Antecesdents and consequences of dimensions of human resource management practices in vietnam ok

Int. J. of Human Resource Management 16:10 October 2005 1830– 1846

Antecedents and consequences of
dimensions of human resource
management practices in Vietnam

Le Chien Thang and Truong Quang
Abstract The purpose of this study is to extend the empirical research concerning the
impact of human resource management (HRM) practices on organizational effectiveness
into the context of developing and transitional economy countries. From a survey of 137
cross-sector companies, it was discovered that there are five dimensions of HRM practices
currently in use in Vietnam. Variation in the application of these dimensions can be partly
traced to several organizational characteristics, but most salient is the perception of
management on the value of human resources. In some dimensions, this variation
constitutes a source of the difference in the perceptual company performance. These
findings break new ground to propose a process for implementing HRM practices in
Vietnam.
Keywords

HRM practices; firm performance; HR value; Vietnam.

Introduction
When change is constant and competition is compulsory, companies have few choices
but to search for sources of sustainable competitive advantage. To do so, the resourcebased theory suggests companies develop and utilize rare, valuable, inimitable, and nonsubstitutable resources (Barney, 1991; Barney et al., 2001). The power of this idea, in
tandem with the recent realization that people working in the company are the source and
also the basis for utilization of both human and other resources, has led to the
examination of this theory for human resources. The theoretical analysis shows that
human resources (Wright et al., 1994) and human resource management practices as a
system (Lado and Wilson, 1994) match the condition of this theory and thus can confer
sustainable competitive advantage. There comes a new reality that human capital has
gradually gained increasing ground as a more intangible source of competitive advantage

over other traditional sources such as product technology, process, market regulation,
and access to sources of capital (Pfeffer, 1999).
Empirical evidence abounds to confirm the ‘success contributing’ role of HRM
practices. Numerous studies in the West (mainly in the US and the UK) point out that the
system of HRM practices helps to increase firm performance (Huselid, 1995; MacDuffie,
1995; Delery and Doty, 1996; Delaney and Huselid, 1996; Youndt et al., 1996;
Ichniowski et al., 1997; Ramsay et al., 2000). What is noticeable is HRM practices were
Le Chien Thang, Shinawatra University, Pathum Thani, Thailand (e-mail ).
Truong Quang, Asian Institute of Technology, Bangkok, Thailand (e-mail ).
The International Journal of Human Resource Management
ISSN 0958-5192 print/ISSN 1466-4399 online q 2005 Taylor & Francis
/>DOI: 10.1080/09585190500298420


Thang and Quang: Human resource management practices in Vietnam

1831

found to vary across countries (e.g. Bae et al., 1998) and the variation was hypothesized
to be attributable to cultural values (Ngo et al., 1998). This contextual influence explains
a growing proliferation of research of this kind in a wide diversity of non-Western
settings such as in Hong Kong (Ngo et al., 1998), Israel (Harel and Tzafrir, 1999), Korea
(Bae and Lawler, 2000), Russia (Fey and Bjorkman, 2001), Taiwan (Chang and Chen,
2002), and New Zealand (Guthrie et al., 2002). In the main, these studies consistently
find a positive direct relationship between HRM practices and firm performance.
On closer examination, it is also apparent that the way companies blend HRM practices
and the impact of those bundles on firm performance differs across studies. Hence, the
generalization of these results into other contexts, such as developing and transitional
countries, may confront the question of validity.
Remarkably, for the majority of countries belonging to the developing or transitional

world, where recent economic, political, and social changes offer different challenges as
companies implement HRM practices (Napier and Vu, 1998), there has been little
research effort on the impact of HRM practices on firm performance to delineate this
issue. To fill this void, this study aims to extend the emerging non-Western literature on
the firm-level impact of HRM practices into this less charted area. In this vein, Vietnam
emerges as an interesting test base for this purpose given its enormous ethnic, religious
and cultural diversity (McLeod and Nguyen, 2001).
Due to geographic conditions, the Vietnamese in the north are believed to be most
industrious and politically ambitious, while southerners are seen to be more easy going
and receptive to new ideas and methods. The ethnic Chinese are, in particular, recognized
for their high sense of business and entrepreneurship, whereas other ethnic groups (53 in
total) are still lagging in many aspects of the fast moving society. Thanks to their well
established clan networks and community solidarity, the Chinese have played an active
role in the economic landscape of Vietnam throughout consecutive political changes, yet
they still form the backbone of the recently reviving private enterprises, which are
concentrated in Cho Lon – the Chinatown of Vietnam in the south. The locus of power is
practically in the hands of the Kinh (the Vietnamese) in the north, where the siege of the
government and a large number of state-owned enterprises (SOEs) are located.
Besides a high degree of ethnic diversity, Vietnam carries along in its history a notable
complexity of religious influences, such as Confucianism, Taoism, Buddhism,
Christianity, Hinduism, Islam and even locally founded religious sects (e.g. Cao Dai
and Hoa Hao). They have, surprisingly, co-existed and developed with one another
without much conflict, as ‘the Vietnamese hardly ever accepted beliefs or practices
completely as presented to them; instead they adopted and adapted foreign traditions,
blending them with indigenous beliefs and with each other’ (McLeod and Nguyen,
2001).
Typically, as a product of the country’s socio-cultural idiosyncrasy, HRM practices in
Vietnam reflect the slow and cautious evolution of a complex system in an attempt to
address the concerns and benefits of all stakeholders.
Against this backdrop, this study aims to: (1) identify the dimensions of HRM

practices currently in use in Vietnam which represents one of the ethnically and
culturally diversified developing economies in transition; (2) trace the determinants of
these dimensions from the organizational characteristics; and (3) examine the impact of
the dimensions of HRM practices on organizational effectiveness. The conceptual
framework for the research is presented in Figure 1.


1832 The International Journal of Human Resource Management

Figure 1 Conceptual framework of the study

Theoretical background and hypotheses
The ready imitability of individual HRM practices prevents companies from relying on
such practices per se for competitive advantage (Wright et al., 1994). However, the
system of HRM practices (set of interrelated practices used in combination) can bring a
source of competitive edge (Lado and Wilson, 1994; Wright et al., 2001), thanks to the
complexity of combination and synergistic nature among HRM practices. Empirical
research adopting this systemic view has shown a positive relationship between systems
of HRM practices and various indicators of organizational effectiveness (e.g. Huselid,
1995; MacDuffie, 1995).
Under the systemic view, recent studies either examine predetermined combinations
of HRM practices (some even narrow it down to a single index to represent a total
system of HRM practices) or develop and empirically verify key dimensions of a
company HRM system by factor analysis (Becker and Huselid, 1998). The latter
approach is more appropriate to capture variations in the formation of dimensions of
HRM practices due to contextual influences. This study adopts the same approach by first
identifying some primary HRM dimensions from the literature and then conducting an
exploratory factor analysis to pinpoint precisely the dimensions of HRM practices arising
in companies currently operating in Vietnam.
Dimensions of HRM practices and organizational effectiveness

Previous research relying on factor analysis did not render uniform dimensions of HRM
practices, in part due to the inclusion of different practices to reflect the contexts under
study. Early research by Huselid (1995) anticipated that HRM practices could be grouped
into dimensions that augment employee skills, motivate employees, and organize the
workforce, but such practices have been consolidated in two factors. One factor concerns
compensation while the other is a blend of development and organizational structure.
Other research undertaken in Hong Kong identified two slightly different reliable factors:
‘structural training and development’ and ‘retention-oriented compensation’ (Ngo et al.,
1998). Although the two studies resulted in closely related dimensions of compensation,
that of the latter tied also to retention. Fey and Bjorkman (2001) reviewed the literature
and came to expect four factors of training and development, employee pay system,
employee feedback, and workplace organization, but their empirical evidence from
Russia revealed three factors including ‘development’, ‘feedback’, and ‘pay/organization’. This outcome created a clearly defined factor of development (which was very
similar to but clearer than Ngo et al. (1998)) and a feedback factor (which contained
items on up –down communication), but combined items related to payment and
organization into a single factor. Thus, the literature suggests that although some of the
dimensions in previous studies are mixed together, there exist at least four dimensions of
HRM practices: training and development, information exchange, compensation, and
workforce structure. One possible source for this variant application of HRM practices
is the influence of cultural values on the practices of HRM (Ngo et al., 1998).
This stresses the need for identifying the HRM dimensions in context.


Thang and Quang: Human resource management practices in Vietnam

1833

Our factor analysis for the sample of Vietnamese companies revealed five dimensions
of HRM practices, namely information exchange, performance management, training
and development, group orientation, and retention management (Table 1). The theoretical

analysis of each dimension is given below.
The first dimension of HRM practices is composed of six
practices, which are mainly related to the exchange of information within the companies.
Communication across departments is an important ingredient of the information
exchange process since it helps to facilitate the coordination of efforts among different
parts of the organization (Robbins, 2003). At the individual level, companies may also
give employees opportunities to participate (an intrinsic reward) in decision making so as
to account for the opinions of those who will often be in closer touch with implementing
decisions later on. Such participation is expected to increase the commitment of
employees to the decisions because they have a share in them. Empirically, employees’

Information exchange

Table 1 Rotated factor solution for HRM practices
Factor loadings
1
1 Information exchange (a ¼ .828)
Interdepartmental communication
Participation in decision making
Information sharing programmes
Employee attitude surveys
Complaint resolution systems
Job analysis for training demand
2 Performance management (a ¼ .785)
Result-emphasized performance appraisals
Job security
Job analysis to set realistic
job performance standard
Performance vs. seniority based promotion
Company profit/sales in bonus

3 Training and development (a ¼ .748)
Management training
Technical/professional training
Employees transfers used as developmental
activities
Assistance in career planning
4 Group orientation (a ¼ .582)
Seniority-based compensation
Teamwork
Group performance in pay
5 Retention management (a ¼ .627)
Retention-intended pay and bonus
Industry-attractive pay level
Non-entry jobs filled within the firms
Variance
Cumulative variance

2

3

.736
.695
.671
.564
.546
.524

.169
.137

.253
2 .057
.294
.362

2.007
.308
.096
.293
.061
.361

.055
.081
.109
.218
.032
.218

.232
.295
.030
.255
.422
2.207

.149
2.049
.217

.809
.800
.643

.121
.074
.057

.091
.129
.153

.117
.209
.218

.488
.311

.595
.575

2.012
.157

2 .007
2 .096

2.011
.151

.219
2.107
.479

.012
.234
.132

.865
.808
.572

.042
2 .004
2 .153

.057
.160
2.085

.380

.016

.495

.412

2.023

2.029
.085
.437

.024
.095
.167

.062
2.067
.097

.758
.678
.581

.215
2.112
.088

.070
.308
.397
17.44
17.44

.261
.217
.250

14.35
31.79

.197
2.001
2.089
11.47
43.26

.242
2 .239
.212
9.07
52.33

.753
.633
.459
8.75
61.08

Notes
n ¼ 137; bold type indicates the factor to which HRM practices best loaded.

4

5


1834 The International Journal of Human Resource Management

participation in decision making has been proven to have a positive influence on
employee productivity, motivation, and job satisfaction, though the impact is modest
(Robbins, 2003: 195). Similarly, the sharing of information on company activities from
the upper levels helps employees keep abreast of what is going on in the company so that
they can best align their efforts with company activities. Furthermore, the arrangement of
employee attitude surveys and complaint resolution systems offers employees a channel
to voice their ideas, opinions, concerns, desires, grievances, or needs to the upper levels
in the organization for their perusal and action. It is critical to have timely information on
these issues so that responsive measures can be taken. Finally, companies can conduct
job analysis to seek information from the employee side about training demands for
mutual benefit. This will provide more insightful knowledge on how employees should
be prepared to perform better on the job. All these methods, if used in appropriate
combination, will facilitate and accelerate the downward, upward and sideward flow of
information within the organization. Well-channelled information will help people to
make good decisions and to implement them more effectively, thus contributing to the
company performance in the end. Therefore, it would be expected that:
H1:

The utilization of information exchange within the company is positively
related to firm performance in Vietnam.

Performance management A variety of practices was used by companies in Vietnam to
reward their employees. The application of result-emphasized performance appraisals
will direct employees’ effort into what is valued by the company and provide objective
criteria to improve fairness in recognizing employees’ contributions.
To begin this process, the companies may conduct job analysis to set realistic job
performance standards in order to compensate jobholders fairly (Werther and Davis,
1996). Empirical evidence for the activation theory confirms that optimized performance
of employees is achieved at a realistic intermediate job demand (one that is neither too
low nor too high) and that fairness perception moderates the curvilinear relationship

between job demand and job performance (Janssen, 2001). Also, as a part of the
performance management, the sharing of the financial success, which employees’ efforts
help to generate, in the form of a bonus contingent to company profit or sales will
motivate employees to work harder since they know their effort will be paid off.
In addition, companies that provide job security for employees convey to them a
signal of commitment toward employees and opportunities for long-term career
development in these companies. This practice, if used together with a promotion policy
that is based on performance instead of seniority, will likely encourage employees to
perform at their fullest potential to be promoted on their way to build a long-term career
in a company. Hence, the following hypothesis is proposed,

H2:

Companies exercising more performance-based management have higher
performance.

Companies in Vietnam utilized four HRM practices
in association in their efforts to develop their human resources. Companies which invest
in both technical and management training seem to benefit from the enhanced skills and
knowledge of their human capital. In fact, training and development are indispensable
as a performance enhancer in a variety of settings (Harel and Tzafrir, 1999; Delaney
and Huselid, 1996). Obviously, training and development are particularly pertinent
to companies, start-up or established alike, in Vietnam as an effective tool to fix

Training and development


Thang and Quang: Human resource management practices in Vietnam

1835

the performance gaps, given the chronic shortage of skilled labour caused by the failure
of the country’s education system to meet the human resources requirement of
companies (Quang, 1997; Kamoche, 2001). As pointed out in a recent report, only about
one third of the companies in operation are satisfied with the qualifications of their new
recruits (Saigon Times Weekly, 2002).
Companies may also rotate employees across different jobs as an alternative for
training and development. Employee transfers used as developmental activities allow
employees to broaden their skills and avoid the boredom of work repetition (Herzberg,
2003).
After all, providing employees with assistance in career planning, if done properly,
will encourage employees to take responsibility for their personal development and at the
same time direct these efforts in harmony with the company’s strategy. This practice has
been included as an important part of high performance HRM practices in many studies
(e.g. Huselid, 1995; Fey and Bjorkman, 2001; Guthrie et al., 2002). It has also been
shown that a manager’s support for career development explained significant variance in
employees’ willingness to participate in development activities and developmental
behaviours (Noe, 1996). Thus, we put forward that:
H3: There is a positive association of training and development with firm performance.
Group orientation This factor reflects the Vietnamese culture rather well. In this
aspect, China, Japan, Korea and Vietnam are considered part of the same cultural region,
which has been influenced by a common Confucian heritage (Hung et al., 1999).
The Confucian value highly respects seniority, which comes into play in the form of
seniority-based compensation in the work setting. In addition, the high collectivism of the
cultural values in Vietnam (Ralston et al., 1999) harmonizes with the preference for
teamwork in organizations. As one study illustrated, teamwork is positively associated
with organizational commitment and work satisfaction among Vietnamese employees
(Hung et al., 1999). Concurrently, the egalitarianism practice resulting from socialist
ideology puts group performance in pay as a standard to reward group effort. To a certain
degree, the blend of these practices could be a reflection of a mentor system, which can

be observed in many Vietnamese companies. The underlying feature of this system is
that a senior person who is more experienced and competent is designated as a group
leader to sponsor and guide other less senior persons in the group work arrangement.
Group work, if arranged properly, will stimulate members to pool innovative ideas,
solutions, and suggestions that can only come as a result of synergistic collective
wisdom, and thus contribute to performance improvement. As a result, it is hypothesized
that:

H4: Companies with more group orientation will achieve higher performance.
The serious shortage of skilled labour in Vietnam (Quang,
1997; Kamoche, 2001) and the more flexible employment opportunities among the
younger generation in the Vietnamese workforce at present (An, 2002) have made
employee retention an important issue for HRM practices of Vietnamese companies.
The three building practices of this dimension were also identified as salient ingredients
of HRM practices in other Asian research (Ngo et al., 1998).
First, a policy of pay and bonuses that intends to promote retention will likely help to
tie employees voluntarily to the company since the general standard of living in Vietnam
is still low. The reported gross national income (GNI) per capita in 2000 was US$390 or

Retention management


1836 The International Journal of Human Resource Management
US$2,000 in PPP equivalent (World Bank, 2002: 20). In fact, monetary reward is found
to positively relate with employee job satisfaction in Vietnam (Hung et al., 1999).
Second, in combination, companies may package their compensation more attractively
compared to the industry average to retain people. Better compensation conveys a
message that the company values its people. In return, employees can view the surplus
income as a gift and hence work more industriously (Pfeffer, 1999).
Finally, promotion from within is one of the effective HRM practices as in most

studies (for example, Huselid, 1995; Ngo et al., 1998; Fey and Bjorkman, 2001; Guthrie
et al., 2002). The availability of internal promotion opportunities binds workers who seek
career advancement to companies offering such chances. At the same time, it creates an
incentive for employees to perform well so as to earn the monetary and status rewards
brought by promotion (Pfeffer, 1999). On this basis, we propose that:
H5:

Higher firm performance is found in companies emphasizing more on retention
management.

Influence of manager’s perception of HR value on the HRM practices
Previous case studies or research on the adoption of HRM practices among companies in
Vietnam have usually been based on types of company ownership, the size of the
company (the number of employees), the degree of exportation, and union status (Zhu,
2002), leaving unexplored the interesting aspect on what, if any, is the role of a
company’s top management. Management philosophies and core values certainly affect
the managerial practices of a company. If the management of a company considers HR an
important source of productive capabilities to achieve efficiency and effectiveness in its
operation, the company is likely to adopt HRM practices to utilize the human capital as
fully as possible. Empirical evidence in other countries (Lewin and Yang, 1992; Bae and
Lawler, 2000) supports this analysis. However, the relevance of this analysis remains a
question for the context of Vietnam. Under the pressure of increasing competition, the
criticality of HR in business success has been underscored by companies in Vietnam
(Quang and Thang, 2004). In the face of such a pressing need for HR, companies are
expected to take action to improve their human capital. Hence, we extend the hypothesis
that:
H6:

The higher the value top management gives to human resources, the higher the
extent of dimensions of HRM practices is likely to be found in a company.

Research methods
Measures
HRM practices were adapted from Ngo et al. (1998) and Fey and Bjorkman (2001) and
pilot tested with companies operating in Vietnam for content validity. As in Fey and
Bjorkman (2001), the use of HRM practices was measured on five-point Likert scales
from 1 ¼ ‘to a little extent’ to 5 ¼ ‘to a great extent’.
Measuring firm performance by ‘bottom line’ measures such as ROE, ROA is always
desired by both business practitioners and academics. However, getting Asian companies
to disclose reliable financial data is often difficult and the data are not comparable
across firms (Bae and Lawler, 2000). In addition, though not as strong, subjective
measures of firm performance have been shown to correlate well with objective measures
(Geringer and Hebert, 1991; Powell, 1992). Hence, analogous to many prior studies


Thang and Quang: Human resource management practices in Vietnam

1837

(to name but a few, Delaney and Huselid, 1996; Ngo et al., 1998; Fey and Bjorkman,
2001), this study used perceived organizational and market performance adapted from
Delaney and Huselid (1996). Respondents were asked to compare how their firms have
been performing regarding market share, sales growth, profitability, quality of
products/services, development of new products/services, employee satisfaction, ability
to retain essential employees, and ability to attract critical employees to other
organizations that do the same kind of work (where 1 ¼ significantly lower, and
5 ¼ significantly higher). The first three measures were averaged to form a composite
measure for perceived market performance, while the rest was used for perceived
organizational performance.
The management perception of human resource value was measured with items

adapted from Lewin and Yang (1992) on a five-point Likert scale to reflect the
prioritization of human resources, the valuation of human resources relative to financial
resources, and the management belief about human resources as a strategic asset and a
critical contributor to the firm’s overall performance.
Sample and data collection
A mail survey was conducted during February and March 2003 to collect data. A list of
1,486 identifiable companies with at least 100 employees was compiled from the
Business Directory in Ho Chi Minh City. The city was chosen for data collection because
it is the major economic centre of the country where business activities are most dynamic
and concentrated. Contacts via mail were initially made with a HR manager, head of
personnel department, general manager, or those who are in charge of HRM aspects
of the company. A two-step mailing approach was taken to create a favourable response.
In the first mailing, two sets of questionnaires, a sympathy provoking cover letter with
confidentiality assurance and two postage-paid return envelopes were directed to target
respondents to boost the willingness to participate. With the same intention, a formal
letter of introduction from the Ho Chi Minh University of Technology was attained and
included. The targeted mail receivers were asked in the cover letters to fill in the first
questionnaire seeking information on HRM policy and practices and forward the
second questionnaire asking about perceptual firm performance to one appropriate
member of the board of directors. Such an approach to gathering information on one
company from separate sources aimed to address the problem of common source bias;
that is, raters tend to relate the degree of utilizing HRM practices with firm performance
if they are asked for both. After two weeks, a reminder letter was sent to non-responsive
managers as another follow-up attempt to engage their response.
Finally, 137 valid pairs of questionnaires were returned making for a yield rate of 9.4
per cent. This falls in the range 6–28 per cent in similar kinds of research (Guthrie et al.,
2002: 187). The sample consisted of 42.3 per cent state-owned enterprises (SOEs), 27 per
cent foreign-invested companies, 15.3 per cent equitized companies (partially
privatized), and 15.4 per cent local private companies. By industry, companies split
into 54 per cent in manufacturing, 19 per cent in service, 3.6 per cent in transportation,

8.8 per cent in construction, and 15.3 per cent in commerce. Considering the usually low
habit of taking part in survey research in Vietnam, the response rate was considered
statistically acceptable and valid.
Data analysis
This study used three main multivariate data analysis procedures: (a) factor analysis to
identify the dimensions of HRM practices; (b) hierarchical multiple regression which


1838 The International Journal of Human Resource Management
controlled for a series of variables comprising firm size, firm age, industry, ownership,
union status and exportation to test the proposed hypotheses; and (c) general linear model
to investigate the variations of dimensions of HRM practices due to organizational
characteristics. In addition, reliability analysis procedure and general linear model were
also applied to assess scale reliability and potential non-response bias.
Potential non-response bias
The low response rate might raise concerns about whether the companies in the sample
provided sufficient representation for those non-responding companies. To account for
this issue, this study followed Guthrie et al. (2002) approach to analyze the potential nonresponse bias. The sample was divided into two sub-groups according to the time
of response. One group included companies which responded before, while the other
group consisted of companies which did so after receiving the reminder letter. The latter
was assumed to be similar to non-response companies. A general regression model was
performed to compare the two groups in terms of HRM dimensions, HR value, and
perceived firm performance. No significant difference was found between the two
groups. Thus, though the threat of non-response bias could not be totally removed, the
result built up confidence that the sample was representative.
Results
Factor analysis with varimax rotation reveals five dimensions of HRM practices in
Vietnam (Table 1). A summary of means, standard variations, bivariate Pearson
correlations, and Cronbach’s alphas for the main variables is presented in Table 2.
Nearly all constructs have alpha values above the suggested reliability level of .7. Group

orientation and retention management, however, have only marginal levels of reliability.
The results indicate that significant positive correlations ( p , .01) were found
between either market or organizational performance and all dimensions of HRM
practices, except for group orientation. In addition, the management’s perception on HR
values correlates positively with all dimensions of HRM practices ( p , .01). These
findings are preliminarily supportive of almost all of the hypotheses. However, more
robust analysis to test these hypotheses will follow.
To examine whether or not the application of HRM practices affects firm
performance, a series of linear regression models was estimated (Table 3). Factor scores
for the dimensions of HRM practices were regressed on the measures of market and
organizational performance along with a number of control variables including firm size
(log of the number of employees), firm age (the number of years in operation), industry,
type of ownership, union status and exportation.
On top of the control variables in the restricted model (Model 1), the inclusion of
HRM practices (Model 2) accounted for an additional 14 per cent of the variance in
perceived market performance (F ¼ 4.70; p , .001). Overall, Model 2 explained 27 per
cent of that variance (F(16,120) ¼ 2.74; p , .001). Dimensions of information exchange,
performance management, and training and development were significantly positively
related with perceived market performance. The other two dimensions were not
significant. Similarly, 45 per cent of variance in perceived organizational performance
was explained in Model 4 (F(16,120) ¼ 6.15, p , .001), of which, the addition of
dimensions of HRM practices accounted for an extra 32 per cent of variance (F ¼ 13.76,
p , .001) relative to the restrictive control model (Model 3). Again, the three identical
dimensions were found to have positive associations with perceived organizational
performance. Thus, consistent with Hypotheses 1, 2 and 3, the more the companies


Market performance
Organizational performance
Information exchange

Performance management
Training and development
Group orientation
Retention management
Perceived HR value
Log of no. employees
Firm age
Union presence
Export product
Mean
SD

(.84)
.75**
.39**
.30**
.33**
.08
.28**
.24**
.26**
.21*
.05
2.04
3.65
.86

1
(.85)
.49**

.42**
.45**
.10
.38**
.32**
.23**
.14
2.01
2.01
3.55
.81

2

Notes
**p , .01; *p , .05; Cronbach’s alphas are in parentheses.

1
2
3
4
5
6
7
8
9
10
11
12

Variables

(.83)
.56**
.52**
.39**
.54**
.49**
.14
.21*
.19*
2 .11
3.27
.94

3

(.79)
.33**
.28**
.54**
.42**
.25**
.14
.25**
2.08
4.18
.78

4

(.75)
.22**
.26**
.26**
.14
.09
2 .03
2 .14
2.65
.90

5

Table 2 Means, standard deviations, correlations and Cronbach’s alphas (n ¼ 137)

(.58)
.29**
.32**
.07
.11
.23**
.01
3.46
1.02

6

(.63)
.40**

.23**
.35**
.19*
.09
3.66
.88

7

(.75)
.03
.23**
.14
2 .01
4.30
.57

8

1
.24**
.32**
.12
2.53
.49

9

.23**
.09

13.5
9.67

1

10

1
.03
.93
.25

11

1
.61
.49

12

Thang and Quang: Human resource management practices in Vietnam
1839


1840 The International Journal of Human Resource Management
Table 3 Human resource management practices and company performance (n ¼ 137)

Variables
Step 1: Controls
Firm size

Firm age
Service
Manufacturing
Transportation
Construction
Foreign
Equitized
Private
Union
Export
Step 2: Independents
Information exchange
Performance management
Training and development
Group orientation
Retention management
DR 2
Model R 2

Market performance

Organizational
performance

Model 1

Model 3

Model 2

.27**
.22*
.07
2 .08
.02
.10
.10
.07
.13
2 .06
.01

.18þ
.17
.01
2.17
.01
.03
.08
.02
.14
2.06
.07

.124

.24**
.20*
.24**
2.04

.06
.143***
.268***

.27**
.24*
.14
.05
.08
.17
.26*
.02
.15
2.09
.03

.135þ

Model 4
.14þ
.17þ
.05
2 .08
.03
.10
.27**
2 .03
.17þ
2 .12
.11

.35***
.39***
.27***
2 .02
.11
.315***
.450***

Notes
Commerce and SOEs are two omitted benchmark industry and sector variables respectively.
Standardized regression coefficient presented.
R 2 values are unadjusted.
þ
p , .1; *p , .05; **p , .01; ***p , .001.

engage in information exchange, performance management, and training and
development, the higher both market and organizational performance the companies
can expect, while no significant relationship was held for group orientation and retention
management with both market and organizational performance.
Next, a general linear model was performed to trace antecedents for HRM practices
(Table 4). The results indicate that group orientation escapes the explanation of
organizational characteristics. However, all organizational variables account for more or
less the variation in the remaining dimensions of HRM practices. As shown in Table 4,
foreign-invested companies and local private companies apply less information exchange
than state-owned enterprises, while the foreign-invested companies, local private
companies, and equitized companies are more involved in training and development than
the latter. Union status and exportation only have some impact on training and
development. Unionized and export companies showed a lower degree on this dimension
than their respective counterparts. Moreover, the results revealed that the larger the
companies, the higher the degree of application of performance management and training

and development, and the longer the companies had been in operation, the more they use
training/development and retention management. Most prominently, the higher extent of
all dimensions of HRM practices is associated with the higher value management assigns
to human resources. Therefore, this result highly supports Hypothesis 6.


Thang and Quang: Human resource management practices in Vietnam

1841

Table 4 Antecedents of human resource management practices (n ¼ 137)

Ownership
Foreign
Equitized
Private
Union status
Export
Firm size
Firm age
HR value
Model R 2

Information
exchange

Performance
management

Training and

development

Group
orientation

Retention
management

2.60*
2.24
2.50þ
.54
2.26
2.15
2.01
.44**
.200***

.07
.25
2.02
.28
2.01
.37þ
2.01
.54***
.150**

.94***
.42þ

.48þ
2 .77*
2 .31þ
.50**
.02þ
.31*
.195***

2.49þ
2.27
2.20
.51
.10
2.16
2.01
.32*
.095

.09
2 .05
.43
.06
.13
.28
.03**
.271þ
.160**

Notes
State-owned enterprises are the omitted benchmark sector variable.

þ
p , .1; *p , .05; **p , .01; ***p , .001.

Discussion
Vietnam stands out as one of the rare countries where the imprint of cultural values from
different parts of the world co-exists since the country inherited the peculiar heritage of
long periods of colonization, external intervention, and internal conflicts. These cultural
and historical legacies have left clear bearings on all types of organizations in terms of
leadership and management styles, and managerial practices. Notably, a blend of such
‘good’ behaviours and practices as ‘the noble man’, ‘hierarchy’, ‘mandarin career’,
‘respect for seniority’, ‘middle of the way’ (Chinese); ‘divide and rule’, ‘elite system’
and ‘individualism’ (French); ‘grassroots democracy’, ‘merit system’ and ‘delegation’
(American); and ‘egalitarianism’ and ‘collective decision and responsibility’ (socialism)
can still be seen ubiquitously in all organizations throughout the country (Quang and
Thang, 2004). All of these mean that Vietnam provides a unique test laboratory to
investigate empirically the firm-level impact of HRM practices.
On initiating the idea of conducting such an empirical test in Vietnam, this study relies
on the central premise that key dimensions of HRM practices and their impacts on
organizational effectiveness differ accordingly with regard to the country settings. In this
vein, the discovery of five idiosyncratic dimensions of HRM practices in the Vietnamese
sample of companies confirms to some extent the distinctiveness in the way HRM is
practised in this context relative to those found in the literature. Thus, this justifies the
need to first identify dimensions of HRM practices for a specific context before
proceeding to examine their implication for firm performance.
Concerning the derived dimensions of HRM practices, the results pointed out that
companies in Vietnam show a varying emphasis on the acting out of the dimensions of
HRM practices. Part of this variation can be attributed to such organizational
characteristics as ownership form, firm size, firm age, union status and export or not.
While the influence of these variables is quite modest as a whole, it is interesting to reveal
that management’s perception on the value of human resources is the single prominent

controllable element. It is natural to ask what, then, is the implication of these variations
for organizational effectiveness?
As part of the answer, it is found that those companies putting a premium on HRM
practices that help foster information exchanges within companies that link performance


1842 The International Journal of Human Resource Management
to compensation, and that aim to develop the pool of human capital, can expect to earn
higher perceived market and organizational performance. The findings also suggest that
companies in Vietnam can turn to these HRM practices as one of the sources for
performance enhancement.
In contrast, retention management appears useful as indicated by its positive
correlations with both perceived market and organizational performance. However, in a
more robust model to control for other influences, retention management loses its
significance. Possible explanations could be that the companies fail to make visible their
sincere intention to retain employees, fail to provide significant extra income above the
average, or to offer attractive promotion within the companies. All these factors may
integrally contribute to the lack of motivation for employees to perform at their
discretionary efforts.
By the same token, the implementation of HRM practices that focus on group
orientation exerts no significant influence on both perceived market and organizational
performance. Some speculations can be made to offer possible explanations. The failure of
group orientation as a performance enhancer could first be attributable to a recent clash of
old and new values in the country, which blend between a growing individualism and the
conventional collectivism (Ralston et al., 1999). The emergence of more individualistic
behaviours/attitudes of a workforce may render group-promoting practices less effective
and practical as a stimulus for better performance. In addition, the ineffective group
orientation dimension may stem from the lack of a sense of goal congruence among
group members in the Vietnamese workforce, which is one of the basic requirements of
group success (Tuan and Napier, 2000).

In conclusion, regardless of the contextual peculiarity, HRM practices overall remain
consistent to establish a positive relationship with firm performance in a developing and
transitional economy like Vietnam as elsewhere in previous research. While the findings
lend more support to the prevailing universal school of thought about the direct impact
of HRM practices on firm performance, it should be emphasized that the configuration of
the HRM system in Vietnam remains contextually unique with its distinct dimensions
of HRM practices and, equally important, that not all those dimensions would contribute
to the enhancement of firm performance.
The final theme for discussion here is the generalizability of the above findings. On this
point, it is necessary to bring up the fact that our survey results are derived from a crosssectional sample of companies from different industries and ownership forms, culled
information on HRM practices and firm performance from separate sources, and control
for a wide range of organizational characteristics. As a result, confidence has
strengthened the argument that the relationships found in this study are sufficiently robust
to extend well beyond those companies in the sample.
Admittedly, the study is similar to many others of this kind in the limitations faced.
First, perceptual performance was used instead of hard data. Although previous research
showed a positive association between hard performance and perceptual performance,
the latter is not able to reflect the real impact of HRM practices on the performance of the
companies. Second, data on HRM practices and performance were collected at the same
point in time. Consequently, the direction of causality between the two cannot be
specified definitely. It may be the case that better performing companies are in a better
position to invest in HRM practices. Certainly, the nature of the causal relationship
between HRM practices and firm performance is of particular importance for managerial
implication. Arguably, the two-way direction of causality can innocuously coexist in a
mutually enhanced loop. A better-performing company is better positioned to capitalize
on HRM practices, which in turn help it to bring about improved performance, upon


Thang and Quang: Human resource management practices in Vietnam

1843

which further investment on HRM practices is based. To verify this dynamic, future
research is urged to collect longitudinal data to confirm the casual relationship between
HRM practices and firm performance as well as to investigate the mutually enhanced
nature of HRM practices and firm performance. Performance data at two different points
in time with data on HRM practices in between or the other way around can provide
much insight into the relationship thereof. In addition, future research can be directed to
investigate the mediating effects of HR outcomes in the relationship between HRM
practices and firm performance.
Conclusion
The study provides another piece of evidence to extend the overall universal relationship
between HRM practices as system and firm performance into one reconstructing economy
with no identical duplication, where there is an on-going flux between tradition and
modernity, between capitalism and socialism (McLeod and Nguyen, 2001). However, it
has also confirmed the idiosyncratic features of both the dimensions of HRM practices and
the influence of these dimensions on firm performance across studies from different
countries. An important implication that follows is that the quest for competitive
advantage through the effective management of people should be put in the operating
context of companies. Therefore, future study into firm-level impact of dimensions of
HRM practices in other contexts is still needed to guide the development of HRM practices
in other particular contexts. In addition, the results suggest that it is crucial first to win the
management’s commitment if the company intends to turn to HRM practices for
performance enhancement because management perception on the value of human
resources is proven to have a definitive influence on the adoption of HRM practices.
Finally, the findings lay a foundation to propose a preliminary process for
companies to pursue in the quest for competitive advantage through HRM practices
(Figure 2). It is critical to start with the cultivation of awareness among managers of a
company that human resources are one of the most critical ingredients to utilize and
that HRM practices can help the company to seek better firm performance via the

effective management of its people. Without this awareness, management commitment
is not likely to be secured and the role of HRM practices is not to be seen on the
strategic investment agenda of the company. Once such awareness gains a firm
foothold, a favourable perception about the value of human resources should be
expected to develop among top management of the company. When this value
acquires considerable momentum, it could lead to the desire for adopting effective
HRM practices in the hope of deriving better firm performance from the human

Figure 2 Proposed process for implementing effective HRM practices


1844 The International Journal of Human Resource Management
capital. As a consequence, the company will start searching for effective practices
(e.g. through benchmarking and consultancy) and then go on planning the application
of those appropriate practices in the company. At the first stage, the implementation of
HRM practices, which are found universally effective, is recommended to retain a
sufficient degree of effort and focus to render a higher chance of success so as to build
up confidence on the workability of HRM practices. The outcome of such an
undertaking can be compared with the firm performance as a barometer for selfassessment. This will help to see if the company should adjust its current HRM
practices or adjust its HRM system by further investment to add more
effective practices as a result of better firm performance. Thereafter, the process
repeats. Ultimately, subsequent scaling-up implementation of effective HRM practices
on a continuing basis will render higher levels of competitiveness and consequently,
sustainable success for the companies.

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