The thesis studies the factors affecting the decision of direct foreign investment of Vietnamese enterprises, in which Vietnamese enterprises registered to apply for direct investment to the Kingdom of Cambodia by the Foreign Investment Agency and registered, licensed by the Investment Development Council of Cambodia (CDC) and businesses that intend to invest in Cambodia.
MINISTRY OF EDUCATION - TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY - LE QUANG HUY DETERMINANTS OF VIETNAMESE ENTERPRISES’ OUTWARD DIRECT INVESTMENT DECISION: THE CASE OF CAMBODIA Major: Commercial business Code: 9340121 SUMMARY OF PH.D DISSERTATION Ho Chi Minh City – 2019 The thesis is completed at: Name of the supervisor: Reviewer 1: Reviewer 2: Reviewer 3: The dissertation will be reported to the thesis committee meeting at At……………… Date ……… The thesis can be found at the library: DISCLOSURE OF RESEARCH RESULTS RELATED TO THE THESIS During the study and completion of the thesis, the author has done researches directly related to the thesis as follows: Research project Vo Thanh Thu & Le Quang Huy (2015) Vietnamese enterprises outward direct investment: The reality of foreign direct investment of Vietnamese enterprises - in case of Cambodia Upgrading project of Journal of Economic Development achieving international standard SCOPUS 2015 Ho Chi Minh City: University of Economics Ho Chi Minh City Articles published in academic journals Le Quang Huy (2013) Re-aware of Vietnam's direct foreign investment role and some policy comments Journal of Financial Research - Marketing, 13 & 14 Vo Thanh Thu, Le Quang Huy & Le Thi Bich Diep (2016) Researching factors affecting decision of Vietnam's FDI: The case of Cambodia Journal of Economic Development, 27 (9), - 33 Vo Thanh Thu & Le Quang Huy (2017) Determinants of Viet nam’s FDI in Cambodia Proceedings of the National Conference: Economic picture for Vietnamese enterprises 2017 Ho Chi Minh City: University of Economics & Law, Viet Nam National University HCM Vo, T T., & Le, Q H (2017) Determinants of Vie.tnam’s Outward Direct Investment: A difference test among entry modes International Conference of University of Economics Ho Chi Minh City: Policies and Sustainable economic development Ho Chi Minh City: University of Economics Ho Chi Minh City Vo, T T., Le, Q H., & Le, T B D (2018) Determinants of Vietnam’s outward direct investment: The case of Cambodia Journal of Asian Business and Economic Studies, 25(01), 24 - 49 doi: 10.24311/jed/2018.25.S01.2 CHAPTER GENERAL INTRODUCTION 1.1 Theoretical context As defined by OECD (2008), foreign direct investment is a type of cross-border investment with the goal of establishing longterm benefits in an enterprise that is residing in another economy Many studies explain the role of foreign direct investment: For investors to seek more attractive profit margins in foreign markets (Agarwal, 1980; Moosa, 2002) or to implement diversification of investment activities (Tobin, 1958; Markowitz, 1959; Moosa, 2002) or influenced by output output and market size of the receiving country (Balassa, 1966; Moore 1993; Wang & Swain, 1995) By assessing the outward investment motives of Japanese enterprises, Kreinin et al (1999) concluded that "market share protection is one of the most important motivations for FDI." For countries receiving capital, OECD (2002) pointed out that FDI creates a spillover effect on technology, supports investment in human resources, contributes to the nation's international trade integration, helps create a business environment more competitive and increase the development of businesses All of these contributes to higher economic growth and is seen as an effective solution to help economic growth in developing countries According to Grossman and Helpman (1991), Hermes and Lensink (2003) point out that FDI plays an important role in modernizing and promoting the development of the economy in the host country Johnson (2005) in the study of the impact of FDI on economic growth, concluding FDI impacts on host countries, especially the group of developing countries mainly in the form of physical capital and technology, in particular, technology is a key factor According to Kemp (1962), capital mobility is due to differences in marginal productivity Capital moves from where marginal productivity is lower to where marginal productivity is higher Kemp's theory is based on a perfect market assumption, without risk, that profit is the only variable of investment decisions Therefore, a country with abundant capital has a lower profit margin than the scarce country However, this theory did not explain the reason besides the capital inflows, the capital flow also moves out of a country and moreover, why the countries that lack capital and technology are not high in developing countries which include Vietnam, the enterprises directly invest abroad? So what causes direct investment abroad from developing countries? According to UNCTAD (2006) and Dunning (2006), there are differences in the causes affecting foreign direct investment enterprises from developed countries and developing countries It is also the topic that attracts the research of the authors in the world So far, there have been many theoretical works explaining the cause of the formation of foreign direct investment such as: theory of effective market hypothesis, theory of inefficient market assumption, choice theory choose the position of internationalization theory After all, there are two ways to study the cause of FDI formation In the direction of studying motivational factors from the country, researchers believe that the motivation for businesses to decide to invest abroad may be because the domestic market is no longer attractive (UNCTAD, 2006; Kayam , 2009; Masron & Shahbudin, 2010; Lu & co-author, 2011, Lou & Wang, 2012), domestic business costs are too high (Andreff, 2003; Kayam, 2009; Masron & Shahbudin 2010), natural resources increasingly depleted or inaccessible (UNCTAD, 2006; Masron & Shahbudin, 2010; Yao et al., 2010) In addition, for FDI enterprises to facilitate investment abroad, there is a great need for support from the domestic government in making investment policies and regulations (Aykut & Ratha, 2004; UNCTAD, 2006; Yao et al, 2010; Masron & Shahbudin, 2010; Lu et al, 2011; Lou & Wang, 2012; Stoian, 2013) In the direction of research focused on attracting factors, the researchers argue that businesses that decide to invest abroad may stem from recognizing the attractiveness of the market in the intended country private (Balassa, 1966; Dunning, 1988 & 2002; Wheeler & Mody, 1992; Moore, 1993; Wang & Swain, 1995; Markusen & Venables, 1998, 2000; UNCTAD, 2006; Buckley et al., 2007; Duanmu & Guney , 2009; Cuyvers et al., 2011; Anil et al, 2011; Gill, 2014; Lee et al, 2016; Mourao, 2017), low operating costs (Dunning, 1988 & 2002; MacCarthy & Atthirawong, 2003; UNCTAD, 2006; Anıl & et al, 2011), abundant or easily accessible resources (Dunning, 1988, 2002; Anil & et al., 2011), have a close geographical position or a Cultural similarities (Anil et al., 2014), economic infrastructure (Dunning, 1988 & 2002; Wheeler & Moody, 1992, Zhang & Zuk, 1998, Na and Lightfoot, 2006), Business support of local governments (Dunning, 1988 & 2002; Anil et al., 2014; Buckley et al, 2007; Dunning, 1988 & 2002) or due to good international economic integration (Dunning, 1988 & 2002; Anil et al., 2011) In addition, Aykut and Ratha (2004), UNCTAD (2006) synthesized and recommended two groups of push - pull factors to impact on FDI However, in these studies, it is only limited to summarize the discrete studies of factors attracting capital in the country of capital import and promoting from the capital exporting countries affecting FDI.The most recent publication by Li et al (2018) recommends new research directions so that simultaneously assessing all components affecting FDI include: internal corporate perspective (ownership, type of FDI ), the level of managers and the context decide the location selection (the factors belong to home country, host country, local, sub-regions, networks) On that basis, this thesis proposes to examine the simultaneous impact of Push - pull factor groups to investment decisions of enterprises from a developing country This is an research gap that the thesis expects to solve 1.1.2 Empirical context Up to now, Vietnam has invested abroad with 1318 projects and over 22 billion USD, the average investment capital / project is nearly 17 million USD Among more than 30 countries receiving investment capital from Vietnam, by the end of 2017, the Kingdom of Cambodia is the second ranked country with the total number of projects with 168 projects (accounting for 16.05%) and 3rd ranking of investment capital with more than 2.7 billion USD (accounting for 13.7%) In 2017, Vietnam and Cambodia celebrated 50 years of establishing diplomatic relations with Cambodia, in this historical period, the economic - political - military relations between the two countries always developed in a wide and deep way However, Vietnam is only the fifth largest investor among foreign investors in Cambodia, this result is not commensurate with the potential and relations of the two countries So far, there have been some empirical studies on FDI activities from Vietnam to abroad, but the works have not focused on studying the factors affecting the investment abroad decisions of Vietnamese enterprises and measures the degree of simultaneous influence of these factors on the decision of direct investment activities abroad and there is no empirical study on in-depth investment of Vietnam in Cambodia market Based on the theoretical and practical context, the author proposes the thesis: “Determinants of Vietnamese enterprises’s outward direct investment decision: the case of cambodia” 1.1.3 Research significance of Vietnamese enterprises’s FDI to Cambodia Cambodia is a small market but a very important position for Vietnam because the two countries have territory, economic cohesion, penetrating into each other's markets will help stabilize socio-political security In the context of many Vietnamese enterprises wishing to invest abroad, the results of the study not only complement the research activities on FDI from developing countries like Vietnam but also helping Vietnamese State administrative agencies have a basis to propose appropriate strategies and solutions to enhance FDI activities from Vietnam to Cambodia in particular and to other countries in general, contributing greatly to development Vietnam's political and economic relations with Cambodia and other countries in the world 1.2 Research aims (1) Simultaneously verify the scale of motivating factors from the capital exporting country and the factors of attraction from the receiving country affecting the decision of direct investment of enterprises abroad (2) Determine the influence and degree of influence on Push factors to the direct investment decision of Vietnamese enterprises (3) Determining the influence and degree of influence on Pull factors to Vietnamese enterprises' direct investment decisions (4) Proposing policy implications with scientific basis and management applicability to the State of Vietnam and the host country in creating a favorable investment environment to promote FDI from Vietnam; at the same time, give suggestions for managers of Vietnamese enterprises which are and intend to invest directly abroad 1.3 Research’ object and scope Research’ object: Factors affecting Foreign direct investment decisions Research’ scope: The thesis studies the factors affecting the decision of direct foreign investment of Vietnamese enterprises, in which Vietnamese enterprises registered to apply for direct investment to the Kingdom of Cambodia by the Foreign Investment Agency (Ministry of Planning and Investment of Vietnam) and registered, licensed by the Investment Development Council of Cambodia (CDC) and businesses that intend to invest in Cambodia - Research period from 1989 to 2017 1.4 The research methodology The general research method of the thesis is based on Embedded Design method in which quantitative research is main (Creswel, 2014) The research methods, the process of building the scale, the sampling process will be detailed in Chapter of the thesis In general, it is possible to generalize the research methods, analysis techniques and data processing as follows: 10 markets Electic theory (OLI model) New trade theory Institution approach - Benefit of owning productive processes, patents, technology, management skills - Advantage of locating in protected markets, favourable tax systems, low production and transport costs, lower risk - Advantage of internalisation cutting transaction costs, lowering risk of copying technology, quality control Market size, Transport costs, Barriers to entry, Factor endowments Financial and economic incentives, Tariffs, Tax rate Dunning (1977, 1979, 1988, 2002) Markusen & Venables (1998, 2000) Bénassy Quéré & co-author (2001, 2007), Cleeve (2008) Source: Compiled by the author 11 2.2 The empirical research Table 2.2 Summary of FDI determinants from the empirical research (Detailed in 1st Appendix of thesis) The empirical research on push factors Determinants Market size, market growth Competition level, Openness of the economy Macroeconomic condition Regulations, business condition (cost, available of input) Incentive and promotion policy The empirical research on pull factors Market size, market growth Competition level, Openness of the economy Macroeconomic condition Regulationss, business condition (cost, available of input) Incentive and attraction policy Culture - Geographical proximity, political stability, political relationship Author(s) (year) Kyrkilis & Pantelidis (2003); Masron & Shahbudin (2010); Lou & Wang (2012); Saad & co-author (2014) Kyrkilis & Pantelidis (2003); Kayam (2009); Masron & Shahbudin (2010); Wei & Alon (2010); Lou & Wang (2012); Saad & co-author (2014) Kyrkilis & Pantelidis (2003); Kayam (2009); Wei & Alon (2010); Saad & coauthor (2014) Andreff (2003); Yang (2003); Kayam (2009); Lou & Wang (2012); Fan & coauthor (2018) Yao & co-author (2010); Lu & co-author (2011); Wu & Chen (2014) Zhang & Zuk (1998); Buckley & co-author (2007); Duanmu & Guney (2009); Anil & cộng (2011); Zhang & Daly (2011); Gill (2014); Yilmaz co-author (2014); Mourao (2017) Cuyvers & co-author (2008); Duanmu & Guney (2009); Zhang & Daly (2011); Yilmaz cộng (2014) Zhang & Zuk (1998); Cuyvers & co-author (2008); Duanmu&Guney(2009); Gill (2014) Zhang & Zuk (1998); Buckley & co-author (2007); Anil et al.(2011); Gill (2014); Mourao (2017) Zhang & Zuk (1998); Anil & co-author (2011) Zhang & Zuk (1998); Buckley & co-author (2007); Cuyvers & et al (2008); Duanmu & Guney (2009); Quer & co-author (2012); Mourao (2017) 12 2.3 Research model and hypotheses There are three hypotheses set out as follows: Hypothesis H1: There exists a positive relationship between push factors and pull factors for Vietnamese enterprises FDI decision Hypothesis H2: The push factors affect the FDI decision of Vietnamese enterprises to achieve the target of market, efficiency and resource seeking Hypothesis H3: The pull factors affect the FDI decisions of Vietnamese enterprises to achieve the target of market, efficiency and resource seeking Figure 2.1 Proposed research model 13 CHAPTER 3: RESEARCH METHOD 3.1 Research design The research procedure as well as the procedure of developing and adjusting the scale of the research can be generalized through Diagram 3.1 Diagram 3.1 Research procedure and scale evaluation Source: Author 14 3.2 Sampling method and data collection Sampling method The author selected managers with the right to participate in FDI decision making and the experts with in-depth research on Vietnam's OFDI - Sampling method for preliminary quantitative research step: the author chooses the sample scale for this preliminary quantitative research step of 120 managers - Sampling method for the official quantitative research step: the author conducts research with a sample size of 489 enterprise managers, through convenient sampling and snowball sampling - Sampling method for the official qualitative research step: the author of the thesis in-depth interviews with 10 experts, including experts in the host country (Cambodia) Data collecting method - The author selected Semistandardized interview with open discussion to collect data for preliminary qualitative research step - The author used survey design with closed questionnaires to collect data for preliminary and official quantitative research steps In the preliminary quantitative research, the author issued 150 direct surveys of enterprises, collected 135 valid votes, of which 120 votes were used to analyze In quantitative research, the author issued 525 votes, collecting 489 valid votes to be included in the analysis - The author conducted in-depth interviews with experts who are researchers and experient managers relating to Viet Nam’s FDI in Cambodia to collect data for the formal qualitative research step 15 Data processing tools Collected data in quantitative research were input in data entry, coding and processing, analyzed by SPSS 20 and AMOS 20 software 3.2 Analysis of preliminary quantitative research results Through preliminary qualitative research with experts, next to preliminary quantitative research with the sample of 120 observations by assessing the scale’s reliability with Cronbach's Alpha and scale value with EFA, with independent variables are excluded from the research model including CPVN7, KTC5, CPC2, HTC3, HTC7, VDC3, VDC7, the remaining 40 observable variables were put into official quantitative and qualitative analysis in Chapter 16 CHAPTER ANALYSIS OF RESULTS OFFICIAL RESEARCH 4.1 The character of official data sample The survey sample includes 489 observations, of which businesses have been directly investing in Cambodia with 75 investors accounting for 15.33%; enterprises that have not invested but have been conducting business and surveying the Cambodian market through the forms of import, export, bidding and services with Cambodia, including 414 enterprises, accounting for 84.66% In particular, 75 investors are typical investors, with the largest capital investment of Vietnam in Cambodia such as Vinamilk, Metfone Company, Military Bank, Investment and Development Bank in Cambodia, Binh Dien Fertilizer Company, Dong Duong Rubber Investment and Development Joint Stock Company, a number of investment project companies of Vietnam Rubber Group in Cambodia Thereby, it shows that the private survey sample of 75 investors also ensures the representative of capital for Vietnamese investors to Cambodia 4.1 Assessment of scale reliability and scale value Cronbach’s Alpha overall result of the set of 40 observed variables is 0,928 After evaluating partial Cronbach’s Alpha, one variable was excluded because of the low total correlation coefficients, the remaining 39 turned to reliability With two times EFA analyzes, two variables were excluded due to Communalities less than 0,4, the remaining 37 observed variables were grouped into factor groups at eigenvalue with a total variance extracted of 58,73% 17 4.2 The results confirming the factors affecting the direct investment decision of Vietnamese enterprise in Cambodia With standardized CFA results as shown in Figure 4.1, it shows that the CMIN / df value of 1.151 is less than (satisfactory), TLI is equal to 0.982 and CFI is equal to 0.984 (greater than 0.9 and smaller 1) , the RMSEA index is equal to 0.008 (less than 0.8), all of which meet the requirements In addition, according to CFA (standardization) analysis, all partial scales have an estimated weight greater than 0.5; in which the lowest level is CPVN5 of GVN scale with a weight of 0.553 In addition, the critical value (t value) is much higher than 1.96 and the P value in the estimated sign (***) will conclude that the estimated result is statistically significant Next, the calculation results of the average variance extract and the composite reliability index of each scale show that the variance extract of all scales is greater than 40%, the scale of QCC has the largest AVE value with 50.62%, on the other hand all scales have a composite reliability index greater than 60%, at least a KTVN scale with a value of 63.83% Since then, it is confirmed that all scales achieve convergent values In addition, the values of correlation coefficients and measurement errors between constructs are greater than zero and different from one In addition, the critical value (t-value) of measurement errors is much larger than 1.96, so the probability of deviation is less than 1% (Schumacker & Lomax, 2010) thereby concluding that constructs have differentiated values and high reliability as well as being unidirectional 18 Figure 4.1 Results of critical measurement model (standardized) by CFA Source: Results of data processing from AMOS 4.3 Results of testing the official theory model 4.3.1 Results of testing the hypothesis H1 According to the analysis results, the model has 518 degrees of freedom, chi square has a value of 591,593 with p is 0,013; The squared cost on the order of freedom is 1,143 (less than 2), the index measures the other relevance of the model is quite high value, in which GFI index reaches 0,934, TLI reaches 0,984, CFI reaches 19 0,986 (approximately 1), RMSEA reached 0,017 (less than 0,8) Thereby, the conclusion that this model is completely consistent with the research data Next, based on the results of variance and standard deviation, the lowest critical value (t-value) reached 5,325 (greater than 1.96), indicating that all measurement variables achieving statistical significance very high The estimated value of the measurement errors is greater than zero, indicating that the model does not suffer from Heywood phenomenon On the other hand, with a correlation coefficient of 1,04, there is a high correlation between the groups of factors So it can be concluded that hypothesis H1 is accepted 4.3.2 Results of testing the hypothesis H2 and H3 Adjusting the official research model Because of the very high correlation coefficients of push-pull factors (H1 hypothesis test above), the dissertation author removes the correlation relationship between two groups of factors in testing SEM linear structure model below However, these two groups of factors all have a relationship in the simultaneous impact on FDI decisions of enterprises So the following SEM model will evaluate simultaneously the hypothesis H2 and H3 Evaluating model fit The results of SEM as shown in Figure 4.3 show that the model has 619 degrees of freedom, chi square has value of 1057 with p is 0,000; Chi square /df is 1,709 (less than 2), the indicators measuring other relevance of the model are quite high value, in which the GFI index reaches 0.905, the TLI reaches 0.915, CFI reaches 0.921 (Approximately 1), RMSEA reached 0.038 (less than 0.8) Thereby, it can be concluded that this model is completely 20 consistent with the research data With the results of estimating the main parameters in the theoretical structure model, there is a significant relationship (because p = 0.00