The outcome of such an undertaking can be compared with the firm performance as a barometer for selfassessment This will help to see if the company should adjust its current HRM practices or adjust its HRM system by further investment to add more 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Proceedings of the Forty-Fourth Annual Meeting of the Industrial