DSpace at VNU: Training and firm performance in economies in transition: a comparison between Vietnam and China

DSpace at VNU: Training and firm performance in economies in transition: a comparison between Vietnam and China tài liệu...

This article was downloaded by: [University of Saskatchewan Library] On: 01 January 2015, At: 11:27 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Asia Pacific Business Review Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/fapb20 Training and firm performance in economies in transition: a comparison between Vietnam and China a b Thang Ngoc Nguyen , Quang Truong & Dirk Buyens c a University of Economics and Business, Vietnam National University , Hanoi, Vietnam b The Northern University of Management and Technology Ubon Ratchathani , Thailand c Vlerick Leuven Gent Management School , Belgium Published online: 22 Jan 2011 To cite this article: Thang Ngoc Nguyen , Quang Truong & Dirk Buyens (2011) Training and firm performance in economies in transition: a comparison between Vietnam and China, Asia Pacific Business Review, 17:01, 103-119, DOI: 10.1080/13602381003773982 To link to this article: http://dx.doi.org/10.1080/13602381003773982 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection 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This paper provides a comparative analysis on the role of training and its impact on firm performance in some economies in transition in Asia The starting point is an examination of country contexts and training, and how these have shaped organizational approaches to human resource (HR) training The paper also reviews the results of recent studies that have investigated the relationship between training and firm performance in Vietnam and China The review results show that training is positively related to firm performance and reveals some convergence of HR training in both countries On the basis of this, some caveats on HR training development in the future in these two countries are given The paper ends with theoretical and practical implications Keywords: China; economies in transition; firm performance; HR training; Vietnam Introduction The relevance of human capital, defined to include both education and post-school training, contributes to economic growth and firm performance through raising the productivity of an enterprise and facilitating the adaptation and use of new technologies (Martocchio and Baldwin 1997, Lawler et al 1998) However, there is currently a debate regarding whether or not the private sector or the government is the best provider of training In addition, training among countries seems to be associated with stages of industrial and economic development, cultural features, country institutions, or globalization (Rowley and Benson 2002, Rowley et al 2004) There are only a few studies on comparative training and its impact on firm performance in terms of economies in transition and very little bilateral comparative study of Vietnam and China This paper attempts to make a contribution to close this research gap It is difficult to compare training and its impact on firm performance in different countries (e.g different cultures and economic values) and this study is no exception This study was undertaken among typical developing countries in Asia – Vietnam and China These countries were chosen because: (1) they are developing countries which have joined the World Trade Organization (WTO) and are attempting to make a transition from a centrally-controlled economy towards a market economy; (2) they show high and constant economic growth in the last decades, the restructuring and downsizing of state-owned enterprises (SOEs) are increasing and SOEs have been playing a very significant role with respect to employment; (3) foreign investment has increased exponentially since the introduction of Foreign Investment Law and its influence on training; and (4) governments *Corresponding author Email: qtruong65@yahoo.com ISSN 1360-2381 print/ISSN 1743-792X online q 2011 Taylor & Francis DOI: 10.1080/13602381003773982 http://www.informaworld.com Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 104 T.N Nguyen et al are anxious to invest in education and training to make their workforce more competent and competitive internationally This comparative analysis focuses on the social-economic context of the two HR training systems and aims to provide an answer to the question ‘How the different country contexts have shaped company approaches to HR training in typical economies in transition?’ The paper begins with an examination of the country contexts and training and how these have shaped organizational approaches to HR training In the next section, we briefly review the results of current studies that have investigated the influence of HR training on firm performance in Vietnam and China The subsequent section provides results, discussion, and caveats that might happen for HR training in the future in the two countries with consequent implications for theory and managerial practice The conclusions and suggestions for future research are then outlined in the last section Methodology In an effort to integrate the effects of globalization in the analysis, various socio-economic factors were taken into consideration as the starting-point for this paper, in order to analyze the possible contextual dependency of different HR training systems While empirical study is comparatively easy in terms of the different HR training systems, this type of research design is not a realistic option for a study which primarily aims to review the variety of cultural, economic and management-related context of each country (Pudelko 2006) Therefore, to answer the research question as stated above, an empirical study seems to be unrealistic A literature review approach was chosen to provide a wider scope of socio-economic contextual factors and sub-areas of management in the analysis and to assess the existing intellectual territory and diversity of knowledge of management studies (Tranfield et al 2003, Weick 2007) In addition, by reviewing and analyzing the multitude of findings from previous empirical studies that used econometric techniques to estimate the impact of HR training on firm performance in Vietnam and China, and integrating the obtained information with socio-economic contextual factors, we obtained a more complete overview of HR training and firm performance between these two countries than any single empirical study would be able to provide As such, we have also addressed the lack of critical assessments and tried to further develop the existing body of knowledge on this specific subject Country context and HR training Vietnam context Vietnam embarked on the Doi Moi (renovation) policy in 1986 Since then, the country has experienced radical changes, first and foremost in its fundamental economic thinking The centrally planned economy following the Soviet Union model was replaced by a market economy, albeit of a socialist character, which started with a sweeping restructuring of the state-owned sector This also allowed the private sector to take part in the economy and facilitated the process of full integration into the region and world economic mainstream (Thang and Quang 2005a) During the first 20 years of Doi Moi, the gross domestic product (GDP) of Vietnam has seen sustained growth (CIEM 2006) The rate of increase, which was 8.2% each year on average in the 1991 – 1995 period, reached 8.5% in 2007 (GOS 2008) Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 105 The Doi Moi policy has opened up new opportunities for Vietnam to make full use of its inherent comparative advantages, notably relatively untapped natural resources and an abundant and low-cost workforce These advantages have been exploited to raise Vietnamese exports, which helps generate an increasing flow of foreign income to support its economic growth and industrialization strategy The country has also attracted significant inflows of foreign direct investment (FDI) FDI not only generates profits for foreign investors, but also represents an important capital source, which brings in technology transfer and advanced managerial skills (Thang and Quang 2007) to upgrade the quality of the local workforce Paradoxically enough, Vietnamese labour remains relatively abundant and inexpensive while many companies are faced with a chronic shortage of skilled workers As a result of Vietnam becoming a member of the WTO in January 2007, a surge in FDI and international trade is expected, which will undoubtedly lead to much higher growth in labour demand (Anh and Thang 2007), especially in the high-end of the market HR training in Vietnam The educational system in Vietnam has developed from pre-school education to doctoral level at university The system had been dominated by public and formal schools, but there are now some private schools and other different forms of informal education (e.g open learning, distance education), and joint ventures with foreign institutions (Thang and Quang 2007) The Vietnamese government considers vocational training as one of the main tasks of education and HR development because the majority of the most needed jobs in Vietnam’s transitional economy relate to technical skills Annually, over one million new workers seek jobs (GOS 2008); most of them are in the younger age group The growing economy requires more qualified workers, which all together has made the employment problem become more critical Although the Vietnamese government has implemented several policies and designed specific programmes to revamp the education and training system, there still is an urgent need to improve the quality of Vietnamese workers at all levels of the labour structure It is reported that only 20% of the working age population has vocational education or training and that education is not linked strongly with practical and organizational needs (CIEM 2006) Up to 80% of graduates need specific employer training to match specific job requirements The shortage of qualified workers in sectors with opportunities for growth and employment has had a negative impact on the quality of the production process and endangers the growth strategies of companies (CIEM 2006) Vocational education development is challenged from both a supply and demand perspective On the supply side, there has been and continues to be a shortage of faculty, facilities, equipment, materials and practical training programmes On the demand side, many students consider that vocational education lacks the prestige attributable to a university education in a society where education is still regarded as the biggest investment any parent can make for their children’s future (Thang and Quang 2007) Consequently, many potential students will not pursue a vocational education in favour of a college or university degree, even though the unemployment rate among college and university graduates is extremely high The percentage of students enrolling in professional secondary and vocational schools remains low with a slight and slow increase (GOS 2008) This has caused a huge imbalance in the labour market in Vietnam and exerted a serious effect on the sustainable development of the country Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 106 T.N Nguyen et al Most Vietnamese companies recognize the importance of training and development for their success, but are faced with problems in funding these activities Employers often decide upon acquiring modern equipment and expanding factories rather than training and developing people At the same time, the quality of education in general is not adequate, often failing to meet regional and world standards or the actual needs of the companies (CIEM 2006) The majority of graduates are critically limited in practical skills and in the ability to adapt to professional work, work discipline and teamwork To close this gap, private and state-owned enterprises have begun to reserve a proportion of their budget for employee training (Thang and Quang 2007, Thang et al 2008) According to the new Education Law, incentives are offered to enterprises to encourage in-house training for their employees Exemption from taxes relating to training is permitted, as is subsidized credit for newly established training institutions The practice of the ‘dual’ system of training in both schools and enterprises has been relatively successful because theory and basic skills can be more efficiently taught in schools and institutions, whereas advanced technical and practical skills are better learned in the workplace (CIEM 2006) China context China launched its first attempt at economic reform at the end of the 1970s with ‘open door’ policies and entered a period of rapid and sustainable economic growth The majority of reforms were aimed at replacing direct government administration at the enterprise level, facilitating the introduction and expansion of private enterprises, and attracting foreign direct investment (Ahlstrom et al 2005) However, the socialist market mechanism has been maintained in a general context of political stability Real GDP growth rates for China have averaged about 10% each year for the past 30 years (China Statistical Yearbook 2004) These reforms have led to an emergent external labour market, which requires a large amount of labour and brought a great opportunity to employees of the country’s huge working population A more flexible labour market is being developed to replace government assignment and firms have gained more autonomy to recruit employees and other HR functions In the first 20 years of reform, 300 million job positions have been created (Xie and Wu 2001) HR training in China Although China has made some great achievements in economic growth and increased annual spending on education, the skills and knowledge of the workforce are still poor According to the China Statistical Yearbook 2004, 19% of the Chinese population has received higher education However, firms that must seek workers from this graduate pool have remained unimpressed with the quality of recruits and have had to rely on their own job-training programmes that provide re-education for their newly hired workers The public, also, has not been very enthusiastic over vocational secondary education which, unlike general education, does not lead to the possibility of higher education This situation has forced the central government to pay more attention to education and training needs Some laws and regulations related to training were issued (Xie and Wu 2001) While the Vocational Education Law in 1996 encouraged financial institutions to support and develop vocational education by applying a means for credit or cooperation between enterprises and vocational schools for the training of students, the Labour Reserve System imposed in 1996 was prepared for those who graduated from high school but were not Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 107 qualified for higher education to undertake vocational school However, the training and development infrastructure was still weak There is a constant lack of equipment and qualified teachers, and most infrastructures for this development remain under construction, especially in the rural and remote areas Therefore, enterprises have faced an acute deficiency of skilled workers (Yan 2007) Economic reform developed the classification system of SOEs and non-SOEs NonSOEs include local private enterprises and foreign-invested enterprises (FIE) FIEs tend to offer more training programmes than other types of enterprises The large FIEs often pay more attention to training and offer training and development packages to their employees (Tang et al 1996, Ngo et al 1998) The introduction and exponential increase of foreign investors has created the opportunity for local non-SOEs to adopt some of the ‘new’ HR training policies (Zhu et al 2007) SOEs are often less receptive to adopting sound human resource management (HRM) than the local private companies In addition, SOEs provide less training for their employees This situation has been caused by many factors but the main reason is the ‘old’ training vision of managers and their allocated budgets, which lack internal resources for training They view expenditure for training as an expense rather than as a HR capital investment Commonly, employers decide upon other investment priorities (such as technological changes) rather than the training and development of people, which has left employees with no choice but to seek self-development in external vocational schools, colleges and universities (Xie and Wu 2001) Literature on the relationship between training and firm performance Human resource academics and professionals together have identified training policies that are critical for improving employee skills, firm performance, and organizational survival (Schuler 1995) and are considered essential if a firm is to remain competitive (Barney 1991, MacDuffie 1995, Salas and Cannon-Bowers 2001) A number of authors have attempted to examine the relationship between training and firm performance In one of the first contributions to this topic, Bartel (1994) used data on the training policies and economic characteristics of firms in the Columbia Business School survey to measure the impact of formal training programmes on labour productivity The survey contained information on training activities, number of employees and output in 1983 and 1986 The major finding of this study is that firms that were operating below their labour productivity in 1983 and implemented training programmes after 1983 caused significant productivity gains during the 1983 –1986 period Bartel (1994) also found that returns on training investment increased productivity by about 16% Black and Lynch (1996) looked at the relationship between training and productivity by using the final sample of 2945 firms from the National Center on the Educational Quality of the Workforce’s National Employer Survey They used a Cobb-Douglas production function in their estimation and found that a 10% increase in average education will lead to an 8.5% increase in manufacturing productivity and a 12.7% increase in non-manufacturing productivity Using general and specific training for their studies, Barrett and O’Connell (2001) used data from two waves of Irish firms surveyed in 1993 and 1995, where the response rate of the second wave was only one-third of the initial firms They found that general training has a statistically positive effect on productivity growth but specific training had no significant effect on firm productivity Zwick (2006) used data collected from the Institute for Employment Research establishment panel with a five year observation period He estimated the impact of Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 108 T.N Nguyen et al training intensity on establishment productivity The research result indicated that increasing training intensity has a positive and significant effect on firm productivity in Germany The evidence of the links between training and firm performance is extremely strong in developed countries (e.g Bartel 1994, Black and Lynch 1996, Barrett and O’Connell 2001, Zwick 2006) and recently in emerging countries such as Vietnam and China Other studies have estimated the impact of training on firm performance by using firm-level data collected through mail surveys The most frequently cited China studies are those by Tang et al (1996), Zhu (1998), Ng and Siu (2004) and the most frequently cited Vietnamese studies are those of Quang and Dung (1998), Thang and Quang (2005a, 2005b), and Thang et al (2008) The main attributes and findings of these studies are summarized in Table The first study on China looked at 156 FIEs and was conducted by Tang et al (1996) in late 1995 It indicated that training had a positive and significant effect in: (1) improving the administrative ability of management; (2) enhancing productivity; (3) expanding employees’ skill range; (4) developing employees’ ability to cope with technical innovation; (5) responding to production changes; and (6) improving employees’ morale In addition, the authors also found that staff turnover had a powerful effect on employer decisions to provide training to employees because the high mobility of employees implies that a given rate of investment in employees results in a smaller stock of workers with firm-specific skills The second study of 253 enterprises by Ngo et al (1998) analyzed the relationship between training and firm performance of Chinese, American, Japanese and British firms that had been operating in China The findings indicated that training had positive effects on employee satisfaction, employee retention, competitive sales performance, competitive new product development, and competitive net profit In addition, they found that local Chinese firms tended to provide less structural training and development than American, British, and Japanese firms The third study of 440 enterprises of various ownership types in Shanghai by Zhu (1998) showed that training was recognized as an effective tool to improve firm performance More specifically, the author found that training was used to help employees understand the organizational business strategy and value system In addition, the results also indicated that training focused more on job-related skill and the improvement of employee productivity Finally, a study by Ng and Siu (2004) estimated the impact of training on firm performance in SOEs and non-SOEs They found that managerial training had a positive and significant effect on sales in both SOEs and non-SOEs However, technical training made no contribution to firm productivity The study also indicated that training objectives have three major dimensions, namely enhancing working relationships, tackling skill deficiencies, and skill development In addition, SOEs tended to focus more on skill development whereas non-SOEs concentrated on enhancing both working relationships and skill development On a comparative basis, three Vietnamese studies have sought a link between workforce training and firm performance First, Quang and Dung (1998) used data collected from 47 SOEs in southern cities and provinces in Vietnam to examine the role of human resource training in firm performance They found that 96% of the SOEs claimed to provide training for their employees and 62% of the SOEs provided training for new employees The study also indicated that the major reason for training was to improve employee performance, thus improving the performance of the enterprises In addition, Tang et al (1996) Ngo et al (1998) Zhu (1998) Ng and Siu (2004) Quang and Dung (1998) Thang and Quang (2005a/2005b) Thang et al (2008) Author/study No 196 137/169 47 485 440 253 156 Sample size Training has positive effects on perceived employee performance and job satisfaction There is a positive association of training with market share and perceived organizational performance 1% increase in training lead to increase total firm sales and productivity (0.18% in manufacturing companies) 1% increase in managerial training induced increase in sales from 0.13 to 0.32% Training has positive and significant effects in (1) productivity and employees’ morale, (2) developing employees’ ability to cope with technical innovation, (3) responding to production changes Training has positive effects on perceived employee satisfaction (r ¼ 32), perceived employee retention (r ¼ 16), perceived competitive sales performance (r ¼ 21), perceived competitive new product development (r ¼ 35), and perceived competitive net profit (r ¼ 31) Training is recognized as an effective tool to improve perceived firm performance Productivity Employees’ morale Production changes Employee retention and satisfaction New product Sales and profit Employee productivity Commitment Sales Productivity Employee performance Job satisfaction Market share General firm performance Sales Productivity Findings Performance measure Table A summary of empirical studies on the relationships between training and firm performance in China and Vietnam Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 109 Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 110 T.N Nguyen et al other reasons for training were job satisfaction, the acquisition of professional qualifications, and a type of compensation Second, Thang and Quang (2005a) used data from a study of 137 cross-sector enterprises to estimate the impact of training on firm performance The survey was conducted in 2003 They found that there was a positive association of training with market share and organizational performance In a follow-up paper, Thang and Quang (2005b) indicated that FIEs tended to provide more on-the-job training than other types of enterprises However, off-the-job training was preferred less by FIEs than by SOEs Finally, Thang et al (2008) studied the impact of training programmes on firm performance by using the data from the Vietnam Employer Survey Instrument (VNSI), which was undertaken by a group of researchers of Ghent University, Belgium in 2007 From a survey of 196 companies, the major findings indicated that those manufacturing companies that implemented training in 2006 had increased sales and productivity by 0.18% in manufacturing companies In addition, manufacturing companies which implemented training programmes after 2005 increased their total sales and productivity by 0.32% per year between 2005 and 2006 However, we found no statistically significant effect on 2005 – 2006 percentage changes in the sales and productivity of non-manufacturing companies if these companies provided training after 2005 The survey result also shows that manufacturing companies had been solely focusing on training for technical engineers The econometric analysis method in this study which assisted the authors in overcoming the limitations of estimation depends on the accuracy of the assumption regarding the cost of training and the accuracy of the subjective estimates of firm performance (Bartel 2000) Results and discussion Differences There are a number of studies indicating that organizational differences in HR policies and practices, including training policy, are related to variations in national legislation and the cultural framework of a country (Brewster and Bournois 1991, Lane 1991, Randlesome 1993, Shaw et al 1993, Brewster and Hegewisch 1994) In addition, the contexts for training policy differ widely between Vietnam and China due to the timing and the pace of economic reform, educational policy, and employment status Therefore, there are three major differences in training between Vietnam and China First, both Vietnam and China have followed an export-oriented industrialization strategy and have been gradually shifting to export-oriented economies This strategy is linked to particular HR management policies that stress training and HR development (Kuruvilla and Venkataratnam 1996) More specifically, Kuruvilla (1994) suggests that there are variable stages in the strategy The first stage focuses on the low-cost production of light manufacturing goods for export coupled with a highly compliant labour force However, the advanced stage of export-oriented strategy is based on higher technology and highly skilled labour requirements At this stage, both countries have made efforts to develop the skills of their workforce through various training programmes as well as providing better-qualified workers for the growing export industry Therefore, the stage of economic development and the industrial strategies adopted affect the decisions of both government and employers with regard to the provision of training to employees Vietnam and China are currently at different stages of economic development Comparatively, local non-SOEs in China have made significant investments in a variety of training programmes to upgrade the skills of their employees (Yan 2007) because they are in the advanced stage of export-oriented strategy, whereas local non-SOEs in Vietnam seldom have training Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 111 programmes for their employees since Vietnam is still in the first stage of its economic development and focused primarily on low-cost production instead of quality and diversity As such, almost all local company training programmes have been provided by government funding (Thang and Quang 2007) Second, although Vietnamese education has undergone 20 years of renovation and reform and despite all its officially claimed results, there is a huge imbalance in its current labour market structure One explanation for this situation could be the fact that many Vietnamese students consider that vocational education lacks prestige compared with a university education in a society where education is still the greatest concern shared by many parents about their children Consequently, many children will not pursue vocational education in favour of a college or university degree despite the high rate of unemployment among college and university graduates The slow increase in the percentage of students applying for professional secondary and vocational schools hardly helps improve the situation (Thang and Quang 2007) In contrast, students in China have a more practical perception and are more willing to undertake vocational schooling instead of studying in college and university (Yan 2007) In addition, manufacturing companies in Vietnam have been focusing on training for technical engineers rather than workers (Thang et al 2008), whereas training in China has been extended to cover the unskilled to technical engineers and staff The different stages of economic development between the two countries may be a reason for this phenomenon Finally, there are more training and development laws and regulations in China than there are in Vietnam because China embarked on economic reform 10 years earlier than Vietnam During this time, the Chinese government introduced more than 20 laws and regulations relating to employment training (Rowley and Benson 2002) More specifically, Chinese laws and regulations on training include the labour law; the strategic decision on education system reform by the central committee of the Communist Party of China; the compulsory education law of 1986; the vocational education law in 1996; the labour reserve system enforced in 1996; the vocational ability appraisal system and the vocational qualification certificate system On the contrary there are only the labour code, educational law, and vocational law in Vietnam Furthermore, the functions of the mediation and arbitration system are more effective in China than in Vietnam (Zhu and Fahey 1999) Similarities The country context, education and training situations, and case studies also highlight four significant similarities in training between Vietnam and China First, economic reform has dramatically changed the business landscapes of both Vietnam and China, especially the openness of the economy and encouragement of FDI As a result, FIEs have been brought in and have transferred new HR policies and practices to Vietnam and China in general and training policies in particular Perhaps one of the biggest factors influencing employer-training decisions is the labour market in which firms operate and the skills available in that market Therefore, when foreign investors recognize the shortage of qualifications and skills within the labour market for their production processes and purposes, training is considered a necessary and vital tool to fill this gap Studies by Ngo et al (1998) and Thang and Quang (2005b) indicated that FIEs have been offering more training for employees than other types of enterprises Second, within SOEs in both Vietnam and China, training is still used as a reward mechanism (Xie and Wu 2001, Quang and Dung 1998) or SOEs use more formal training programmes rather than informal ones More specifically training is considered a means Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 112 T.N Nguyen et al to provide the employees with some kind of compensation within the SOE’s, especially when employees attend training programmes abroad In these cases, the trainees tend to consider training as an opportunity to travel or to save money, due to the low level of income and poor benefits system of SOEs Third, both the Chinese and Vietnamese education systems are under development and renovation (Xie and Wu 2001, Thang and Quang 2007) Thus, the graduates are still weak in quality and lack the necessary and practical skills when they join the labour markets (Trung and Swierczek 2009) In order to facilitate the solving of this dilemma, these two governments have placed emphasis on the whole spectrum of training and skill development, to encourage the link between training and job placement Accordingly, training institutions and enterprises have been cooperating in the development of training content, curricula, teaching materials and the ‘executive’ courses that combine study and work experience In this way, training organizations can satisfy the company’s needs for labour requirements Companies can receive a reduction in revenue tax, if they provide training for local employees Finally, aside from the improvement in the quality of labour force skills and the encouragement to link training with job placement, both Vietnam and China are encouraged to expand and increase international cooperation for education and training with prestigious universities and institutes all over the world, as well as training and research projects based on financial aids or loans from international organizations in order to train technical workers (Collins 2005, Zhu 2005) Further, foreign organizations with experience and high qualification in the training area are being supported to establish educational campuses in Vietnam and China by virtue of wholly-owned foreign capital or join-venture ownership with local partners Convergence in HR training between Vietnam and China Convergence theorists suggest that the process of industrialization and the spread of advanced technology could shift all countries towards political and economic systems similar to those of the United States (Kerr 1983, Sparrow et al 1994, Tregaskis et al 2001) An implication of this approach is that there are convergences of HRM/HR training across national borders Multinational companies are physically dispersed in environmental settings that represent very different economic, social and cultural groups (Hofstede 1980, Humes 1993) They adapt and follow different HRM approaches and practices to respond to both environmental and organizational requirements across businesses, functions and geographic locations (Brewster 1995, Tregaskis 1997) In the same vein, Solomon (1995) agrees that multinationals are paying greater attention to cross-cultural issues as they search for ways to improve human resource development in their overseas operations Thus, global companies are increasingly exporting their management development and training systems internationally However, Bamber and Lansbury (1998) argue that the differing cultural and institutional factors might act as constraints and further limit the prospects for convergence More specifically, from the cultural perspective, cultural factors include not only the values held by individuals and relations between people at work and in their families, but also the structure of the firm and society in which they operate (Whitehill 1991) Both product-market and social-cultural ‘logic’ shape HRM policies (Evans and Lorange 1989) From the institutional perspective, Kerr (1983) states that the traditional values and practices are embedded in a countries social and economic institution Accordingly, pre-industrial history, cultural factors and the processes of industrialization Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 113 have shaped institutions that in turn have shaped Asian business systems (Whitley 1992) Within the field of HRM, Brewster et al (2004) suggest that institutional factors have a significant influence on the kinds of policies that organizations adopt and the roles that they enact For instance, Japanese firms often have the problems of designing appropriate HRM policies to suit local conditions in China (Beamish and Jiang 2002), despite similarities between the two countries in many aspects (Zhu and Warner 2000, Horn and Cross 2009) In the case of Vietnam and China, the economic reforms in both countries aim to replace a centrally planned economy with a market economy The major features of reform seem to be restructuring SOEs and to launch a new form of ownership – private enterprises, which include FIEs and local private enterprises FIEs have been not only contributing to national economic growth, but they have also brought modern managerial expertise into these two countries Those companies with long experience in market economy have more developed and sophisticated HRM practices than companies previously in the centrally planned economy (Weinstein and Obloj 2002) They adopt a more cooperative strategy to cope with the requirements of the host country and pay more attention to providing appropriate working conditions and training for their employees They are more sensitive to training and consider it as an investment rather than a cost In this respect, the economic reform and the introduction of FDI in both countries has created the opportunity for local domestic enterprises to adopt some of the ‘new’ HR practices SOEs that are involved in joint ventures (JVs) or contracting arrangements with foreign companies are more likely than other SOEs to have adopted HRM A number of studies by Ding et al (2000) on China, and Thang and Quang (2005a, 2005b) on Vietnam, show that multinational companies and JVs have a positive impact on changes in HR practices They not only introduce updated management systems and practices into their business operation, but also influence local enterprises in changing traditional peoplemanagement practices Kamoche (2001) and Warner (1996a) suggest that HRM in Vietnam and China may move towards a hybrid form combining local management characteristics with modern Western practices It is also expected that the role of training will incorporate some aspects of a Western-style individualistic approach, emphasizing work-related knowledge and skills improvement, whilst maintaining some elements consistent with the host countries ideologies To summarize, the above evidence indicates not only that there is some convergence in HR training in Vietnam and China, but also that this convergence tends towards Western HR practice However, the different stages of industrial and economic development, coupled with the unique value systems of each country, their various cultural features, and socio-political and economic institutions have imposed some limitations and constraints on this convergence Caveats on future HR training development It is clear that the transition process in both Vietnam and China is not yet complete and the quality of the labour force still remains low (Xie and Wu 2001, Thang and Quang 2007) Thus, policymakers in the two countries continue to be confronted with difficult problems with respect to labour training, which essentially influence their economic reform and development process The restructuring of the education system in order to facilitate the needs of an increasingly developing society and country in a period of industrialization and modernization is urgent and will no doubt persist over the coming years More and more laws and regulations relating to training are officially launched in order to renovate Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 114 T.N Nguyen et al the contents and curricula of training, education management, and to strengthen international cooperation on training as well as encourage enterprises to attend the requisite training courses The cooperation on training between governments and enterprises continues to be developed In addition, more and more young people are willing to undertake vocational training rather than general training in universities in order to comply with the job markets The advent of FIEs and JVs has helped to introduce new HRM concepts (Zhu et al 2007) and as a result changes in staffing, training and compensation practices are happening They are more involved in capital-intensive and high-tech sectors, which not require the exploitation of cheap labour to make a product, as control over the technology and the market is more important Instead these enterprises pay more attention to providing appropriate working conditions and training, and encouraging workers’ participation in their training programmes By cooperating with host governments and training organizations the companies can achieve their long-term goals for skilled employees They will continue to provide more training for their employees than other types of ownership enterprises in Vietnam and China in the near future However, the different institutional frameworks and stages of economic development between the countries will require multinational companies to pursue a distinctive HR training policy (Rowley and Benson 2002) Increased levels of global competition are already affecting both Vietnam and China, specifically with the WTO entry The restructuring and downsizing of enterprises is increasing State-owned enterprises are facing privatization across the countries (Collins 2005, Zhu 2005) Local managers are beginning to realize that they can no longer compete solely on low labour costs with a labour-intensive manufacturing strategy and are beginning to adopt sophisticated technological processes Accordingly, state-of-the-art technology must be embraced and the skills to operate and manage this technology must accompany its introduction and development Within this context, the technical and problem-solving skills of employees tend to be more important in the production process Reflecting upon this relationship, comprehensive training programmes that emphasize the development of individuals together with problem-solving, technical and interpersonal skills should be instrumental in increasing productivity and ensuring the justification of customer requirements for product quality and diversification Retraining of the existing unqualified employees will happen Conversely, companies will not pay more training expenditure for their employees, but will provide a wide range of training programmes available for those who need them Local enterprises will also follow the Western forms of HR training (Rowley et al 2004) Implications This study has implications and relevance for both HRM theory and management practices in terms of the challenges from globalization, market competition, and economic reform and transition Theoretical implications First, the results of this study contribute to the rapidly developing HRM literature in that it is the first study of comparative HRM training in the two emerging and transitional Asian economies – Vietnam and China By comparing the training and education systems in Vietnam and China and the impacts of these systems on HR training approaches, we have seen how the concept of convergence in HR training has to be further differentiated Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 Asia Pacific Business Review 115 and developed HR training has been moved towards convergence Some common characteristics within the training appear in both Vietnam and China through their respective training and education systems, and HR training policies and practices of enterprises In addition, a trend in HR training in developing economies may be identified For instance, FIEs offer more training than other types of enterprises (Quang and Dung 1998, Thang and Quang 2005b) Second, our contribution relates to the relationship between company-level training and firm performance that is of key interest to this paper By reviewing the studies on Vietnam and China, which have estimated the impact of training on firm performance by using firm-level data collected through the surveys, we found that training has a significant influence on firm performance This finding indicates an existing relationship between training and firm performance in emerging and transitional economies Finally, in terms of methodology, it is clear that there are many factors influencing training decisions as well as training programmes and expenditure These include economic and educational reforms, institutional framework, and globalization Thus, our study is inclusive as we examined HR training combined with other factors Also, our study examined HR training in terms of both general training and specific training Management or practical implications Our first implication involves HRM in general and HR training in particular for all kinds of enterprises in Vietnam and China The low level of employee qualification and skill shortages has been a constraint for enterprises since the quality of human resources is crucial to the success of overseas investments and local enterprises (Rowley and Benson 2002) Therefore, companies should pay more attention to HR training policies if they wish to succeed in these markets A different approach to training policy and the resources available may need to be adopted More specifically, companies may use more expenditure as well as different training programmes in order to improve the skills, commitment, and knowledge of their employees Second, although both Vietnam and China are typical economies in transition, their different stages of industrial and economic development and different cultures impose considerable constraints on the introduction of HR training policy as the interaction between various business contexts and cultures will facilitate the development of a ‘unique’ HRM (HR training policy) approach (Sparrow et al 1994) More cross-cultural training is needed to provide to employees, especially for expatriate managers in dealing with HR problems in more locally adapted contexts Finally, the implications of this study for policymakers in both Vietnam and China are significant If public policy seeks to enhance the level of skills for workers in all firms throughout the economy, irrespective of size or nature of ownership, formal rather than informal training will be preferred as formal training leads to a qualification that all employers recognize, and it is easier to monitor funding to ensure training is actually being provided However, it is precisely this type of training that firms not favour as the training is not tailored to the unique requirements of the firms and the costs in terms of loss of staff time Therefore, the Vietnamese and Chinese governments cannot enhance labour and deal with skill shortages in this way This implies that a type of hybrid solution needs to ne developed in order to overcome the difficulty For a more effective and sustainable development, such a HRD programme should be a joint effort between education and training institutions, the business community, and government agencies (Truong et al 2009) Downloaded by [University of Saskatchewan Library] at 11:27 01 January 2015 116 T.N Nguyen et al Conclusions This study gives a mixed picture of the review of evidence on the training context and whether those firms providing training exhibit better performance in Vietnam or China The results suggest that training is positively related to organizational performance in both countries and some convergence of HR training across national borders is a foregone conclusion Globalization, international trade and finance may place substantial pressure on firms to standardize HR training policy The different stages of industrial and economic development, cultural features, and institutionalization of these countries, however, provide some constraints on the degree of this convergence There are some marked differences in HR training in the two countries The study also makes some predictions about what might happen in future HR training in these countries Restructuring and downsizing are increasing globally and are a further pressure on these countries to reform their education and training systems They are facing the double need to provide adequate training for new employees and at the same time, retraining for the incumbent workers to upgrade their low skills The paper also presents significant challenges for the related governments that need to provide and manage formal training, as well as to enhance the capabilities of local enterprises in providing training for their employees on an ongoing basis Finally, in this study we have focused on the existence of HR training and firm performance but not attempted to measure HR training in the workplace and other firm characteristics This approach would involve detailed case studies of Vietnam and China that examined the influence of training on firm performance This study is based on a rather small number of available studies on the subject and therefore not sufficient enough to generalize and draw any concrete conclusion on the issue under study To fill this void, future research should implement a longitudinal survey of enterprises covering all major industrial sectors in the two countries This longitudinal study would allow for more accurate predictions and enable the comparison of the relationship between HR training and firm performance in Vietnam and China Notes on contributors Thang Ngoc Nguyen is currently a lecturer in HRM and Change Management at the University of Economics and Business, Vietnam National University, Hanoi, Vietnam He holds a MBA from Southern California University, USA and a PhD in Applied Economic Sciences from the Faculty of Economics and Business Administration, Ghent University, Belgium He has published several articles on education, training and development, and firm performance in Vietnam Quang Truong, PhD is Professor and Vice President for Quality and Development at the Eastern University of Management and Technology in Ubon Ratchathani, Thailand Dirk Buyens is currently Professor and Academic Dean at the Vlerick Leuven Gent Management School and Professor at the Department of Management and Entrepreneurship, Gent University, Belgium He holds a PhD in Industrial and Organizational Psychology from Gent University, Belgium (cum laude) He has published 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