VIET NAM NATIONAL UNIVERSITY, HO CHI MINH CITY INTERNATIONAL UNIVERSITY HOANG THANH NHON Student ID: PBAIU2002 SUMMARY OF DISSERTATION Exploring the mediating role of dynamic capabilities in the relationship between intellectual capital and performance of information and communications technology firms HO CHI MINH CITY…….1 Research background Many countries are in the process of transforming from manufacturing- to knowledge-based economies. This trend has created a need for innovative and in which information and communications technology (ICT) has had an increasingly large impact on economic and social life, especially in Industrial Revolution 4. The development of ICT has enabled “information societies” of more than three billion people to access the Internet, with eight out of 10 Internet users owning a smartphone (VietNamNet, 2020). The demand for ICT services is increasing by leaps and bounds.
This rapid growth has led ICT to become the one of the main drivers of economic growth as well as a cornerstone of daily life in many countries. Vietnam is no exception. Vietnam’s ICT sector grew substantially between 2010 and 2019, with its total revenue reaching US $134 billion in 2019 as the country emerged as a production center for ICT hardware and software products and services (VietNamNet, 2020). The government of Vietnam has increasingly recognized the important impact of the ICT industry on social and economic activities and recently devised a master plan for ICT called the “taking- off strategy,” which specifies targets for 2020 and aims to continue the transformation of Vietnam into an advanced ICT country, especially in Industrial Revolution 4.
However, in term of inputs and management knowledge, unlike other manufacturing industries, ICT involves short product life cycles, high customer demand, and very unpredictable technological changes. Accordingly, acquiring and managing “valuable, rare, inimitable, and non-substitutable” (VRIN) sources like intellectual capital is crucial to achieving outstanding performance in ICT (Wang et al. To follow the worldwide ICT trend, ICT firms that are able to survive and develop in a highly competitive and uncertain institutional environment must increase their capabilities in terms of intellectual capital development. Intellectual capital is often referred to as the value created by three types of intangible resources: human capital, which describes individual knowledge, skills, and education; organizational capital, which includes all 2 non-human knowledge containers (e., information and communication systems, databases, process manuals, strategies, routines); and social capital, which refers to the social relationships within an organization as well as individual relationships with customers, investors, competitors, or suppliers (Wang et al.
While Western empirical research on intellectual capital is popular, it is built on the assumption that intellectual capital is the key source of superior performance. Very few studies have been conducted to validate or operationalize this assumption in developing countries where the business environment is highly unstable, such as Vietnam. The interaction between the external environment—especially the dynamic environment—and firm strategies is expected to be related to performance (Hsu & Wang, 2012). To maximize performance, managers must pursue competitive strategies that best match the conditions of the external environment.
In other words, managers’ perceptions of the external environment are expected to affect firm strategy. Therefore, a firm’s strategy must involve deploying its resources, especially intellectual capital, to seize opportunities in the market. dynamic capabilities offer a bridge to debates in the strategy field proposing either a resource-based view that a firm’s resources, particularly those that are intangible, are more likely to contribute to the firm’s ability to sustain superior performance or the emerging discourse surrounding the dynamic environment (Hsu & Wang, 2012). While there is a wealth of literature on intellectual capital (Zhou et al., 2017), very few studies have addressed how dynamic capabilities mediate the impact of IC on firm performance.
Drawing on previous studies related to dynamic theories (Singh & Rao, 2016; Zhou et al., 2017), this dissertation proposes an alternative mechanism for the intellectual capital–performance relationship whereby dynamic capabilities mediate the effect of intellectual capital on firm performance.2 Problem Identification When physical or tangible assets of wealth like land and natural resources, basis for firm performance improvement, become scared or harder to obtain, economy must find develop other resources to maintain competitive advantages of the economy system. (Vuong et al. As a result, the concept of intellectual capital was developed. Its cornerstone drives firm performance include reputation, brands, intellectual properties, knowledge, organizational procedure and social networks (Inkinen, 2015).
Inkinen 3 (2015) suggests intellectual capital representing knowledge, skills, experiences and culture that are converted into profit. To be more precise, they are defined as the sum of capabilities, knowledge, culture, strategy, process, intellectual property, and relational networks of a company (Kenny and Bourne, 2015). They are also conceptualized as the knowledge and dynamic capability of an organization representing one of the most relevant antecedents of innovation, which has been fundamental for achieving competitive advantage (Kenny and Bourne, 2015). Therefore, their importance for innovation has attracted researchers interested in determining its elements and the process by which it enhances the capabilities and performance of firms.
Many studies of the intellectual capitals are sourced out of Western countries. There are only a few studies on those capitals as well as their roles in the business community’s development of the developing countries. In Vietnam, at the macro-level, since the renovation in 1986, Vietnam has achieved rapid changes in its industrialization and modernization process. The economy has shifted away from a centrally planned economy toward a market economy remarkably (Vuong et al.
However, in many years, most strategic transformations only concentrated on labor intensive industries and natural resources exploration; there are little focuses on how to develop intellectual capital in the transition stage in Vietnam. To modernize the economy system, Vietnam has been transforming the manufacturing-based economy toward a knowledge-based economy in which service sectors, such as finance and banking, tourism, media, biotechnology, and information communication technology, key knowledge intensive sectors now have been contributed increasingly to GDP in the 2009-2019 period. The contribution of service sectors to GDP has increased by 5%, from 41% up to 46% depended on the use of the intellectual capitals intensively. Furthermore, Vietnam’s ICT industry grew substantially during 2010-2019 and total revenue in 2019 reached USD 134 billion and has been emerging as production and outsourcing center for both ICT hardware and software outsourcing (Enriquez, Grijpink, Manyika, Moodley, Sandoval, Sprague & Strandell-Jansson, 2019).
The impacts of ICT on social and economic activities have been considered a tech trends to 4 drive economic growth. The Vietnamese government has recently devised a master plan on ICT which is called “Taking-off strategy” specifying targets for 2020 and aims at turning Vietnam into an advanced ICT country. However, unlike other well-developed or manufacturing-industries are based on natural resource inputs or labor-intensive production, ICT with short product life cycles, very unpredictable customer demand and technological changes, attaining and managing valuable, rare, inimitable, and non- substitutable (VRIN) sources such as social, human and organizational capital, the key source of superior performance, are very important. To follow the worldwide ICT trend, ICT firms surviving and growing in a highly competitive and uncertain institutional environment must increase their efforts to develop intellectual capital components and dynamic capabilities.3 Rationale and Deficiencies for Current Research There are reasons for undertaking this study which is presented as the followings: At first, Vietnamese ICT firms are unfamiliar with the idea of developing intellectual capitals through motivating innovative activities as a valuable resource.
In a knowledge- based economy, Intellectual capitals play an essential role in terms of creating and maintaining the firm’s competitive advantages, furtherly, improving performance. Therefore, there is a need for empirical research on the importance of the intellectual capital to help SMEs understand their contribution to the performance. Second, the impact of intellectual capitals on ICT firm performance differs from developed countries to developing countries. A review of literature indicates that many previous studies on the impact of intellectual capitals on firm performance in western countries in which business environment, macro policies, regulation are transparent and stable, while large extent ignoring developing countries like Vietnam in which business environment and regulation are unstable.
Finally, Vietnam is striving to achieve sustainable economic development where intellectual capitals become one of the main drivers of economic growth. Intellectual capital help nation to shift from labor-intensive economy to the knowledge-intensive economy in which high-tech and service sectors are key players. The industries having key influences of the Intellectual capital on firm performance are finance and banking, tourism, media, biotechnology, and information communication technology. There are a 5 few studies on the relationship between Intellectual capital and ICT performance in an unstable environment in developing countries like Vietnam.
However, they do not mention on how we measure the mediating role of the dynamic capabilities on the impacts of the intellectual capitals on firm performance in which understanding of that mediating role may improve internal and external factors related to corporate performance such as the working environment, human resource policies and corporate relationships (Chih, Hsing Liu & Gilbert & Broome, 2017). It is research gap that we want to fill up in this dissertation.4 Purpose statement This study investigates the impact of the Intellectual capital’s component on firm performance and the mediating role of the dynamic capability on that impact. Specifically, this study focuses on : (1) the effect of intellectual capital on ICT firm performance, (2) The effects of Intellectual capitals directly on each of dynamic capabilities, respectively. (3) the mediating role of each DCs on the link between the ICs and firm performance.
6 CHAPTER 2 LITERATURE REVIEW 2.1 Resource-based view Knowledge on how to effectively manage intellectual capitals are vital, especially, in sectors that are innovation oriented and non-manufacturing. The ICT sector is a service sector possessing intellectual capitals resulting from knowledge and skills of employees, processes, information systems, and customer relationships. It is acknowledged that ICT firms with strong intangible resources can achieve sustainable competitive advantages and differentiate themselves from their competitors. For this reason, I use the resource-based view (RBV) as a theoretical framework for this study.
RBV has been established for more than 20 years and has become one of the most influential theoretical tools used to determine the strategic resources available to a firm. The main development of the RBV occurred from 1985 to 1995 after it is first introduced by Werner felt in 1984 (Campbell & Park, 2017; Lin & Wu, 2014). Subsequently, many researchers contributed remarkably to the conceptual development of RBV (Campbell & Park, 2017; Kull, Mena, & Korschun, 2016; Lin & Wu, 2014; Sodhi, 2015). After the academic publication of Prahalad and Hamel (1990), the use of RBV became popular, especially, the significant contributions of Barney (2015) are well-known as the first application of the RBV into a comprehensive theoretical framework.
The RBV looking inside the company for resources of superior outcome is valuable, rare, not available to other competitors, imperfectly imitable, not easily implemented by others and non-substitutable and not able to be replaced by some other non-rare resource. These attributes are also known as VRIN attributes of the firm resources (Demir, 2017). These resources are further categorized in physical and intellectual capitals (social, human and organizational capital). Barney (2015) proposed that firms obtain these resources may achieve competitive advantages over other competitors.
Therefore, it is argued that the management and development of capitals are a vital means of a firm’s outcome or performance. Some previous researches also mention to how the intellectual capitals, VRIN resources, on firm performance. Campbell & Park, 7 (2017)’s article is well known as the research focusing on testing factors believed to affect small business performance of the service firms, utilizing RBV and the instrumental stakeholder framework approach. Within the research stream, the RBV framework has considered the relationship of one type of the intellectual capitals, social capital, with business performance.
Han & Li (2015) mention to RBV of firm holds that competitive advantage comes from resources such as social and human capital are both supportive and necessary for innovative performance, especially is very important indirectly for ICT or service firm’ performance.