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 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 Table of Contents Table of Contents List of Acronyms List of Figures List of Tables Acknowledgement Abstract Introduction Literature review 13 Ethical leadership 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 18 Research methodology 20 Research design 20 Sample characteristics 23 Measures 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 33 Discussion 33 Implications 35 Limitation and directions for future research 36 Conclusion 38 References 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 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 List of Figures Figure 1: Research model……………………………………………………………… 19 Figure 2: Research procedure……………………………………………………………20 Figure 3: Structural results of model…………………………………………………….30 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 - Default model)………………………31 Table 6: Chi-Distribution……………………………………………………………… 32 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 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 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 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) Intrinsic Rewards Reliability Statistics Cronbach's Alpha N of Items 806 Item-Total Statistics Scale Variance Corrected if Item Deleted Item-Total Correlation 5.908 633 5.896 640 5.814 614 5.807 598 Cronbach's Alpha if Item Deleted 751 748 760 768 Reliability Statistics Cronbach's Alpha N of Items 896 Item-Total Statistics Scale Mean if Scale Variance Corrected Item Deleted if Item Deleted Item-Total Correlation ER1 6.76 6.060 734 ER2 6.80 5.747 769 ER3 6.96 6.261 809 ER4 6.91 5.992 776 Cronbach's Alpha if Item Deleted 879 867 855 863 Scale Mean if Item Deleted IR1 IR2 IR3 IR4 8.50 7.91 8.63 8.48 Extrinsic Rewards 55 Appendix 5: Exploratory factor analysis-EFA Factor Initial Eigenvalues Total Variance Explained Extraction Sums of Squared Loadings Total % of Variance Cumulative % Total % of Variance Cumulative % 7.999 30.765 30.765 7.608 29.261 29.261 3.255 12.517 43.282 2.879 11.074 40.335 2.575 9.904 53.186 2.192 8.430 48.765 1.914 7.360 60.546 1.527 5.875 54.639 1.728 6.645 67.191 1.320 5.079 59.718 742 2.854 70.045 678 2.607 72.652 636 2.445 75.097 557 2.143 77.240 10 549 2.111 79.351 11 512 1.969 81.320 12 496 1.909 83.228 13 460 1.769 84.998 14 437 1.682 86.680 15 427 1.644 88.324 16 393 1.510 89.834 17 353 1.359 91.193 18 343 1.321 92.514 19 326 1.256 93.770 20 300 1.153 94.923 21 274 1.055 95.978 22 261 1.002 96.980 23 237 913 97.894 24 205 787 98.680 25 184 709 99.390 26 159 610 100.000 Extraction Method: Principal Axis Factoring a When factors are correlated, sums of squared loadings cannot be added to obtain a total variance Rotation Sums of Squared Loadingsa Total 5.471 5.647 4.642 4.038 3.554 56 EL9 EL2 EL4 EL3 EL1 EL7 LMX LMX LMX LMX LMX LMX SIB5 SIB6 SIB4 SIB2 SIB1 SIB3 ER3 ER4 ER2 ER1 IR1 IR2 IR3 IR4 863 851 781 775 691 654 Pattern Matrixa Factor 940 842 817 708 678 522 865 805 760 758 647 641 894 840 824 749 748 740 721 651 Extraction Method: Principal Axis Factoring Rotation Method: Promax with Kaiser Normalization a Rotation converged in iterations 57 Appendix 6: Confirmatory factor analysis - CFA 58 Model Fit Summary CMIN Model NPAR CMIN DF P CMIN/DF Default model 39 312.816 132 000 2.370 Saturated model 171 000 Independence model 18 3651.180 153 000 23.864 RMR, GFI Model RMR GFI AGFI PGFI Default model 027 912 886 704 Saturated model 000 1.000 Independence model 267 283 199 253 Baseline Comparisons Model NFI RFI IFI TLI CFI Delta1 rho1 Delta2 rho2 Default model 914 901 949 940 948 Saturated model 1.000 1.000 1.000 Independence model 000 000 000 000 000 RMSEA Model RMSEA LO 90 HI 90 PCLOSE Default model 064 055 073 007 Independence model 260 253 267 000 Regression weights: (Group number – Default model) EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 < < < < < < < < < < < < < < < - EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX Estimate 1.000 997 838 889 852 852 1.000 990 1.154 1.069 795 900 1.000 1.065 997 S.E C.R P 053 048 054 056 058 18.877 17.394 16.359 15.112 14.628 *** *** *** *** *** 068 072 071 065 074 14.581 15.966 15.098 12.215 12.220 *** *** *** *** *** 056 058 18.959 17.337 *** *** Label 59 LMX1 LMX5 LMX6 < < < - LMX LMX LMX 817 947 761 057 061 063 14.439 15.534 12.170 *** *** *** Covariance: (Group number – Default model) EL EL SIB < > < > < > SIB LMX LMX Estimate 171 297 128 S.E .028 040 026 C.R 6.083 7.392 5.030 P *** *** *** Label Correlations: (Group number – Default model) EL EL SIB < > < > < > SIB LMX LMX Estimate 413 519 330 60 Appendix 7: Structural results for model Model Fit Summary CMIN Model Default model Saturated model Independence model RMR, GFI NPAR 38 171 18 Model Default model Saturated model Independence model Baseline Comparisons RMR 048 000 267 GFI 906 1.000 283 AGFI 879 PGFI 704 199 253 Model NFI Delta1 908 1.000 000 RFI rho1 894 IFI Delta2 942 1.000 000 Default model Saturated model Independence model RMSEA Model Default model Independence model CMIN 336.278 000 3651.180 RMSEA 067 260 000 LO 90 058 253 DF 133 153 P 000 CMIN/DF 2.528 000 23.864 TLI rho2 933 000 HI 90 076 267 CFI 942 1.000 000 PCLOSE 001 000 61 Regression weights: (Group number – Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 495 250 1.000 997 838 887 850 852 1.000 985 1.152 1.063 794 898 1.000 1.063 996 817 949 763 S.E .054 044 C.R 9.104 5.703 P *** *** 053 048 054 056 058 18.877 17.410 16.308 15.076 14.616 *** *** *** *** *** 068 072 071 065 073 14.564 16.018 15.075 12.248 12.244 *** *** *** *** *** 056 058 057 061 063 18.904 17.310 14.424 15.559 12.210 *** *** *** *** *** Label Variance: (Group number – Default model) EL e19 e20 e1 e2 e3 e4 e5 e6 e7 e8 e9 e10 e11 e12 e13 e14 e15 e16 e17 e18 Estimate 610 388 249 200 285 269 371 429 469 184 192 165 192 231 296 255 199 270 346 365 487 S.E .062 045 031 022 028 025 033 037 040 017 018 017 018 020 025 025 022 026 030 032 040 C.R 9.780 8.664 8.088 9.069 10.260 10.961 11.350 11.693 11.803 10.620 10.784 9.445 10.414 11.817 11.818 10.339 9.153 10.509 11.713 11.347 12.205 P *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** *** Label 62 Appendix 8: Moderating testing results Intrinsic reward invariant Model Fit Summary CMIN Model Default model Saturated model Independence model NPAR 74 342 36 CMIN 663.532 000 3841.075 DF 268 306 P 000 CMIN/DF 2.476 000 12.553 RMR, GFI Model Default model Saturated model Independence model RMR 118 000 251 GFI 830 1.000 290 AGFI 783 PGFI 650 206 259 NFI Delta1 827 1.000 000 RFI rho1 803 IFI Delta2 889 1.000 000 TLI rho2 872 Baseline Comparisons Model Default model Saturated model Independence model 000 000 CFI 888 1.000 000 RMSEA Model Default model Independence model RMSEA 066 185 LO 90 060 180 HI 90 073 190 PCLOSE 000 000 63 Regression weights: (Low – Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 316 1.000 1.000 942 828 907 937 757 1.000 749 894 915 825 692 1.000 1.553 1.403 1.135 1.345 1.000 S.E .052 C.R 6.086 P *** 063 063 063 064 074 14.962 13.124 14.406 14.708 10.277 *** *** *** *** *** 045 048 044 040 057 16.797 18.431 20.607 20.732 12.095 *** *** *** *** *** 117 112 111 122 125 13.233 12.497 10.186 11.019 8.020 *** *** *** *** *** Label Regression Weights: (high - Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 346 1.000 1.000 1.067 815 813 723 937 1.000 986 1.045 880 512 834 1.000 1.586 1.551 1.224 1.380 1.262 S.E .059 C.R 5.853 P *** 095 076 097 102 098 11.258 10.693 8.352 7.106 9.529 *** *** *** *** *** 078 078 081 076 075 12.635 13.367 10.905 6.709 11.084 *** *** *** *** *** 173 182 165 170 170 9.174 8.525 7.419 8.110 7.409 *** *** *** *** *** Label 64 Intrinsic reward variant CMIN Model Default model Saturated model Independence model NPAR 76 342 36 CMIN 538.089 000 3841.075 DF 266 306 P 000 CMIN/DF 2.023 000 12.553 RMR, GFI Model Default model Saturated model Independence model RMR, GFI RMR 052 000 251 GFI 857 1.000 290 AGFI 816 PGFI 667 206 259 Model Default model Saturated model Independence model RMSEA RMR 052 000 251 GFI 857 1.000 290 AGFI 816 PGFI 667 206 259 Model Default model Independence model RMSEA 055 185 LO 90 048 180 HI 90 062 190 PCLOSE 104 000 Regression Weights: (low - Default model) SIB LMX5 LMX7 LMX7 SIB3 SIB2 SIB2 SIB2 SIB2 SIB2 SIB5 SIB5 SIB4 EL7 EL7 EL3 EL3 EL4 EL4 < < < < < < < < < < < < < < < < < < < - EL EL4 SIB3 SIB5 EL7 EL EL7 EL3 EL2 EL9 LMX5 LMX7 EL4 SIB3 SIB5 LMX5 SIB3 LMX5 SIB4 M.I 6.106 7.343 10.054 4.593 6.524 7.148 8.739 5.232 11.864 6.450 4.551 5.142 5.808 5.295 4.200 4.533 4.028 7.158 4.850 Par Change 137 144 -.153 -.107 -.128 113 104 083 122 093 -.084 -.090 096 -.163 150 -.099 114 128 149 65 Regression Weights: (high - Default model) SIB LMX6 LMX6 LMX6 LMX1 LMX1 LMX1 LMX1 LMX7 LMX7 SIB4 EL7 EL7 EL1 EL3 EL3 EL9 EL9 < < < < < < < < < < < < < < < < < < - EL SIB3 SIB5 EL3 EL EL4 EL2 EL9 EL1 EL3 EL7 LMX1 SIB4 EL3 SIB3 EL1 SIB5 SIB6 M.I 9.476 4.877 4.560 4.926 5.289 9.052 7.264 5.293 5.569 9.948 13.082 4.618 5.658 4.366 5.289 5.226 5.032 6.673 Par Change 174 180 162 134 -.178 -.210 -.150 -.137 -.112 -.153 142 145 186 145 198 143 141 167 Extrinsic reward invariant Model Fit CMIN Model Default model Saturated model Independence model RMR, GFI NPAR 74 342 36 Model Default model Saturated model Independence model Baseline Comparisons RMR 121 000 248 GFI 823 1.000 290 AGFI 774 PGFI 645 207 260 Model NFI Delta1 822 1.000 000 RFI rho1 797 IFI Delta2 884 1.000 000 TLI rho2 866 Default model Saturated model Independence model CMIN 688.155 000 3876.803 000 DF 268 306 P 000 CMIN/DF 2.568 000 12.669 000 CFI 882 1.000 000 RMSEA Model Default model Independence model RMSEA 068 186 LO 90 062 181 HI 90 075 191 PCLOSE 000 000 66 Regression Weights: (low - Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 360 1.000 1.000 954 815 830 937 789 1.000 781 962 875 910 791 1.000 1.372 1.237 1.009 1.232 978 S.E .053 C.R 6.798 P *** 064 061 071 065 074 14.988 13.346 11.749 14.488 10.627 *** *** *** *** *** 049 048 050 043 056 15.886 20.235 17.369 21.270 14.012 *** *** *** *** *** 096 094 093 112 106 14.296 13.180 10.805 10.973 9.219 *** *** *** *** *** Label Regression Weights: (high - Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 287 1.000 1.000 1.099 894 1.005 737 945 1.000 928 964 928 289 647 1.000 1.784 1.783 1.263 1.568 1.197 S.E .057 C.R 5.074 P *** 100 085 093 106 101 10.988 10.530 10.778 6.952 9.353 *** *** *** *** *** 066 076 068 071 070 14.128 12.711 13.579 4.087 9.251 *** *** *** *** *** 218 228 196 203 205 8.192 7.810 6.431 7.716 5.850 *** *** *** *** *** Label 67 Extrinsic reward variant Model Fit CMIN Model Default model Saturated model Independence model NPAR 76 342 36 CMIN 565.898 000 3876.803 DF 266 306 P 000 CMIN/DF 2.127 000 12.669 RMR, GFI Model Default model Saturated model Independence model RMR 057 000 248 GFI 850 1.000 290 AGFI 807 PGFI 661 207 260 NFI Delta1 854 1.000 000 RFI rho1 832 IFI Delta2 917 1.000 000 TLI rho2 903 Baseline Comparisons Model Default model Saturated model Independence model 000 000 CFI 916 1.000 000 RMSEA Model Default model Independence model RMSEA 058 186 LO 90 051 181 HI 90 064 191 PCLOSE 026 000 68 Regression Weights: (low - Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 470 197 1.000 954 815 830 936 788 1.000 935 1.168 1.059 1.093 950 1.000 1.021 922 772 913 747 S.E .068 058 C.R 6.900 3.408 P *** *** 064 061 071 065 074 15.013 13.342 11.745 14.481 10.617 *** *** *** *** *** 090 090 093 083 101 10.431 12.918 11.392 13.219 9.404 *** *** *** *** *** 062 062 064 078 074 16.466 14.817 12.114 11.745 10.026 *** *** *** *** *** Label Regression Weights: (high - Default model) LMX SIB EL9 EL2 EL4 EL3 EL1 EL7 SIB6 SIB4 SIB5 SIB2 SIB1 SIB3 LMX2 LMX7 LMX4 LMX1 LMX5 LMX6 < < < < < < < < < < < < < < < < < < < < - EL LMX EL EL EL EL EL EL SIB SIB SIB SIB SIB SIB LMX LMX LMX LMX LMX LMX Estimate 443 342 1.000 1.100 894 1.006 739 946 1.000 1.042 1.078 1.026 319 720 1.000 1.115 1.125 796 984 732 S.E .086 081 C.R 5.134 4.223 P *** *** 100 085 093 106 101 10.975 10.518 10.771 6.962 9.349 *** *** *** *** *** 093 105 096 091 093 11.263 10.290 10.727 3.505 7.732 *** *** *** *** *** 122 129 115 116 121 9.135 8.694 6.914 8.520 6.043 *** *** *** *** *** Label 69 ... CITY International School of Business TRAN PHONG Factors influencing service innovative behavior: Evidence from Vietnam MASTER OF BUSINESS (HONOURS) SUPERVISOR: Dr NGUYEN THI MAI... paper examines the factors that influence service innovative behavior with the following purposes:  Examining the impact of ethical leadership influencing service innovative behavior through LMX... and innovative factors that create good working environment where motivate employees perform positive behavior at work (Hansen et al., 2013; Lu & Guy, 2014) Service innovative behavior Service innovative