Academic journal article Asian Social Science

Impact Evaluation of Training on Productivity of the Small and Medium Enterprises in Vietnam

Academic journal article Asian Social Science

Impact Evaluation of Training on Productivity of the Small and Medium Enterprises in Vietnam

Article excerpt

Abstract

This paper investigates the impact of investment in human capital (off-the-job training in short term) on productivity of the small and medium enterprises (SMEs) by using Propensity Score Matching (PSM) method with dynamic approach. The paper employs the data from two surveys on the SMEs in Vietnam in the year of 2009 and 2011 that provide detailed information about training and firm characteristics. The results found that training has significantly positive impact on the productivity of household business, but there is no evidence on the impact of training on productivity of the firms in formal sector in the short run; and there is no evidence on the impact of training activities on productivity in the medium run (one-or-two-year after training) for both household business and formal enterprises. Besides, qualitative approach shall be conducted to provide more description on training efficiencies in some specific cases.

Keywords: evaluation, matching, propensity score, SMEs, Vietnam, productivity, human capital investment

JEL Classification: J21, O15

1. Introduction

One of big issues in enhancing productivity of enterprises in Vietnam is the low investment in human capital that leads to employ low quality labor force with old technology. According to Thien et al. (2014), basing on equity criteria, the number of SMEs in Vietnam is 334608 enterprises, accounted for 97.5 percentage of the total number of enterprises. Albeit, major of Vietnamese enterprises with backward technology, low-qualified workforce are positioned in the lowest productivity group of the world, these enterprises do not have appropriate attention in training activities. Indeed, there are approximately 34 percentage of enterprises that have not human resource strategies in 437 investigated enterprises and the trained workers account for merely 30 percentage of labor total number (Tranh, 2013). The other survey on 800 investigated enterprises in 2013 in 6 big provinces and cities conducted by Thien et al. (2014) found that the percentage of enterprises having labor training policy is still at low level (approximately, Hanoi: 20%, HaiPhong: 40%, DaNang: 50%, BinhDuong: 40%, H°ChiMinh City: 28%, CanTho: 30%). In comparison to the other countries, Vietnam remains the static advantage with labor endowment and relatively low wages. The low qualified labor leads to low labor productivity with slow improvement. Due to the low qualified but highly endowment labor force (Vietnamese population in 2014 is 90 million people), Vietnamese enterprises have more motivation in employing several old technologies and cheap labor with low skill to enhance their profit. Therefore, the concentrate on exploiting this advantage rather than developing appropriate policies in technology innovation or in training as well as human resource management may be the major obstacle in productivity enhancement, transfer from labor intensive sectors to capital and knowledge intensive sectors as well as the higher value added product development.

Whether investment in training activities may enhance productivity is a great concern to enterprises; however, studies on impact of training on firms' productivity are still inconsistent. Some studies, such as Dearden et al. (2006), found considerable effects of training on productivity. However, Black and Lynch (2001) did not find any impact of training on productivity. These studies tried to establish effects of training on the firms' productivity as the first step in dealing with the argument between necessity of training and uncertainty in the impact of training on firm productivity.

Therefore, this study aims to investigate the impact of off-the-job training activities on the productivity of SMEs in Vietnam. In order to achieve this objective, the research will emphasize on answering the following question:

Research question: How is the impact of human capital investment (off-the-job training) on the productivity of SMEs? …

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