Factors affecting the adoptiuon of an e commerce model developed for small and medium enterprises in viet nam

FACTORS AFFECTING THE ADOPTION OF AN E-COMMERCE
MODEL DEVELOPED FOR SMALL AND MEDIUM
ENTERPRISESIN VIET NAM

___________________________

A DISSERTATION
Presented to the Faculty of the Graduate School
Southern Luzon State University, Lucban, Quezon, Philippines
in Collaboration with
Thai Nguyen University, Socialist Republic of Vietnam

___________________________

In Partial Fulfillment
of the Requirements for the Degree
Doctor of Business Administration

___________________________

By
NGUYEN TIEN HUNG (FAT)
December 2013


APPROVAL SHEET

The Dissertation of

NGUYEN TIEN HUNG
entitled

FACTORS AFFECTING THE ADOPTION OF AN E-COMMERCE MODEL
DEVELOPED FOR SMALL AND MEDIUMENTERPRISES IN VIET NAM
Submitted in Partial Fulfilment of the Requirements for the Degree
DOCTOR OF BUSINESS ADMINISTRATION
A program offered by Southern Luzon State University,
Republic of the Philippines in collaboration with
Thai Nguyen University, Socialist Republic of Vietnam
has been approved by Oral Examination Committee

WALBERTO A. MACARAAN, EdD
Expert

CONRADO L. ABRAHAM, PhD
Expert

MELCHOR MELO O. PLACINO, PhD
Expert

TRAN DAI NGHIA, PhD
External Panel

CECILIA N. GASCON, PhD
Chairman
Endorsed by:

Recommended by:

JOANNA PAULA A. ELLAGA, DBA
Adviser

APOLONIA A. ESPINOSA, PhD
Dean

Accepted in Partial Fulfilment of the Requirements for the Degree
Doctor of Business Administration

_____________________
Date

WALBERTO A. MACARAAN, EdD
Vice President for Academic Affairs
ii


CERTIFICATE OF ORIGINALITY
This is to certify that the research work / dissertation entitled:"Factors
affecting the adoption of e-commerce model developed for small and medium
enterprises in Viet nam” orally defended/ presented under the DBA Program
jointly offered by Southern Luzon State University of the Republic of the
Philippines and Thai Nguyen University of the Socialist Republic of Vietnam,
embodies the result of original and scholarly work carried out by the
undersigned.
This dissertation does not contain words or ideas taken from published
sources or written works by other persons which have been accepted as basis
for the award of any degree from other higher education institutions, except
where proper referencing and acknowledgement were made.

Researcher/Candidate

iii

ACKNOWLEDGMENT

I would like to express my gratitude to Assoc. Prof.Dr.Tran Chi Thien
for being an outstanding adviser and excellent professor. Your constant
encouragement, support, and invaluable suggestions made this work
successful. You haveeverything that one could want from an adviser. I would
like to thank you for providing me ideas on the research methodology and
valuable insights on financial management system.
I am also deeply indebted to Dr. Nguyen ThanhHai and Ms. Trinh
ThiHieu -International Training Center, Thai Nguyen University of the Socialist
Republic of Vietnam, for their enormous pursuit to provide the Vietnamese
people an opportunity to grow through education. Also, I would like to thank all
the lecturers of DBA1 course for helping me to complete this dissertation in
which I have been their student in for three years.
I am deeply and forever indebted to my family for their love, support,
and encouragement throughout my entire life!

NGUYEN TIEN HUNG

iv


DEDICATION

I wish to dedicate this dissertation to my family and friends.

NTH

v


TABLE OF CONTENTS
PAGE
TITLE PAGE ………………………………………………………………..

i

APPROVAL SHEET ……………………………………………………….

ii

CERTIFICATE OF ORIGINALITY ………………………………………..

iii

ACKNOWLEDGMENT ………………………………………………..…..

iv

DEDICATION ………………………………………………………………

v

TABLE OF CONTENTS …………………………………………………..

vi

LIST OF TABLES ………………………………………………………….

viii

LIST OF FIGURES ………………………………………………………...

ix

ABSTRACT …………………………………………………………………

x

CHAPTER
I

II

III

INTRODUCTION
Introduction ………………………………………………….

1

Background of the Study …………………………………..

2

Objectives of the Study …………………………………….

5

Significance of the Study …………………………………..

6

Scope and Limitation of the Study ………………………..

7

Definition of Terms ………………………………………….

7

REVIEW OF LITERATURE AND STUDIES
Related Literature and Studies…………....…………….…

10

Conceptual Framework ……………………………………

29

METHODOLOGY
Research Design ……………………………………………

31

Determination of Sample Size …………………………….

31

Sampling Design and Techniques …………………….….

32

Data Gathering Procedure…………………………………

32

Research Instrument ……………………………………….

33

Data Processing Method …………………………………..

33

vi


IV

RESULTS AND DISCUSSIONS ………………………….

V

SUMMARY OF FINDINGS, CONCLUSIONS AND

34

RECOMMENDATIONS
Summary of Findings ………………………………………

75

Conclusions …………………………………………………

77

Recommendations …………………………………………

79

BIBLIOGRAPHY …………………………………………………………..

81

APPENDICES ……………………………………………………………...

87

Questionnaire …………………………………………………………..

87

CURRICULUM VITAE …………………………………………………….

90

vii

LIST OF TABLES
TABLE

PAGE

1

Success Factorsfor SMEs ……………………………………

15

2

Internet Accessibility in Viet Nam ……………......................

19

3

Business Areas ………………………………………………...

52

4

Statistical Tables the Number of Businesses Using the
Web ……………………………………………………………..

55

5

KMO and Bartlett’s Test ………………………………..……..

56

6

Rotated Component Matrix…………………………………..

57

7

Reliability Statistics (H1) ……………………………………..

60

8

Item-Total Statistics (H1) ……………………………………..

61

9

Reliability Statistics (H2)………………………………………

61

10

Item-Total Statistics (H2) ……………………………………..

62

11

Reliability Statistics (H3) ………………………………………

62

12

Item - Total Statistics (H3) ……………………………………

62

13

Reliability Statistics (H4) ……………………………………..

63

14

Item - Total Statistics (H4) ……………………………………

63

15

Reliability Statistics (H5) ……………………………………..

63

16

Item-Total Statistics (H5)………………………………………

64

17

Omnibus Tests of Model……………………………………….

65

18

Model Summary ………………………………………………..

66

19

Classification Table……………………………………………

67

20

Variables in the Equation ……………………………………..

68

viii


LIST OF FIGURES
FIGURE

PAGE

1

Research Model (Grandon and Pearson, 2004) ……………..

14

2

Proposedmodel for assessing e-commercesuccessin SMEs
……………………………………………………………..

15

Proposed Electronic Commerce Adoption Model for Smalland Medium-sized Enterprises ………………………………...

17

4

Internet Model ……………………………………………………

18

5

B2B Business Model ……………………………………………

24

6

B2C Business Model ……………………………………………

27

7

C2C Business Model ……………………………………………

28

8

C2B Business Model ……………………………………………

29

9

Research Model …………………………………………………

30

10

Business Areas ………………………………………………….

53

11

Business Areas and Firm Utilize E-Commerce ………………

53

12

Number of the Firms Have Internet ……………………………

54

3

ix

ABSTRACT
Title of Research

: FACTORS AFFECTING THE ADOPTION OF AN
E-COMMERCE MODEL DEVELOPED FOR
SMALL AND MEDIUM ENTERPRISES IN VIET
NAM

Researcher

: NGUYEN TIEN HUNG (FAT)

Degree Conferred

: DOCTOR OF BUSINESS ADMINISTRATION

Name and Address
of Institution

: Southern Luzon State University Lucban, Quezon,
Philippines and Thai Nguyen University,
Socialist Republic of Vietnam

Adviser

: Dr.Tran Chi Thien

Year Written

: 2013
______________________________________________________________

Throughout this research, the author has studied the factors that
influence the development of electronic commerce in the world through the
development model of their e-commerce and based on the index information
commerce in Vietnam (EBI INDEX). Based on the information, the author
determined the factors affecting the development of e-commerce in small and
medium enterprises in Vietnam. A model of e-commerce adoption for SMEs in
Vietnam was created out of the findings.

Implications of this research study can be divided into implications for
managers and implications for government. In this research, the author
proposed and validated a predictive model for managers that suggest four
determinant factors for e-commerce adoption in Vietnam SMEs. These
factors, according to the rank order of importance, are: 1. organizational
readiness; 2. compatibility; 3. ease; and 4. usefulness.

x


Therefore, managers who wish to adopt e-commerce should consider
these factors in making their decision about adoption and try to improve those
factors that are within their control.

xi


1

Chapter I
INTRODUCTION
In recent decades, Information Technology (IT) has been changing the
world by significantly contributing to fasten the globalization process in which
all competitors come to have equal opportunities in a “flattened” world as well
as creating a real revolution in every field of science and life.
The application of IT in production and business is not out of this trend
either. The concept of IT application in commercial activities, also known as ecommerce, came into the world and became a new trend. E-commerce has
been gradually replacing the old ways of doing business because of its
various prominent advantages, such as faster buying/selling procedure,
lowered operational costs, more convenience for customers to place orders,
increased efficiency with unlimited space and time properties, etc.
However, for developing countries in general and for Vietnam in
particular, e-commerce is a relatively new thing although the development of
this trend has been taking place in both width and depth. It has not actually
been completed for this area in State management. The application in the
enterprises as well as in the agencies and organizations is also at explorative
level, to support the traditional business form or to combine these two forms
with each other.
In fact, many enterprises have applied and developed e-commerce and
some of them have become good models in this area such as VIETGO, a
pricing joint stock company with e-commerce page www.vatgia.com; and
Peaceoft solution company with website www.chodientu.vn, etc…Despite its
increased popularity, the exploitation and application of e-commerce are


2

always two sides of a problem:
Firstly, we are in a transitional period from traditional business to ecommerce business method, so it is necessary to always make pragmatic and

short-term comparison of the efficiency between these two methods.
Secondly, there also requires a different and more intellectual way of
looking at e-commerce. In order to successfully apply and develop ecommerce, it is required that negative aspects such as fraudulence, distrust
and sabotage, etc. are limited by raising public awareness, developing firms’
policy, executing management of ecommerce. These things, however, have
been difficult to control because of the fast, powerful and high-tech
characteristics of e-commerce.
The development of e-commerce has happened in the same manner
as the development of traditional commerce, in which the first step was
unprompted as each individual, company, agency or organization realized its
internal benefits then it became more advanced and multiform. However, to
expand and develop it to a high level as well as to create real benefits for
society, it needs an intervention of “State hand” from the angle that these
entities cannot or do not want to do.
For the above reasons, there is a question to ponder such as: how do
we develop and manage e-commerce in order to minimize the negativity and
make optimal use of the positivity, and to successfully promote high efficiency
to the society, the community, and each individual?

Background of Study
It cannot be denied that benefits achieved by e-commerce have a great
impact to the development of a nation’s economy. Many developed countries


3

in the world, among which United States was the first, have created favorable
conditions for e-commerce to be developed, leading humans in achieving
great business results. Although there are many problems needed to be
solved in the application of e-commerce, the developed countries, realizing its

huge advantages, has quickly employed and developed e-commerce with the
expectation of achieving the foundation for digital economy.
Internet is changing the lifestyle and the way of working. Internet
creates good conditions for everyone, from university researchers and
students in big cities to people in remote mountainous areas, in which
everyone have the opportunity to access the same endless information
resources. Moreover, Internet also provides means of communication for
people or places to carry out transactions at any time. Enterprises with
different scales all can communicate to their partners and customers via
Internet. Online activities help them to get necessary information quickly,
thereby improving the quality of products and services with low cost.
The Government of Vietnam has placed special emphasis on
developing e-commerce and assigned the Ministry of Commerce to be the
clue agency who is responsible for examining and constructing the projects of
e-commerce development in Vietnam. On 22/11/2001, the Center of
Promoting Software Development, directly under Department of Vietnam
Trade and Industry, opened the first training course named “E-commerce for
Business” that was held free in Dong Nai with the purpose of helping
enterprises step by step approach e-commerce and serve business activities
on Internet.
Since an initial application of e-commerce still faces a number of


4

difficulties, it is essential to create real power, which comes from the
infrastructure for e-commerce, strategy to develop e-commerce business in
small and medium enterprises, government support, and awareness of
business e-commerce applications in business. The intelligentsia needs to
meet the requirements of specialty, and the cultural standards of the people

also need to be gradually improved, especially for young people, one of the
main forces helping to deploy e-commerce.
According to figures from the Ministry of Industry and Commerce, at
present, small and medium enterprises account for more than 85% of
enterprises in Vietnam, with registered capital of nearly 2,313,857 billion
dongs (equivalent to 121 billion dollars) and 100% having Internet access.
While more and more customers are looking for new products and trade
opportunities with Southeast Asian countries, Vietnamese enterprises are also
seeking new opportunities to reach them through e-commerce. Along with
maintaining domestic operations actively, Vietnam will definitely continue to
receive more attention from importers in the near future according to Vincent
Wong, Senior Managing Director of Business Development and Customer
Services Department of Group Alibaba.com.
In 2012, Vietnam Association of E-commerce (VECOM) constructed
the E-business Index in order to support agencies, organizations and
enterprises evaluating quickly the application of e-commerce on a national
scale as well as in each province and central city. E-business Index,
abbreviated to EBI, helps agencies, organizations and enterprises to evaluate
quickly the degree of ecommerce application and to compare the
developments by the years in each locality, concurrently support to an


5

assessment and comparison between the localities based on a system of
index.
So in Vietnam today there is only VECOM which constructed the EBI
to assess a degree of e-commerce application in the enterprises and home
organizations. But this is only statistical and investigative index that reflects a
degree of e-commerce application annually. It cannot bring out an index that

helps enterprises in identifying whether the abilities of their own enterprises
can apply e-commerce or not; how to invest and apply e-commerce to
business.
Therefore, there is a need to have an e-commerce adoption model
which can examine the factors that influence e-commerce adoption in Viet
Nam SMEs. In order to do so Grandon and Pearson e-commerce adoption
model

is applied

in the Vietnam context (Grandon and Pearson, 2004).

Grandon and Perason's model factors that influence the adoption of ecommerce in SMEs.

Objectives of the Study
This study focused on the analysis of some e-commerce models which
are being implemented in the world, especially the e-commerce models for the
small and medium enterprises. A suitable model for small and medium
enterprises in Vietnam to evaluate and test to find out the factors that
influence directly the development of electronic commerce in small and
medium businesses in Vietnam, to suggest some policy measures to
encourage businesses to use e - commerce model, in order to improve
business performance of enterprises.


6

This study specifically aimed to:
1. Analyze e-commerce models which is the most successful and choose
the best suited model for small and medium enterprises in Vietnam;

2. Determine factors affecting the adoption of ecommerce model for small
and medium enterprises in Vietnam in terms of;
2.1. Organizational Readiness
2.2. Compatibility of e-commerce for the value, work practices, and
technology in the firm
2.3. Ease of use
2.4. Usefulness
2.5. External pressure
3. Propose recommendations using e-commerce model for small and
medium enterprises in Vietnam.

Significance of the Study
This study can help small and medium enterprises in Vietnam for this
research will support the enterprises in constructing business strategies,
strengthen advertising, and improve competitive advantages in the market
economy and in the integration of Vietnam today to the world economy.
This study can provide necessary information and support to the
Government’s programs in formulating policies and laws on e-commerce
applied for businesses in Vietnam.
Researchers can use this study as a reference for further research
related to this issue.


7

Scope and Limitation of the Study
The study shall focus on determining the e-commerce strategy that might
help small and medium enterprises improve the production, sales and profit of
the company. It will mainly focus on the small and medium enterprises
(SMES) in Vietnam. The forms of ownership and types of enterprises

considered in this study are enterprises of all forms of ownership and
business types, except for the enterprises with 100% foreign capital.
The research focuses on the enterprises in Hanoi. The representative
samples meet the requirement needed to augment the capacity for applying ecommerce in particular and IT in general at the highest level in Viet Nam.

Definition of Terms
The following terms are extensively used in this study and are hereby
conceptually and operationally defined:
Electronic commerce (e-commerce) is a much broader term encompassing
not only EDI but also other forms of communication, such as E-mail
and Electronic bulletin boards. EDI was primarily developed for high
volume exchange of commercial documents in standardized electronic
format over an electronic public network between the automated
business processes of trading partners. E-mail, on the other hand, is
the exchange of less structured correspondence in electronic format.
Electronic Data Interchange (EDI) is simply the means to communicate
between companies from one computer to another. For many years
companies have been using computers to send business documents
instead of mailing paper documents (i.e. most of our pay checks are


8

directly deposited into our bank accounts). This transfer of funds is
accomplished by the use of an electronic file being sent form your
company to your bank). The problem was that the all efforts employed
proprietary or unique formats. The absence of a standard format led to
the condition where computers could not longer "talk" to one another
without a great deal of effort by programmers. For example, Supplier X
could recognize an electronic Purchase Order from Retailer A but not

from Retailer B.
Information Technology (IT) is the application of
telecommunications equipment

to

computers and

store, retrieve,

transmit and

manipulate data, often in the context of a business or other enterprise.
The term is commonly used as a synonym for computers and computer
networks, but it also encompasses other information distribution
technologies such as television and telephones. Several industries are
associated with information technology, such as computer hardware,
software, electronics, semiconductors, internet, telecom equipment, ecommerce and computer services.
Organizational readiness was assessed by including two items about the
financial and technological resources that the company may have
available as well as factors dealing with the compatibility and
consistency of e-commerce with firm’s culture, values, and preferred
work

practices

(existing

technology

infrastructure;

and

top

management’s enthusiasm to adopt e-commerce).
Perceived ease of use can be measured by identifying how IT is: easy to
learn, controllable, clear & understandable, flexible, easy to become


9

skillful in and easy to use.
Perceived usefulness can be measured by investigating the impact
on

job

performance,

speed

of

work,

increased

of

productivity,

effectiveness, make job easier and useful.
Small and medium Enterprises (SMEs) are companies whose personnel
numbers fall below the limits. In Vietnam, according to Decree No.
56/2009/ND-CP dated 30/6/2009 of the Government, the amount of
labor required an annual average of 10 or less are considered micro
enterprises, 10 less than 200 employees are considered small
enterprises and from 200 to 300 workers are to be treated as Medium
Enterprises.

IT


10

Chapter II
REVIEW OF LITERATURE
Through extensive data gathering from different books and internet
sites, this chapter serves as informative references of this research study
particularly focusing on its objectives. Different research studies have also
been found which are precisely significant to the development of the study.

Mirchandani & Motwani (2001) define electronic Commerce as
commercial activities conducted over the World Wide Web. At the most basic
level, a company can become enabled for electronic commerce simply by
adding communication over the Internet--e.g., e-mail-to its established forms
of communication such as telephone, fax, or the postal service. In increasing
levels of sophistication, the company can use the Internet to manage

information (including on-line databases) or integrate electronic commerce
into re-engineered business processes (e.g., on-line order entry, inventory
tracking, and electronic billing). The company can also use electronic
commerce to reach current customers, potential customers, suppliers, and
other groups (e.g., financial institutions and the media). Nearly half (46%) of
all small businesses have yet to adopt electronic commerce (Wall Street
Journal, 1999). This report appears surprising because electronic commerce
intuitively may be the first medium of choice for small businesses given its
inherent nature of leveling the playing field between small and large
businesses. With decreasing cost and availability of powerful user-friendly
hardware and software, the benefits of information systems (IS), and hence
electronic commerce, are now accessible to even the smallest business.


11

Since small businesses have unique computing needs as well as distinctive
technology acceptance patterns, and that small businesses represent a
distinct group that can benefit significantly from the adoption of electronic
commerce.
The study of Mirchandani & Motwani (2001) has sought to identify
factors that influence the adoption of electronic commerce in small
businesses. Enthusiasm of the top manager/CEO of Greater Grand Rapids
organizations towards electronic commerce, compatibility of electronic
commerce with the work of the company, relative advantage perceived from
electronic commerce, and knowledge of the company's employees about
computers were found to discriminate between adopters and non-adopters of
electronic commerce. The interviews conducted with non-adopters of
electronic commerce also identified their difficulty in hiring and retaining skilled
IS professionals to implement electronic commerce. Clearly the arrival of

electronic commerce to the world of business has facilitated a shift from the
mass labor paradigm of past decades to a knowledge worker paradigm that is
likely to dominate the economy for the future. Small businesses that are able
to retain technology-skilled employees will be the beneficiaries of the
electronic commerce economy
In addition, the study by Lertwongsatien and Wongpinunwatana (2003)
examined small and medium enterprises in Thailand and described the factors
that differentiated e-commerce adopters from non-adopters. These included
organization size, top management support for e-commerce, existence of an
IT department within the organization, perceived benefits and compatibility,
and industry competitiveness (Lertwongsatien and Wongpinunwatana, 2003).


12

In an article entitled “Global and National Factors Affecting ECommerce Diffusion in Singapore,” Wong (2003) has attempted to highlight
the likely global/regional and national environmental factors affecting ecommerce adoption in Singapore. Our summary assessment is that, in
aggregate, Singapore appears to have relatively high readiness for ecommerce development. Indeed, preliminary evidence available suggests that
e-commerce diffusion in Singapore has been relatively rapid by international
standards, and that the broad pattern of diffusion is consistent with our
prediction based on the assessment of facilitating and impeding factors.
Overall, with e-commerce as an innovation still being at an early stage of
evolution, even on a global scale, the biggest factor impeding greater adoption
in Singapore in the near term is likely to be the newness and unproven nature
of e-commerce applications, rather than any internal national factor. Until ecommerce investment has demonstrated a greater economic impact through a
sufficient number of successful role models, and competitive pressures from
rival adoption are beginning to hurt, the pace of diffusion is likely to be
constrained, notwithstanding various active government policy initiatives to
promote their development.
While still preliminary, the empirical evidence suggests that the earlier

investment by Singapore in ICT infrastructure has facilitated the subsequent
development of e-commerce. In this regard, e-commerce development in
Singapore so far appears to primarily build upon, rather than significantly
disrupt, the prior infrastructural investments. The e-commerce development
pattern by sectors also seems to suggest that Singapore’s high dependence
on global MNCs has been a positive facilitating factor, rather than a negative


13

one. The sectors that have been most advanced in adopting e- commerce—
notably the electronics manufacturing and logistics industries—have been the
most highly dependent on global MNCs and have been the most closely
linked to the global production networks. In this regard, Singapore’s strength
in physical transportation infrastructures and high reliance on MNCs appear to
have been an advantage, rather than a liability, in facilitating e-commerce
developments. Last, but not least, while some scholars have argued that the
role of the state would become counterproductive in the e-commerce era,
given the astonishing pace of technological change and the chaotic
uncertainties regarding Internet business models that would make it difficult
for any state agency to pick winners or even to provide guidance, our analysis
of the experience of Singapore suggests that a continuing active government
policy role may have contributed to, or at least not impeded, Singapore’s rapid
e-commerce diffusion, just as Singapore’s past high rate of adoption of ICT
has been significantly driven by active government policies. Indeed, author
has highlighted areas where stronger government policies may be needed,
including the promotion of technological innovation and entrepreneurship,
strengthening network links with entrepreneurial hotspots like the Silicon
Valley, and quickening the pace of financial and telecommunications market
liberalization. In particular, how public policy can contribute to the creation of a

critical mass of e-commerce-related entrepreneurs in Singapore will be an
important policy research question in the future.
Grandon and Pearson (2004) investigated factors that influenced ecommerce

adoption

by

SMEs

in

both

developed

and

developing

counties, the United States and Chile. Using the combination of two theories


14

DIT (Diffusion of Innovation Theory) and TAM (Technology Acceptance
Model), through reviewing a substantial amount of researches on other IT
adoption models, that some of them will be mentioned in this research,
Grandon and Pearson identified organizational readiness, compatibility,
external pressure, perceived ease of use and perceived usefulness as

the most important factors affecting e-commerce adoption in SMEs.

Figure 1. Research Model (Grandon and Pearson, 2004)

Model for Assessing E-commerce Success in SMEs
A comprehensive review of literature in the last 20 years starting from
1991 to 2011 has been done to develop the proposed model of e-commerce
adoption in SMEs. The proposed model consists of factors from relevant
researches that w e r e divided into internal and external factors affecting
e-commerce success in SMEs. The proposed model is shown in Fig 2.
Here, the factors are divided into Independent Factor that is Organizational,
Management, Technological, Individual, Implementation, and Trust and