CULTURE AND ENTREPRENEURSHIP INTENTION OF THE YOUTH IN VIETNAM In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In International Business By Ms. Hua Thi Ngoc Quyen ID: MBA03026 International University - Vietnam National University HCMC February, 2013 i CULTURE AND ENTREPRENEURSHIP INTENTION OF THE YOUTH IN VIETNAM In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In International Business by Ms. Hua Thi Ngoc Quyen ID : MBA03026 International University - Vietnam National University HCMC February, 2013 Under the guidance and approval of the committee, and approved by all its members, this thesis has been accepted in partial fulfillment of the requirements for the degree. Approved: ---------------------------------------------Chairperson ---------------------------------------------Committee member ---------------------------------------------Committee member --------------------------------------------Committee member --------------------------------------------Committee member --------------------------------------------Committee member ii Acknowledgement To complete this thesis, I have been benefited from the following people… At first, I am heartily thankful to my supervisor, Doctor Nguyen Quynh Mai, whose guidance and support from the initial to the final level that enabled me to accomplish this research. Without her whole-hearted instructions and supports, I hardly overcome the obstacles during research process. She not only shows me how to conduct a real and meaningful research but also inspire me to keep studying. My sincere thanks also go to my two specially friends, ―Vu and Vu‖, who always give me timely advices and helpful supports during the time research being carried out. I would like to thank to all those professors in School of business for helping in revising questionnaires and many academic advices. My appreciation is also expressed to the fervor support from school‘s student affair. Last, I want to show my deep gratitude to my family, especially my mother, for giving birth to me, encouraging and supporting me throughout of my life. i Plagiarism Statements I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions. I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Ho Chi Minh City. ii Copyright Statement This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author‘s prior consent. © Hua Thi Ngoc Quyen/ MBA03026 / 2013 \ iii Contents LIST OF TABLES ............................................................................................................................... viii LIST OF FIGURES ................................................................................................................................ xi Abbreviations ....................................................................................................................................... xiii Abstract................................................................................................................................................ xiv CHAPTER 1: INTRODUCTION ......................................................................................................... 1 1. Research background ................................................................................................................... 1 2. Rationale ..................................................................................................................................... 2 3. Entrepreneurship in Vietnam ........................................................................................................ 3 4. Problem statement........................................................................................................................ 7 5. Research Objectives ..................................................................................................................... 8 6. Research methodology ................................................................................................................. 8 7. Research scope ............................................................................................................................ 8 8. Significance ................................................................................................................................. 8 9. Research structure ........................................................................................................................ 9 CHAPTER 02: LITERATURE REVIEW .......................................................................................... 11 1. Entrepreneurship ........................................................................................................................ 11 1.1. What is entrepreneurship? .................................................................................................. 11 1.2. Dimensions of entrepreneurship intention ........................................................................... 11 2. Culture....................................................................................................................................... 12 3. Vietnam National Culture .......................................................................................................... 16 4. Factors influence entrepreneurship ............................................................................................. 23 4.1. Personal traits ..................................................................................................................... 23 iv 4.2. Needs and Motives ............................................................................................................. 27 4.3. Environment Context ......................................................................................................... 31 CHAPTER 03: RESEARCH METHODOLOGY .............................................................................. 34 1. Conceptual framework and hypotheses....................................................................................... 34 2. Research Procedure.................................................................................................................... 36 3. Measurement ............................................................................................................................. 36 4. Semi – structure interview.......................................................................................................... 41 4.1. Interviewer ......................................................................................................................... 41 The interview protocol is attached in Appendix B .............................................................................. 41 4.2. 5. 6. 7. Outcome of Semi-Structure interview ................................................................................. 42 Draft questionnaire .................................................................................................................... 42 5.1. Questionnaire design .......................................................................................................... 42 5.2. Pilot questionnaire .............................................................................................................. 43 Data collection method .............................................................................................................. 43 6.1. Sample ............................................................................................................................... 43 6.2. Sampling design ................................................................................................................. 44 Data analysis method ................................................................................................................. 44 7.1. Descriptive statistics ........................................................................................................... 44 7.2. Factor analysis and reliability test ....................................................................................... 45 7.3. Testing model with Structural Equational Modelling (SEM) ............................................... 48 CHAPTER 04: DATA ANALYSIS – FINDINGS .............................................................................. 49 1. Introduction ................................................................................................................................... 49 2. Sample demographic...................................................................................................................... 49 v 3. Descriptive statistics ...................................................................................................................... 51 3.1. Dependent factor (Entrepreneurship intention) ........................................................................ 51 3.2. Independent factors ................................................................................................................. 51 4. Exploratory factor analysis (EFA) and Reliability test using Cronbach‘s alpha ............................... 59 4.1. EFA for individual scale.......................................................................................................... 59 4.2. EFA for all factor scales together ............................................................................................ 68 5. Confirmary factor analysis (CFA) .................................................................................................. 74 5.1 CFA of factor Entrepreneurship intention. ................................................................................ 74 5.2. CFA of all independents constructs ............................................................................................. 75 6. Model and hypotheses modification ............................................................................................... 83 7. Testing research model using SEM ................................................................................................ 85 CHAPTER 5: DISCUSSION, RECOMMENDATION, AND CONCLUSION ................................. 85 1. Discussion ..................................................................................................................................... 85 1.1. The relationships between Confucian work ethics and other factors ......................................... 85 1.2. The relationships between Family culture value and other factors. ........................................... 87 1.3. The correlation between Motives and Personal traits................................................................ 88 1.4. The influence of Confucian work ethics on Entrepreneurship intention. ................................... 88 2. Limitations and Recommendations ................................................................................................ 90 3. Conclusion .................................................................................................................................... 90 REFERENCE LIST ............................................................................................................................... 91 APPENDIXES ...................................................................................................................................... 95 APPENDIX A: ENTREPRENEURIAL READINESS QUESTIONNAIRE ....................................... 95 APPENDIX B: SEMI-STRUCTURED INTERVIEW PROTOCOL................................................... 97 vi APPENDIX C: RESEARCH SURVEY ........................................................................................... 104 APPENDIX D: EXPLORATORY FACTOR ANALSYS (ALL FACTORS) ................................... 110 APPENDIX E: NORMALITY ASSESSMENT ............................................................................... 125 APPENDIX F: REGRESSION WEIGHT AND STANDARDIZED REGRESSION WEIGHT OF FINAL CONSTRUCT MODEL ...................................................................................................................... 126 APPENDIX G: MODIFICATION INDICES OF FOR ADJUSTMENT OF FINAL MODEL .............. 128 vii LIST OF TABLES Table 1: The mainstreams of entrepreneurial research (Chu 1998:9)............................................. 1 Table 2: Enterprise category ........................................................................................................... 4 Table 3: Number of SMEs categoried by labor scale ..................................................................... 5 Table 4: Characteristics and attributes of entrepreneurs (cited from Turan & Kara, 2007) ......... 24 Table 5: Traits of entrepreneurs (cited from Pendergast , 2004) .................................................. 24 Table 6: Entrepreneurship entry motives (cited from Basu & Altinay , 2002)............................. 29 Table 7: Research hypotheses ....................................................................................................... 35 Table 8: Measurements ................................................................................................................. 37 Table 9: Model fit indices ............................................................................................................. 47 Table 10: Entrepreneurship intention descriptive statistics .......................................................... 51 Table 11: National culture descriptive statistics ........................................................................... 52 Table 12: Personal traits descriptive statistics .............................................................................. 54 Table 13: Motives descriptive statistics ........................................................................................ 56 Table 14: Environment descriptive statistics ................................................................................ 58 Table 15: Total Variance Explained of factor EP intention .......................................................... 59 Table 16: RELIABILITY TEST ................................................................................................... 59 Table 17: Item elimination process of factor National culture ..................................................... 60 Table 18: Rotated Component Matrix .......................................................................................... 61 Table 19: RELIABILITY TEST of Culture subconstructs ........................................................... 61 Table 20: Remained cultural subconstructs for next EFA ............................................................ 62 Table 21: Item elimination process of factor Personal traits ........................................................ 63 Table 22: Rotated Component Matrix of factor Personal traits .................................................... 64 Table 23: Reliability test of subconstructs factor Personal traits .................................................. 64 viii Table 24: Item elimination process of factor Motives .................................................................. 65 Table 25: Rotated Component Matrix of factor Motives.............................................................. 66 Table 26: Reliability test of subconstructs factor Motives ........................................................... 66 Table 27: Remained items of Motive factor for next EFA ........................................................... 67 Table 28: Item elimination process of Factor Environment ......................................................... 67 Table 29: Rotated Component Matrix of factor Environment ...................................................... 68 Table 30: Reliability test for subconstructs of factor Environment .............................................. 68 Table 31: Sum of items for next EFA ........................................................................................... 69 Table 32: Item elimination process ............................................................................................... 70 Table 33: Rotated Pattern Matrix of All Scale Together .............................................................. 70 Table 34: Sub-constructs and their names .................................................................................... 72 Table 35: Reliability test for new-formed sub-constructs............................................................. 73 Table 36: HOELTER index .......................................................................................................... 75 Table 37: Fitness indices of construct model ................................................................................ 76 Table 38: Composite reliability and extracted variance of each construct ................................... 78 Table 39: Composite reliability and extracted variance of each construct ................................... 79 Table 40: Reliability using Cronbach's alpha ............................................................................... 80 Table 41: Correlation calculation and estimation ......................................................................... 80 Table 42: Modified hypotheses ..................................................................................................... 83 Table 43: Fit indices of model phase 1 ......................................................................................... 85 Table 44: Regression Weights of model phase 1 .......................................................................... 74 Table 45: Standardize regression weight of model phase 1 .......................................................... 74 Table 46: Fit indices of model testing phase 2 ............................................................................. 75 Table 47: Regression weight of model phase 2 (version 1) .......................................................... 77 ix Table 48: Standardized Regression Weights of model phase 2 (version 1) ................................. 77 Table 49: Covariances between Personal traits and Motives........................................................ 78 Table 50: Correlations between Personal traits and motives ........................................................ 78 Table 51: Regression weight of modified model .......................................................................... 80 Table 52: Fit indices of second time modified model................................................................... 82 Table 53: Fitness indices of Final model ...................................................................................... 82 Table 54: Result of hypotheses testing ......................................................................................... 84 x LIST OF FIGURES Figure 1 : Number of enterprises registered annually (source GSO) .............................................. 4 Figure 2: Number of active enterprises in term labor scale on 1 Jan 2010 ..................................... 5 Figure 3: Number of SMEs categoried by sector (source GSO) .................................................... 6 Figure 4: Recommended theoretical model by Phan Truong Giang (2011) ................................... 7 Figure 5: Geert Hoftede‘s five cultural dimensions ...................................................................... 14 Figure 6: A model of Culture's Assciation with Entrepreneurship ............................................... 31 Figure 7: Conceptual model .......................................................................................................... 34 Figure 8: Research procedure ....................................................................................................... 36 Figure 9: Respondent' current job ................................................................................................. 49 Figure 10: Respondent's education level ...................................................................................... 49 Figure 11: Respondent's desire job ............................................................................................... 50 Figure 12: Questionnaire responses on national culture ............................................................... 53 Figure 13: Questionnaire responses on personal traits ................................................................. 55 Figure 14: Questionnaire responses on Motives ........................................................................... 57 Figure 15: Questionnaire responses on environment factor ......................................................... 58 Figure 16: single construct model of EP intention factor (version 1) ........................................... 74 Figure 17: Single construct model of EP intention factor............................................................. 75 Figure 18: Construct model (version 1) ........................................................................................ 77 Figure 19: Construct model (final version) ................................................................................... 82 Figure 20: Research model modification ...................................................................................... 83 Figure 21: Model phase 1 ............................................................................................................. 73 Figure 22: Model testing phase 2 .................................................................................................. 76 xi Figure 23: First time modified model ........................................................................................... 79 Figure 24: Second time modified model ....................................................................................... 81 Figure 25: Final model .................................................................................................................. 83 Figure 26: Simplified model ......................................................................................................... 89 xii Abbreviations CFA Confirmary Factor Analysis EFA Exploratory Factor Analysis EP Entrepreneurship GSO General Statistic Office KMO Kaiser – Meyer – Olkin index SEM Structural Equational Modelling SMEs Small and Medium Enterprises xiii Abstract Entrepreneurship is considered as the main source of economic development, poverty reduction and job creation. There are many researches on the world has been studied this field for long time, however, the concept of entrepreneurship seem to be fresh for Vietnamese scholar since there is very limited number of research studying on Vietnamese entrepreneurship. There are varieties of approach for studying entrepreneurship, this research has been conducted on the cultural perspective to see how Vietnam national culture has influence on new business start-ups of young people living in Ho Chi Minh city. The research is based on previous qualitative study of Phan (2011) which has been located the prominent and typical values of Vietnamese people. To continue, the quantitative research is needed to identify the causal relationship between national culture and entrepreneurship of youth. From the literature review, the relationship is formed with more three added moderate factors including personal traits, motives, and environmental context. A sample of 447 people including students, office staffs, and young entrepreneurs who are from 18 to 35 years old participated in research survey. Semi structure interview is employed for the measurement formation and questionnaire design. Convinience and snowball samplings are used for data collection. The technique of structural equational modeling is applied to identify the causal relationships among factors. The findings show that entrepreneurship intention of young people originates from the personal traits which are influenced by Confucian work ethics, family culture values and personal motivations. Confucian work ethics has no direct effect on entrepreneurship but it underlies and directs the common thoughts and behaviors of Vietnamese people including starting a new venture. The research is failed to identify the relationship between external environment and entrepreneurship, therefore, it is suggested for the further study should have long term perspective to see the effect of environment on new firm formation. xiv 15 CHAPTER 1: INTRODUCTION 1. Research background A considerable amount of literature conducted over the past decades has shown that entrepreneurship has emerged as an important field of study among researchers and policy makers who have been interested in understanding the factors affecting entrepreneurial activity (Mueller & Thomas, 2000a). The word ―entrepreneur‖ is derived from a French root ―entreprendre‖, meaning to ―undertake‖. The term ―entrepreneur‖ seems to have been introduced into economic theory by Cantillon (1755) but Say (1803) first accorded the entrepreneur prominence (Kruger, 2004). However, Schumpeter is known as the one who initiated in the field of entrepreneurship by associating it clearly with innovation. This Austrian economist‘s ideas help establish entrepreneurship as a substantive area of historian‘s endeavors by linking entrepreneurship to a theory of economic change (Jones & Wadhwani, 2007). Entrepreneurship occurs at significantly higher rates than at any time in the last 100 years (Gartner & Shane, 1995). From research perspective, there are numerous studies investigating business start-up from both sides, supply and demand. The supply-side school concentrates on the characteristics of entrepreneurs. On the other hand, the demand-side school focuses on the environmental basis of organization formation. From subject-area approach, the study of entrepreneurs can be conducted under one or combination of the four dimensions stream as compiled and summarized in table 1.1 (Chu, 1998) below. Table 1: The mainstreams of entrepreneurial research (Chu 1998:9) Mainstreams Psychological: Traits and Research Subjects Entrepreneurs‘ characteristics Line of Inquiry and Causes (Why) entrepreneurial process behavioral Sociological: Social and cultural Entrepreneurs of different social and Causes (Why) cultural backgrounds 1 Economics Relationship between economic Effects (What) environment and entrepreneurship Management Entrepreneurs‘ skill, management and Behavior (How) growth 2. Rationale In recent decades, historians have increasingly sought to ground the study of how culture and nationality affect entrepreneurship by examining how specific social structures and relationships shape the influence of entrepreneurial culture (Jones, G. & Wadhwani R.D., 2007). Landes (1953) said that culture was a consistent determinant of the supply of entrepreneurship and hence of long-term economic growth. For over half a century, he has kept stressing the importance of national cultural factors, values, and social attitudes in explaining the growth of entrepreneurial activity (1969, 1999, 2003). Sawyer (1954) with the same argument has show that the persistence of Puritan values and the frontier spirit in American society have a strong support for new business formation in the United States. Davidson (1997) conducted a research on 6 regions of Swenden to identify the influence of culture on different new firm formation rate across regions. They concluded that cultural values and beliefs have a small but statically significant association with regional rates of new firm formation. Lee and Peterson (2000) suggested that only countries with a culture that is favorable to entrepreneurship are able to generate a strong entrepreneurial, leading to the development of entrepreneurial activity and the increase of global competitiveness. Many researchers try to identify personal characteristics distinguishing entrepreneurs and non-entrepreneurs (Bolton & Thompson, 2004; Shane, 2003; McClelland, 1961). Several researches which are based on five cultural dimensions of Geert Hoftede have pinpointed that cultural values have effects on entrepreneur‘s characteristics and motives (Scheinberg&MacMillan 1998; McGrath et al 1992b; Mueller & Thomas 2000; Thomas & Mueller 2000). Chan K. L, Sivapalan S., and Bahiyah A H (2009) conducted a research focusing on entrepreneurship of young people (from 25 to 40 years old) in Malaysia. The study result 2 has show that not only sociological environment like religious particularity, cultural values but also variety of business attributes such as willingness to take risk, to work hard, to continually learn, and to be undaunted by challenges has influence on new business star-ups of youth in Malaysia. The research also compared the different characteristics between male and female entrepreneurs. However, social-cultural approach has been widely critiqued. Gerschenkron (1962b, 1966) was strongly disagreed about the role of national culture and norm as a determinant of national entrepreneurship. He argued that the statics and rigidity of national culture make it impossible to totally account for the dynamic nature of entrepreneurial activity. He also figured out the social-cultural perspective had missed Schumpeter‘s basic premise the entrepreneurs often acted as agents of change rather than as captives of their environment (cited in Jones&Wadhwani, 2007). On the other hand, Hayton, George and Zahra (2002) argued that culture is as ―a moderator of the relationship between contextual factors and entrepreneurial outcomes‖. They believed that ―cultural characteristics transform and complement the institutional and economic contexts to influence entrepreneurship‖. Moreover, they said ―culture is not the only one moderator of the relationship between new business formation and economic and institutional contexts‖. There are some other moderators such as need and motives, beliefs and behaviors, and cognition of entrepreneurs which should be included in studying entrepreneurship. 3. Entrepreneurship in Vietnam In Vietnam, the Doi moi (renovation) policy in 1986 coupled with the passage of the Enterprise Law in 2000 has stimulated a tremendous growth of small – and medium – sized enterprises (SMEs), which are considered an important vehicle for the economic growth in Vietnam. Since then, there has been a phenomenal transition to a marketoriented model, in which entrepreneurship has broadly become a universal modality for people wishing to become gloriously rich. For the last decade, the number of newly established enterprises has increased dramatically. The new business formation rate was 3 to be about 6 times larger in 2010 compared with one in 2000 84,531 84,000 65,319 58,196 48,959 46,744 37,306 39,958 14,453 19,642 21,668 27,774 Figure 1 : Number of enterprises registered annually (source GSO) Under Decree No.56/2009/ND-CP of the Government on June 30, 2009 on assistance to the development of SME, micro enterprise, small enterprise, and medium enterprise are defined based on labor scale, capital and economic sector as follow: Table 2: Enterprise category Micro enterprises Small enterprise Medium enterprises SECTOR Number of laborers Total capital Number of laborers Total capital Number of laborers Agriculture, forestry and fishery [...]... orientation, but exhibiting low results in terms of masculinity and uncertainty avoidance This is also a typical cultural values of Asian countries In the exploratory research of Phan (2011), his findings one more time confirmed the dominance of collectivism in Vietnamese culture in which people define their self-image in term of ―We‖ They tend to belong in groups that take care of them in exchange for loyalty... business formation and economic and institutional contexts‖ There are some other moderators such as need and motives, beliefs and behaviors, and cognition of entrepreneurs which should be included in studying entrepreneurship 3 Entrepreneurship in Vietnam In Vietnam, the Doi moi (renovation) policy in 1986 coupled with the passage of the Enterprise Law in 2000 has stimulated a tremendous growth of. .. Objectives  To develop the conceptual framework demonstrating relationships among factors/ determinants and between them with entrepreneurship of youth in Vietnam  To determine the effect intensity of various factors on entrepreneurship of young people in Vietnam 6 Research methodology Utilizing the findings from exploratory research of Phan (2010) combined with literature review, the conceptual framework... & Kent, 2003) Culture has been described as an elusive, difficult – to - define concept (Ralston et al., 1997; Trandis et al., 1986) Hoftede and Bond (1998) defined culture as the collective programming of the mind that distinguishes the members of one category of people from those of another In a similar vein, culture can be seen as the rich, complex set of meanings, beliefs, values, and symbols prevalent... research inherits the findings of (Phan, 2011) who took the first step on studying how cultural factors have influence on business start-ups of Vietnamese youth, his works are served as an exploratory stage for further studying about the impact of culture on entrepreneurship in Vietnam By exercising qualitative approach, Phan used narrative method which employed the story – telling strategy, the content of. .. between the immediate and extended family The immediate family which is the traditional household in Vietnam, includes grandparents, parents, and children The extended family consists of the immediate family and close relatives who share the same last name and ancestors and who live in the same community Family in Vietnam looks similar to a system of mini hierarchic society with the most elderly having the. .. because of following reasons such as the level of analysis used, the potential for stereotyping , methodological concerns , and whether the simplicity of the model truly accommodates the complexity of culture Hampden – Turner and Trompenaars (1997) also argued that Hofstede‘s (1980) cultural dimensions are linear, whilst true cultures are not Although the theory of Hofstede has been employed in many... its simplicity, this paper concentrates on how culture impacts entrepreneurship in Vietnam only Therefore, it is necessary to include other cultural values of Vietnam in studying the association between culture and entrepreneurship 15 3 Vietnam National Culture Village culture is an important component taking part in building Vietnam cultural identity Being a typical agricultural country, people's lives... Recommended theoretical model by Phan Truong Giang (2011) 7 This research aims to continue fulfilling a set of socio-cultural factors that have influence on the decision of being self – employment of Vietnamese youth It is also set to determine the relationship among these factors and between them with the entrepreneurship Therefore, its findings will serve as base for further academic researches on business... culture hold about the appropriateness of power and authority differences in hierarchies such as business organizations (2) Individualism vs Collectivism (IDV) is the extent in which a person‘s belief about the relative importance of the individual and the groups to which that person belongs (3) Masculinity vs Femininity (MAS) is the dimension that reflects differing goals and the division of emotional roles .. .CULTURE AND ENTREPRENEURSHIP INTENTION OF THE YOUTH IN VIETNAM In Partial Fulfillment of the Requirements of the Degree of MASTER OF BUSINESS ADMINISTRATION In International Business by... 1997; Trandis et al., 1986) Hoftede and Bond (1998) defined culture as the collective programming of the mind that distinguishes the members of one category of people from those of another In a... how culture impacts entrepreneurship in Vietnam only Therefore, it is necessary to include other cultural values of Vietnam in studying the association between culture and entrepreneurship 15 Vietnam