In the age of rapid digitization and globalization, companies worldwide are facing increasing pressure to innovate, increase productivity, and increase competitiveness. While this emerging trend is clearer than ever when looking at the rise of “computational entrepreneurship” in developed countries, what remains elusive is whether this is the case in developing countries (Vuong 2019a
). In order to foster a more technologically advanced entrepreneurship, it is first and foremost necessary to go back to the micro level and examine the factors that affect firm performance, whether high- or low-tech. Understanding firm performance requires a thorough grasp of a firm’s characteristics and its entrepreneurial endeavors. The current research looks at the transitional economy of Vietnam whose emerging market characteristics have captured the interests of academics over the past decades. Through an investigation of the performance of nearly 700 listed companies on Vietnam’s stock markets, this study will triangulate the empirical results of three different indicators of a firm’s performance: net income per employee, return on assets (ROA), and return on equity (ROE). It is hoped that robust evidence on the correlates of firm performance can be found. As such, the current study not only adds to the related literature on the issue, but also highlights, once again, a gap in the application of technology among public companies in Vietnam. The next subsections will review the relevant studies that have been done all over the world and in Vietnam to call attention to the scanty empirical evidence coming from the emerging market of nearly 100 million people with the Gross Domestic Products (GDP) at USD 204 billion in 2015 and a growth rate over 6% since then (Vuong 2019b
1.1. Studies on the Correlates of Firm Performance around the World
Given the importance of explaining firm performance, a large volume of research in this area has focused on uncovering various factors associated with firm performance. Considering the effect of female leadership, there is more evidence for the positive impact of having a female in the top position of a company on their performance. Dezsö and Ross
) analyzed 15 years of panel data from the S&P 1500 firm and found having a female in top management does improve firm performance, given that innovation is the focus of a firm’s strategy. Dezsö and Ross used Tobin’s Q as the primary measure of firm performance. In a similar vein, Lückerath-Rovers
) found that companies with women on board are performing better than those without through analyzing 99 listed firms in the Dutch Female Board Index. Using different measures of performance, such as return on assets (ROA), other studies found a positive correlation between having female in the board of directors and performance (Carter et al. 2003
; Krishnan and Park 2005
). In contrast, in a Danish study, Rose
) did not find any significant relationship. This inconsistency might be explained by the sampling methods or cultural factors or even study designs. In many cases, it is a not a straightforward link between having women directors and better performance. For example, a study in China investigated this question among China’s listed firms from 1999 to 2011 and found the type of ownership can be a mitigating factor: state-controlled firms are less likely to benefit from having female leaders (Liu et al. 2014
Regarding competition as a correlate of firm performance, Ospina and Schiffbauer
) attempted to measure a firm’s productivity in four different ways, among which the total factor productivity (TFP) is employed under an augmented Cobb–Douglas production function. They found that in countries that reformed during 2004, firms experienced a more pronounced increase in competition and in turn, productivity. Pressure from international competition can also exert positive influence, greater international competition enlarges the relevant market and can affect both the number and the type of competitors a firm faces (De Loecker and Van Biesebroeck 2018
). Regarding competition effects across product markets, high rent firms (firms that are able to earn profits beyond a competitive level) had consistently lower productivity growth than low rent firms (Nickell 1996
). More recently, Bourlès et al.
) considered the impact of competition in intermediate goods markets on downstream productivity. Notably, their evidence shows that anticompetitive upstream regulations have significantly curbed TFP growth, particularly for firms that are close to the productivity frontier.
In 2012, Wager surveyed the literature on international trade and firm performance attempting to establish the links between exports and imports activities and various dimensions of firm performance (productivity, wages, profitability, and survival). Wagner found that a large amount of empirical studies in various countries points to the same direction: international training firms perform better in terms of productivity than nonexporters and nonimporters. However, this trend must be interpreted with caution due to the absence of comparable sample size (Wagner 2012
). Andersson et al.
) presented an analysis of international trade engagement of Swedish firms, showing the relationship between firm performance and international trade is not straightforwardly about a firm being an exporter or nonexporter; the geographical nature of export and import activities also has a statistically significant effect on firm’s productivity. In a study on Portuguese manufacturing firms, two-ways traders are shown to perform better than only exporters or only importers. Moreover, intensity of international training activities, diversity of market goods, and destination of products are also explanatory for better performance (Silva et al. 2013
). A study in 2018 suggests the gain in firm performance is three times higher than the direct costs of export promotion (Munch and Schaur 2018
Considering the relationship of wage and firm performance, an empirical study using a dataset of 200,000 French firms between 1995 to 2007 found that firm size regulation seems to result in a loss in productivity as many productive firms choose to stay below the threshold of firm size to avoid regulation. These productive firms are allocated too little employment and must bear implicit labor tax; the reducing equilibrium wages encourages more people who work as small entrepreneurs rather than working as employees for more productive firms (Garicano et al. 2016
). Regarding firm size, empirical studies on corporate finance have commonly used firm size as an important and a fundamental firm characteristic. This factor is worth considering given that business regulations or taxation policies often differ among big, medium, and small firms, which would in turn affect the firm’s performance (Garicano et al. 2016
). Additionally, firm size is empirically found to have positive association with capital structure, such that bigger firms may have higher leverage in external financing (Kurshev and Strebulaev 2015
). On the relationship between firm size and firm performance, studies have sought to compare the level of competitiveness or corporate social performance between small and big firms. For instance, Wolff and Pett
) noted that when it comes to the internationalization of small U.S. firms, the larger ones did show competitive patterns consistent with their size-related resource base, as opposed to the smaller ones. Meanwhile, scholars have confirmed the positive correlation of corporate social performance and financial performance in firms with a large size (Orlitzky 2001
; Schreck and Raithel 2015
). In terms of sustainability performance, small and medium enterprises, particularly in the food supply chain, are found to be more susceptible to high social, environmental, and economic pressures than larger enterprises. In one study in Turkey, the researchers found a positive correlation between the size indicators of a firm and its performance (Doğan 2013
Researchers have also tried to uncover other factors that can influence firm performance. Sun and Yu
), for example, found a positive correlation between performance (measured by sales per employees and net income per employee) and Corporate Social Responsibility (CSR) practices and firms without. Choudhary
) looked at the impact of smartphones use on net income per employee and found they have a positive correlation. Camisón and Villar-López
) analyzed a dataset of 144 Spanish firms and found that organizational innovation does have a positive effect on technological capabilities, which in turn tends to cause better firm performance. A study on 89 high-tech firms in Jiangsu province, China revealed that knowledge sharing, whether explicit or implicit, does support innovation and performance (Wang and Wang 2012
). A study in Tunisia looked at the relationship between information and communication technologies (ICTs) use and the performance of Tunisian SMEs (measured by net profit margins) and showed there is a significant association between the level of ICT use and firm performance (Piget and Kossaï 2013
). The research area where correlates of firm performance are studied does fall into the larger context of understanding corporate governance. Interesting studies have been carried out, for example, on market competition (Giroud and Mueller 2011
), CEO tournament as governance (Coles et al. 2017
), compensation incentives (Core and Guay 1999
), or mutual monitoring of executives (Li 2014
) as governance mechanisms.
As shown above, although the literature on firm performance around the world is truly diverse, the same cannot be said about business research in Vietnam, an emerging economy which has only entered the lower middle income rank recently (Vuong 2019b
). The next section will cover the meager ground of research on firm performance in Vietnam.
1.2. Studies on Firm Performance in Vietnam
In the recent years, Vietnam’s now nearly 100 million people has been enjoying continuous economic growth for over 30 years, in this success, entrepreneurship and internationalization of the economy have played a crucial role. The state-led economic reform in 1896 has brought radical changes to the country; the country’s GDP per capita has reached to nearly US$
2300 in 2015 from only US$
217 in 1989 (Vuong 2019b
). It is estimated that in just 8 years from 1991 to 1999, there were around 40,000 newly established companies (Pham and Vuong 2009
). Following this first generation of business ventures, the number of small and medium sized enterprises (SMEs) continued to increase from 349,000 in 2009 (Vuong and Tran 2009
) to around 500,000 in 2017 (Nhan Dan 2017
). In 2015, Vietnam was considered one of the most globalized populous economies in the world (Kopf 2018
Recently, the arrival of Industry 4.0 has marked a new era for entrepreneurship in Vietnam (Vuong et al. 2019
), the next generation of business ventures is now operating ever more on complex computational platforms, marking a shift to a new form of entrepreneurship: computational entrepreneurship (Vuong 2019a
). In 2017, it is reported that Vietnam is among the countries with the highest total early-stage entrepreneurial activity—23.3%—and a significant entrepreneurial spirit index—0.26 (GERA 2018
). Some of the successful startups are digital, such as Foody—a food delivery app, or Tiki—an e-commerce website, or WeFit—a fitness app allowing users to use gyms around a city.
Given the importance of successful entrepreneurship for Vietnam, it goes without saying understanding which factors influence firm performance is crucial. However, research in this area remains meager and scattered over the years, especially when it comes to listed companies. A comparative study between Thai and Vietnamese SMEs in 2003, found the difference in entrepreneurial orientation between Thai and Vietnamese business owners lead to difference in firm performance. Thai SMEs are more innovative and proactive, while Vietnamese SMEs are likely to take risks. Thai SMEs have higher perceived business growth, job creation, and net profit than Vietnamese SMEs (Swierczek and Ha 2003
). Another study examined the impact of privatization by comparing the pre- and postprivatization financial and operating performance of 121 former state-owned enterprises (SOEs) (Truong et al. 2006
). The results highlighted significant hikes in profitability, revenues, efficiency and employee income, in addition to confirming the key determinants of better performance to be firm size, residual state ownership, corporate governance, and stock listing (Truong et al. 2006
More recent studies also noted that when ownership is concentrated, firms with residual state ownership see poorer performance than those with foreign ownership (Phung and Hoang 2013
; Phung and Mishra 2016
; Tran et al. 2014
). These findings, however, are contested as another research that used data of listed firms in Vietnam reached the opposite conclusion—that foreign ownership turns out to have a negative impact on firm performance but positive impact on capital structure (Phung and Le 2013
). Moreover, in a resource-constrained setting such as Vietnam, Vuong
) shed light on the significant relationships between operational scales, financial resources and firms’ performance, all the while highlighting the importance of an innovation strategy, as opposed to factors such as firm size, sales, and growth rate to Return-on-equity (ROE).
In a different approach on evaluating firm performance, Vo and Nguyen
) looked at a set of variables related to corporate governance. Particularly, upon analyzing a dataset of 177 listed Vietnamese companies from 2008–2012, the authors found that duality role of CEO and board independenance are positively correlated with firm performance. However, there was no empirical support for a relationship between board size and firm performance (Vo and Nguyen 2014
). Additional studies have even noted a positive association between a firm’s long-term credit financing relationship with banks and firm performance (Thanh and Ha 2013
), a significantly negative relation between firm’s debt ratio and its performance (Le and Phan 2017
), a positive correlation between corporate social responsibility disclosures and firm value (Nguyen et al. 2015
), and a significant and positive relationship between board diversity and earnings quality (Hoang et al. 2017
), to name a few.
Overall, it is clear that there are a wide range of approaches in studying factors that are associated with firm performance in Vietnam. Most research articles in this area tend to focus on capital structure, board diversity, and ownership. Another striking issue is that measure of firm performance in Vietnam appears to vary greatly, which is also an issue for research studies around the world. For example, Vu et al.
) used Return on Assets (ROA), Swierczek and Ha
) used net profit, and Vo and Nguyen
) used four measures (ROA), return on equity (ROE), Z-score and Tobin’s Q. It appears that firm performance measured using net income per employee has not been deployed in Vietnam. This paper will focus on this understudied area of the literature by analyzing the association between net income per employee and predictor variables such as firms’ wage, competition, age, and CEO’s sex. Analyzing pure cross-sectional data of 693 firms which are listed via the Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) indices using both OLS and quantile regression methods, this study will triangulate the empirical results coming from analyzing the correlates of three indicators of firm performance: net income per employee, ROA, and ROE.