In terms of labor size, micro-enterprises (under 10 labors) perform the
most effective CSR (ES = 0.8013), followed by large enterprises (above 1000
labors) (ES = 0.7951). Small and Medium-sized enterprises (From 10 to 1000
labors) perform ineffective CSR. Micro firms have less than 10 labors. Thus, it
should be easier for them to manage the relationship with customers, labor,
government, and community due to the small scale of operation, making them
more effective at CSR implementation. Large firms with above 1000 labors
should have the financial ability to perform various CSR activities. Besides,
they get more attention from the public; therefore, doing CSR should help
them secure their image and reputation. Small and medium-sized enterprises
take the most portion of the economy; however, it seems like they do not
perform CSR effectively. Future researches should investigate further to find
reasonable evidence behind this finding in order to improve the efficiency of
small and medium-sized firms.
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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
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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.
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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
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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
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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
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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.
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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
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(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
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