Corporate social responsibility of fdi enterprises in Vietnam, given issues and solutions

terprises. The Thesis studies the case of FDI enterprises, which are highly demanded in CSR implementation, but have not been exploited much due to the limitation. research data. (ii) Regarding study method: Studies on CSR in the world often use qualitative, quantitative methods or a combination of the two. Studies on CSR in Vietnam mainly use qualitative methods, researches used quantitative methods are very little and researches used a combination of both qualitative and quantitative methods are very limited. The Thesis boldly absorbs and selectively uses both qualitative and quantitative research methods to analyze the CSR implementation of FDI enterprises in Vietnam and assess the impact of CSR implementation on the corporate reputation and propose appropriate solutions to improve CSR implementation of FDI enterprises in Vietnam in the coming time. CHAPTER 2. THEORETICAL FOUNDATION ABOUT CORPORATE SOCIAL RESPONSIBILITY OF FDI ENTERPRISES 2.1. Theoretical foundation about corporate social responsibility 2.1.1. The concept of CSR Although, there are many theoretical and empirical studies surrounding CSR, but there is not a consistent concept of CSR. Wood (2010) argues that CSR is difficult to be defined. Each stakeholder has a different view of CSR. Each industry, organization, and Government see CSR from its own perspectives and have their own definitions of CSR. The CSR approach adopted in the Thesis is understood as the business needs to be responsible for the impacts generated by its operations on society, the natural environment and stakeholders. These responsibilities need to be on voluntary basis and come from enterprises themselves, be aware and actively 10 implemented as an essential activity of enterprises. Implementing CSR proactively, methodically and strategically will help businesses maximize the positive impacts from business activities to the society and at the same time create value for businesses. 2.1.2. Motivations of CSR 2.1.2.1. Legal motivation 2.1.2.2. Pressure from stakeholers 2.1.2.3. Economic motivation 2.1.3. Theories of CSR 2.1.3.1. Pyramid model This model covers all of the CSR's interested groups of responsibilities: Economy, Legal, Ethics, and Philanthropy. Carroll (1991) argues that economic responsibility is the most fundamental responsibility of a business, reflecting a business's nature as a profitable business organization. The model also demonstrates a mechanism for the transition from economic and legal responsibilities to more socially oriented responsibilities including ethical and philanthropy responsibilities. 2.1.3.2. Stakeholder theory Theory of Stakeholders by Freeman (1984) states that shareholders are not the only object for which the enterprise should be responsible for, the enterprise should also consider the interests of all other subjects that may be affected or affected by achieving business goals. These subjects can include: shareholders or owners of businesses, employees, suppliers, customers, communities and others such as regulators, associations or non-profit organizations, profit or international organizations (Moon et al., 2005). 2.1.3.3. Value theory Value theory is a coherent approach to solving social problems - promoting social value creation while at the same time providing business benefits (Porter and Kramer 2002, 2006; Habisch 2006). CSR is a business resource to create a competitive advantage and reputation from a resources based view. According to Helm, Garnefeld, & Tolsdorf (2009), reputation is seen as a competitive advantage and increasingly recognized as an important business asset. Besides, reputation is one of those intangible assets that is extremely difficult to copy, making it a valuable source of competitive advantage (Alsop, 2004, p. 1). CSR is proved to have the ability to build coporate reputation among stakeholders. 2.1.3.4. Approach foudation of the Thesis To study the relationship between CSR and reputation, the PhD student uses a combination of three typical basic theories including CSR Pyramid model, stakeholder theory and value theory. 11 The relationship between CSR and reputation is built on stakeholder theory and value theory. In particular, the CSR implementation brings benefits to the business itself (value theory) as well as for the company's stakeholders (stakeholder theory). Consequently, corporate reputation is built when the mutual value created between firm and its stakeholders through its CSR performance. CSR is the implementation of activities by enterprises to demonstrate responsibility to stakeholders. These activities are completely voluntary and include economic, legal, ethical and philanthropy aspects. The implementation of CSR not only brings benefits to society but also benefits enterprises themselves. Therefore, businesses should proactively implement CSR to balance benefits for society and for themselves. By doing so, businesses can achieve the sustainable development. 2.2. Theoretical foundation about corporate social responsibility of fdi enterprises 2.2.1. The concept of FDI enterprise Foreign Direct Investment (FDI) enterprise is defined as an enterprise with foreign direct investment capital and direct management participation of foreign investors. This enterprise operates under the host country's laws to carry out business activities that benefit all parties. In Vietnam's legal documents, the identification of this type of enterprise is generalized in Clause 17, Article 3 of the 2014 Investment Law as an economic organization with capital Foreign investment means an economic organization with a member or shareholder as foreign investors. It can be seen that the current Vietnamese law recognizes the activities of foreign investors in the host economy to a broader scope (foreign-invested economic organizations) than enterprises with Foreign investment capital. 2.2.2. CSR of FDI enterprises and their stakeholders The stakeholder theory associated will be the basis for identifying the most important corporate stakeholders and identifying their interests in the FDI firms' CSR. In the theory section, the PhD student has listed potential stakeholders and their expectations for the business and the responsibilities that businesses need to have with them. Based on an overview of foreign researches, the PhD student determines that FDI firms’ most important stakeholders will be customer, labor, government and the community. 2.2.3. The CSR contents associated with the stakeholders of FDI enterprises 2.2.3.1. CSR for the Government (1) Responsibility to pay taxes (2) Responsibility to comply with the law in the host country 12 2.2.3.2. CSR for labor CSR for labor refers to the enterprise's responsibility in ensuring the legitimate benefits of employees both at present and in the future. The content of CSR for labor will include (1) paying an adequate salary (2) protecting employees' interests (3) training to improve the quality of human resources and (4) building a safe and effective working environment. 2.2.3.3. CSR for customer This specific responsibility includes: creating a variety of products and services with certain standards of quality, safety for consumers, products that satisfy customer’s needs, delivery on time, providing after-sales service, product information is clear and honest. Therefore, CSR for consumers is shown in two contents, including (1) providing products and services (2) protecting consumers. 2.2.3.4. CSR for community (1) Responsibility to protect the environment (2) Responsibility to support the local community 2.2.4. Factors affecting the CSR performance of FDI enterprises 2.2.4.1. External factors (i) Legal system (ii) The inspection and supervision of functional agencies (iii) Perceptions of stakeholders: Government, employees, customers, community (iv) Associations and media participation 2.2.4.2. Internal factors (i) Enterprise perception (ii) Consciousness of law observance (iii) Enterprise characteristics: size of the enterprise, number of years of operation, financial capacity 2.3. Proposing a research model on the implementation of social responsibility of FDI enterprises 2.3.1. Theoretical foundation According to Gotsi & Wilson (2001), a company's reputation is the overall assessment of a company's stakeholder. This assessment is based on stakeholders' direct experience with the company for differential comparison with competitors (Mutch et al., 2009). Therefore, CSR implementation with stakeholders plays an important role in building the corporate reputation. However, there are many different stakeholders. Each business has stakeholders that are more important than the rest, and need more attention. 2.3.2. Theoretical framework and research model 13 CSR has been shown to bring competitive advantage and value to the business by building the corporate reputation. The question is how can a business perform CSR to maximize its impact on its reputation. CSR identifies the four most important stakeholders of FDI enterprises, including the Government, labor, customer, and the community based on the stakeholder theory. Next, the PhD student analyzes CSR implementation results to improve the reputation of the business through a 2-step model, including: +) Step 1: using DEA model (Developed Efficientcy Analysis) to evaluate CSR implementation to improve the reputation of the business. +) Step 2: using multivariate regression model to assess the impact of CSR implementation on each stakeholder to improve the business's reputation. 2.3.2.1. Measuring CSR performance The result of CSR implementation of FDI enterprises is that FDI enterprises allocate their resources to the optimal implementation of CSR to stakeholders in order to improve the corporate reputation. Here, the PhD student uses the DEA model to evaluate the CSR performance. In other words, firms' efficiency ratios are determined based on inputs and outputs. This efficiency score takes the maximum value of 1 or less than 1. Based on the collected data, the input and output values to evaluate the CSR performance of FDI enterprises in Vietnam are specified as follows: +) Input: CSR for government, CSR for labor, CSR for customer, CSR for community +) Output: corporate reputation 2.3.2.2. Impact of CSR implementation on corporate reputation Figure 2.7. Research model 14 The model analyzes the impact of CSR performance for stakeholders of FDI enterprises on corporate reputation is determined by the linear regression form with the following equation: REP = β0 + β1.CUS + β2.LAB + β3.GOV + β4.COM + ε In which: REP: dependent variable, representing the reputation of the business β0: intercept, which is constant β1, β2, β3, β4: regression coefficients corresponding to independent variables CUS, LAB, GOV, COM are independent variables, corresponding to the stakeholders of FDI enterprise: CUS is the CSR for the customer; LAB is CSR for labor; GOV is CSR to the Government; COM is CSR to the community ε: error. CHAPTER 3. CURRENT SITUATION OF CORPORATE SOCIAL RESPONSIBILITY IMPLEMENTATION OF FDI ENTERPRISES IN VIETNAM, GIVEN ISSUES 3.1. General information about FDI enterprises in Vietnam 3.1.1. Characteristics of FDI enterprises in Vietnam Foreign direct investment (FDI) in Vietnam has increased dramatically since Vietnam joined the World Trade Organization (WTO) in 2007. Especially after Vietnam signed and joined a series of Free trade agreements (FTA), Vietnam has become a large open economy (reaching more than 200% of GDP in 2018). After more than 30 years of opening, integrating and reforming the business environment, Vietnam has become an attractive destination for foreign investors. FDI inflows into Vietnam have increased sharply and diversified according to investment partners, sectors, and the amount of signed capital and implemented capital improved over the same period of the years. 3.1.2. The role of FDI enterprises in Vietnam Firstly, FDI supplements an important source of capital for the national economic development. Secondly, FDI capital plays an important role as the driving force for Vietnam's GDP growth and contributes significantly to the state budget revenue. Third, FDI enterprises play an important role in increasing the proportion of domestic exports, expanding foreign relations and increasing international economic integration. 15 Fourthly, FDI enterprises contribute significantly to the growth of labor productivity. Fifth, FDI has created a technology spillover effect, contributing to improving the level of technology through technology transfer. Sixth, FDI has promoted economic restructuring towards modernization. 3.1.3. Policies and achievements to attract FDI in Vietnam 3.1.3.1. Policies to attract FDI in Vietnam The attraction of investment capital from abroad is concretized through the provisions of the legal documents. These include: Law on Investment 2014, Law on Corporate Income Tax 2008 amended and supplemented in 2013, Law on Import and Export Tax 2016, and other guiding documents. Specifically, the current investment incentives to attract FDI are: import tax exemption or reduction, corporate income tax or land lease at preferential prices. 3.1.3.2. Achievements in attracting FDI in Vietnam In recent years, thanks to investment incentives, the profit from FDI attraction has increased significantly. According to a report by the Foreign Investment Agency, within the first four months of 2020, registered FDI capital has increased over the same period in 2016 to 2018. Also in the first 4 months of 2020, FDI capital has flowed into 18 industries and business fields, especially in the field of processing and manufacturing with investment capital of nearly 6 billion USD. The country leading in the rate of investment capital in Vietnam is Singapore, followed by Thailand and Japan. Although recently, Vietnam's economy has been seriously affected by the Covid-19 pandemic, the proportion of foreign capital flow into Vietnam has increased. 3.2. Current status of implementing CSR of FDI enterprises in Vietnam 3.2.1. Current status of implementing CSR for the Government (1) Responsibility to pay taxes: Contrary to the greatest profit margins, FDI enterprises have the lowest contribution to the state budget. This shows that FDI enterprises in particular are still not really aware of the issue of tax obligation fulfillment - implementing the legal aspect of CSR. (2) Responsibility to comply with the law in the host country: +) Many FDI enterprises have not seriously implemented commitments in the contract, have violated the interests of workers, leading to many labor disputes. +) FDI sector has also created many negative effects on the country's sustainable development, in particular the negative impacts on the ecological environment causing damages to the property and health of the community. 3.2.2. Current status of implementing CSR for the labor 16 (1) Responsibility to pay worthy salaries: Basically, FDI enterprises have performed well CSR in paying adequate wages to their employees. FDI enterprises pay special attention to employees' treatment and attraction, especially those with high professional qualifications (reflected in the highest salary that enterprises pay to their employees). (2) Responsibility to protect employees 'interests: Some FDI enterprises still have shortcomings in building relationships with employees, affecting employees' interests. (3) The responsibility of training to improve the quality of human resources: FDI enterprises are very interested in and spend a lot of money on training and building human resources to improve the quality of labor, thereby improving productivity, quality and efficiency. The provision of many training opportunities for employees is assessed as content outside of the legal obligation, reflecting the firm's CSR to a higher level in Carroll's (1991) model, which is an ethical aspect. . (4) Responsibility to build a safe and effective working environment: According to the authorities, in ensuring occupational safety at enterprises, FDI enterprises perform better than local enterprises due to better financial potential. For multinational corporations, they always have a set of safety work standards to follow. 3.2.3. Current status of implementing CSR for the customer (1) Responsibility to supply products and services: Customers are the most important strategic partners of the business, determining the growth rate, revenue, profitability and success of the business. Therefore, in providing products and services, most businesses have done well their distribution role, in order to bring products and services to customers, thereby bringing in revenue for the company. (2) Responsibility to protect consumers: For the quality of products and services and to ensure customers' safety, many businesses have let a series of events occur such as food that do not ensure hygiene and safety and cause negative consequences to customers. 3.2.4. Current status of implementing CSR for the Government (1) Responsibility to protect the environment: Many FDI enterprises consider CSR with the environment a "burden" or just a way of marketing, creating an image to benefit businesses. (2) Responsibilities for local community development: FDI enterprises coming from developed countries should understand this issue very well, and they are always the pioneer in charity programs. 3.3. Result of research models on the implementation of social responsibility of FDI enterprises 17 3.3.1. Survey sample and statistical result of survey sample 3.3.1.2. Survey sample The question is designed for managers and directors working in FDI enterprises operating in the territory of Vietnam. The questionnaire was then posted online to the Google Form survey system and supported by the Department of Planning and Investment and the Hanoi Tax Department in accessing the surveyed businesses. According to the sampling principle, the number of survey samples is calculated by the formula: N = 5 * m (Comrey, 1973; Hoang Trong & Chu Nguyen Mong Ngoc, 2005; Hair, Anderson, Tatham and Black, 2010). In which: N is the sample size, m is the number of questions in the survey. With 36 parameters (controlled variables) that need factor analysis, the necessary minimum sample size for the Thesis is: N = 5 * 36 = 180 PhD student issued 500 survey forms and collected 233 returning samples, including 208 valid samples, which were greater than the required minimum number of samples, ensuring reliability, stability when analyzing and evaluating. 3.3.1.2. Scale encryption * The dependent variable is the reputation of the business * Independent variable includes 4 groups of CSR activities corresponding to 4 main stakeholders that businesses focus on implementing CSR including Government, labor, customer, community. The PhD student proceeds to build scales for each variable based on the theory in Chapter 2 and encodes the variables according to the 5-level Likert scale in Table 3.3. 3.3.1.3. Statistical results of survey form Among 208 surveyed FDI enterprises, the majority of enterprises in the manufacturing and trade sectors are 21.63% and 20.67% respectively. In terms of labor size of enterprises, mainly small enterprises with 10 to 100 employees (accounting for 44.23%) and micro enterprises with less than 10 employees (accounting for 37.5%). This survey results are quite close to the actual labor size of FDI enterprises. According to Table 3.4. 3.3.2. Results of statistical analysis of independent variables 3.3.2.1. CSR for the Government The survey results show that most of the FDI enterprises operating in Vietnam's territory have good compliance with the state regulations on labor safety, working environment conditions, and paying social insurance premiums. Full and proper unemployment insurance for workers, compliance with environmental regulations and environmental protection, full tax payment, good 18 implementation of corporate legal responsibilities (over 80% of businesses FDI industry confirmed yes with the given criteria). However, the standard deviation is quite large, showing that besides many enterprises performing well CSR for the Government, few enterprises have not done well. 3.3.2.2. CSR for labor In terms of ethics, CSR for employees is placed on a higher ladder than purely legal compliance, and FDI enterprises surveyed are very interested in training to improve their employees' capacity. Notably, 64.42% of enterprises confirmed that they had a centralized database on company human resources, which is a prerequisite for using employees as well as implementing employee- related programs in a reasonable and effective manner. However, the standard deviation is quite large, showing that besides many enterprises performing well CSR for employees, few enterprises have not done well. 3.3.2.3. CSR for customer Survey results show that FDI enterprises operating in the Vietnam territory have paid attention and performed CSR for consumers very well. Because they understand that consumers are the critical part in the business strategy of the business. The trust of customers is the success and sustainable development of the business. 3.3.2.4. CSR for community Most of the FDI enterprises operating in Vietnam's territory have a relatively good sense of CSR for the community. However, only 58.17% of enterprises have certificates of sustainable development; 60.57% implement activities for the community; 74.03% use environmentally friendly production technology. The reason may be that the respondents are mainly small and micro enterprises with limited financial capacity, so they cannot perform many CSR at the highest level in the Carol model (1991). In general, businesses are aware of the benefits of implementing CSR to the community in preventing the loss of compensation and overcoming costs and helping businesses preserve and improve the company's image, creating trustworthiness, sympathy, and prestige. Not only that, but officials and the Government are also very fond of businesses with a good history of environmental protection, consumer protection and charity work. 3.3.2.5. Compare survey results and state inspection results The results of analyzing CSR implementation's current situation are based on secondary documents, mainly reports of state ministries, inspection results, official media, so the analytical results in this section will represent the Government approach. 19 The survey's analytical results are primary data for the respondents of the survey are FDI enterprises, so the analytical results in this section will represent the enterprise approach. The comparison results show that surveyed FDI enterprises have quite an optimistic assessment of their CSR implementation compared to the state reported results. Specifically, in all contents, on average, FDI enterprises evaluate that they perform well CSR. Also from the state's inspection point of view that, for the 4 related parties, enterprises implementing CSR have both good implementation content and poor implementation content. Specifically, FDI enterprises have not performed well CSR for the Government in both tax payment and compliance with legal regulations. FDI enterprises have performed well CSR for employees in the content of worthy salaries and training to improve the quality of human resources. However, it has not performed well CSR for employees to protect the interests of employees and build a safe and effective working environment. FDI enterprises have performed well CSR for customers in the content of providing products and services, but have not performed well in consumer protection content. FDI enterprises have performed well CSR for the community in the content of community development, but have not done well in the content of environmental protection. 3.3.3. Results of DEA model 1. Out of 208 FDI enterprises surveyed, four are rated to be effective with an optimal score of 1. These four firms belong to the following industries: Logistics, ITC, Education, and Manufacture. Furthermore, all four firms are micro and small-sized. 2. The average ES coefficient of all 208 FD