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Asia Pacific Business Review
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Training and firm performance in
economies in transition: a comparison
between Vietnam and China
a

b

Thang Ngoc Nguyen , Quang Truong & Dirk Buyens

c

a

University of Economics and Business, Vietnam National
University , Hanoi, Vietnam
b

The Northern University of Management and Technology Ubon
Ratchathani , Thailand
c

Vlerick Leuven Gent Management School , Belgium
Published online: 22 Jan 2011.

To cite this article: Thang Ngoc Nguyen , Quang Truong & Dirk Buyens (2011) Training and firm
performance in economies in transition: a comparison between Vietnam and China, Asia Pacific
Business Review, 17:01, 103-119, DOI: 10.1080/13602381003773982
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Asia Pacific Business Review
Vol. 17, No. 1, January 2011, 103–119

Training and firm performance in economies in transition:
a comparison between Vietnam and China
Thang Ngoc Nguyena, Quang Truongb* and Dirk Buyensc
a

University of Economics and Business, Vietnam National University, Hanoi, Vietnam;
The Northern University of Management and Technology Ubon Ratchathani, Thailand;
c
Vlerick Leuven Gent Management School, Belgium

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b

This paper provides a comparative analysis on the role of training and its impact on
firm performance in some economies in transition in Asia. The starting point is
an examination of country contexts and training, and how these have shaped
organizational approaches to human resource (HR) training. The paper also reviews the
results of recent studies that have investigated the relationship between training and firm
performance in Vietnam and China. The review results show that training is positively
related to firm performance and reveals some convergence of HR training in both
countries. On the basis of this, some caveats on HR training development in the future in
these two countries are given. The paper ends with theoretical and practical implications.
Keywords: China; economies in transition; firm performance; HR training; Vietnam

Introduction
The relevance of human capital, defined to include both education and post-school
training, contributes to economic growth and firm performance through raising the
productivity of an enterprise and facilitating the adaptation and use of new technologies

(Martocchio and Baldwin 1997, Lawler et al. 1998). However, there is currently a debate
regarding whether or not the private sector or the government is the best provider of
training. In addition, training among countries seems to be associated with stages
of industrial and economic development, cultural features, country institutions, or
globalization (Rowley and Benson 2002, Rowley et al. 2004). There are only a few studies
on comparative training and its impact on firm performance in terms of economies in
transition and very little bilateral comparative study of Vietnam and China. This paper
attempts to make a contribution to close this research gap.
It is difficult to compare training and its impact on firm performance in different
countries (e.g. different cultures and economic values) and this study is no exception. This
study was undertaken among typical developing countries in Asia – Vietnam and China.
These countries were chosen because: (1) they are developing countries which have joined
the World Trade Organization (WTO) and are attempting to make a transition from a
centrally-controlled economy towards a market economy; (2) they show high and constant
economic growth in the last decades, the restructuring and downsizing of state-owned
enterprises (SOEs) are increasing and SOEs have been playing a very significant role with
respect to employment; (3) foreign investment has increased exponentially since the
introduction of Foreign Investment Law and its influence on training; and (4) governments

*Corresponding author. Email:
ISSN 1360-2381 print/ISSN 1743-792X online
q 2011 Taylor & Francis
DOI: 10.1080/13602381003773982



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T.N. Nguyen et al.

are anxious to invest in education and training to make their workforce more competent
and competitive internationally.
This comparative analysis focuses on the social-economic context of the two HR
training systems and aims to provide an answer to the question ‘How the different country
contexts have shaped company approaches to HR training in typical economies in
transition?’
The paper begins with an examination of the country contexts and training and how
these have shaped organizational approaches to HR training. In the next section, we briefly
review the results of current studies that have investigated the influence of HR training
on firm performance in Vietnam and China. The subsequent section provides results,
discussion, and caveats that might happen for HR training in the future in the two countries
with consequent implications for theory and managerial practice. The conclusions and
suggestions for future research are then outlined in the last section.

Methodology
In an effort to integrate the effects of globalization in the analysis, various socio-economic
factors were taken into consideration as the starting-point for this paper, in order to analyze
the possible contextual dependency of different HR training systems. While empirical
study is comparatively easy in terms of the different HR training systems, this type of
research design is not a realistic option for a study which primarily aims to review the
variety of cultural, economic and management-related context of each country (Pudelko
2006). Therefore, to answer the research question as stated above, an empirical study
seems to be unrealistic. A literature review approach was chosen to provide a wider scope
of socio-economic contextual factors and sub-areas of management in the analysis and to
assess the existing intellectual territory and diversity of knowledge of management studies
(Tranfield et al. 2003, Weick 2007).
In addition, by reviewing and analyzing the multitude of findings from previous
empirical studies that used econometric techniques to estimate the impact of HR training

on firm performance in Vietnam and China, and integrating the obtained information with
socio-economic contextual factors, we obtained a more complete overview of HR training
and firm performance between these two countries than any single empirical study would
be able to provide. As such, we have also addressed the lack of critical assessments and
tried to further develop the existing body of knowledge on this specific subject.

Country context and HR training
Vietnam context
Vietnam embarked on the Doi Moi (renovation) policy in 1986. Since then, the country
has experienced radical changes, first and foremost in its fundamental economic thinking.
The centrally planned economy following the Soviet Union model was replaced by a
market economy, albeit of a socialist character, which started with a sweeping
restructuring of the state-owned sector. This also allowed the private sector to take part in
the economy and facilitated the process of full integration into the region and world
economic mainstream (Thang and Quang 2005a). During the first 20 years of Doi Moi,
the gross domestic product (GDP) of Vietnam has seen sustained growth (CIEM 2006).
The rate of increase, which was 8.2% each year on average in the 1991 – 1995 period,
reached 8.5% in 2007 (GOS 2008).


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The Doi Moi policy has opened up new opportunities for Vietnam to make full use of
its inherent comparative advantages, notably relatively untapped natural resources and
an abundant and low-cost workforce. These advantages have been exploited to raise
Vietnamese exports, which helps generate an increasing flow of foreign income to support

its economic growth and industrialization strategy. The country has also attracted
significant inflows of foreign direct investment (FDI). FDI not only generates profits for
foreign investors, but also represents an important capital source, which brings in
technology transfer and advanced managerial skills (Thang and Quang 2007) to upgrade
the quality of the local workforce. Paradoxically enough, Vietnamese labour remains
relatively abundant and inexpensive while many companies are faced with a chronic
shortage of skilled workers. As a result of Vietnam becoming a member of the WTO in
January 2007, a surge in FDI and international trade is expected, which will undoubtedly
lead to much higher growth in labour demand (Anh and Thang 2007), especially in the
high-end of the market.

HR training in Vietnam
The educational system in Vietnam has developed from pre-school education to doctoral
level at university. The system had been dominated by public and formal schools, but there
are now some private schools and other different forms of informal education (e.g. open
learning, distance education), and joint ventures with foreign institutions (Thang and
Quang 2007). The Vietnamese government considers vocational training as one of the
main tasks of education and HR development because the majority of the most needed jobs
in Vietnam’s transitional economy relate to technical skills. Annually, over one million
new workers seek jobs (GOS 2008); most of them are in the younger age
group. The growing economy requires more qualified workers, which all together has
made the employment problem become more critical. Although the Vietnamese
government has implemented several policies and designed specific programmes to
revamp the education and training system, there still is an urgent need to improve the
quality of Vietnamese workers at all levels of the labour structure. It is reported that only
20% of the working age population has vocational education or training and that education
is not linked strongly with practical and organizational needs (CIEM 2006). Up to 80% of
graduates need specific employer training to match specific job requirements.
The shortage of qualified workers in sectors with opportunities for growth and
employment has had a negative impact on the quality of the production process and

endangers the growth strategies of companies (CIEM 2006). Vocational education
development is challenged from both a supply and demand perspective. On the supply
side, there has been and continues to be a shortage of faculty, facilities, equipment,
materials and practical training programmes. On the demand side, many students consider
that vocational education lacks the prestige attributable to a university education in a
society where education is still regarded as the biggest investment any parent can make for
their children’s future (Thang and Quang 2007). Consequently, many potential students
will not pursue a vocational education in favour of a college or university degree, even
though the unemployment rate among college and university graduates is extremely high.
The percentage of students enrolling in professional secondary and vocational schools
remains low with a slight and slow increase (GOS 2008). This has caused a huge
imbalance in the labour market in Vietnam and exerted a serious effect on the sustainable
development of the country.


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Most Vietnamese companies recognize the importance of training and development
for their success, but are faced with problems in funding these activities. Employers often
decide upon acquiring modern equipment and expanding factories rather than training and
developing people. At the same time, the quality of education in general is not adequate,
often failing to meet regional and world standards or the actual needs of the companies
(CIEM 2006). The majority of graduates are critically limited in practical skills and in the
ability to adapt to professional work, work discipline and teamwork. To close this gap,
private and state-owned enterprises have begun to reserve a proportion of their budget for
employee training (Thang and Quang 2007, Thang et al. 2008). According to the new

Education Law, incentives are offered to enterprises to encourage in-house training for
their employees. Exemption from taxes relating to training is permitted, as is subsidized
credit for newly established training institutions. The practice of the ‘dual’ system of
training in both schools and enterprises has been relatively successful because theory and
basic skills can be more efficiently taught in schools and institutions, whereas advanced
technical and practical skills are better learned in the workplace (CIEM 2006).
China context
China launched its first attempt at economic reform at the end of the 1970s with
‘open door’ policies and entered a period of rapid and sustainable economic growth.
The majority of reforms were aimed at replacing direct government administration at the
enterprise level, facilitating the introduction and expansion of private enterprises, and
attracting foreign direct investment (Ahlstrom et al. 2005). However, the socialist market
mechanism has been maintained in a general context of political stability. Real GDP
growth rates for China have averaged about 10% each year for the past 30 years
(China Statistical Yearbook 2004). These reforms have led to an emergent external labour
market, which requires a large amount of labour and brought a great opportunity to
employees of the country’s huge working population. A more flexible labour market is
being developed to replace government assignment and firms have gained more autonomy
to recruit employees and other HR functions. In the first 20 years of reform, 300 million
job positions have been created (Xie and Wu 2001).
HR training in China
Although China has made some great achievements in economic growth and increased
annual spending on education, the skills and knowledge of the workforce are still poor.
According to the China Statistical Yearbook 2004, 19% of the Chinese population has
received higher education. However, firms that must seek workers from this graduate pool
have remained unimpressed with the quality of recruits and have had to rely on their
own job-training programmes that provide re-education for their newly hired workers.
The public, also, has not been very enthusiastic over vocational secondary education
which, unlike general education, does not lead to the possibility of higher education. This
situation has forced the central government to pay more attention to education and training

needs.
Some laws and regulations related to training were issued (Xie and Wu 2001). While
the Vocational Education Law in 1996 encouraged financial institutions to support and
develop vocational education by applying a means for credit or cooperation between
enterprises and vocational schools for the training of students, the Labour Reserve System
imposed in 1996 was prepared for those who graduated from high school but were not


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qualified for higher education to undertake vocational school. However, the training and
development infrastructure was still weak. There is a constant lack of equipment and
qualified teachers, and most infrastructures for this development remain under
construction, especially in the rural and remote areas. Therefore, enterprises have faced
an acute deficiency of skilled workers (Yan 2007).
Economic reform developed the classification system of SOEs and non-SOEs. NonSOEs include local private enterprises and foreign-invested enterprises (FIE). FIEs tend to
offer more training programmes than other types of enterprises. The large FIEs often pay
more attention to training and offer training and development packages to their employees
(Tang et al. 1996, Ngo et al. 1998). The introduction and exponential increase of foreign
investors has created the opportunity for local non-SOEs to adopt some of the ‘new’ HR
training policies (Zhu et al. 2007). SOEs are often less receptive to adopting sound human
resource management (HRM) than the local private companies. In addition, SOEs provide
less training for their employees. This situation has been caused by many factors but the
main reason is the ‘old’ training vision of managers and their allocated budgets, which lack
internal resources for training. They view expenditure for training as an expense rather
than as a HR capital investment. Commonly, employers decide upon other investment

priorities (such as technological changes) rather than the training and development of
people, which has left employees with no choice but to seek self-development in external
vocational schools, colleges and universities (Xie and Wu 2001).
Literature on the relationship between training and firm performance
Human resource academics and professionals together have identified training policies
that are critical for improving employee skills, firm performance, and organizational
survival (Schuler 1995) and are considered essential if a firm is to remain competitive
(Barney 1991, MacDuffie 1995, Salas and Cannon-Bowers 2001). A number of authors
have attempted to examine the relationship between training and firm performance.
In one of the first contributions to this topic, Bartel (1994) used data on the training
policies and economic characteristics of firms in the Columbia Business School survey to
measure the impact of formal training programmes on labour productivity. The survey
contained information on training activities, number of employees and output in 1983 and
1986. The major finding of this study is that firms that were operating below their labour
productivity in 1983 and implemented training programmes after 1983 caused significant
productivity gains during the 1983 –1986 period. Bartel (1994) also found that returns on
training investment increased productivity by about 16%.
Black and Lynch (1996) looked at the relationship between training and productivity
by using the final sample of 2945 firms from the National Center on the Educational
Quality of the Workforce’s National Employer Survey. They used a Cobb-Douglas
production function in their estimation and found that a 10% increase in average education
will lead to an 8.5% increase in manufacturing productivity and a 12.7% increase in
non-manufacturing productivity.
Using general and specific training for their studies, Barrett and O’Connell (2001) used
data from two waves of Irish firms surveyed in 1993 and 1995, where the response rate of
the second wave was only one-third of the initial firms. They found that general training
has a statistically positive effect on productivity growth but specific training had no
significant effect on firm productivity.
Zwick (2006) used data collected from the Institute for Employment Research
establishment panel with a five year observation period. He estimated the impact of

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training intensity on establishment productivity. The research result indicated that
increasing training intensity has a positive and significant effect on firm productivity in
Germany.
The evidence of the links between training and firm performance is extremely strong in
developed countries (e.g. Bartel 1994, Black and Lynch 1996, Barrett and O’Connell
2001, Zwick 2006) and recently in emerging countries such as Vietnam and China. Other
studies have estimated the impact of training on firm performance by using firm-level data
collected through mail surveys. The most frequently cited China studies are those by Tang
et al. (1996), Zhu (1998), Ng and Siu (2004) and the most frequently cited Vietnamese
studies are those of Quang and Dung (1998), Thang and Quang (2005a, 2005b), and Thang
et al. (2008). The main attributes and findings of these studies are summarized in Table 1.
The first study on China looked at 156 FIEs and was conducted by Tang et al. (1996) in
late 1995. It indicated that training had a positive and significant effect in: (1) improving
the administrative ability of management; (2) enhancing productivity; (3) expanding
employees’ skill range; (4) developing employees’ ability to cope with technical
innovation; (5) responding to production changes; and (6) improving employees’ morale.
In addition, the authors also found that staff turnover had a powerful effect on employer
decisions to provide training to employees because the high mobility of employees implies
that a given rate of investment in employees results in a smaller stock of workers with
firm-specific skills.
The second study of 253 enterprises by Ngo et al. (1998) analyzed the relationship
between training and firm performance of Chinese, American, Japanese and British firms

that had been operating in China. The findings indicated that training had positive effects
on employee satisfaction, employee retention, competitive sales performance, competitive
new product development, and competitive net profit. In addition, they found that local
Chinese firms tended to provide less structural training and development than American,
British, and Japanese firms.
The third study of 440 enterprises of various ownership types in Shanghai by Zhu
(1998) showed that training was recognized as an effective tool to improve firm
performance. More specifically, the author found that training was used to help employees
understand the organizational business strategy and value system. In addition, the results
also indicated that training focused more on job-related skill and the improvement of
employee productivity.
Finally, a study by Ng and Siu (2004) estimated the impact of training on firm
performance in SOEs and non-SOEs. They found that managerial training had a positive
and significant effect on sales in both SOEs and non-SOEs. However, technical training
made no contribution to firm productivity. The study also indicated that training objectives
have three major dimensions, namely enhancing working relationships, tackling skill
deficiencies, and skill development. In addition, SOEs tended to focus more on skill
development whereas non-SOEs concentrated on enhancing both working relationships
and skill development.
On a comparative basis, three Vietnamese studies have sought a link between
workforce training and firm performance. First, Quang and Dung (1998) used data
collected from 47 SOEs in southern cities and provinces in Vietnam to examine the role of
human resource training in firm performance. They found that 96% of the SOEs claimed
to provide training for their employees and 62% of the SOEs provided training for new
employees. The study also indicated that the major reason for training was to improve
employee performance, thus improving the performance of the enterprises. In addition,


Tang et al. (1996)

Ngo et al. (1998)

Zhu (1998)

Ng and Siu (2004)

Quang and Dung (1998)

Thang and Quang
(2005a/2005b)
Thang et al. (2008)

1

2

3

4

5

6

7

Author/study

No

196

137/169

47

485

440

253

156

Sample
size

.
.
.
.
.
.
.
.
.
.
.
.

Training has positive effects on perceived employee performance and job
satisfaction.
There is a positive association of training with market share and perceived
organizational performance.
1% increase in training lead to increase total firm sales and productivity (0.18% in
manufacturing companies).

1% increase in managerial training induced increase in sales from 0.13 to 0.32%.

Training has positive and significant effects in (1) productivity and employees’
morale, (2) developing employees’ ability to cope with technical innovation,
(3) responding to production changes.
Training has positive effects on perceived employee satisfaction (r ¼ .32),
perceived employee retention (r ¼ .16), perceived competitive sales performance
(r ¼ .21), perceived competitive new product development (r ¼ .35), and
perceived competitive net profit (r ¼ .31).
Training is recognized as an effective tool to improve perceived firm performance.

.
.
.
.
Productivity
Employees’ morale
Production changes
Employee retention and
satisfaction
New product
Sales and profit
Employee productivity

Commitment
Sales
Productivity
Employee performance
Job satisfaction
Market share
General firm performance
Sales
Productivity

Findings

Performance measure

Table 1. A summary of empirical studies on the relationships between training and firm performance in China and Vietnam.

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other reasons for training were job satisfaction, the acquisition of professional
qualifications, and a type of compensation.

Second, Thang and Quang (2005a) used data from a study of 137 cross-sector
enterprises to estimate the impact of training on firm performance. The survey was
conducted in 2003. They found that there was a positive association of training with
market share and organizational performance. In a follow-up paper, Thang and Quang
(2005b) indicated that FIEs tended to provide more on-the-job training than other types of
enterprises. However, off-the-job training was preferred less by FIEs than by SOEs.
Finally, Thang et al. (2008) studied the impact of training programmes on firm
performance by using the data from the Vietnam Employer Survey Instrument (VNSI),
which was undertaken by a group of researchers of Ghent University, Belgium in 2007.
From a survey of 196 companies, the major findings indicated that those manufacturing
companies that implemented training in 2006 had increased sales and productivity by 0.18%
in manufacturing companies. In addition, manufacturing companies which implemented
training programmes after 2005 increased their total sales and productivity by 0.32% per
year between 2005 and 2006. However, we found no statistically significant effect on 2005 –
2006 percentage changes in the sales and productivity of non-manufacturing companies if
these companies provided training after 2005. The survey result also shows that
manufacturing companies had been solely focusing on training for technical engineers. The
econometric analysis method in this study which assisted the authors in overcoming the
limitations of estimation depends on the accuracy of the assumption regarding the cost of
training and the accuracy of the subjective estimates of firm performance (Bartel 2000).
Results and discussion
Differences
There are a number of studies indicating that organizational differences in HR policies and
practices, including training policy, are related to variations in national legislation and the
cultural framework of a country (Brewster and Bournois 1991, Lane 1991, Randlesome
1993, Shaw et al. 1993, Brewster and Hegewisch 1994). In addition, the contexts for
training policy differ widely between Vietnam and China due to the timing and the pace of
economic reform, educational policy, and employment status. Therefore, there are three
major differences in training between Vietnam and China.
First, both Vietnam and China have followed an export-oriented industrialization

strategy and have been gradually shifting to export-oriented economies. This strategy is
linked to particular HR management policies that stress training and HR development
(Kuruvilla and Venkataratnam 1996). More specifically, Kuruvilla (1994) suggests that
there are variable stages in the strategy. The first stage focuses on the low-cost production
of light manufacturing goods for export coupled with a highly compliant labour force.
However, the advanced stage of export-oriented strategy is based on higher technology
and highly skilled labour requirements. At this stage, both countries have made efforts to
develop the skills of their workforce through various training programmes as well as
providing better-qualified workers for the growing export industry. Therefore, the stage of
economic development and the industrial strategies adopted affect the decisions of both
government and employers with regard to the provision of training to employees. Vietnam
and China are currently at different stages of economic development. Comparatively, local
non-SOEs in China have made significant investments in a variety of training programmes
to upgrade the skills of their employees (Yan 2007) because they are in the advanced stage
of export-oriented strategy, whereas local non-SOEs in Vietnam seldom have training


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programmes for their employees since Vietnam is still in the first stage of its economic
development and focused primarily on low-cost production instead of quality and
diversity. As such, almost all local company training programmes have been provided by
government funding (Thang and Quang 2007).
Second, although Vietnamese education has undergone 20 years of renovation and
reform and despite all its officially claimed results, there is a huge imbalance in its current
labour market structure. One explanation for this situation could be the fact that many

Vietnamese students consider that vocational education lacks prestige compared with a
university education in a society where education is still the greatest concern shared
by many parents about their children. Consequently, many children will not pursue
vocational education in favour of a college or university degree despite the high rate of
unemployment among college and university graduates. The slow increase in the
percentage of students applying for professional secondary and vocational schools hardly
helps improve the situation (Thang and Quang 2007). In contrast, students in China have a
more practical perception and are more willing to undertake vocational schooling instead
of studying in college and university (Yan 2007). In addition, manufacturing companies in
Vietnam have been focusing on training for technical engineers rather than workers
(Thang et al. 2008), whereas training in China has been extended to cover the unskilled to
technical engineers and staff. The different stages of economic development between the
two countries may be a reason for this phenomenon.
Finally, there are more training and development laws and regulations in China than
there are in Vietnam because China embarked on economic reform 10 years earlier than
Vietnam. During this time, the Chinese government introduced more than 20 laws and
regulations relating to employment training (Rowley and Benson 2002). More specifically,
Chinese laws and regulations on training include the labour law; the strategic decision on
education system reform by the central committee of the Communist Party of China; the
compulsory education law of 1986; the vocational education law in 1996; the labour
reserve system enforced in 1996; the vocational ability appraisal system and the vocational
qualification certificate system. On the contrary there are only the labour code, educational
law, and vocational law in Vietnam. Furthermore, the functions of the mediation and
arbitration system are more effective in China than in Vietnam (Zhu and Fahey 1999).
Similarities
The country context, education and training situations, and case studies also highlight four
significant similarities in training between Vietnam and China.
First, economic reform has dramatically changed the business landscapes of both
Vietnam and China, especially the openness of the economy and encouragement of FDI.
As a result, FIEs have been brought in and have transferred new HR policies and practices

to Vietnam and China in general and training policies in particular. Perhaps one of the
biggest factors influencing employer-training decisions is the labour market in which firms
operate and the skills available in that market. Therefore, when foreign investors recognize
the shortage of qualifications and skills within the labour market for their production
processes and purposes, training is considered a necessary and vital tool to fill this
gap. Studies by Ngo et al. (1998) and Thang and Quang (2005b) indicated that FIEs have
been offering more training for employees than other types of enterprises.
Second, within SOEs in both Vietnam and China, training is still used as a reward
mechanism (Xie and Wu 2001, Quang and Dung 1998) or SOEs use more formal training
programmes rather than informal ones. More specifically training is considered a means


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to provide the employees with some kind of compensation within the SOE’s, especially
when employees attend training programmes abroad. In these cases, the trainees tend to
consider training as an opportunity to travel or to save money, due to the low level of
income and poor benefits system of SOEs.
Third, both the Chinese and Vietnamese education systems are under development and
renovation (Xie and Wu 2001, Thang and Quang 2007). Thus, the graduates are still weak
in quality and lack the necessary and practical skills when they join the labour markets
(Trung and Swierczek 2009). In order to facilitate the solving of this dilemma, these
two governments have placed emphasis on the whole spectrum of training and skill
development, to encourage the link between training and job placement. Accordingly,
training institutions and enterprises have been cooperating in the development of training
content, curricula, teaching materials and the ‘executive’ courses that combine study and

work experience. In this way, training organizations can satisfy the company’s needs for
labour requirements. Companies can receive a reduction in revenue tax, if they provide
training for local employees.
Finally, aside from the improvement in the quality of labour force skills and the
encouragement to link training with job placement, both Vietnam and China are
encouraged to expand and increase international cooperation for education and training
with prestigious universities and institutes all over the world, as well as training and
research projects based on financial aids or loans from international organizations in order
to train technical workers (Collins 2005, Zhu 2005). Further, foreign organizations with
experience and high qualification in the training area are being supported to establish
educational campuses in Vietnam and China by virtue of wholly-owned foreign capital or
join-venture ownership with local partners.
Convergence in HR training between Vietnam and China
Convergence theorists suggest that the process of industrialization and the spread of
advanced technology could shift all countries towards political and economic systems
similar to those of the United States (Kerr 1983, Sparrow et al. 1994, Tregaskis et al.
2001). An implication of this approach is that there are convergences of HRM/HR
training across national borders. Multinational companies are physically dispersed in
environmental settings that represent very different economic, social and cultural groups
(Hofstede 1980, Humes 1993). They adapt and follow different HRM approaches and
practices to respond to both environmental and organizational requirements across
businesses, functions and geographic locations (Brewster 1995, Tregaskis 1997). In the
same vein, Solomon (1995) agrees that multinationals are paying greater attention to
cross-cultural issues as they search for ways to improve human resource development
in their overseas operations. Thus, global companies are increasingly exporting their
management development and training systems internationally.
However, Bamber and Lansbury (1998) argue that the differing cultural and
institutional factors might act as constraints and further limit the prospects for
convergence. More specifically, from the cultural perspective, cultural factors include not
only the values held by individuals and relations between people at work and in their

families, but also the structure of the firm and society in which they operate (Whitehill
1991). Both product-market and social-cultural ‘logic’ shape HRM policies (Evans and
Lorange 1989). From the institutional perspective, Kerr (1983) states that the traditional
values and practices are embedded in a countries social and economic institution.
Accordingly, pre-industrial history, cultural factors and the processes of industrialization


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have shaped institutions that in turn have shaped Asian business systems (Whitley 1992).
Within the field of HRM, Brewster et al. (2004) suggest that institutional factors have a
significant influence on the kinds of policies that organizations adopt and the roles that
they enact. For instance, Japanese firms often have the problems of designing appropriate
HRM policies to suit local conditions in China (Beamish and Jiang 2002), despite
similarities between the two countries in many aspects (Zhu and Warner 2000, Horn and
Cross 2009).
In the case of Vietnam and China, the economic reforms in both countries aim to
replace a centrally planned economy with a market economy. The major features of reform
seem to be restructuring SOEs and to launch a new form of ownership – private
enterprises, which include FIEs and local private enterprises. FIEs have been not only
contributing to national economic growth, but they have also brought modern managerial
expertise into these two countries. Those companies with long experience in market
economy have more developed and sophisticated HRM practices than companies
previously in the centrally planned economy (Weinstein and Obloj 2002). They adopt a
more cooperative strategy to cope with the requirements of the host country and pay more
attention to providing appropriate working conditions and training for their employees.

They are more sensitive to training and consider it as an investment rather than a cost.
In this respect, the economic reform and the introduction of FDI in both countries has
created the opportunity for local domestic enterprises to adopt some of the ‘new’ HR
practices. SOEs that are involved in joint ventures (JVs) or contracting arrangements with
foreign companies are more likely than other SOEs to have adopted HRM. A number of
studies by Ding et al. (2000) on China, and Thang and Quang (2005a, 2005b) on Vietnam,
show that multinational companies and JVs have a positive impact on changes in HR
practices. They not only introduce updated management systems and practices into their
business operation, but also influence local enterprises in changing traditional peoplemanagement practices. Kamoche (2001) and Warner (1996a) suggest that HRM in
Vietnam and China may move towards a hybrid form combining local management
characteristics with modern Western practices. It is also expected that the role of training
will incorporate some aspects of a Western-style individualistic approach, emphasizing
work-related knowledge and skills improvement, whilst maintaining some elements
consistent with the host countries ideologies.
To summarize, the above evidence indicates not only that there is some convergence in
HR training in Vietnam and China, but also that this convergence tends towards Western
HR practice. However, the different stages of industrial and economic development,
coupled with the unique value systems of each country, their various cultural features, and
socio-political and economic institutions have imposed some limitations and constraints
on this convergence.
Caveats on future HR training development
It is clear that the transition process in both Vietnam and China is not yet complete and the
quality of the labour force still remains low (Xie and Wu 2001, Thang and Quang 2007).
Thus, policymakers in the two countries continue to be confronted with difficult problems
with respect to labour training, which essentially influence their economic reform and
development process. The restructuring of the education system in order to facilitate the
needs of an increasingly developing society and country in a period of industrialization
and modernization is urgent and will no doubt persist over the coming years. More and
more laws and regulations relating to training are officially launched in order to renovate

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the contents and curricula of training, education management, and to strengthen
international cooperation on training as well as encourage enterprises to attend the
requisite training courses. The cooperation on training between governments and
enterprises continues to be developed. In addition, more and more young people are
willing to undertake vocational training rather than general training in universities in order
to comply with the job markets.
The advent of FIEs and JVs has helped to introduce new HRM concepts (Zhu et al. 2007)
and as a result changes in staffing, training and compensation practices are happening. They
are more involved in capital-intensive and high-tech sectors, which do not require the
exploitation of cheap labour to make a product, as control over the technology and the
market is more important. Instead these enterprises pay more attention to providing
appropriate working conditions and training, and encouraging workers’ participation in their
training programmes. By cooperating with host governments and training organizations the
companies can achieve their long-term goals for skilled employees. They will continue to
provide more training for their employees than other types of ownership enterprises in
Vietnam and China in the near future. However, the different institutional frameworks and
stages of economic development between the countries will require multinational companies
to pursue a distinctive HR training policy (Rowley and Benson 2002).
Increased levels of global competition are already affecting both Vietnam and China,
specifically with the WTO entry. The restructuring and downsizing of enterprises
is increasing. State-owned enterprises are facing privatization across the countries
(Collins 2005, Zhu 2005). Local managers are beginning to realize that they can no longer
compete solely on low labour costs with a labour-intensive manufacturing strategy and are

beginning to adopt sophisticated technological processes. Accordingly, state-of-the-art
technology must be embraced and the skills to operate and manage this technology must
accompany its introduction and development. Within this context, the technical and
problem-solving skills of employees tend to be more important in the production process.
Reflecting upon this relationship, comprehensive training programmes that emphasize the
development of individuals together with problem-solving, technical and interpersonal
skills should be instrumental in increasing productivity and ensuring the justification of
customer requirements for product quality and diversification. Retraining of the existing
unqualified employees will happen. Conversely, companies will not pay more training
expenditure for their employees, but will provide a wide range of training programmes
available for those who need them. Local enterprises will also follow the Western forms of
HR training (Rowley et al. 2004).
Implications
This study has implications and relevance for both HRM theory and management practices
in terms of the challenges from globalization, market competition, and economic reform
and transition.
Theoretical implications
First, the results of this study contribute to the rapidly developing HRM literature in that it
is the first study of comparative HRM training in the two emerging and transitional Asian
economies – Vietnam and China. By comparing the training and education systems in
Vietnam and China and the impacts of these systems on HR training approaches, we have
seen how the concept of convergence in HR training has to be further differentiated


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and developed. HR training has been moved towards convergence. Some common
characteristics within the training appear in both Vietnam and China through their
respective training and education systems, and HR training policies and practices of
enterprises. In addition, a trend in HR training in developing economies may be identified.
For instance, FIEs offer more training than other types of enterprises (Quang and Dung
1998, Thang and Quang 2005b).
Second, our contribution relates to the relationship between company-level training
and firm performance that is of key interest to this paper. By reviewing the studies on
Vietnam and China, which have estimated the impact of training on firm performance by
using firm-level data collected through the surveys, we found that training has a significant
influence on firm performance. This finding indicates an existing relationship between
training and firm performance in emerging and transitional economies.
Finally, in terms of methodology, it is clear that there are many factors influencing
training decisions as well as training programmes and expenditure. These include
economic and educational reforms, institutional framework, and globalization. Thus, our
study is inclusive as we examined HR training combined with other factors. Also, our
study examined HR training in terms of both general training and specific training.
Management or practical implications
Our first implication involves HRM in general and HR training in particular for all kinds of
enterprises in Vietnam and China. The low level of employee qualification and skill
shortages has been a constraint for enterprises since the quality of human resources is
crucial to the success of overseas investments and local enterprises (Rowley and Benson
2002). Therefore, companies should pay more attention to HR training policies if they
wish to succeed in these markets. A different approach to training policy and the resources
available may need to be adopted. More specifically, companies may use more
expenditure as well as different training programmes in order to improve the skills,
commitment, and knowledge of their employees.
Second, although both Vietnam and China are typical economies in transition, their
different stages of industrial and economic development and different cultures impose
considerable constraints on the introduction of HR training policy as the interaction

between various business contexts and cultures will facilitate the development of a
‘unique’ HRM (HR training policy) approach (Sparrow et al. 1994). More cross-cultural
training is needed to provide to employees, especially for expatriate managers in dealing
with HR problems in more locally adapted contexts.
Finally, the implications of this study for policymakers in both Vietnam and China are
significant. If public policy seeks to enhance the level of skills for workers in all firms
throughout the economy, irrespective of size or nature of ownership, formal rather than
informal training will be preferred as formal training leads to a qualification that all
employers recognize, and it is easier to monitor funding to ensure training is actually being
provided. However, it is precisely this type of training that firms do not favour as the
training is not tailored to the unique requirements of the firms and the costs in terms of loss
of staff time. Therefore, the Vietnamese and Chinese governments cannot enhance labour
and deal with skill shortages in this way. This implies that a type of hybrid solution needs
to ne developed in order to overcome the difficulty. For a more effective and sustainable
development, such a HRD programme should be a joint effort between education and
training institutions, the business community, and government agencies (Truong et al.
2009).


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Conclusions
This study gives a mixed picture of the review of evidence on the training context and
whether those firms providing training exhibit better performance in Vietnam or China.
The results suggest that training is positively related to organizational performance in both
countries and some convergence of HR training across national borders is a foregone

conclusion. Globalization, international trade and finance may place substantial pressure
on firms to standardize HR training policy. The different stages of industrial and economic
development, cultural features, and institutionalization of these countries, however,
provide some constraints on the degree of this convergence. There are some marked
differences in HR training in the two countries.
The study also makes some predictions about what might happen in future HR training
in these countries. Restructuring and downsizing are increasing globally and are a further
pressure on these countries to reform their education and training systems. They are facing
the double need to provide adequate training for new employees and at the same time,
retraining for the incumbent workers to upgrade their low skills. The paper also presents
significant challenges for the related governments that need to provide and manage formal
training, as well as to enhance the capabilities of local enterprises in providing training for
their employees on an ongoing basis.
Finally, in this study we have focused on the existence of HR training and firm
performance but not attempted to measure HR training in the workplace and other firm
characteristics. This approach would involve detailed case studies of Vietnam and China
that examined the influence of training on firm performance. This study is based on a
rather small number of available studies on the subject and therefore not sufficient enough
to generalize and draw any concrete conclusion on the issue under study. To fill this void,
future research should implement a longitudinal survey of enterprises covering all major
industrial sectors in the two countries. This longitudinal study would allow for more
accurate predictions and enable the comparison of the relationship between HR training
and firm performance in Vietnam and China.
Notes on contributors
Thang Ngoc Nguyen is currently a lecturer in HRM and Change Management at the University of
Economics and Business, Vietnam National University, Hanoi, Vietnam. He holds a MBA from
Southern California University, USA and a PhD in Applied Economic Sciences from the Faculty of
Economics and Business Administration, Ghent University, Belgium. He has published several
articles on education, training and development, and firm performance in Vietnam.
Quang Truong, PhD is Professor and Vice President for Quality and Development at the Eastern

University of Management and Technology in Ubon Ratchathani, Thailand.
Dirk Buyens is currently Professor and Academic Dean at the Vlerick Leuven Gent Management
School and Professor at the Department of Management and Entrepreneurship, Gent University,
Belgium. He holds a PhD in Industrial and Organizational Psychology from Gent University,
Belgium (cum laude). He has published numerous articles and books, and provided consultancy
services internationally in the fields of human resource management and organization development.

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