UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ TRAN PHONG Factors influencing service innovative behavior: Evidence from Vietnam MASTER OF BUSINESS (HONOURS) Ho Chi Minh City – Year 2019 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ TRAN PHONG Factors influencing service innovative behavior: Evidence from Vietnam MASTER OF BUSINESS (HONOURS) SUPERVISOR: Dr. NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2019 TIEU LUAN MOI download : skknchat@gmail.com Table of Contents Table of Contents. 1 List of Acronyms. 3 List of Figures.
4 List of Tables. 13 Service innovative behavior. 14 Ethical leadership and leader member exchange relations. 15 The positive relationship between LMX and service innovative behavior.
17 The moderating role of intrinsic reward (IR) and extrinsic reward (ER) on LMX-SIB’s relationship. 24 Data analysis and results. 26 Cronbach’s alpha results. 27 Exploratory factor analysis (EFA).
28 Structural equation modeling (SEM) testing results. 30 Hypothesis testing results. 31 Moderating testing results. 32 Discussion and implication.
35 Limitation and directions for future research. 36 1 TIEU LUAN MOI download : skknchat@gmail. 39 Appendix 1: Guideline for pilot study. 49 Appendix 2: Vietnamese Questionnaire.
50 Appendix 3: Descriptive statistics of samples. 52 Appendix 4: The results of Cronbach’s Alpha coefficient of reliability. 53 Appendix 5: Exploratory factor analysis-EFA. 56 Appendix 6: Confirmatory factor analysis - CFA.
58 Appendix 7: Structural results for model. 61 Appendix 8: Moderating testing results. 63 2 TIEU LUAN MOI download : skknchat@gmail.com List of Acronyms 3PL: Third Party Logistics AGFI: Adjusted Goodness of Fit Indices CFA: Confirmatory Factor Analysis CFI: Comparative Fit Indices CR: Cronbach’s alpha DF: Degrees of Freedom DV: Dependence Variable EL: Ethical Leadership ER: Extrinsic Rewards EFA: Exploratory Factor Analysis GFI: Goodness of Fit Indices H: Hypothesis HCM: Ho Chi Minh IR: Intrinsic Rewards LMX: Leader Member Exchange NFI: Normed Fit Indices PFI: Parsimony Fit Indices SEM: Structural Equation for Model SIB: Service Innovative Behavior SME: Small & Medium-Sized Enterprise SPSS: Statistical Package for the Social Sciences RMSEA: Root Mean Square Error of Approximation 3 TIEU LUAN MOI download : skknchat@gmail.com List of Figures Figure 1: Research model……………………………………………………………….19 Figure 2: Research procedure……………………………………………………………20 Figure 3: Structural results of model…………………………………………………….30 4 TIEU LUAN MOI download : skknchat@gmail.com List of Tables Table 1: Demographic details……………………….24 Table 2: KMO and Bartlett's Test……………………………………………………….28 Table 3: Factors loading…………………………………………………………….……29 Tables 4: CR & AVE…………………………………………………………………….30 Table 5: Regression Weights: (Group number 1 - Default model)………………………31 Table 6: Chi-Distribution……………………………………………………………….32 5 TIEU LUAN MOI download : skknchat@gmail.com Acknowledgement Honorably, I sincerely express my warmest thank you to my supervisor Prof. Nguyen Thi Mai Trang for her attention, patience, encouragement, and professional knowledge.
Her direction and hardly support me to finish draft proposal, evaluated proposal and make many corrections till I got the best version and She event help me to review the questionnaire many times before I take pilot test, main survey and that lead me to write final research of the master thesis. Besides, I would also like to thank lecturers who instruct us in International School of Business (ISB) during the master course with many interesting subjects. Not only the knowledge I absorbed but also value experience they share that help us growth in real like and doing better business. In addition, my grateful thanks for all respondents who spend time to participated in my pilot study and help to answered main survey questions.
I also would like to thank all my classmate of MBUS 7 for useful conversation, for weekend studying together before examinations, and for all interesting time we have studied in the last two years. Finally, I am very glad to thank my company where gave me time and experience to finish my master course that last for two years and all employee help me for some part like review questionnaire or suggest some ideas about survey schedule. Especially, I am happy to thank my family who motivated me to go through all subjects and thank for their take care me to complete my thesis step by step. 6 TIEU LUAN MOI download : skknchat@gmail.com Abstract This research thesis examined the effects of ethical leadership and its impacts on service innovative behavior through leader member exchange at small and medium size logistics companies in Vietnam, the proposed integrated research model was formed to enhance the relationship between ethical leadership and service innovative behavior while interacting through the mediator leader member exchange, the study also examines the roles of intrinsic and extrinsic reward as moderators.
By using empirical test of 339 respondents from SME logistics Companies in Vietnam indicated that there are positive relationships among independent variables and dependent variables. Furthermore, the new findings from this model showed that there are positive relationships between moderator’s intrinsic reward and extrinsic reward with service innovative behavior, these moderators generate creative environment and promoting service innovative behavior of frontline employee working in SME logistics companies in Vietnam, the leader member exchange also shows positive relationship as mediator. Key words: Ethical, Leader, Ethical leadership, leader member exchange, intrinsic reward, extrinsic reward, service innovative behavior 7 TIEU LUAN MOI download : skknchat@gmail.com Introduction Due to the globalization process and international trade agreements have connected business regions to each other and connected nations and nations, the global organizations exchange their business frequently and the connections also affect every product and service being offered on global market. Especially, that caused business models being shifted from manufacturing to providing alternative services as new strategies to develop their organizations (Thakur & Hale, 2013).
Han, Kim, & Srivastava (1998) and Im & Workman (2004) stated that innovative service is an essential management feature to guarantee firm’s development, the quality of service is essential for business sustainability and important to service industry where enterprises create service competitive advantages (Oldham & Cummings, 1996). Therefore, creative service plays an important role in every business unit influencing service innovative behavior (Dhar, 2015) or cognitive ability (Khan, Bashir, Abrar, & Saqib, 2017). Current reports showed that leader’s behaviors have forced organizations to reconsider ethical behavior of their leaders (Shadnam & Lawrence, 2011), ethical leadership also gained a lot of interest in company’s applications and in academics for research purposes (Lu & Guy, 2014). A majority of researchers found that there are positive effects of moral leadership on work satisfaction influencing staff’s performance (Hansen, Alge, Brown, Jackson, & Dunford, 2013).
However, there is a few studies have examined the influences of ethical leadership at work place on innovative service behavior that critically fosters employees to contribute their creativities for achieving company’s sustainable development (Dhar, 2015). 8 TIEU LUAN MOI download : skknchat@gmail.com Regarding to employee performance and service creativity that were synonymously defined as complicated interaction process among parties (Dotzel, Shankar, & Berry, 2018). Because of that, the management are looking for effective methods to offer high quality services in service business industry (Redman & Mathews, 2016). In addition, the leaders bring out positive impacts that would motivate employees to provide quality services to customers, as more favorable treatments employees receive from leaders as higher service innovative behavior employees offer to clients (Chen & Kanfer, 2006), this is correct for logistics market in Vietnam where small and medium sized logistics companies facing with main challenge of strictly holding low price competitive rather than improving service quality or innovative services (Koustab, 2014).
Therefore, SMEs need to improve relationships among leaders and followers that would direct more innovative service performance of frontline employees who direct serve customer (Dhar, 2016). Another remarkable point from this paper is an study of leader member exchange (LMX) which was known as crucial factors interacting among leaders, supervisors, managers and subordinators, LMX role actually is influencing the relationship between ethical leadership and service innovative behavior (SIB) in work place (Chen, Lam, & Zhong, 2012) and (Sears & Hackett, 2011), Previous studies proved that ethical leaders are undertaking to foster positive relationships between LMX and service innovative behavior (Hammond & Volmer, 2012). Hence, it is proposed that LMX and ethical 9 TIEU LUAN MOI download : skknchat@gmail.com leaders are encouraging service innovative behavior among frontline employees (Hammond, Neff, Farr, Schwall, & Zhao, 2011). Although two research constructs such as SIB and LMX were considered as complicated process in natural working condition (Dotzel, Shankar & Berry, 2013), rewards are very important motivating functions to build constructive relationship between ethical leadership and service innovative behavior and play significant roles to establish work engagement which helps employees focus on their work to complete their task responsibly (Chen et al., 2012; Malik, Butt, & Choi, 2015).
Definitely employees would use their experience, confidence and skills to deliver the best services to customers rather than just rewards. The previous studies showed that job autonomy is factor plays as moderating role influencing relationship between ethical leadership and SIB (Dhar, 2016)) while very few paper researches reveals that the ethical leadership and LMX are influencing SIB through moderating of intrinsic and extrinsic reward (Dhar, 2016), whether rewards were used as a medium by leaders to promote employee’s creativity at the workplace, there are contradictory standpoints regard to the impacts of rewards on creativity. Deci, Koestner, & Ryan (2001) mentioned that individuals perceive the environment expresses obstacles to their self-determination or liberality, their intrinsic tasks interesting tends to lessen or eliminate and resulting in poor creativity. Hence this study tries to expand the theory by examining the role of LMX in influencing employee’s innovative service behavior and to confirming intrinsic and extrinsic rewards as moderators.
10 TIEU LUAN MOI download : skknchat@gmail.com Moreover, this study examines the impact of ethical leadership on service innovative behavior of frontline employee from small and medium sized (SME) logistics companies, those firms with under 50 employees was defined as small and they are called medium companies if they own from 50 to under 100 employees (Government department, 2018). These companies are offering main logistics services and those services are being managed by department manager or leader directly and the services are being performed by followers (Autry, 2003). Therefore, SME firms are suitable to do research about service innovative behavior because frontline employees directly communicate with customers and their managers. Frontline employees in SME often interact directly with customer to handle their daily work so that leaders use intrinsic rewards to encourage service quality like accomplishment of task finished, respect and esteem (Russell, 2001).
Beside that, these SME’s logistics leaders also use extrinsic rewards like bonus, commission, party or gift to motivate their following employees (Malik et al. As a result, their employees generate more innovative behavior in logistics services that lead to higher service quality performed and higher services competitive level for SME. Furthermore, SME logistics companies in Vietnam provide their services such as sea freight, air freight, inland trucking, customs clearance, warehousing and documentation services to direct customer and the customers are being served by their frontline employees like customer service, customs broker, consultant and salesman or leaders also interact with customer directly if needed. Especially, third party logistics (3PL) 11 TIEU LUAN MOI download : skknchat@gmail.com companies play an significant role in logistics market where increasing service-driven economy is well recognized (Bolumole, 2003).
Consequently, this thesis examines the impact of ethical leadership on SIB of frontline employees at small and medium sized logistics companies in Ho Chi Minh City (Ministry of Trade, 2017), Vietnam. The SME logistics sector was selected because logistics field in HCMC contributes to high economy income and owns the biggest sea port and airport that attracts much investment which creates market competition and develops alternative logistics services (Van Nam, 2016). Logistics cost accounts for 21% in 2017 in Vietnam (Cam Tu, 2017).