1 CHAPTER orientation: the case study of Vietnamese small and medium enterprises" has been selected as the topic of this study GENERAL INTRODUCTION OF THE STUDY 1.1 The necessity of the study The important role of institutions to economic development of each country has been recognized in previous studies around the world and in Vietnam At the organizational level, institutional theory shows that institutional factors affect organizational strategies and processes (Scott, 1995) Institutions as part of the business environment affecting the development of businesses including SMEs have attracted research interests from scholars However, available institutional documents mainly focus on formal institutions, while the effects of informal institutions are less of a concern (Roxas and Chadee, 2012) In recent years, Entrepreneurial Orientation has become a popular topic in the field of business studies in general and the entrepreneurial orientation in particular Vij and Bedi (2012) argue that entrepreneurial orientation is a key determinant of the success of a business Many previous studies have explored entrepreneurial orientation in the context of SMEs (for example, Keh et al., 2007; Wang et al., 2015) In developing countries like Vietnam, entrepreneurial orientation and and some of its premises have also attracted the attention of researchers, but to a modest level (Nguyen, 2009, 2011; Swierczek and Thai, 2003) Institutions have effects on the expectations, awareness of risks and profits of business activities (Avnimelech et al, 2014; Shane, 2003), and innovation capabilities of businesses (Chadee and Roxas, 2013) However, there seems to be a lack of research on the relationship between institutions, especially informal institutional groups and entrepreneurial orientation at firm level It should be noted that the effects of informal institutions on risk-taking tendency, innovation and pioneering proactiveness are still unclear (Roxas and Chadee, 2012) This requires more research to understand the relationship between informal institutions and the forms of entrepreneurial orientation SMEs play a very important role to Vietnamese economy By the end of December 2015, there was 500,000 SMEs in Viet Nam, accounting for 97.6% of the total number of active businesses, contributing over 40% of GDP and attracting over 50% of the national labor force (General Statistics Office, 2018) However, since the global economic crisis, the number of dissolved and closed businesses have continued to increase Basic characteristics of SMEs are small-scaled, with loweducated labor, backward technology, limited capital, low labor productivity, which are barriers to SMEs in the process of development and integration to the global economy For above justifications, "The effects of institutions on entrepreneurial 1.2 Objectives of the study The purpose of this study is to understand the influence of formal and informal institutions on each aspect of entrepreneurial orientation of SMEs Besides, the entrepreneurial orientation of SMEs in the context of developing countries is also of this study’s concern Obtained results can provide some suggestions to improve institutions, promote entrepreneurial orientation of Vietnamese SMEs to enhance competitiveness in the integration period 1.3 Scope and objects of the study 1.3.1 Scope of the study: Research objects: Vietnamese SMEs according to the official definition in the Government Decree No 56/2009/ND-CP dated June 30, 2009 Research space: The thesis has been done to collect data in three major cities of Hanoi, Da Nang and Ho Chi Minh City Study period: Collected data used for this thesis is across years from 2012 to 2017 1.3.2 Study objects: The thesis examines the entrepreneurial orientation; the effects of formal and of informal institutions on the entrepreneurial orientation of Vietnamese SMEs 1.4 New contribution of the thesis Theoretical contribution The effects of formal institutions and informal institutions on entrepreneurial orientation at firm level has not been much studied by scholars Theoretical framework used for research has not yet been clear and consistent The informal institution is only considered as national cultural element rather than informal institutional elements as defined by Helmke and Levitsky (2004) This thesis examines the effects of institutions on each aspect of SMEs’ entrepreneurial orientation (innovation, risk taking and pioneering proactiveness) Some specific contribution of the study are as follows: / To measure the quality of formal institutions regarding the mismatch of the system of policies and regulations of the State, research needs to be added by two indicators The first is the overlapping and lack of clarity, while the second is the instability and inconsistency 3 / To measure informal institutions regarding SMEs' institutional trust, research needs to be added by an indicator which reflects general perception of positive changes from regulations and policies of the state CHAPTER / Experimental evidence shows that the mismatch of the State's policy/regulation systems, institutional trust and corruption are all related to every aspect of entrepreneurial orientation (innovation, risk taking and proactiveness) in the context of SMEs in developing countries like Vietnam / The relationship between execution quality and entrepreneurial orientation of SMEs may change towards opposite direction depending on the context Practical contribution While formal institutional barriers and corruption remain at a high level that negatively affects the entrepreneurial orientation, institutional trust of many SMEs does not seem to be as such Therefore, the positive role of institutional trust to entrepreneurial orientation is a finding with many practical implications in Vietnamese context In addition to solutions to eliminate formal institutional barriers and constrain corruption, those aimed at strengthening institutional trust will be an important driving force to promote the entrepreneurial orientation of Vietnamese SMEs 1.5 Structure of the thesis The thesis "Effects of institutions on entrepreneurial orientation: case study of Vietnamese small and medium enterprises" consists of 159 pages, including the list of tables and figures, Table of content, main section of five chapters, references and appendices Five chapters include Chapter which generally introduces the study, Chapter on research overview and theoretical framework of institutional effects on entrepreneurial orientation of enterprises; Chapter on research methodology; Chapter on research findings; Chapter on Evaluation of research findings and some suggestions There are 20 tables and figures in total RESEARCH OVERVIEW AND THEORETICAL FRAMEWORK 2.1 Overview of the relationship between institutions and entrepreneurial orientation of SMEs 2.1.1 Research overview and gaps While entrepreneurial orientation has been studied by scholars, informal institutional factors are mainly considered as national culture and only formal institutions are scholars’ interest However, informal institutions are not necessarily cultural elements from the views of Helmke and Levitsky (2004) Some studies have confirmed that the influence of informal institutions on enterprises' strategic choices is independent (Peng, 2002) Meanwhile, typically informal institutional factors in the context of transition and developing economies such as corruption and trust have not seem to be much examined Although research has already attempted to asssess the institutional impact on entrepreneurial orientation at national level, there is still a lack of research on the relationship between institutions, especially informal ones and entrepreneurial orientation at firm level More importantly, the effects of institutions on risk-taking, innovation and pioneering proactiveness are unclear (Roxas and Chadee, 2012) This requires more research to explore the relationship between formal and informal institutions and patterns of entrepreneurial orientation Effects of informal institutions, particularly corruption, institutional trust at firm level in the context of SMEs will be an interesting research gap Interpretation of these relationships will help contribute to further clear the role of informal institutions to entrepreneurial orientation at corporate level, in the context of a transition and developing country Literature review indicated that research on entrepreneurial orientation in the context of Vietnam has only been done by few scholars, and there are still many different opinions about entrepreneurial orientation (Hoang Van Hoa, 2010 ) In addition, studies so far have just mainly examined the relationship between entrepreneurial orientation and business results of Vietnamese SMEs (Nguyen, 2009; Swierczek & Thai, 2003) Those on the relationship between institutions and entrepreneurial orientation have not almost done 2.1.2 Theoretical framework and research hypothesis on the relationship between institutions and entrepreneurial orientation of SMEs 2.1.2.1 Concepts used in the research Determinants Table 2.2: Concepts used in the research The execution quality of state management agencies is defined as barriers to businesses' activities such as tax rates, tax administration, inspection activities imposed by the State (Chadee and Roxas, 2013) These institutional barriers also include a lack of State support to business development of businesses such as finance and support services (Hashi and Krasniqi, 2011; Zhu et al., 2012) Execution quality refers to the rigidity and bureaucracy that businesses face when dealing with representative state agencies, for example when going to business registration or granting a business license to conduct a specific business activity (Norton, 1998) This concept also refers to rules, procedures, processes and level of suitability to the provisions of the current laws, which leads to unreasonable cost burden on businesses This increases the cost for businesses to deal transactions with state agencies These costs could be financial costs, time and effort spent to complete procedures (Fogel et al., 2006) These barriers also increase transaction costs and uncertainty, thereby preventing access to resources to support innovation activities (Chadee and Roxas, 2013) Most research in the context of transition and developing economies has indicated that execution quality negatively effects the ability of businesses to innovate (Chadee and Roxas, 2013; Xheneti and Bartlett, 2012) Zhu et al (2012) have pointed out that innovation activities of SMEs are hampered by innovation-related costs such as tax burdens, financial costs, etc., or compliance with bureaucracy and rigidity of state agencies This barrier leads to the escalation of uncertainties and costs, preventing the ability of businesses to access resources to support or stimulate innovation In addition, enterprises’ awareness of opportunities and risks affects innovation and pionnering proactiveness of enteprises (Haro et al., 2011) When the level of uncertainty and cost increases, the ability of risk management is limited, especially for SMEs This will make businesses not dare to take risks that may lead to business opportunities Facilitation of procedures and support services of state agencies for SMEs to exploit new business opportunities will positively affect risk taking level of businesses (Haro et al., 2011) Therefore, increasing costs and time as well as troubles faced by businesses when carrying out business procedures will negatively affect their risk taking level Thus, execution quality may negatively affect all three aspects of entrepreneurial orientation Operational quality barriers to SME operations have also been addressed by local studies (CIEM et al., 2016; VCCI, 2016) Inspection and various types of costs have discouraged enterprises, making them hesitant to invest and eliminate their motivation for innovation (Nguyen Thi Luyen, 2018; Le Du Phong and Le Huynh Mai, 2018) Based on the overall results, the thesis proposes following research hypotheses: Definition Source Institution "Play rules" in a society North (1990) Formal institution Formal institutions refer to the system of laws, regulations, policies, contracts and enforcement Along with the whole legal and policy documents is the enforcement mechanism, regulation and oversight of the relevant agencies to help policy implementation North (1992) Informal institution Entrepreneurial orientation Informal institutions refer to shared values in a society, usually those that are not Helmke and expressed in writing, communicated and Levitsky (2004, enforced outside officially recognized 2006) channels This concept refers to "processes, practical activities and decision-making activities Miller (1983); that lead to the birth of new things in the Lumpkin and business." Entrepreneurial orientation Dess (1996) consists of three elements: risk- taking, pioneering proactiveness and innovation Source: Author’s synthesization Concepts of components of entrepreneurial orientation: Innovation refers to the willingness of enterprises to support creativity and experimentation, participation in creative processes, testing ideas such as applying new production methods, new technologies or developing new products and services for current or new markets Risk taking refers to the willingness of enterprises to invest a significant resource in exploiting business opportunities and implement high-risk business strategies Risk taking does not mean that it is "doing without knowing" ignoring the consequences, but it reflects enterprises‘ boldness, dare to grasp business opportunities Proactiveness reflects the willingness of businesses to act ahead of competitors Proactiveness may include actions such as: recognise and evaluate new opportunities, identify and track market trends and establish new business groups 2.1.2.2 Theoretical framework and research hypotheses on the relationship between formal institutions and entrepreneurial orientation H1a: Execution quality is negatively correlated with the level of innovation H1b: Execution quality is negatively correlated with risk taking level 7 H1c: Execution quality is negatively correlated with proactiveness The mismatch of the policy and regulation systems is defined as the complexity/ overlapping, lack of clarity and volatility/instability and inconsistency of the state system of policies and regulations These barriers are addressed by Lajqi and Krasniqi (2017) These are also two typical characteristics of formal institutions in Vietnam State policies refer to the issuance and enforcement of laws, ordinances, regulations with any form of legislations and/or government decisions, especially those affecting business field (Forgel, 2001) State policies could be considered as a pipeline through which SMEs can participate in business activities in accordance with external rules and regulations, thus reducing the level of uncertainties in their businesses (Roxas et al., 2008) Institutional documents, both theoretical and empirical ones have indicated that state policies and regulations have a direct effect on entrepreneurial orientation (Dickson and Weaver, 2008; Roxas et al., 2008 ; Alvarez and Urbano, 2012) Most studies have found that comprehensive and developed regulations ensuring full compliance with market mechanism have a positive relationship with the development of enterprises through ability of innovation and strategic decisions (Roxas et al., 2008) The relationship will be negative if legal regulations become barriers to businesses‘ operations (Chadee and Roxas, 2013; Liu, 2011; Zhu et al., 2012) State regulations and policies can promote or hinder opportunities for SMEs to pursue more risky but promising innovative projects (Zhu et al., 2012) The instability and complexity of the regulation and policy systems cause policy risks, business risks, loss of motivation to innovation and affect investment and development decisions of enterprises (Nguyen Thi Luyến, 2018) Because policies are not appropriate, environment becomes contrary to business growth and entrepreneurs find it difficult to predict future economic prospects to establish contractual relationships This may prevent SMEs from taking risks for investments (Lajqi and Krasniqi, 2017) In addition, the complexity and volatility of state regulations and policies will make it difficult for businesses to predict as well as how to conform to regulations when they want to pioneer in the market This may negatively affect the pionnering proactiveness of businesses Based on overall results, the thesis proposes following research hypotheses: H2a: The mismatch of the state system of policies and regulations is negatively correlated with the level of innovation H2b: The mismatch of the state system of policies and regulations is negatively correlated with the risk-taking level H2c: The mismatch of the state system of policies and regulations is negatively correlated with proactiveness 2.1.2.3 Theoretical framework and research hypotheses on the relationship between informal institutions and entrepreneurial orientation While there are different opinions to identify informally institutional elements (Helke and Levisky, 2006; Sayoum, 2011), informal institutions could be defined in three groups of key elements: the first group includes national cultural elements, social norms (Busenitz et al., 2000); the second group is social factors such as trust, reputation (Wicks and Berman, 2004; Seyoum, 2011); and the third group are factors that were born as a result of the lack and weakness of formal institutions such as networks of relations (Aslanion, 2006), corruption and political connectivity (Li, 2009) All three groups of informal institution are directed towards achieving "acceptance" when it comes to "playing rules" in a society Covin and Miller (2014) and Miller (2011) who specialise in studying entrepreneurship have suggested that entrepreneurial orientation can be shaped by social power, related parties or government pressure to imitate or stand out from competitors or promote its organization to be accepted In the context of transition and developing economies, studies have introduced some informal institutional factors, such as corruption (Li, 2009, Zhghenti, 2017), trust (Nguyen et al., 2005; Seyoum, 2011), and networks of relationship (Aslanion, 2006; Steer and Sen, 2010) However, studies have a high consensus on the regulatory role of the relation network to relationship between entrepreneurship and business results of enterprises (Chin et al., 2016; Zhang and Zhang, 2012; Walter et al., 2006) Therefore, this thesis only studies the relationship between informal institutions and entrepreneurship by understanding the effects of two informal institutional factors which are corruption and institutional trust Corruption is the abuse of power entrusted to personal interests (Bardhan, 1997, Transparency International, 2010) Corruption is defined as ways of selfenriching, self-rewarding money from state officials from the highest to the lowest level, to obtain money and gifts for individuals from any state transaction whenever possible This concept of corruption has been used in many previous studies, including those for the context of transition and developing economies (Avnimelech et al., 2014, Chadee and Roxas, 2013), and is also used in this study In fact, corruption exists in all countries However, in transition economies, it has been considered as a common phenomenon and its level is significantly higher than in developed economies (Tonoyan et al., 2010) Although the government's anticorruption efforts and anti-corruption campaigns are different in developing countries, corruption is still a big challenge to businesses' operations and it has been suggested to be an important factor affecting businesses' behaviour (Chadee and Roxas, 2013; Le, 2017) Regarding the effects of corruption on businesses’ behavior, literature review has shown that corruption affects immediate or future resource allocation (Macrae, 10 1982) and may have some positive effects in the short term but it will hinder innovation and sustainable development of businesses (Avnimelech et al, 2014; Nguyen et al., 2016) At the national level, the negative impact of corruption has been widely recognised in previous studies such as causing negative incentives for entrepreneurs to engage in value creation opportunities from doing business and thus lead to a reduction in entrepreneurship activities (Avnimelech et al., 2014) At the corporate level, some previous studies have shown the negative impact of corruption on corporate innovation (Chadee and Roxas, 2013, Nguyen et al., 2016) Corruption has contributed to shaping entrepreneurial behavior of small businesses in the context of transition economies (Tonoyan et al., 2010) Corruption is identified as a huge obstacle to the performance of SMEs (Aidis, 2005; Hashi & Krasniqi, 2011) When corruption is at high level, enterprises tend to short-term business, little investment and snatching (Nguyen Van Thang, 2015) Thus, the level of risk taking and pioneering proactiveness may be negatively affected because they neither intend to long-term investment nor focus on innovation However, effects of corruption on all aspects of entrepreneurial orientation (innovation, risk taking, and pioneering proactiveness) does not seem to be much studied Based on the overall framework, the thesis proposes following research hypotheses: Institutional trust fosters cooperation and will have a positive impact on outcomes when encouraging actors to engage in business partnerships with a range of potential partners thus expanding business opportunities and resource availability (Rus & Iglic, 2005) Thus, possible impacts of institutional trust on entrepreneurship as a relationship needs to be examined by both theoretical and empirical studies In this study, based on research objectives, the author focuses on institutional trust, which is considered as the most central in the function of modern and very important socioeconomic systems in early period of the relationship between companies (Rus and Iglic, 2005) Similar to corruption, institutional trust has been found to play an important role in creating an institutional environment The activities of entrepreneurship require a fundamental foundation of institutional trust (Karmann et al, 2016) In particular, entrepreneurship and innovation of enterprises can be reduced or developed (Anokhin and Schulze, 2009; Ellonen et al., 2008) Based on the literature review, the thesis proposes following research hypotheses: H4a: Institutional trust is positively correlated with the level of innovation H4b: Institutional trust is positively correlated with risk taking level H4c: Institutional trust is positively correlated with proactiveness H3a: Corruption is negatively correlated with innovation 2.2 Proposed research models H3b: Corruption is negatively correlated with risk taking level The theoretical model is based on formal and informal institutional factors that can affect every aspect of entrepreneurial orientation Although there is no central theoretical framework for this study, the research model is proposed in Figure 2.4 based on literature review and inherited from the empirical evidence and suggestions from previous studies H3c: Corruption is negatively correlated with proactiveness Trust which is an important informal institution and commonly used (Williamson, 1993; Dixit, 2009; Seyoum, 2011) has become an important principle of the organization when there is a shortage of a strong market institution ( Nguyen et al., 2005) and developing trust will result in better performance (Wicks and Berman, 2004; Nguyen and Rose, 2009) Trust is often perceived as a substitution for a developed market institution (Redding, 1990; Peng & Heath, 1996) There are many studies of different types of trust and many concepts of trust In general, trust is considered as an informal institution that refers to established belief systems of the behavior of other people It is necessary to identify specific types of trust in the study to make appropriate comparisons Rus and Iglic (2005) have examined the trust of SMEs including institutional trust and inter-personal trust Institutional trust in this study is defined as shared expectations derived from formal social structures through signals such as members of professional associations or intermediary mechanisms such as legal regulations, banking, government bureaucracy (Fuglsang and Jagd, 2015), which is generally beyond a certain transaction and beyond specific exchange partners (Zucker, 1986; p 63) Figure 2.4: Research model Mismatch of policy and regulation systems Innovation Execution quality Risk taking Institutional trust Proactiveness Corruption - Operation period - Type of ownership 11 12 CHAPTER businesses, ownership, size (capital and number of employees), and diversed areas of activity An important note for the author to choose respondents is that entrepreneurial orientation often follows the perspective of senior managers (Wiklund & Shepherd, 2003) They are often those who highly influence company strategy (Keh et al, 2007) This approach has been accepted in studies, especially in the context of SMEs (Keh et al., 2007, Wiklund & Dean 2003) Therefore, in this research, General Director/Director or Deputy General Director/Deputy Director or Member of the Board of Directors / Board of members of each company has been selected as interviewees All of the top selected managers are those who have worked with their companies for many years so have good understanding of their operations All businesses in the sample have been in active for at least years This way of sampling can ensure the whole representativeness and has been done by a number of previous studies on entrepreneurial orientation of SMEs in Vietnam (Nguyen, 2011; Swierczek & Thai, 2003) RESEARCH METHODOLOGY 3.1 Overall research design The thesis uses both qualitative and quantitative approaches The qualitative one was done in phase (before quantitative research) while the quantitative approach is implemented in phase to test models and research hypotheses Regarding qualitative approach, in-depth interviews are done to clarify and examine the relevance of the concept and content of the 'entrepreneurial orientation' in the context of Vietnam In addition, since the informal institution is controversial, sensitive, difficult to measure, it needs to be explored In addition, qualitative research also helps suggest an overview of the relevance of the model and the relationships in the proposed research model before conducting quantitative research with large sample size In addition, qualitative research contributes to detecting and supplementing indicators for research variables Quantitative research was conducted through a sample survey of Vietnamese SMEs in three big economic centers (Hanoi, Da Nang and Ho Chi Minh city) The model and research hypotheses are tested with survey data collected from the research sample The use of both quantitative and qualitative approaches helps us deeply understand the research problem and give more reliable research findings 3.2 Qualitative research 3.2.1 Objectives There is still a number of different views on the entrepreneurial orientation of SMEs (Hoang Van Hoa, 2010), and the relationships between institutional factors and aspects of entrepreneurial orientation are not really clear Based on the general research objectives and some highly sensitive institutional factors, the thesis uses qualitative methodology to explore and clarify research concepts being concerned The first qualitative study is to explore and understand the nature of entrepreneurial orientation concept and its aspects After identifying aspects of entrepreneurial orientation in the context of Vietnamese SMEs, the second qualitative study was carried out to explore and understand formal and informal institutional factors that affect the entrepreneurial orientation of SMEs 3.2.2 Implementation 3.2.2.1 Research sample Enterprises selected for this research are Vietnamese SMEs as defined according to Government’s Decree No 56/2009/NĐ-CP, dated June 30, 2009 The selection of businesses ensures the diversity of research sample regarding types of Enterprises selected for the first qualitative research are SMEs in Hanoi, which is one of the two cities with the largest number of SMEs in Vietnam This sampling method has also been carried out by previous studies using qualitative research methods (Nguyen, 2009) Business name is coded to keep confidential as required Businesses selected for the second qualitative research are 21 SMEs from three of the country's largest economic centers, representing the three regions of NorthCentral-South (Hanoi, Da Nang and Ho Chi Minh city) The number of SMEs in these three cities accounts for more than 80% of the total SMEs of the country (GSO, 2018) 3.2.2.2 Data collection and analysis Before collecting data, a guideline for in-depth interview was designed based on research model (see appendix 01A and 01B), which will help pre-shape required information This study uses many data sources Data was collected from desk review, observations and in-depth interviews, of which the latter was mainly used in the study Specifically, the author has searched for websites and documents related to SMEs, their characteristics and recent performance Observations were made by the author during visits to companies based on good relationship with these companies During each visit, the author regularly works and discusses directly with the top leaders of each company Therefore, the author can observe the performance of companies, the behavior of company leaders and may have a better view of the level of entrepreneurial orientation of each of them The focus of the interviews was to understand the formal and informal institutional factors, as well as their effects on the aspects of entrepreneurial orientation of SMEs In particular, the respondents were 13 firstly asked to provide an overall picture of the company's performance over the past five years and identify key barriers to their business, especially from the institutional environment Then, the level of proactiveness, innovation and risk-taking level of the company (ie three aspects of entrepreneurial orientation) were examined and the factors affecting the entrepreneurial practices of these companies were explored During interviews, effects of institutional elements, especially informal institutions (corruption and institutional trust) on each aspect of entrepreneurial orientation have been carefully studied Each interview lasted for between 45 and 60 minutes Interviews were conducted at the office of the interviewee or at places which were suggested by interviewees as long as they were comfortable The interviews were recorded, then converted to texts for analysis All interviews were recorded After tape processing was completed, interview information was typed and analysed Content coming out from each interview was noted and analyzed After each interview, information was carefully reviewed in order to change and prepare for the next rounds Then, to analyse the evidence obtained from the first qualitative research, content collected has been coded based on the theoretical concept of entrepreneurial orientation and its aspects Then codes were calculated to come up with frequency from each interviewer and used as a basis for aggregating for each topic at all interviewees Similar to the first qualitative round, the main topics that appeared in each interview of the second qualitative one were carefully identified and analyzed After each interview, the contents were reviewed for possible changes and prepared for the next interviews Based on the identification of institutional elements and aspects of entrepreneurial orientation from the desk review and some possible effects, data coding was conducted to find out relationships 3.2.3 Research findings Based on the research objectives, the qualitative exercise has come up with the following findings: • Entrepreneurial orientation of Vietnamese SMEs includes three outstanding aspects, which are: innovation; risk taking; proactiveness This is the basis to identify the relevance of studying entrepreneurial orientation with aspects in the proposed research model • Formal institutions affect entrepreneurial orientation through one of the typical barriers, which is the volatility and complexity of the State system of regulations and policies This is the basis for adding indicators regarding the appropriateness of the policy and regulations system 14 • Corruption and institutional trust are two informal institutional elements which are considered to have critical impacts on the entrepreneurial orientation of SMEs Initially, corruption is found to negatively affect entrepreneurial orientation while institutional trust having positive impact This finding is also consistent with the proposed research model Institutional trust is felt and shared positively by some businesses, so one additional indicator is suggested to relect this content 3.3 Quantitative research Sau thực nghiên cứu định tính, tác giả tiến hành nghiên cứu định lượng thông qua điều tra DNNVV nhằm mục đích kiểm định mơ hình giả thuyết nghiên cứu Phần sau trình bày số nội dung sau: thang đo sử dụng luận án trình xây dựng bảng hỏi, mẫu điều tra cách thức thu thập liệu điều tra After conducting qualitative research, quantitative exercise was done through a survey of SMEs for the purpose of testing models and research hypotheses This section presents following items: scales used in the thesis and the process of developing questionnaires, survey forms and data collection methodology 3.3.1 Scales and questionnaire development 3.3.1.1 Scales Most of the scales in this study are inherited from previous studies, are screened and adjusted to adapt to the research context in Vietnam The screening and adjustment of these scales is done under the guidance of the two experienced experts in training, teaching and research of entrepreneurial orientation and institutions The thesis was also added by five indicators for three variables as a result of previous studies and qualitative research findings All scales inherited from previous studies are 5-point Likert-type Therefore, the 5-point scale has also been used for this thesis with being fully disagree, is disagree, is normal (neutral), is agree, is fully agree Based on the findings of previous studies and of qualitative research, the analysis used in this thesis with two control variables: operating period and type of ownership The detailed coding of the control variables can be found in Appendix 02 Operating period means the duration from the point enterprises start its production and business activities to the current point This variable is divided into 02 subperiods including: less than years; years or more Type of ownership are divided into two categories: enterprises with and without state capital 3.3.1.2 Questionaire development 15 16 In order to ensure the quality of the collected data being used for the research, the questionnaire design was carried out through a rigorous and scientific process The development of the questionnaire followed steps as: / Identify the concept of variables and scales of variables in the research model based on previous studies and qualitative research results; / Develop Vietnamese version of the questionnaire; / Check the accuracy, clarity and coherence of the Vietnamese version with the support of experts in the research field; / Pilot a small sample to ensure the accuracy and readability The process was carried out in two steps, including direct interviews with businesses and followed by pilot interview with 50 SMEs; / Finalise the questionnaire, with all color print hardcopies of A3 size paper In addition, the questionnaire also includes sections of business information, respondents' information enterprises, big enterprises and newly established ones (Operating time of less than years), the number of remaining enterprises is 1,269 3.3.2 Research sample and data collection The survey was conducted in Hanoi, Da Nang and Ho Chi Minh city These are the three most dynamic economic centers of the country and account for more than 80% of all SMEs operating in Vietnam (General Statistics Office, 2018) This research sample was also selected to be representative for the whole Vietnamese SMEs (for example, Swierczek and Thai, 2003) The sample size was based on the number of observed variables of the study and the research space According to Hair et al (1998), the minimum sample size is to 10 times higher than the number of observed variables that can be used for factor analysis and regression analysis Thus, with 24 observed variables, then the sample size should be at least 240 enterprises The sampling framework of the study is expected to meet the following requirements: / SMEs in accordance with the definition in Government Decree No 56/2009 / ND-CP, dated June 30, 2009; / Having at least years in operation; / Enterprises working in areas including: industry/manufacturing; service/trade; mineral extraction; construction; agriculture/ forestry/fishery In which service/trade enterprises accounts for 70.6% (General Statistics Office, 2018); / The share of micro and small enterprises out of the total number of SMEs in each region based on official statistics of 98.5% (GSO, 2018); / Type of ownership of both state and private enterprises Of which, private businesses accounts for 99.5% (GSO, 2018) Based on the research objectives of the thesis and the sampling framework, the Legal Department of VCCI was contacted to get a list of businesses which was engaged in PCI 2016 survey in Hanoi, Da Nang and Ho Chi Minh city This is the list selected by VCCI based on random stratification method After eliminating backup According to Mangione (1995), the rate from 50% to 59% is acceptable, while the response rate of many current studies is only 30% (Nguyen Thi Tuyet Mai and Nguyen Vu Hung, 2015) Therefore, based on the minimum sample size requirement, all 1,269 survey questionnaires were used In order to conduct data collection, 10 enumerators were trained on how to distribute and collect questionnaires These enumerators are able to communicate well and have certain experience to work with businesses, including: marketing staff in the tourism and hotel sector in Ha Noi; from a research institute in Da Nang; final-year marketing students in Ho Chi Minh city In order to increase the response rate, all the questionnaires were color printed attached with an open letter from the Vice Rector of National Economics University (see Appendix 2) In addition, in each region, there was also support from SMEs Association who sent letters or follow-up calls to request their members to fill in the questionaires After collecting data from each region, random check was done with some businesses to verify reliability of the collected data The survey period was carried out from April 2018 to the end of July 2018 The number of questionaires distributed was 1,269 and the number of response was 486, with the response rate of 39%, and there was 138 invalid questionaires Low number of distributed questionnaire was due to mis-contact with businesses of which some have relocated or refused to respond The number of enterprises who did not get the questionaires were mainly micro enterprises In general, the characteristics of the sample met most of the criteria set in the sampling framework Specifically, the share of micro and small enterprises in the sample was 90.2% compared to 98.5% as required, the proportion of enterprises operating in the service/trade sector reached 71.6% compared to required ratio of 70.6%, the non-state enterprises accounts for 93.7% compared to set ratio of 99.5% Given the research sample methodology, the characteristics of the research sample and data collection methodology were explained above, it is expected that collected data can ensure the reliability and generalization for the overall study All collected data was made with high quality for data analysis Results of data analysis and justification of research results will be presented in the next chapter 17 18 CHAPTER 70) when these variables were dropped out The EFA results with the remaining variables show that the three factors are extracted as expected, ensuring the distinct and convergence value of the scales, with the total variance extracted of 76.721% RESEARCH FINDINGS This chapter presents research findings with a focus on model testing and proposed research hypotheses Before doing this test, a preliminary assessment of scales through an analysis of the exploratory factor analysis (EFA) and the Cronbach’s alpha coefficient was made After that, confirmatory factor analysis (CFA) was done through the evaluation of the full measurement model Research model and hypotheses were tested by structural equation modeling (SEM) analysis technique The affirmative factor analysis (CFA) and the structural equation model (SEM) were carried out with the support of AMOS software integrated in SPSS 21 4.1 Evaluation results of scales 4.1.1 Preliminary assessment of scales through EFA and Cronbach’s alpha Evaluation of scale of independent variables EFA analysis was firstly done simultaneously for all indicators measuring the independent variables in the research model (two elements of formal institutions and two elements of informal institutions) Before analyzing the factor, KMO and Bartlett's Test were done The results showed that Kaiser-Meyer-Olkin Measure of Sampling Adequacy is equal to 0.836 (value from 0.6 is acceptable) and Bartlett's Test of Sphericity has a significant level of under 0.05 (see annex 03) This result indicates eligibility for EFA implementation EFA was then conducted with the Principal Component Analysis and the Varimax rotation EFA results show that factors are extracted at eigen value> 1.00 and the total variance extracted is 65.836% (see Appendix 03) In addition, observed variables have high coefficient (factor weight) on the concept they they measure (from 0.547 or more) and low coefficient on the concept they not measure Therefore, the scales of four institutional factors all achieve convergent values and distinct values The thesis evaluates the reliability of each scale of independent variables through the Cronbach’s alpha coefficient All scales have coefficient alpha above the normal threshold of 70, except alpha of institutional trust scale of 672 Although it has not reached the level of 70, the value is also higher than 60 and so is also acceptable (Hair et al., 1998) Evaluate the scale of dependent variables The thesis continues to perform EFA analysis simultaneously for all indicators measuring the three dependent variables in the research model (three aspects of entrepreneurial orientation) KMO and Bartlett's Test results show that it is satisfactory to implement EFA (KMO> 60 and Bartlett's Test of Sphericity with significance level 4.1.2 Evaluation of scales through affirmative factor analysis (CFA) The results of the CFA analysis with the full measurement model show that the measurement model fits well with the data after eliminating an observed variable of 'corruption' (TN1) because this variable is associated with several standardized residual covariances> 2.58 (Hair et al., 1998) Specifically, the results of the model's relevance index are as follows: χ2 (167) = 350.707, χ2 / df = 2.10, p 3.2) on a scale of This reflects SME’s perception of formal institution elements being as vicious barriers to their business, especially the volatility, inconsistency and overlapping of government policies and regulations (mean = 3,544, S.D) = 744) Descriptive results also show that the average score of the two elements of the informal institution is also just above the average Specifically, institutional trust was not high (mean = 3.662 on a scale of 5; S.D = 6268) Corruption is assessed at a slightly above average level (mean = 3,351; S.D = 8321) This reflects the fact that SMEs often have to pay informal costs when working with state agencies and this is also a barrier to businesses’ operations Statistical results of entrepreneurial orientation aspects 19 20 Regarding SMEs' assessment of the three aspects of entrepreneurial orientation, statistical results show that all three aspects are not high (