VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL STUDENT RESEARCH REPORT FACTORS AFFECTING THE COMMITMENT TO DIGITAL TRANSFORMATION OF VIETNAMESE SMEs.D Tran Cong Thanh Students: Tran Lam Son - 20070319 Hoang Minh Hang – 20070166 Hanoi, April 15, 2024 1 TEAM LEADER INFORMATION I. Student profile - Full name: Trần Lam Sơn - Date of birth: 16/10/2002 - Place of birth: Thanh Hoa Province - Class: IB2020G - Program: International Business - Address: Cầu Giấy district - Phone no. Academic Results (from the first year to now) Academic year Overall score Academic Picturerating 4x6 2020-2021 2. Other achievements: Hanoi, 17th April, 2024 Advisor Team Leader (Sign and write fullname) (Sign and write fullname) Ph.D Trần Công Thành Trần Lam Sơn 2 Table of Contents Acknowledgement.
Chapter 2: Literature Review. Resources-based view (RBV). Governance pressure and commitment to DT. Competitor pressure and commitment to DT.
Customer pressure and commitment to DT. Digital technology and commitment to DT. Financial resource and DT commitment. Human resources and DT commitment.
Digital leadership and digital transformation commitment. Chaper 3: Research design. Profile of respondents. The hypothesis testing.
Business commitment to digital transformation for different industries. Business commitment to digital transformation for international trade. Business commitment to digital transformation for different ownership. Chapter 5: Discussion and Implications.
Competitor pressure and business commitment to digital transformation. Customer pressure and business commitment to digital transformation. Governance pressure & DT commitment.4 Customer Pressure and Digital technology under control of International trade toward Vietnamese enterprise. Digital technology & DT commitment.
Human resources & DT commitment.51 Appendix 1: The Questionnaire .51 Appendix 2: Principal Component Analysis .59 Appendix 3: Pearson’s Corelation analysis.61 4 List of table: Table 1: Conceptual model’s variables. 23 Table 2: Characteristics of respondents (N= 85). 27 Table 3: KMO Coefficient and Bartlett’s test. 30 Table 4: Results of the confirmatory factor analysis, the corresponding factor loadings, and reliabilities of the Model.
31 Table 5: Durbin-Watson. 35 Table 6: Model fit. 35 Table 7: Hypothesis’ Acceptance. 37 Table 8: Summary of the Industry for Business Commitment to Digital Transformation.
38 Table 9: Summary of the International Trade for Business Commitment to Digital Transformation. 39 Table 10: Summary of the Ownership for Business Commitment to Digital Transformation. 40 List of figure: Figure 1: Research model and hypotheses. 14 Figure 2: Categorizing the industry.
28 Figure 3: Respondent’s role/position. 29 Figure 4: Framework after eliminating Financial Resource and Digital Leadership. 34 Figure 5: Analyzing control variables. 41 5 Acknowledgement Taking this moment, we would like to sincerely thank our research supervisor, Ph.
Tran Cong Thanh, for all of his help and support during this study. This study would not have been possible without his passionate support, helpful advice, insightful observations, meticulous attention to detail, and insightful criticism. He has taught us so much, and we are very appreciative that we have had the chance to collaborate with someone so respected and intelligent. Furthermore, we would like to express our gratitude to all of the respondents—CEO, Founder, Director, and Manager—who, despite their busy schedules, agreed to offer feedback for our data-gathering approach.
We would not have been able to finish this research without your help; your assistance was crucial. We sincerely appreciate your commitment to our endeavor and your willingness to assist. In conclusion, We would like to thank everyone for their assistance during this study project. This project would not have been possible without your help, and we really appreciate it.
Student Trần Lam Sơn 6 FACTORS AFFECTING THE COMMITMENT TO DIGITAL TRANSFORMATION OF VIETNAMESE SMEs. Abstract In the context of industrial 4.0, it is evident that many Vietnamese firms have been looking for ways to digitize their business. Although the literature has highlighted many of the key factors that lead to Vietnamese firms' failure, the drivers for their commitments to digital transformation have been unknown. This study aims to identify key pressure factors influencing the commitment of Vietnamese firms to digital transformation.
From the resource-based view and institutional perspective, this study conducted survey research on 85 Vietnamese SMEs (43 manufacturing firms and 42 service enterprises), using SPSS to test the relationships between institutional factors (international and national governance, competitors, and customers), firm resources (human resource, finance resource, digital technology, and digital leadership) and a firm commitment to digital transformation across various manufacturing and service industries. The empirical results show that governance pressure, human resources, and digital technology are among key influencing factors in firm commitment to digital transformation. Interestingly, competitors and customers had no effect on the firm commitment to digital transformation. Comparative analysis shows that both international manufacturing firms and service firms are under strong pressure from adopting digital technology than domestic firms.
The study implies that Vietnamese firms engage with digital transformation due to international and national encouragement and firm resources rather than the competitive pressure of the domestic market. Keywords: Digital transformation, SMEs, Institutional pressures, Firm resources, Vietnam. 7 Chapter 1: Introduction The fourth industrial revolution has had a significant influence on production, distribution, consumption, data analysis, and knowledge discovery, touching various aspects of life. Specifically, digital transformation can be defined as the integration of new technology (big data, blockchain, mobile, social media artificial intelligence, Internet of Things technologies, cloud computing, machine learning) at varying degrees into an organization's operations with the fundamental goals of enhancing efficiency, improving the customer experience, and thus creating value (Chuc & Anh, 2023).
Ansari & Almunawar, (2021) showed that to thrive in this era, businesses must implement digital transformation in their business processes to gain a competitive advantage, expand their presence in the local market, and explore opportunities in the global market. In addition, scholars also reveal digital transformation plays an important role in terms of reducing cost (Makris, et al., 2019; Xu, et al., 2018, Scuotto, et al., 2017; Walsh, et al., 2023), increasing customer satisfaction (Chuc & Anh, 2023), new digital products/services (Kiefer, et al., 2021), boosting operational capacity (Chuc & Anh, 2023) as well as increasing revenue and profit (Schwertner, 2017; Linh, et al. Verhoef, et al (2019) pointed out that digital transformation is a change in the business application of digital technologies to develop a new business model that enables organizations to create more value and attain a competitive advantage. Digital transformation requires the rebuilding of a business and goes beyond simply implementing a few technologies here and there and this process requires changes to the business’s processes, culture, and overall approach to digital technologies.
Heavin & Power (2018); and Skare, et al (2023) reveal that implementing digital transformation strengthens SMEs’ ability and flexibility to address main business issues concerning efficiency and effectiveness in the digital age. If businesses have not begun digital transformation, they will lag behind other businesses in the same industry, reduce their competitiveness, and not be able to catch up with their competitors (Dung & Tri, 2011). Digital transformation (DT) in SMEs in the Vietnam context 8 In 2020, the World Bank pointed out that 58% of Vietnamese enterprises switched to digital platforms. This is a large number which shows that digital transformation is a prerequisite requirement instead of an option “Yes” or “No”.
To improve sustainability and ensure future growth, fostering the digital transformation process is necessary (Ghi, et al. In Vietnam, SMEs make up a significant number of 811.000 businesses which is equivalent to 98.1% of the total businesses, contributing to 45% of GDP in December 2020. According to a survey conducted by the Department of Enterprise Development, Ministry of Planning and Investment in 2022, only 2.2% of SMEs are in the 2nd phase of the DT process, and approximately 48.8% of businesses were used to utilize digital solutions. The speed of digital transformation in Vietnam is relatively slow (Nguyen, et al., 2023) due to a lack of professional knowledge in technology, lack of capital, and digital transformation awareness of the managers although governance support from government and industry association is still available.
Meanwhile, in the vision of 2030, Vietnam will become a digital country with comprehensively innovative production and business activities of enterprises. According to Hoa & Tuyen (2021), approximately 72.07% of enterprises are still at a low level of digital transformation and fall into the "Newcomers" category in terms of their use of digital technologies. For these businesses, the positive impact of digital technology is tempered by the significant costs associated with technology adoption, worker’s rejection of new technology, and psychological stress that negatively affects labor productivity. In addition, the lack of in- house human resources to apply digital technology made up 32.
The SME sector has been under pressure since it is unable to assure quick innovation in the manufacturing process and management system, as well as compete with larger enterprises. Despite the fact that all of the country's SMEs are aware of the need for and advantages of digital technology, over 60% of SMEs in Vietnam lack the resources to use it in their business processes (PwC, 2021). According to Thang and Freeman (2009), the government favors FDI and state-owned firms over non-state enterprises. It is well recognized that the 9 Vietnamese government's preference for state-owned businesses (SOEs) tends to limit the potential participation of SMEs.
As a result, only a limited proportion of Vietnamese businesses may have begun to really consider digital transformation. Previous research has acknowledged that organizations, regardless of size or type, must begin the digital transformation process sooner or later (Dung and Tri, 2021; Ghi et al., 2022; Cortellazzo et al., 2019) due to external pressures (DiMaggio and Powell, 1983; Wedlin and Sahlin 2017; Mergel et al. Kuo, Chen & Yang (2022); Sherer, et al., (2016); and Yang & Zhang (2021) suggest that pressures from competitors, customers, and governance can have a major impact on the organization’s decision to implement digital technology. Chwiłkowska-Kubala, et al., (2023) suggest that financial and technological resources play an important role in digital transformation; other studies consider human resources to be crucial (Betchoo, et al., 2016; Fenech, et al.
Weiner (2009) demonstrates that digital commitment mirrors the amount of engagement among organizational members at various levels. However, the fundamental factors impacting digital transformation commitment in Vietnamese SMEs are unclear and incomprehensive in the research. Most studies have already focused on investigating the reasons why Vietnamese enterprises failed or have not been successful in implementing the digital transformation process, particularly in the early stages, and little research has been conducted to determine what factors, both external and internal, will foster the execution of the digitization process with a clear commitment from Vietnamese SMEs across various industries. Whether a business is committed to digital transformation depends on the encouragement of foreign markets and the company's potential human resources and digital technology.
This study therefore clarifies the current pressures motivating businesses to invest in digital transformation in Vietnam, a developing country integrating into the international market by answering the two following research questions: RQ1: What are the forces driving SMEs to commit to digital transformation? 10 RQ2: Why do these pressures impact the business commitment to digital transformation? This paper aims to provide a comprehensive analysis of the impact of external institutional forces and internal resources on DT commitment in Vietnamese SMEs. More precisely, the study is based on two theories which are “Institutional theory” and “Resources-based view”. Both of these theories will be applied to explore what are the main factors affecting DT commitment in Vietnamese SMEs. Using resource-based views and institutional theories can provide a standard explanation for DT (Yu & Pan, 2020).
The industry of the company, ownership, and international trade factors will be taken into consideration. The contribution of the study lies in indicating human resources and pressure from international and national governance as well as digital technology have been contributing to clearly building Vietnamese enterprises' commitment to digital transformation in various industries by constructing a framework that integrates these two theories.