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MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS, HO CHI MINH CITY --- TRINH HIEP THIEN Mediating effect of strategic management accounting practices in the relationship betw

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

-

TRINH HIEP THIEN

Mediating effect of strategic management accounting practices in the relationship between intellectual capital and corporate performance

Evidence from Vietnam

A summary of dissertation submitted for the Degree of

Doctor of Philosophy in Accounting

Code: 9.34.03.01

October 2018

MEDIATING EFFECT OF STRATEGIC

MANAGEMENT ACCOUNTING PRACTICES IN THE RELATIONSHIP BETWEEN INTELLECTUAL CAPITAL AND CORPORATE PERFORMANCE

EVIDENCE FROM VIETNAM

Trinh Hiep Thien

MPAcc (University of Sydney), MBA (UEH), BBus (UEH)

A summary of dissertation submitted for the Degree of

Doctor of Philosophy in Accounting

INTRODUCTION

1 Background

It iis ioften iargued ithat iorganizations iin itoday’s iknowledge-based

ieconomy ido inot ionly iinitially iinvest iin iphysical iassets, inevertheless iin

iintangibles, ias ithese iare ibut ialso itoday’s ivalue idrivers i(Mehralian,

iRasekh, iAkhavan, i& iGhatari, i2013). iAmongst ithese iintangible iassets,

iIC iplays ia ikey irole, iand its imanagement ibecomes ia icritical iissue igiven

ithe idirect iand iindirect iadvantages. i

When ianalysing ithe iVietnamese itransitional ieconomic icontext,

iVietnamese ienterprises ihave igradually iapplied ithe iadvanced iaccounting

itechniques, iin iline iwith imarket imechanisms ibecause imany iwholly

iforeign-owned ienterprises iestablished iin iVietnam ihave ibeen iproviding

ipractical iknowledge iof istrategic imanagement iaccounting, iwhich ihas

ibeen iintroduced ito iVietnamese ipractitioners iand ischolars. iTherefore, iit

iis iinappropriate ito istate ithat imedium iand ilarge ienterprises iin iVietnam

ido inot ihave iany iunderstanding iof ihow ito iimplement istrategic

imanagement iaccounting iin itheir ibusiness ioperations. iNot isurprisingly,

ithe iissue iof istrategic imanagement iaccounting ithereby istarted ito ibe

istudied iin iVietnam isince ithe i2010s. iBased ion iall iabove iarguments, ithe

iauthor ibelieves ithe inecessity iof istudying ithe icorrelation ibetween

iintellectual icapital, istrategic imanagement iaccounting ipractices iand

icorporate iperformance iin ithe icase istudy iof iVietnam Vietnamese business environment will provide enough information about intellectual capital as well as strategic management accounting practices that support such research endeavours

2 Research questions and research objectives

Three research questions have been proposed:

Research question 1: What is the direct effect of intellectual capital

components on corporate performance in Vietnamese enterprises?

Research question 2: What is the effect of intellectual capital

components on corporate performance in the presence of strategic management accounting practices?

Research question 3: How do SMA practices handle each

component of IC to improve corporate performance?

Overall research objective:

The overall research objective of this dissertation is to investigate the mediating effect of SMA practices on the relationship among IC components and three financial dimensions of corporate performance It also empirically analyses the role of SMA practices playing the management of IC components

Specific research objectives:

- RO1: iTesting ithe idirect iimpact iof ieach iof iintellectual icapital

icomponents ion icorporate iperformance

- RO2: iExamining ithe idirect iinfluence iof istrategic imanagement

iaccounting ipractices iover icorporate iperformance

- RO3: iInvestigating ian iindirect ipath ibetween iintellectual icapital

icomponents iand icorporate iperformance ithrough ithe imediating

irole iof istrategic imanagement iaccounting ipractices

- RO4: iEmpirically ianalysing iwhich igroup iof istrategic

imanagement iaccounting ipractices iare irelated ito imanage iwhich

icomponents iof iintellectual icapital

- RO5: iProviding iadditional ievidence ion ithe iinterconnection iof

iintellectual icapital icomponents

3 Research object and research scope

The research object of this dissertation is the relationship among IC, SMA practices and corporate performance To investigate SMA practices applied in a business organization, the data is collected through questionnaire survey which is sent to SMA practitioners Moreover, the

unit of observation is also financial information in annual reports or financial statement reports which draw financial data on IC and corporate performance

The scope of this study is limited in three aspects Firstly, this study selects Vietnam Secondly, the observed business organizations are enterprises listed on Hochiminh Stock Exchange (HoSE) and Hanoi Stock Exchange (HNX) Thirdly, since the survey related to SMA practices is conduct in the year of 2016, this study only uses 2016 financial information about IC and financial performance of the public companies

4 Methodology

This istudy imainly iuses iquantitative iresearch imethod iby iusing

iempirical isurvey idata iand ifinancial idata iobtained ifrom ia isample iof iat

ileast i127 ipublic ienterprises iin iVietnam ifor ithe iyear iof i2016. iData ianalysis

iis iconducted iby iapplying ipartial ileast isquares istructural iequation

imodelling i(PLS-SEM) iwith ithe isupport iof iSPSS i24.0 iand iSmartPLS i3.1

isoftware ipackages. i

5 Outline of the dissertation

Besides the parts of introduction and conclusion, this dissertation is organized with 7 chapters, as follows:

Introduction part

Chapter 1: Literature review

Chapter 2: The concepts and intellectual capital measurement models Chapter 3: Theoretical framework and hypotheses development

Chapter 4: Research methodology

Chapter 5: Sample characteristics and measurement scales assessment Chapter 6: Data analysis and discussion

Chapter 7: Implications for managing IC by SMA practices

Conclusion part

CHAPTER 1: LITERATURE REVIEW

1.1 Review of international studies of intellectual capital

1.1.1 Stages in developing intellectual capital (IC) as a research field

Petty iand iGuthrie i(2000) ialso ioutlined itwo istages iin iresearching

iIC. iThe ifirst-stage i(prior ithe imid-1990s) iefforts itypically ifocused ion

iraising iawareness ias ito iwhy irecognizing iand iunderstanding ithe ipotential

iof iIC itowards icreating iand imanaging isustainable icompetitive iadvantages

iis iextremely iessential i(Petty i& iGuthrie, i2000). iThe isecond istage iof iIC

iresearch igathered ifurther ievidence, iat ian iorganizational ilevel, ifocusing ion

ithe ihow iof iIC icapital iand ilabour imarket ireacted itowards ithe ipotential ifor

iIC ito icreate ivalue i(Petty i& iGuthrie, i2000). iAccording ito iDumay, iGuthrie,

iand iRicceri i(2012) ia ithird istage iof iIC iresearch iis iemerging iand istage iIC iresearch ifocuses ion iconsidering ivalue ifrom iIC iis inot ijust

third-imonetary ibut iincorporates iworth iand iimportance iof ithe iproducts iand

iservices ito icustomers iand iother istakeholders i(Dumay & Garanina, 2013)

1.1.2 Research trends on IC in the accounting discipline

The issue of IC is studied in four perspectives, such as economic, strategic, managerial and accounting perspective (Alcaniz, Gomez-Bezares, & Roslender, 2011) In the accounting discipline, as illustrated in Dumay et al (2012)’s paper examining 423 journal papers in terms of IC during the period from 2000 to 2009, the ipopular ifocus iof iIC iaccounting

iresearch iis imanagement iaccounting iand iexternal ireporting ibut ilittle ihas

ibeen ipublished iabout iaccountability, igovernance iand iauditing

1.1.3 Research methods used to study intellectual capital

There iare ifive igroups iof iresearch imethods ifound. iIt iindicates ithat

icommentary/ inormative/ ipolicy iis ithe imost icommonly iused, ifollowed iby

isurvey/ iquestionnaire iand inext ito icase istudy/ iinterviews. iDumay iet ial.

i(2012) ihighlight ithat ithe itrend iover ithe ilast i10 iyears iis ia isteady iincrease

inempiricalwork,whilenormativeworkhasdeclined

1.1.4 Review of studies investigating the relationship between intellectual capital and corporate performance

There are numerous pieces of research in many countries, affirming this correlation between IC and corporate performance undertaken by a variety of research methods One quantifiable and obtainable measure for

IC is the VAIC, developed by Public (2000) Overall, istudies iusing iVAIC

ias imeasures iof iIC icomponents ihave iresulted iin ia imixture iof ioutcomes

iacross idifferent icountries, iindustries iand iyears. iA irange iof iinconsistent

ievidence ido inot iresult iin ia icompelling iconclusion iregarding ithe

icorrelation ibetween iIC iand icorporate iperformance

1.2 Review of international studies of SMA

Since Simmonds’ first definition was introduced over 30 years ago, there is little agreement what is and what constitutes SMA Overall, the research continues to maintain four themes emphasizing on (1) how to define the concept of SMA, (2) what kinds of SMA techniques applied in

a variety of industries, countries, (3) the impacts of strategy options on SMA changes and (4) strategic management accounting process Most iof

ithe ipublished iempirical iresearch iover ithe ipast i30 iyears ihas iconsisted iof

iquestionnaire isurveys ithat isought ito iestablish ithe iextent ito iwhich ispecific

iSMA itechniques ihave ibeen iadopted (Langfield-Smith, 2008)

1.3 Review of studies of intellectual capital and strategic management accounting in Vietnam

1.3.1 Vietnamese context

The iemergence iof ia iprivate isector, ithe idevelopment iof isecurities

imarkets iand iparticipation iin iinternational itrading ihave ipositioned

iVietnam ias ione iof ithe iworld’s igrowing ieconomies Although there are many “incremental” or “big bang” changes in Vietnamese overall organizations, including listed companies, during Vietnam’s progress of international integration, these have not actually measured or valued their

IC (i.e human resources capital, structural capital, relational capital) which are generated in the past and after the impacts due to competitive pressures

1.3.2 Research on intellectual capital in Vietnam

The empirical studies on IC have been conducted in many countries, including but not to limited to, North America (Bontis, 1998; Riahi-Belkaoui, 2003), South Africa (Firer & Mitchell-Williams, 2003), Australia (Dumay, 2009), China (J Chen, Zhu, & Hong Yuan, 2004) and conducted in many Asian countries such as Malaysian (Bontis, Chua Chong Keow, & Richardson, 2000), Taiwan (Ming-Chin, Shu-Ju, & Hwang, 2005), Singapore (Hong Pew, Plowman, & Hancock, 2007), Thai (Saengchan, 2008) Vietnamese firms are in developing various aspects of

IC, thus the need for more research in this area is evident

1.3.3 Research on strategic management accounting in Vietnam

Since Vietnam adopted an open-door policy, the level of competition in the economy has been increasing significantly for most Vietnamese enterprises, because many privates, joint ventures and the wholly foreign-owned enterprises have been established in Vietnam during the last two decades (Anh, 2010) Therefore, the foreign organizations bring practical knowledge of SMA introduced to Vietnamese practitioners and scholars Not surprisingly, hence, the issue of SMA started to be studied in Vietnam since the 2010s; however, there has been little systematic documentation and analysis of recent efforts to the use of strategic management accounting practices in Vietnamese enterprises

1.4 Research gaps

This istudy ihas iidentified ithree imajor iresearch igaps: i(1) ilack iof

istudies iconcerning iperformance iimplication iof iIC iin iassociation iwith ithe

imediating irole iof istrategic imanagement iaccounting ipractices, i(2) ilack iof

iempirical iresearch iconcerning ithe irelationship ibetween iIC iand ieach

igroup iof iSMA ipractices, iand i(3) ilack iof iVietnam iempirical istudies ion iIC

andSMApractices

CHAPTER 2: THE CONCEPTS AND

INTELLECTUAL CAPITAL MEASUREMENT

MODELS

2.1 Definition of intellectual capital

Although IC has been defined from different perspectives, the only common aspect in the definition of IC is related to the fact that strategic intangible resources including information and knowledge are identified and managed to acquire competitive advantages and a sustainable creation

of value with the aim of adding value to defined key stakeholders As ifor

ithe icomponents iof ithe iIC, iit iseems ithat ithere iis ia ibroad iconsensus iabout

ithe iexistence iof ithree iprimary iinterrelated inon-financial icomponents

iincluding ihuman icapital, istructural i(internal) icapital iand irelational

i(external) icapital

2.2 Components of intellectual capital

2.2.1 Human capital

According ito iMcGregor, iTweed, iand iPech i(2004), ihuman icapital iis

imore ibroader imeanings ithan ihuman iresource iin iterm iof ithe ibusiness

iworkforce iand ithe imore ispecific irequirements iof iindividual icompetence

iin ithe iform iof iknowledge, iskills, ithe iinnovativeness iand italents iof

iemployees. iFurthermore, iBarney i(1991a) iexpands ithe idefinition iof

ihuman icapital ito iinclude itraining, ijudgment, irelationships iand iinsights iof

iindividuals iand ithose irepresenting ithe itacit iknowledge iembedded iin ithe

imind iof iemployees (Bontis & Fitz-enz, 2002)

2.2.2 Structural capital

Bontis i(2001) idefines istructural icapital ias ithe ihardwares, isoftwares,

idatabases, iorganization istructure, ipatents, itrademarks iand ieverything ielse

ithat iemployees iuse ito isupport itheir ibusiness iand iprocesses The essence

of structural capital concentrates on “the knowledge infrastructure embedded within the routines of an organization” (Bontis, 2001) including

technological components and architectural competencies Referred to as knowledge infrastructure in Gold and Arvind Malhotra (2001), it consists

of organizational structure, culture and technology Furthermore, structural capital refers to the learning and knowledge enacted in day-to-day activities (Bontis, Bart, & Kong, 2007) This imeans ithat ithe ipool iof

iknowledge iremaining iin ian iorganization iafter iemployees ihave ileft ithe

iworkplace irepresents ithe ifundamental icore iof istructural icapital (Mouritsen, Nikolaj, & Marr, 2004; Nazari, 2010; Wang, 2011)

2.2.3 Relational capital

Relational icapital iis ia isuitable iterminology ito irepresent iall

iorganization’s irelations iwith iexternal istakeholders i(Bontis i& iFitz-enz,

i2002; iHelm iStevens, i2011; iLevy, i2009; iMouritsen iet ial., i2004).

iRelational icapital iexpands ithe iconcept iof i“client ior icustomer icapital” ito

iinclude iall ithe iexternal irelationships iof ithe ifirm i(e.g. isuppliers, iallies,

itrade iunions, ietc.). iThis icapital iincludes irelationships iwith iexternal

istakeholders, inetworks iwith isuppliers, idistributors, ilobby iorganizations,

ipartners, icustomer irelationships i(image ibuilding, iloyalty, inetwork

ipartners iand iinvestors) iand ibranding i(attitude, ipreference, ireputation,

ibrand irecognition) i(Sydler, iHaefliger, i& iPruksa, i2014). iGenerally, iMaría

iViedma iMarti i(2001) idefines irelational icapital ias ithe iability iof ian

iorganization ito iinteract ipositively iwith ibusiness icommunity imembers ito

imotivate ithe ipotential ifor iwealth icreation iby ienhancing ihuman iand

istructural icapital

2.3 Definition of corporate performance

Dorestani (2009) defines corporate performance as a set of measures focusing on factors that are most critical for the success of the organization, including both financial and non-financial information However, this study limits research scope focusing on financial information as a set of criteria to measure corporate performance

Figure 2.1 Four-stage model of corporate market valuation

2.4 Determinants of SMA practices

In ithe i1990s, ia isubstantial inumber iof iother iresearchers iworked iand

ito idefine ithe iconcept iof istrategic imanagement iaccounting, ie.g. iBromwich

i(1990); iWard i(1992); iDixon iand iSmith i(1993); iFoster iand iGupta i(1994);

iGuilding, iCraven, iand iTayles i(2000); i(Cinquini i& iTenucci, i2010).

iAlthough itheir idefinition iand idescription iof iSMA idiffer iconsiderably,

ithree itypical icharacteristics iof iSMA ican ibe idrawn ifrom itheir iwritings:

- An iexternal ifocus;

- A ilong-term, iforward-looking iorientation;

- The iprovision iof iboth ifinancial iand inon-financial iinformation

ifor imanagerial idecision imaking

Cravens iand iGuilding i(2001) idiscovered ithat ithere iare ithree imain

iunderlying idimensions iin istrategic imanagement iaccounting ipractices.

iThese imay ibe ireferred ito ias i“strategic icost imanagement” i(6 itechniques),

i“competitor iaccounting” i(5 itechniques), i“strategic iaccounting” i(4

itechniques). iUpgrading iCravens iand iGuilding i(2001)’s iresearch, ithis

istudy ialso iinclude i3 icustomer-focused itechniques ithat imay ibe ireferred ito

ias ithe ifourth idimension i“customer iaccounting” ibased ion ithe iresearch iof

Guilding and McManus (2002)

2.5 Intellectual capital measurement models

One of the topics in the discussion about IC is that it is immeasurable (Wall, Kirk, & Martin, 2003) The real problem, however, is not that there

is no way to measure intellectual capital There are too many different ways

to measure intellectual capital; however, the results of the measurement are often diverse and contradictable (Fritzsche, 2012) Luthy (1998) and Mitchell Williams (2001) categorize intellectual capital measurement into

at least three categories of measurement models as illustrated in Table 2.1

Table 2.1 Summary of measurement approaches that are mainly

used in intellectual capital research

Quantitative approaches Qualitative approaches

- Skandia NavigatorTM

- Balanced ScorecardTM

- IC indexTM

- Value Chain Scoreboard Return on

Assets model

- iValue iadded iintellectual

icapital icoefficient

i(VAICTM)

- iCalculated iintangible ivalue

- iEconomic ivalue iadded

i(EVATM)

Direct

intellectual

capital model

- iIntellectual iasset ivaluation

- iTotal ivalue icreation

i(TVCTM)

- iInclusive ivaluation

imethodology i(IMVTM)

Source: Levy (2009)

CHAPTER 3: THEORETICAL FRAMEWORK AND

HYPOTHESES DEVELOPMENT

3.1 Mediating effect of SMA practices in the relationship between IC and corporate performance

Figure 3.1 The first research model

3.1.1 Human capital, structural capital and relational capital reciprocally affect each other (H 1 )

Some istudies ipoint iout ithat ihuman, istructural iand irelational

ireciprocally icirculate iand iaffect ieach iother i(Edvinsson i& iSullivan, i1996;

iHsu i& iFang, i2009). iEmployee iabilities i(human icapital) ialso iaffect ia

ifirm’s iprocess iefficiency i(structural icapital). iHigh-quality iemployees

i(human icapital) iwill iattract igood icustomers iand ibusiness ipartners

i(relational icapital). iOn ithe iother ihand, irelational icapital ialso ipositively

iaffect istructural icapital (Hsu & Fang, 2009)

Hypothesis 1a: Human capital positively impacts on relational capital Hypothesis 1b: Human capital positively impacts on structural capital Hypothesis 1c: Relational capital positively impacts on structural

capital

3.1.2 Intellectual capital impacts on SMA practices (H 2 )

3.1.2.1 Underlying theoretical framework

The competence-based theory considers the company’s capacity to recognize, create, strengthen and increase its “core competencies” (Carlucci, Marr, & Schiuma, 2004) as the source of competitive advantage

3.1.2.2 Hypotheses development (H 2 )

According to Widener (2004)’s study, firms which rely more on human capital are likely to consider non-financial measures such as employee loyalty, staff turnover, skill development index to be leading indicators which provides information to make strategic decisions

Hypothesis 2a: Human capital is positively associated with the practices

of strategic management accounting

In terms of competence-based theory by Cleary (2015), firms chasing with customer-focused and market-driven orientation want to develop efficient organizational routines and processes (i.e SMA) that are created by the input IC, to cater for the informational demands

Hypothesis 2b: Structural capital is positively associated with the

practices of strategic management accounting

Strategic management accountants use raw information sourced by external relationships to produce data which will help the business in some number ways, including effective strategic planning, business performance control, better decision-making (Hsu & Fang, 2009)

Hypothesis 2c: Relational capital is positively associated with the

practices of strategic management accounting

3.1.3 Intellectual capital impacts on corporate performance (H 3 ) 3.1.3.1 Underlying theoretical framework

The iresource-based iview, iintroduced iby iPenrose i(1959), ithat ia ifirm

achieves core competences and better performance through the

iacquisition, iholding iand isubsequent iusage iof istrategic iassets (Barney, 1991b)

3.1.3.2 Hypotheses development (H 3 )

According ito ithe iresource-based itheory, iIC iin ithe iview iof istrategic

iassets iavailable ionly ito ia iunique ifirm iis iits imain idriver iof icompetitive

iadvantages iand igrowth idetermining ihow ithese iassets iare ideployed ito

igenerate isuperior ifinancial iperformance (Amit & Schoemaker, 1993)

Hypothesis 3a: There is a positive association between human capital

and corporate performance (asset turnover, investment efficiency, return

on equity, Tobin q)

Hypothesis 3b: There is a positive association between structural capital

and corporate performance (asset turnover, investment efficiency, return

on equity, Tobin q)

Hypothesis 3c: There is a positive association between relational capital

and corporate performance (asset turnover, investment efficiency, return

on equity, Tobin q)

3.1.4 SMA practices impact on corporate performance (H 4 )

3.1.4.1 Underlying theoretical framework

The contingency theory is used to explain that the competitive strategy will dictate organizational structure via management accounting practices which are utilized to direct and control an organization to aim desirable corporate performances (Anderson & Lanen, 1999)

3.1.4.2 Hypothesis development (H 4 )

The ifundamental iof icontingency itheory iholds ithat i“fit” iis

iunderstood ias ia ipositive iimpact ion icorporate iperformance iowing ito

icertain icombinations iof iSMA ipractices iand icontext i(contingency ifactors)

Hypothesis 4: SMA practices are positively associated with corporate

performance (asset turnover, investment efficiency, return on equity,

Tobin q)

3.1.5 The mediating role of SMA practices in the relationship between

IC and corporate performance (H 5 )

A firm with strong IC in availability will make an effective usage of SMA practices which in turn enhance corporate performance While most

of the models follow the concept of classical organization economic paradigm (environment → strategy → performance), (e.g Venkatraman (1989)), or the concept of structural paradigm (strategy → practices → performance), (e.g Prajogo and Sohal (2006); Spencer, Joiner, and Salmon (2009); Teeratansirikool, Siengthai, Badir, and Charoenngam (2013)), this study uses a model of “resources → practices → performance” relationship based on the resource-based view

Hypothesis 5a: SMA practices mediate the positive relationship between

human capital and corporate performance

Hypothesis 5b: SMA practices mediate the positive relationship between

structural capital and corporate performance

Hypothesis 5c: SMA practices mediate the positive relationship between

relational capital and corporate performance

3.2 Associations between IC components and each group of SMA practices

Figure 3.2 The second research model

3.2.1 Underlying theoretical framework

According to the dynamic capability theory, this theory emphasizes the dynamic fit between resources and the environment (Itami & Roehl, 1987) Teece, Pisano, and Shuen (1997) define dynamic capabilities as “the ability to integrate, build, and reconfigure internal and external competencies to address rapidly-changing environment”

3.2.2 Hypotheses development (H 6 )

It is suggested that SMA as a firm’s dynamic capability will be able

to manage more quickly to a firm’s initiatives that may constitute a firm’s

IC It is unclear that how each group of SMA techniques may manage each

of the different IC components Little attention has so far been given to the implication of SMA practices for IC management Hence, this study does

an exploratory research to identify a number of SMA techniques expected

to manage IC components, leading to the following hypotheses

Hypothesis 6a: Which categories of SMA techniques (strategic cost

management, competitor accounting, strategic accounting and customer

accounting) are strongly associated with human capital

Hypothesis 6b: Which categories of SMA techniques (strategic cost

management, competitor accounting, strategic accounting and customer accounting) are strongly associated with structural capital

Hypothesis 6c: Which categories of SMA techniques (strategic cost

management, competitor accounting, strategic accounting and customer accounting) are strongly associated with relational capital.

CHAPTER 4: RESEARCH METHODOLOGY

4.1 Selection of an appropriate regression approach

The author decides to apply PLS-SEM because PLS-SEM handles a complex model (Hair Jr & Hult, 2016) Barrett (2007) suggests PLS-SEM has no identification issue with small sample size PLS-SEM generally makes no assumption about the data distributions (Hair Jr & Hult, 2016) PLS-SEM ican ieasily ihandle ireflective iand iformative imeasurement

imodels i(Hair Jr & Hult, 2016)

4.2 Unit of analysis and sample size

4.2.1 Unit of analysis and informants

In terms of secondary data, this study uses financial data in annual reports or financial statement reports which draw IC and corporate performance With respect to primary data, the research survey is sent to SMA practitioners of the public enterprises The key informants are opted from the senior managers or members of top management team with knowledge about accounting, planning or finance and at least two years of working experience in the current organizations

4.2.2 Sample size

The necessary sample size was calculated by the G*Power 3.1.9.2 program (Faul, Erdfelder, Lang, & Buchner, 2007)

Figure 4.1 Calculation of sample size of the research model

Source: The author

As ican ibe iseen iin iFigure i4.1, ithe isample isize iof ithe ifirst iresearch

imodel iand iof ithe isecond iresearch imodel iis i127 iand i85, irespectively.

iTherefore, ithe iminimum isample isize iapplied iconsistently ifor ithe itwo

iresearch imodels iwill ineed i127 iobservations ito iachieve ia istatistical ipower

4.4 Variables measurement

4.4.1 Measures of each component of intellectual capital

IC constructs measurement based on the “Value Added Intellectual Coefficient” model (VAICTM) developed by Public (2000)

Figure 4.3 The value added intellectual coefficient model

4.4.1.1 Operationalization of value added (VA)

VA iis idefined ias ithe igross ivalue icreated iby ifirm iduring ithe iyears,

iand ibecause idividends iplus iretained iearnings iis iequal ito iafter-tax iincome,

iVA ican ibe iexpressed ias ifollows:

VA = Amortization & Depreciation + Wages & Salaries + Interest

expsenses + Tax expenses + after-tax income

4.4.1.2 Operationalization of human capital efficiency (HCE)

Human icapital iefficiency i(HCE) iis imeasured iby ihow imany idollars

iof ivalue iadded ian iorganization iis iable ito igenerate ifor ieach idollar iinvested

iin iits ihuman icapital. iHCE iis icalculated ias ifollows:

HCE = VA

HC

4.4.1.3 Operationalization of structural capital efficiency (SCE)

Structural capital is composed of innovation capital (RDC) and organizational capital (ORGC) (Nazari, 2010), as follows:

Innovation capital efficiency

Research iand idevelopment iexpenditure i(R&D) ihas ibeen iused

iextensively iin ithe iliterature ias ia iproxy ifor iinnovation icapacity i(Bosworth

i& iRogers, i2001). iThe iefficiency iof iinnovation iis icalculated:

RDCE = RDC

VAFollowing iLev iand iSougiannis i(1996); iGu iand iLev i(2001);

iShangguan i(2005), ion ithe ibasis iof i3-year ieconomic ilife, ithe icumulative

iR&D iinvestment i(RDC) iin ithe iyear it iis:

RDCi,t = RDi,t + 2/3 RDi,t-1 + 1/3 RDi,t-2

Organizational capital efficiency

The efficiency of organizational capital (ORGCE) is calculated:

ORGCE = ORGC

VA The measure of organizational capital involves the capitalization of selling, general administrative (SGA) spending, which is similar to the capitalization of R&D spending in Lev and Sougiannis (1996) This study conducts the following firm-level estimation by industry:

Log(Ei,t)= γ0 + γ1Log(PPEi,t-1) + γ2Log(RDCi,t-1)+ δ1Log(SGAi,t)+

δ2Log(SGAi,t-1) + δ3Log(SGAi,t-2) (1)

As procedures in the 2-step regression approach, in the first stage, SGAi,t is regressed against profitability (ROA) and firm size (TA) to have estimates applied in the general model of the relationship between SGAi,tand log(Ei,t) This study adopts the following model in the first stage:

Log(SGAi,t) = 0 + 1TAi,t-1 + 2ROAi,t-1 + εi,t

After determining the value of δ1, δ2, δ3 in the equation (1) by industries, thus, δ , δ, δ, if significant, represents the contribution of SGA

expenditure in year t, t-1, t-2 to current earnings, (δ1, δ2, δ3) represents the total earnings in year t contributed by SGA expenditures over t, t-1, t-

2 years, while 1 = δ1/ (δ1, δ2, δ3); 2 = δ2/ (δ1, δ2, δ3); 3 = δ3/ (δ1,

δ2, δ3) are the amortization rate of SGA expenditures in year t, t-1, t-2, respectively After determining the value of 1, 2, 3,the firm-specific level of organizational capital is measured by the equation:

ORGCi,t = (1 – 1)SGAi,t + (1 – 2 – 3)SGAi,t-1

4.4.1.4 Operationalization of relational capital efficiency (RCE)

Relational capital efficiency (RCE) is simply equal to structural and relational capital minus structural capital efficiency

RCE = SRCE – SCE

4.4.2 Measures of the variables of SMA practices

Measurement iof ithe idegree iof iusage iis iachieved iby iposing ithe

iquestion i“To iwhat iextent idoes iyour iorganization iuse ithe ifollowing

itechniques?” iImmediately, ifollowing ithe iquestions, ithe i18 iSMA

itechniques iare ilisted itogether iwith ifive-point iLikert iscale, iranging ifrom i1

i(not iat iall) ito i5 i(to ia igreat iextent)

4.4.3 Measures of the variables of corporate performance

This study chooses the constructs of asset turnover and investment efficiency, which represent the productivity driving to a firm’s added value Afterward, return on equity assessing a firm’s profitability represents the measurement of financial indicators Lastly, although there

are many measurements to identify firm value, this study uses Tobin q as

a proxy to evaluate corporate performance through identifying firm value

4.4.4 Measures of control variables

Following previous studies (Biddle & Gilles, 2006; Cadez, 2006; F Chen, Hope, Li, & Wang, 2011; Seaman & Williams, 2011), this study introduces several control variables in all of these regression equations: a proxy of firm growth, firm age, firm size and financial leverage

CHAPTER 5: SAMPLE CHARACTERISTICS AND MEASUREMENT SCALES ASSESSMENT

5.1 Data collection to construct SMA practices variable

The questionnaire was translated into Vietnames with the process proposed by Brislin (1970) To do pilot testing, the Vietnamese questionnaire in paper was sent to the students who have knowledge of strategic management accounting as well working experiences After choosing 80 completed responses, the statistical techniques of Cronbach Alpha and Explanatory Factor Analysis for all scales was then performed

to assess the reliability, convergent and discriminant validities of measurement scales using the software package SPSS 20.0

The final sample was comprised of 174 valid responses

5.2 Sample characteristics

Table 5.1 Respondents by Industry type

Logistics & transportation equipment 19 10.92

Source: The author

Table 5.2 Respondents by Organization size and SMA practices type

Size in terms of total equity

(VND million)

SMA practices Higher level

(> 45)

Lower level ( 45)

Small companies

Medium companies

Large companies

Source: The author

Table 5.3 Respondents by Positions type and Working-year type

4 – 6 years Over 6 years

Source: The author

5.3 The outcomes of reflective measurement scales assessment

The SMA practices variable is built by reflective measurement scales Their characteristics are assessed as follows:

▪ Internal iconsistency ireliability: iThe icomposite ireliabilities iof

ithese ilatent ivariables irange ibetween i0.860 iand i0.950,

iindicating ia ihigh ilevel iof ireliability

▪ Indicator ireliability: iThe iouter iloadings iof iall iobserved

ivariables iof iall ithe iconstructs irange ibetween i0.577 iand i0.881

iand ihigher ithan ithe icut-off ivalue iof i0.5 i(Hair iJr i& iHult,

i2016). i

▪ Convergent ivalidity: iThe iAVE ivalues iof iall ithe ilatent

ivariables iare iacceptable ias ithey iare ihigher ithan i0.5 i(ranged

ibetween i0.516 iand i0.697)

▪ Discriminantvalidity: