Determinants of investorss satisfaction the case of FDI investors in long an province

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY LE QUOC THINH DETERMINANTS OF INVESTORS’ SATISFACTION THE CASE OF FDI INVESTORS IN LONG AN PROVINCE MASTER OF BUSINESS ADMINISTRATION THESIS HO CHI MINH CITY- 2012 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY LE QUOC THINH DETERMINANTS OF INVESTORS’ SATISFACTION THE CASE OF FDI INVESTORS IN LONG AN PROVINCE Major: Business Administration Major code: 60.34.05 MASTER OF BUSINESS ADMINISTRATION THESIS SUPERVISOR: DR DINH CONG KHAI HO CHI MINH CITY- 2012 ACKNOWLEDGEMENT First, I would like to express my gratitude and deepest appreciation to my research supervisor, Dr Dinh Cong Khai for his intensive support, valuable suggestions, guidance and encouragement during the course of my dissertation Then, it is my very much gratitude to Mr Nguyen Van Hoa – Long An Planning and Investment Service for all the useful information and documents as well as the recommendations he did kindly offered Also, this research could not be done without the enthusiastic participation of FDI enterprises in Long An who provided me with valuable feedbacks and questionnaire answers I especially express and thankfulness to the following companies: Formosa Taffeta, Bourbon Ben Luc, Vietnam Australia, Greenfeed, and Golden Bells who helpfully joined my interviews My sincere thanks are also to all of my classmates, my friends, and especially Mr Dang Huu Phuc for his support and guidance Finally, I dedicate this study to my beloved family, my wife, and my little Papaya who have encouraged and supported me during the time Ho Chi Minh City, November 22, 2011 Le Quoc Thinh i Abstract Foreign Direct Investment (FDI) is playing important roles in today‟s global integrated economy, especially for developing countries This study examines determinants of FDI Investors‟ satisfaction in the context of Long An province in order to examine FDI theories in a certain circumstance as well as find out practical reference for Long An province in their FDI attraction policy The research combines three phases: literature review, face to face interviews, and questionnaire surveys to 142 FDI enterprises doing business in Long An Results of the research show that market, labor, infrastructure, and investment policies are significant factors determining foreign investors‟ decision in Long An Besides, investors who possess different characteristics also have different viewpoints towards the above mentioned determinants Finally, the study poses out some recommendations for both Long An government for their policy establishment and FDI scholars for further researches on this topic Keywords: Foreign Direct Investment, Investors’ satisfaction, Determinants of FDI, Long An province, Dunning Eclectic Paradigm ii Table of Contents Acknowledgement i Abstract ii Table of Contents iii List of Tables v List of Charts and Models vi CHAPTER 1: INTRODUCTION 1.1 Theoretical background 1.2 Overview of FDI in Vietnam and Long An province 1.2.1 FDI in Vietnam 1.2.2 FDI in Long An 1.3 Problem Statement and Research Objectives 1.4 Research Method and Structure CHAPTER 2: LITERATURE REVIEW 10 2.1 Review of Determinant of FDI Studies 10 2.2 Dunning‟s Eclectic Paradigm and Determinants of FDI 15 2.3 Determinants of FDI in Developing Countries 18 2.4 Investors‟ satisfaction 23 CHAPTER 3: METHODOLOGY 24 3.1 Qualitative Research 24 3.1.1 Research Design 24 3.1 Research Results 25 3.2 Quantitative Research 27 3.2.1 Population and Sampling 27 iii 3.2.2 Data Collection Process 28 3.2.3 Measurement 29 3.2.4 Pilot Test 32 CHAPTER 4: RESEARCH RESULTS AND FINDINGS DISCUSSION 34 4.1 Research Results 34 4.1.1 Descriptive Statistic of Sample 34 4.1.2 Exploratory Factor Analysis (EFA) 35 4.1.3 Reliability of the questionnaire 39 4.1.4 Research Model 40 4.1.5 Research Hypothesis 42 4.1.6 Regression of Analysis – Determinants of FDI 42 4.1.7 Normal Distribution Test 45 4.1.8 Determinants of FDI Investors‟ satisfaction and Enterprises‟ Character .47 4.2 Findings Discussion 52 CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 56 5.1 Conclusion 56 5.2 Implications 57 5.2.1 Implications for Policy Maker in Long An province 57 5.2.2 Implications for Further Research 59 REFERENCES 61 APPENDIX 68 iv List of Tables Table 3.1 Scale for economic condition factors 30 Table 3.2 Scale for government policy factors 31 Table 3.3 Scale for Investors‟ satisfaction factors 32 Table 4.1 Sample distribution based on FDI enterprises‟ nationality 34 Table 4.2 Sample distribution based on FDI enterprises‟ target market 35 Table 4.3 KMO and Bartlett‟s Test 36 Table 4.4 Total Variance Explained for Economic condition and Government policy variables 36 Table 4.5 Rotated Component Matrix for Economic Condition and Government Policy Variables 37 Table 4.6 Total Variance Explained for Investors‟ satisfaction variables 38 Table 4.7 Component Matrix for Investors‟ satisfaction variables 38 Table 4.8 Consolidation of Reliability Analysis – Scale (Alpha) 39 Table 4.9 Symbols and coding value of research variables 41 Table 4.10 Average of Determinants of FDI 42 Table 4.11 Model Summary 43 Table 4.12 ANOVA(b) 43 Table 4.13 Coefficients(a) 44 Table 4.14 One way ANOVA for nationality character 48 Table 4.15 Post Hoc Tests - Multiple Comparisons for nationality character .49 Table 4.16 Descriptive for nationality character 50 Table 4.17 One way ANOVA for target market character 50 Table 4.18 Post Hoc Tests - Multiple Comparisons for target market character 51 Table 4.19 Descriptive for target market character 51 v List of Charts and Models Chart 1.1 Comparison of GDP growth rate between Vietnam and the world Model 4.1 Research model 40 Model 4.2 Summary of research process and results 45 Chart 4.1 Regression Standardized Residual 46 Chart 4.2 Normal P-P Plot of Regression Standardized Residual 46 Chart 4.3 Regression Standardized Predicted Value 47 vi Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province CHAPTER INTRODUCTION 1.1 Theoretical background World Trade Organization (WTO) defines Foreign Direct Investment (FDI) as an international business activity occurs when an investor based in one country (the home country) acquires a business in another country (the host country) with the intention to manage that business The management dimension is what distinguishes FDI from portfolio investment in foreign stocks, bonds and other financial instruments In most instances, both the investor and the business it manages abroad are business firms In such cases, the investor is typically referred to as the “parent firm” and the business as the “affiliate” or “subsidiary” (WTO, 2011a) From another perspective, Cavusgil (2008) considered FDI as an internationalization strategy in which the firm establishes a physical presence abroad through acquisition of productive assets such as capital, technology, labor, plant and equipment The above definitions though remain differences, consensus in two basic natures of FDI First, there must be the participation of at least one foreign company (the investor) and a host country where the investment locates In this relation, the investor contributes directly their know-how, technology and other production factors into the host country as a form of a business firm The second component is the pattern of the ownership This ownership defines the way investors manages their businesses in host countries in the relation with their mother companies (or parent firms) in home countries According to Hill et al (2008), firms have several options to go global They are, among the most recognized ones, Exporting, Licensing, and Foreign Direct Investment In this, FDI finds great advantages in preventing the company from transportation cost, trade barriers (in case of Exporting) and from leakages of Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province technology know-how, operation and business strategy control problem (in case of Licensing) Shatz and Venables (2000) found two main reasons lead a company to FDI which are to better serve the local market of the host country (horizontal FDI), and is to get lower cost inputs (vertical FDI) Also from Hill et al (2008), multinational enterprises (MNEs) need to locate their businesses in other markets because of their “Strategic Behavior” This behavior requires companies to keep pace with their competitors in any business movement which happens when an industry composed of a limited number of large firms (oligopoly) In addition, in today‟s globalized market, FDI provides MNEs ability to access emerging trends, new technologies and the best skills worldwide (Cavusgil, 2008) The benefit for a FDI host country is still controversial Although there are remain arguments from anti-globalist who protest against “the invasion” of MNEs to local business, most of the scholars agree on the huge benefit that FDI could bring to the host country (Dicken, 2011) Studies in China showed that FDI promoted income growth and asset formation (Zhang (2001), Ng and Tuan (2002)) Positive impact of foreign investment on labor productivity growth rate could be found in the study of Ramirez (2000) in Mexico Domestic pharmaceutical companies in India are beneficial from the appearance of foreign companies in this country in terms of investment, competition and operations (Johri (1983) and Kumar (1996), cited by Nayak, 2008) In addition, empirical studies showed positive relations between FDI and economic growth of host country, even in some indirect ways Findlay (1978, cited by Hill et al, 2008) postulated that FDI increase the rate of technical progress in the host country through a “contagion” effect from the more advance technology and management practices used by foreign firms Tsai (1994) found this relationship and that it varies from periods of time and the patterns of the economy Then, study of Sahoo (2006) on FDI in four countries in South Asia also found that FDI has a significantly positive impact on growth Hill et al (2008) consolidated at least four 68 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province APPENDIX – FDI in Vietnam by province, until Jun 23, 2011 Source: Vietnam Ministry of Planning and Investment (2011b) Province No Ho Chi Minh city Ba Ria - Vung Tau Ha Noi Dong Nai Binh Duong Ninh Thuan Ha Tinh Phu Yen Thanh Hoa 10 Hai Phong 11 Quang Nam 12 Quang Ninh 13 Quang Ngai 14 Long An 15 Da Nang 16 Kien Giang 17 Hai Duong 18 Petro 19 Bac Ninh 20 Vinh Phuc 21 Thua Thien Hue 22 Nghe An 23 Binh Thuan 24 Hung Yen 25 Tay Ninh 26 Lao Cai 27 Khanh Hoa 28 Ca Mau 29 Ninh Binh 30 Can Tho 31 Bac Giang 32 Hau Giang 69 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province 33 Binh Dinh 34 Lam Dong 35 Binh Phuoc 36 Tien Giang 37 Phu Tho 38 Thai Binh 39 Ha Nam 40 Lang Son 41 Nam Dinh 42 Ben Tre 43 Hoa Binh 44 Tra Vinh 45 Son La 46 Tuyen Quang 47 Thai Nguyen 48 Dac Lak 49 Vinh Long 50 Gia Lai 51 An Giang 52 Kon Tum 53 Quang Tri 54 Bac Lieu 55 Quang Binh 56 Dong Thap 57 Yen Bai 58 Soc Trang 59 Cao Bang 60 Bac Can 61 Dac Nong 62 Ha Giang 63 Lai Chau 64 Dien Bien Total 70 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province APPENDIX – INDEPTH INTERVIEW ENGLISH VERSION Introduction: Hello I am a graduate student, course 17 th, Master of Business Administration program of the University of Economics Ho Chi Minh city I am conducting my research on the Determinants of FDI in Long An province First, I would like to thank you for your participation in this discussion It is my honor to discuss with you on some points of the investment issue in Long An I am grateful for any straightforward ideas from you There is no right or wrong opinion All of your ideas are be useful for my research, and to some extent, they will all be helpful for Long An government for further completing their investment environment The required time for this discussion is around hour Discussed questions: What was the situation in that you have decided to invest in Long An province? What are the advantages and disadvantage of Long An‟ investment environment? What is the display of investors‟ satisfaction, from your point of view? What are your comments on the investment conditions in Long An: a) Market (Long An and Vietnam) b) Economy growth rate c) Labor resource (quantity and quality of labor resource, the cost of labor) d) Infrastructure (transportation, electricity, water supply, communication, sea port, industrial zone) e) Province‟s natural resource (mining resource, materials) 71 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province Do you think the conditions above have determined your investors‟ satisfaction into Long An province? Beside them, is there any other factors that make you to invest in Long An? What are your comments of the investment policies of Long An? a) The country‟ openness b) Investment policies c) Investment incentives d) Macro-economy stability Do you think the policies above have determined your investors‟ satisfaction into Long An province? Beside them, is there any other factors that make you to invest in Long An? VIETNAMESE VERSION Giới thiệu: Xin chào Tôi học viên cao học khóa 17, chương trình đào tạo Thạc sĩ quản trị kinh doanh trường Đại Học Kinh Tế Tp HCM Tôi thực đề án nghiên cứu nhân tố định đầu tư trực tiếp nước (FDI) tỉnh Long An Trước tiên, xin trân trọng cảm ơn quý anh (chị) giành thời gian tiếp chuyện với Tôi hân hạnh thảo luận với quý anh (chị) số vấn đề đầu tư Long An Xin q anh chị trao đổi thẳng thắn, khơng có quan điểm hay sai Tất quan điểm anh (chị) giúp ích cho tơi phục vụ cho tỉnh Long An nhằm mục đích hồn thiện mơi trường đầu tư tỉnh nhà Thời gian thực dự kiến khoảng Câu hỏi thảo luận: 72 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province Hồn cảnh cơng ty định đầu tư vào tỉnh Long An? Ưu nhược điểm đầu tư Long An? Theo anh (chị), đâu biểu định đầu tư Làm hiểu nhà đầu tư muốn định? Anh (chị) có nhận xét điều kiện đầu tư tỉnh Long An: a Thị trường (thị trường tiêu thụ nước, khu vực tỉnh Long An) b Tốc độ tăng trưởng kinh tế c Nguồn lao động (số lượng lao động, chất lượng lao động, chi phí lao động) d Cơ sở hạ tầng (giao thông, điện, nước, thông tin liên lạc, cảng biển, khu công nghiệp) e Nguồn lực chổ (tài nguyên, khoáng sản, nguồn nguyên vật liệu đầu vào) Anh (chị) có cho điều kiện tác động đến định anh (chị) chọn Long An địa điểm đầu tư? Ngoài vấn đề trên, cịn có vấn đề khác tác động đến định đầu tư anh (chị) không? Anh (chị) có nhận xét sách đầu tư tỉnh Long An: a) Chính sách mở cửa, hội nhập kinh tế địa phương b) Chính sách đầu tư địa phương c) Các sách khuyến khích đầu tư d) Sự ổn định vĩ mơ kinh tế Anh (chị) có cho sách tác động đến định anh (chị) chọn Long An địa điểm đầu tư? Ngồi vấn đề trên, cịn có vấn đề khác tác động đến định đầu tư anh (chị) không? 73 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province APPENDIX – QUESTIONNAIRE ENGLISH VERSION Hello I am a graduate student, course 17 th, Master of Business Administration program of the University of Economics Ho Chi Minh city I am conducting my research on the Determinants of FDI in Long An province First, I would like to thank you for spending time on my questionnaire I am grateful for any straight ideas from you There is no right or wrong opinion All of your ideas would be useful for my research, and to some extent, they will all be helpful for Long An government in further completing their investment environment a) The nationality of the investor Asia b) The target market of the business International Please provide your level of agreement toward the statements about your investmentrelated issues in Long An with the rule as: is completely disagree, is disagree, is no idea, is agree, is completely agree The consumption market of Long An and the vicinity in general is very potential We have a lot of customers in the province and the vicinity The large amount of suppliers in the province and the vicinity ensures our long-term business Labor resource in the province is abundant Labor cost is reasonable 74 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province The traffic situation and traffic system in the province in quite good The electricity is stably supplied The cost for electricity is reasonable Water supply is stable 10 The cost of water supply is reasonable 11 Telecommunication (telephone, internet, post office,…) is very convenient 12 Land and leasing fee is reasonable 13 The province provide enough land for our business 14 Input material resource is stable 15 The province mineral resource is abundant 16 The province‟s tax policy is almost suitable, that investors can take advantage 17 Customs procedures are prompt 18 The regulations in import and export are reasonable and favorable for enterprises 19 Propriety rights is clearly and effectively set up 20 Investment procedure is neat and complete 21 Communication between government and enterprises are prompt and effectively 75 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province 22 The province‟s administration services provided by the government are qualified 23 The government promptly solves the enterprises‟ difficulties 24 Incentives for new and priority businesses is very helpful 25 Our business is very satisfactory 26 We achieved the expected growth rate 27 We can definitely reach short-term objectives 28 We are willing to invest more if necessary 29 We are happy to introduce other investors to invest in Long An Thank you! VIETNAMESE VERSION Xin chào Tôi học viên cao học khóa 17, chương trình đào tạo Thạc sĩ quản trị kinh doanh trường Đại Học Kinh Tế Tp HCM Tôi thực đề án nghiên cứu nhân tố định đầu tư trực tiếp nước (FDI) tỉnh Long An Trước tiên, xin trân trọng cảm ơn quý công ty giành thời gian trả lời câu hỏi Xin q cơng ty trả lời thẳng thắn, khơng có câu trả lời sai Tất quan điểm q cơng ty giúp ích cho tơi phục vụ cho tỉnh Long An nhằm mục đích hồn thiện mơi trường sách đầu tư tỉnh nhà c) Quốc tịch công ty đầu tư Châu Á d) Thị trường đầu mục tiêu công ty Quốc tế 76 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province Xin công ty cho biết mức độ đồng ý công ty ý kiến xoay quanh vấn đề có liên quan đến hoạt động đầu tư cơng ty Long An, với qui ước: 1: hồn tồn khơng đồng ý, 2: khơng đồng ý, 3: khơng có ý kiến, 4: đồng ý, 5: hồn tồn đồng ý Thị trường tiêu thụ Long An khu vực có tiềm Chúng tơi có nhiều khách hàng địa phương vùng phụ cận Số lượng nhà cung cấp địa phương vùng phụ cận đảm bảo cho hoạt động lâu dài Lực lượng lao động địa phương dồi Chi phí lao động hợp lý Tình trạng giao thơng hệ thống giao thơng địa phương tốt Nguồn điện cung cấp ổn định Giá điện sản xuất hợp lý Nguồn nước cấp ổn định 10 Giá nước sản xuất hợp lý 11 Thông tin liên lạc (điện thoại, internet,…) thuận tiện 12 Mặt chi phí thuê mặt hợp lý 13 Địa phương cung cấp đầy đủ mặt cho 14 Nguồn nguyên liệu đầu vào ổn định 15 Tài nguyên khoán sản địa phương dồi giàu 16 Chính sách thuế địa phương hợp lý, thuận lợi cho nhà đầu tư 77 Determinants of Investors’ satisfaction – the case of FDI Investors in Long An province 17 Thủ tục hải quan nhanh gọn 18 Các quy định xuất nhập hợp lý, thuận lợi cho hoạt động doanh nghiệp 19 Quyền sở hữu tài sản xác lập rõ ràng 20 Thủ tục đầu tư thực nhanh gọn 21 Thông tin hai chiều doanh nghiệp quyền tốt 22 Dịch vụ hành địa phương có chất lượng cao 23 Chính quyền hỗ trợ kịp thời việc giải vướn mắc doanh nghiệp 24 hoạt Ưu đãi mà quyền dành cho doanh nghiệp doanh nghiệp động lĩnh vực ưu tiên hữu ích 25 Hoạt động kinh doanh khả quan 26 Chúng đạt tốc độ tăng trưởng mong muốn 27 Chúng hồn tồn hồn thành mục tiêu ngắn hạn 28 Chúng sẵn sàng đầu tư thêm cần thiết 29 Chúng tơi vui lịng giới thiệu nhà đầu tư khác đầu tư vào địa phương Xin cảm ơn! 78 ... from the theory of 22 Determinants of Investors? ?? satisfaction – the case of FDI Investors in Long An province Dunning and from the context of developing countries Depends on the context and methodology,... V12: Land and leasing fee is reasonable V13: The province provided enough land for our business 30 Determinants of Investors? ?? satisfaction – the case of FDI Investors in Long An province V14: Input... is the comment from most of local and international experts when they encounter the FDI area in Long An The statistic number of FDI Determinants of Investors? ?? satisfaction – the case of FDI Investors