Academic journal article International Journal of Business and Management Science

Determinants of the New Manufacturing Venture's Performance in Vietnam

Academic journal article International Journal of Business and Management Science

Determinants of the New Manufacturing Venture's Performance in Vietnam

Article excerpt

INTRODUCTION

Since Vietnam's economic reform program--officially called the "doi moi" ('renovation' in Vietnamese)--was launched in 1986, the Vietnamese economy has increasingly developed and experienced one of the prominent growths in the world. Over the past two decades the living standard in Vietnam has substantially improved and socio-economic achievement has also been impressively met; especially in terms of the presence of the newly established firms. The new ventures, mostly small and medium-sized enterprises (SMEs), have been a driving force for the development of Vietnam's economy. The new ventures in the manufacturing sector have proved their potential for development and have made a great contribution to the country's GDP and employment. According to GSO (2005), since the Enterprise Law (1) took an effect in 2000, there were more than 14,457 newly established enterprises in 2000 which is 2.5 times as much as in 1999. There were 19,800, 20,803, 26,023, 36,795, and 45,162 newly registered enterprises in 2001, 2002, 2003, 2004 and 2005 respectively. The numbers of newly registered manufacturing ventures were 2,340 and 5,005 in 2003 and 2004, respectively, in which manufacturing sector always account for the second largest one of total business activities. The share of GDP contributed by the new ventures is 24 or 25.5 percent. It has been estimated that in recent years, around 1.6 to 2 million new jobs were created by the new ventures while the foreign invested sector and state-owned enterprises (SOEs) only created a relatively small share of them (Ba, Hao and Thang, 2006), which is 30,000 jobs each year.

Obviously, the new manufacturing ventures play a crucial role in the national economy. It is not hard to understand why policy makers always issue preferential policies to develop this sector. However, in Vietnam's case, there is still a lack of empirical research about the new manufacturing ventures, especially studies about their characteristics, and the factors affecting their performance.

The studies on new venture performance in the world started in the 1980s, and afterwards many findings of these studies were implemented. They are still a hot topic nowadays (Gilbert, McDougall and Audretsch, 2006). Reviewing previous studies show that researchers already suggested quite comprehensive models on new venture performance. They also indicate important gaps in available literatures on new venture performance which is two key decision-makings: how and where the new ventures perform or grow are excluded. These seem to be the potential area for further investigation by the future researches. With this background information, the need for more empirical evidence, especially in Vietnam's situation addresses the need for conducting the current study. Thus, this study has attempted to examine the determinants that affect the performance of the new manufacturing venture in Vietnam.

This article is organized as follows: the following section briefly reviews the available relevant literatures on the models of new venture performance leading the development of the hypotheses. The methodology section discusses the data collection and sampling procedure, variables and their measurement. The data analysis, findings and discussion are reported in the following section. The final section presents the conclusion and implications of the study.

LITERATURE REVIEW

New venture performance has attracted the interest of many scholars researching about enterprises since the 1980s (Gilbert et al., 2006). First of all, it is necessary to discuss the definition of what is called a new venture. A new venture is generally defined as a firm that is created and organized to produce products and services to satisfy market demands for ultimate purposes of profit and growth. However, the different thing is that the new venture has not yet reached a mature phase in its process development. It takes for the new venture three to five years or more usually eight to twelve years after its creation to become a mature business (Sandberg and Hofer, 1987; Kazanjian and Drazin, 1990; Chrisman, Bauerschmidt and Hofer, 1998). …

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