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The New Asian Dragon: Internationalization of Firms in Vietnam by Schaumburg-Müller, H. & Pham, H. C.
This book examines the internationalization process and strategies of firms in Vietnam. To examine these issues, the book presents 10 essays written by a team of scholars from four universities (Copenhagen Business School and Aalborg University of Denmark, National Economics University, and Foreign Trade University of Vietnam). It is the outcome of a cross-border research cooperation that took place over a 5-year period ending in 2009. These essays assess pivotal aspects of the internationalization process, mainly the strategies that Vietnamese firms employ in their insertion into the global value chain, the methods by which Vietnamese firms tap into the expertise of their foreign counterparts, and intercultural management issues.
The underlying message of the book is that Vietnam’s firms have been relatively successful in their integration into the global economy after the Doi Moi (renovation) reforms in 1986. Like the other Southeast Asian countries that have liberalized their economies in the preceding years, Vietnam has reaped the rewards of the reform measures as it has achieved an extraordinary level of economic growth post-1986. Against this backdrop of economic success, the book argues that only firms in a narrow range of industries (e.g., garments and textiles, footwear, and furniture) have been particularly successful (see chapter 1). To make matters worse, their success is unsustainable in the long run as it has largely been due to expansion in volume that also locks the firms in a “race to the bottom” on terms dictated by lead firms (usually from the developed world). The strictness of these terms implies that Vietnamese firms are trapped in low value-added activities in which the possibilities of upgrading (and conducting higher value-added activities along other nodes of the value chain) are limited. In addition, much of Vietnam’s growth is attributed to foreign direct investment (FDI) that dominates many of the country’s high technology and capital intensive industries. Moreover, Asian investors account for a substantial proportion of inward FDI. As of 2011, the three largest investors, in descending order, were Taiwan, Singapore, and South Korea. Following Vietnam’s gradual relaxation of investment rules (which necessitated the partnering of domestic firms, usually the state-owned enterprises, in the past), it is also increasingly clear that the owners of the FDI are less interested in establishing joint venture operations with Vietnamese firms, exacerbating the technological and expertise gap between Vietnam and the other countries. Nevertheless, the influx of FDI, along with the introduction of foreign expatriates, has led to a deeper intercultural understanding between the Vietnamese and their foreign counterparts.
Throughout the book, a balanced approach is evident as quantitative and qualitative methodologies are utilized effectively by the authors. For instance, chapter 4 unpacks the entry modes that foreign firms undertake—fully owned subsidiaries or joint venture—when they invest into Vietnam, and the rationale behind their choices. More specifically, the chapter argues that foreign firms are not only shying away from joint venture with Vietnamese firms, but also converting their existing joint venture operations into fully owned subsidiaries. Chapter 4’s thesis is supported by a masterful presentation of economic data obtained through the analysis of secondary data prepared by the Ministry of Planning and Investment, and primary data resulting from the surveys on investors and other experts in the field. A similar level of diligence is also seen in chapter 6’s analysis on the business cultures of Vietnamese firms and their Scandinavian counterparts operating in Vietnam. By subjecting the responses of close to 100 firms to robust statistical testing, it argues that there is some degree of difference between the two cultures although both sides do their best to bridge this gap. For instance, the Scandinavians emphasize gift giving just as much as the Vietnamese despite a strong stigma against the practice in their home countries. More importantly, Chapter 6’s results push the boundary of Geert Hofstede’s work on the influence of national culture on business practices, covering a hitherto relatively understudied subject, Vietnam. On the other hand, chapter 9 stands out with its qualitative approach, providing an in-depth documentation of the growth trajectory of a firm in the garment industry, one of the largest drivers of the Vietnamese economy. To this end, chapter 9 approaches the topic using the critical incident technique (CIT) because it sheds light on human agency, especially the entrepreneurs themselves, and on sector-specific incidents affecting the firm. Its focus on the key actors (the entrepreneurs) and the way they manage critical events is a refreshing perspective as it illustrates how firms can bolster their positions by exploiting strategic options within their respective economic sectors although the sheer diversity of these options can easily overwhelm (unprepared) firms. The broader implication of chapter 9 is profound because it suggests that firms from developing countries (e.g., Vietnam) need not be locked into performing low value-added activities on terms imposed by the lead firms with minimal opportunities for upgrading. Opportunities do exist for them to upgrade but they can only be fully exploited if a strong entrepreneurial spirit, technical competence, and innovative capability are all present.
Despite the book’s various merits, there is a lack of analysis on how the findings relate to governmental policies and the wider institutional setting. Although The New Asian Dragon is centered on firms and their activities, its (narrow) focus has inevitably obscured the “big picture” of firms and their interactions with the broader society and the government. As the various chapters assert, there is an imperative need for Vietnamese firms to move out of low value-added activities through a process of upgrading. Moreover, they also provide some advice for firms intending to upgrade. Nevertheless, the majority of the advice are not practical because they are too firm centric and do not engage substantially with governmental policies. In other words, it is difficult to encourage firms (in any industry) to upgrade without a corresponding level of understanding on governmental policies and the associated institutional setting.
In addition, there is also scant attention paid to the overseas Vietnamese business community, many of whom left the country in the immediate years following Vietnam’s reunification in 1975. To this end, a big proportion of these overseas Vietnamese have settled down outside of Vietnam and established their own businesses, some of which have long-standing ties with their “home” country. What is worth exploring is how these transborder Vietnamese communities contribute to economic development in their “home” country through the transfer of business practices, financial capability, and technological expertise back to Vietnam. One of the best examples of such a phenomenon is Henry Nguyen, who was forced to flee the former Republic of Vietnam (South Vietnam) for the United States after it was captured by the former Democratic Republic of Vietnam (North Vietnam). The new environment in the United States did not deter Nguyen as he excelled academically and professionally. More crucially, armed with a strong businessmen acumen and determination, he built on his success in the United States and was recently awarded a franchise to establish the McDonald’s chain restaurant in Vietnam. Although there has been some disquiet on the types and extent of patronage networks that are available to Nguyen (who is also the son-in-law of the incumbent Vietnamese prime minister), what is undeniable is that he is one of many successful overseas Vietnamese entrepreneurs contributing to the internationalization of firms in Vietnam. Research along such lines could also enrich the existing knowledge base on cross-border business networks based on ethnic ties and family relationships, an important topic within international political economy and economic sociology. Although these types of business networks have been depicted in a negative light in the immediate years following the 1997 Asian financial crisis, they are not necessarily always counterproductive. More often than not, these networks are vital mechanisms through which firms, industries, and economies interact with each other. The Vietnamese government is aware of this and has gradually changed its attitude toward the overseas Vietnamese and their business networks from suspicion to grudging respect, evidenced in the courting of Nguyen. In addition, the allure of a common ethnicity and the (likely) presence of an extended family network mean that these overseas Vietnamese are more likely to embed their operations in Vietnam than foreign investors of other countries. To this end, their local embeddedness has far-reaching implications for technology transfer, industrial linkages, and management control, all of which are vital for the Southeast Asian country’s development.
In summary, The New Asian Dragon is well organized as it balances the challenges of unraveling a difficult subject by focusing on the essential aspects of the internationalization process: the strategies that Vietnamese firms employ in their insertion into the global value chain, the methods by which Vietnamese firms tap into the expertise of their foreign counterparts, and intercultural management issues. The book’s organization, grounded approach, and attention to empirics also broaden its readership, making it accessible to even non-specialists. Furthermore, its emphasis on firms upgrading their operations to perform higher value-added activities (and to retain a higher level of profit) is especially laudable. Despite some of its shortcomings, the book provides the research, policy, and business communities with valuable insights on the multidimensional aspects of the internationalization of Vietnamese firms. The book is also recommended for general and specialist readers interested in the Vietnamese economy.
National University of Singapore, Singapore
Journal of Asia-Pacific Business
Vol. 15, Iss. 3, 2014
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