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Wednesday, August 22, 2007

Doing Business in Vietnam

Since Vietnam introduced its "renovation" (doi moi) liberalization policy in 1986, there has been a spottily documented increase in use of management styles and practices associated with market-oriented economic activity.

A street in Hanoi
Source: http://live.huymoller.com/

One study, focused on strategies of upward influence, was published last year by the prolific David Ralston and four colleagues.1 The authors explain that in their paper
We explore the ethical facets of within-company upward influence behavior. Our focus is Vietnam, where only minimal research has been conducted, with comparison data from China, France, and the U.S. — countries that have had both past and present relationships with Vietnam. Our hypotheses are developed within the contexts of the historical, business ideology [political, economic and technological orientation], and socio-cultureal relationships that Vietnam has shared with these countries. The findings indicate that Vietnam is largely unique unto itself regarding the perspective on upward influence ethics that is held by its professional workforce.
The authors' measurement tool is the Strategies of Upward Influence (SUI) instrument described in earlier posts. Their most interesting finding is that the professional and managerial-level employees from Vietnam registered distinct differences from their counterparts in China, despite the centuries-long influence exerted by China on Vietnam, and the continuing similarities in the countries' socio-cultural and business ideologies.

Another finding of note was the similarity in perceptions of destructive upward influence behaviors on the part of the Vietnamese and US respondents, who gave significantly lower ethical ratings to these behaviors than did the Chinese and French respondents. (As the researchers expected, the US managers scored significantly higher than the Vietnamese both on the organizationally beneficial behaviors and on the self-indulgent behaviors.)

A final, key conclusion of this study is that "general knowledge of history, business ideology, and culture, while very important, is not sufficient to predict behavior."

An earlier study, by Truong Quang of the Asian Institute of Technology in Bangkok and Nguyen Tai Vuong of the Hanoi University of Technology, introduced in yesterday's post, looked at management styles and practices used by businesses in Hanoi.2 Specifically, the authors address three questions:
  • Which management styles typically prevail in Vietnamese companies?


  • Are there any differences in management style between state-owned enterprises, private companies, and joint ventures?


  • What is the relationship between the management styles and organizational effectiveness of these companies?
To answer these questions, Truong and Nguyen used seven of Khandwalla's ten management styles: bureaucratic, familial, conservative, participative, authoritarian, intuitive, and entrepreneurial. (The professional, organic, and altruistic styles were omitted as irrelevant for Vietnam's situation of evolving away from central planning toward a market economy.) The authors also used Culpan and Kucukemiroglu's taxonomy of management practices.

Truong and Nguyen find that:
  • There were statistically significant differences in management style among the three sectors, though none of the differences were large in practical terms.

    State-owned companies were most likely to use the bureaucratic style, but the familial style was almost as widely represented.

    In the private sector, the familial style was the most widely used.

    For joint ventures, the most widely used style was the participative, followed closely by the bureaucratic style. (Note that most of the Vietnamese partners of the surveyed joint ventures were state-owned enterprises.)


  • With respect to management practices, only supervisory style showed statistically significant differences among the three sectors. (I.e., there were no statistically significant differences for decision making, communication pattern, control mechanism, interdepartmental relations, and paternalistic orientation.)

    All three sectors showed the highest scores for "Leader pays attention to employees' interests" and "Close supervision." Conversely, the lowest scores for all three sectors were for "Delegation of authority to subordinates."

    The only notable difference in practical terms was between the state-owned enterprises and private enterprises on the one hand, and joint ventures on the other. The former showed higher scores than the latter on "Amount of direction given from the top." Conversely, the former showed lower scores than the latter on "Encouraging work teams."
Truong and Nguyen conclude by recommending that "a comprehensive change strategy, applicable for all enterprises in Vietnam, should be generated and led by a more dynamic and creative contingent of managers who are willing to facilitate active employee participation and to take personal responsibility." It remains to be seen how much scope for such changes the ongoing implementation of the doi moi policy allows.

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1 David A. Ralston, Jane Terpstra-Tong, Isabelle Maignan, Nancy K. Napier, and Van Thang Nguyen, "Vietnam: A Cross-Cultural Comparison of Upward Influence Ethics" (pdf), Journal of International Management, Vol. 12 (2006), pp. 85-105.

2 Truong Quang and Nguyen Tai Vuong, "Management Styles and Organisational Effectiveness in Vietnam," Research and Practice in Human Resource Management, Vol. 10, pp. 36-55.

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