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The WTO, marketing and innovativeness capabilities of Vietnamese rms

Tho D. Nguyen
University of Economics, Ho Chi Minh City, Vietnam and University of Western Sydney, Sydney, Australia, and

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Trang T.M. Nguyen

Vietnam National University, Ho Chi Minh City, Vietnam
Abstract
Purpose This study aims to explore the impact of Vietnamese rms expectations of opportunities provided by the World Trade Organization (WTO) expected WTO opportunities on their marketing and innovativeness capabilities, and subsequently, on business performance. Design/methodology/approach Using a sample of 323 Vietnamese rms in Ho Chi Minh City, a model incorporating expected WTO opportunities, marketing and innovativeness capabilities, and business performance by means of structural equation modeling was tested. Findings It was found that expected WTO opportunities had positive impacts on both marketing and innovativeness capabilities. Further, marketing and innovativeness capabilities underlie business performance of Vietnamese rms. Research limitations/implications A key limitation of this study is the examination of the impact of expected WTO on only two rm capabilities: marketing and innovativeness. There might be several other rm capabilities that may be affected by expected WTO such as entrepreneurial orientation and learning orientation. Practical implications The results of this study suggest that rms should be prepared to take advantage of the WTO: to evaluate its opportunities, as well as threats, in order to design and implement appropriate strategies for doing business in a new and challenging environment. Originality/value This is the rst study of this type on Vietnams entry into the WTO as an important event for Vietnamese rms. The ndings of this study suggest expected WTO opportunities play an important role in strengthening marketing and innovativeness capabilities, and subsequently, on business performance. Keywords Marketing, Innovation, Business performance, Vietnam, Marketing opportunities Paper type Research paper

Management Research Review Vol. 34 No. 6, 2011 pp. 712-726 q Emerald Group Publishing Limited 2040-8269 DOI 10.1108/01409171111136239

Introduction Entry to the World Trade Organization (WTO) has been a signicant event for Vietnam as part of its integration into the global economy. This has led to the lowering of trade barriers and, in turn, has created several opportunities as well as threats for Vietnamese rms. Opportunities include new markets for exports of goods and services as well as imports of raw materials and technologies, more chances for international business co-operations, etc. However, with a more open market, competition is more severe, and business standards such as product quality, safety, etc. are more strictly controlled (Vu, 2008).
The authors would like to thank Nigel Barrett for his comments on an earlier draft of the paper.

To survive and develop in such a competitive business environment, Vietnamese rms must enhance their competitive positions in the market. To achieve sustainable competitive positions in the market, Vietnamese rms should, therefore, have appropriate resources and capabilities. Consequently, identifying and nurturing resources and capabilities that can create competitive advantage are necessary for Vietnamese rms. Among rm capabilities, marketing and innovativeness capabilities are perhaps the most important capabilities for rms in transition economies like Vietnam. In 1986, the Vietnamese government initiated a new economic reform program, aiming to transform the economy from a centrally planned economy to a market-oriented economy under socialist guidance (Bartram et al., 2009). Under the centrally planned system, business activities of Vietnamese rms focused primarily on production. Vietnamese rms lacked knowledge about market economics and management, and, in particular, marketing (Nguyen et al., 2006). The movement toward a market economy together with the entry to the WTO has caused Vietnamese rms to change their traditional ways of doing business. Instead of focusing on production and relying primarily on the government planning system, Vietnamese rms, like rms in other transition markets, are now required, not only to nd their own markets for their brands, but also to have capabilities of producing higher quality and more competitive brands in order to successfully compete with international brands in their home markets. They must design and develop cutting-edge products and processes to obtain a competitive edge (Sala-I-Martin et al., 2008). However, during the past several years, with a production focus, Vietnamese rms did not fully understand the way to build and market their brands. Market oriented activities of Vietnamese rms were mainly reactive. Therefore, in so doing, Vietnamese rms are confronted with several difculties, especially, the difculty in enhancing their marketing and innovativeness capabilities (Nguyen and Nguyen, 2008). WTO membership offers Vietnamese rms an access to international input and output markets and strengthens their capabilities through increased competition, provided that they are prepared to take advantage of such opportunities. Different capability levels among rms are reected in their abilities to create and utilize resources to reach their objectives. Several factors, both external and internal to the rm, can contribute to such differences (Sirmon et al., 2007). The resource-based view (RBV) of the rm postulate that rms have different resources and capabilities. And, superior performance can come from rms resource and capability uniqueness and their ability to appropriately respond to the surrounding environment (Song et al., 2005). However, little research has been undertaken to explore the impact of a rms environment on its capabilities, especially, in transition markets like Vietnam. Vietnams entry into the WTO is an important event that may affect Vietnamese rms capabilities if they expect that such an event might generate greater opportunities than costs. There are both advantages and disadvantages to join the WTO. During the last several years, Vietnamese rms have had different perspectives on the costs and benets of the WTO entry. Some rms have expected that such an event produces more opportunities for Vietnamese rms than threats. Other rms still have worried about their capabilities in competing in a more severe competitive environment (Vu, 2008). However, to the best of our knowledge, no research has been conducted to explore the role of such expectations. For this reason, in this study, we examine the relationship between Vietnamese rms expectations of the opportunities provided by the WTO (in short, expected WTO opportunities) and their capabilities. Specically, we investigate

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the impact of expected WTO opportunities on rms marketing and innovativeness capabilities, and subsequently, on their business performance. The rest of the paper is organized around the following key points: literature review and hypotheses; method; data analysis and results and discussion and conclusions. Literature review and hypotheses Resources and capabilities of the rm Competition theory, based on industrial organization economics (Porter, 1981) focuses heavily on the environment of rms rather than on the idiosyncratic attributes of rms (Barney, 1991; Barney et al., 2001). RBV considers a rm as a bundle of resources and capabilities (Barney et al., 2001; Wernerfelt, 1984). The rms resources include tangible and intangible assets such as nancial and physical assets, human capital and know-how. Capabilities are the ability of the rm to effectively use its resources to achieve its objectives (Amit and Schoemaker, 1993; Grant, 1991). RBV posits that different rms possess different resources and capabilities, and that a rm within an industry uses different business strategies. The rm cannot imitate the strategies of other rms because the rms business strategy is built on the rm-specic resources. These rm-specic resources drive value creation, because the rm will produce greater utility for customers than its competitors. Thus, the rm will enjoy a competitive advantage (Sirmon et al., 2007). RBV has been developed in the context of dynamic markets and is, therefore, viewed as the dynamic capabilities approach to the rm. This approach stresses the exploitation of existing internal and external rm-specic competences and the development of a strategic consistency to address the changing environment (Lamberg et al., 2009; Teece et al., 1997). A rm will enjoy competitive advantages if it has the ability to create new resources and capabilities that are valuable, rare, not easily immutable and substitutable (Barney, 1991; Teece et al., 1997; Eisenhardt and Martin, 2000). For a more recent comprehensive review, see, for example, Teece (2007). In the marketing literature, RBV has been used intensively to explain the relationship between marketing-related resources and capabilities and business performance (Nath et al., 2008; Song et al., 2005, 2007). Conceptual model Figure 1 shows a conceptual model explaining the role of expected WTO opportunities in marketing and innovation capabilities and, subsequently, business performance. A rm that expects greater opportunities provided by the WTO, tends to have a higher level of marketing and innovativeness capabilities and, subsequently enjoys a higher level of business performance.

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H1 Expected WTO opportunities

Marketing capability

H3 Business performance

Figure 1. Conceptual model

H2

Innovativeness capability

H4

Marketing capability Fundamentally, marketing is a management philosophy that creates superior value to customers in a way that benets the organization and its stakeholders (Kotler et al., 2006). In view of that, marketing capability of a rm reects the rms competence in deciphering the market including customers, competitors and the macro-environment (Homburg et al., 2007; Jayachandran et al., 2004; Li and Calatone, 1998; Nath et al., 2008). The rm should continuously collect information about the market from various sources, transform it into knowledge, and use it for making business decisions (Nguyen and Barrett, 2007; Nonaka and Takeuchi, 1995). Such knowledge is a source of marketing capability and is valuable to the rm (de Luca and Atuahene-Gima, 2007; Krasnikov and Jayachandran, 2008; Li and Calatone, 1998). Further, marketing capability reects the capability of the rm to obtain quality relationships with business partners (Krasnikov and Jayachandran, 2008; Nguyen et al., 2007). Thus, the rm should build and nurture high-quality relationships with its customers, suppliers, distributors and the local government. In sum, marketing capability comprises four key components: responsiveness to customers; responsiveness to competitors (Homburg et al., 2007; Narver and Slater, 1990; White et al., 2003); responsiveness to changes in the macro-environment (Srivastava et al., 2001; Zahra et al., 1999); and, business relationship quality (Krasnikov and Jayachandran, 2008; Nguyen et al., 2007; Srivastava et al., 2001). Thus, marketing capability is more than market orientation, which is a key concept in marketing (Narver and Slater, 1990; Kohli and Jarworski, 1990). Market orientation focuses the organization on continuously collecting information about target-customers needs and competitors capabilities, and using this information to create continuously superior customer value (Slater and Narver, 1995, p. 62). Marketing capabilities include market orientation but cover another important aspect of marketing, i.e. business relationship marketing. Innovativeness capability Innovativeness capability reects a rms competence in generating, developing and implementing new ideas, products, or processes that improve the rms competitive advantage and performance (Damanpour, 1991; Hult et al., 2004). Innovativeness capability is a means for organizational change, which assists a rm in achieving innovation. It reects both the willingness of the rm to eliminate the business routines that are not consistent with new environments, as well as the adoption of new ideas that are suitable for competitive conditions (Hult et al., 2004; Menguc and Auh, 2006). These activities can result from responses to changes in the environment, internal or external to the rm, or as a result of a preemptive move undertaken by the rm to inuence its environment. When business environments change, it is necessary for the rm to innovate in order to achieve both improved competitive positioning in the market and business performance (Damanpour, 1991; Hult et al., 2004; Laforet, 2009). Marketing and innovativeness capabilities are types of dynamic capabilities that assist a rm in achieving its business goals (Foley and Fahy, 2009; Menguc and Auh, 2006). Marketing capability helps the rm to effectively implement marketing plans: rapidly responding to the needs of customers, competitive actions and macro-environments, as well as building and maintaining high-quality relationships with business partners. Innovativeness capability assists the rm in becoming a pioneer in the market which allows it to obtain a competitive advantage (Hult et al., 2004).

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The WTO and marketing and innovativeness capabilities of Vietnamese rms The entry into the WTO of Vietnam creates opportunities as well as threats for Vietnamese rms. In this study, expected WTO opportunities are dened as the expectation of benets that the WTO provides to the rm relative to its costs. The attention-based view of the rm (Ocasio, 1997) argues that the focus of a rm on issues happening in the market will affect the behavior of the rm. The focus of the rm on the WTO is a selective focus. The rm will evaluate the balance between benets and costs generated by this issue (Ocasio, 1997). Organizational expectation theory (Cyert and March, 1992) reveals that when a rm expects a business opportunity, it is likely to evaluate the opportunity, as well as react to it, according to its expectation. After more than ten years of negotiation, Vietnam nally joined the WTO in November 2006. During this period, Vietnamese rms had different expectations of the benets given by WTO membership. Several rms have put a lot of effort in enhancing their capabilities to be ready for doing business in the new environment (Saigontiepthi, 2006). When a rm has expected a positive benet, i.e. the benets given by the WTO surpass its costs, the expectation of the rm about opportunities given by the WTO is high and the rm is prepared to take advantage of these opportunities. Therefore, it could be expected that the rm would utilize its resources to enhance its marketing capability and innovativeness capability to satisfy its more sophisticated customers. These capabilities are related directly to its customers, competitors and business partners. Thus: H1. There is a positive relationship between expected WTO opportunities and marketing capability. H2. There is a positive relationship between expected WTO opportunities and innovativeness capability. Firms with high marketing and innovativeness capabilities spend more resources in interacting with the market, i.e. to use capabilities to transform resources into output that enhances business performance. Business performance is dened as the achievement of organizational goals, including protability, growth, market share, sales and other strategic objectives (Homburg et al., 2007; Hult et al., 2004). Thus: H3. There is a positive relationship between marketing capability and business performance. H4. There is a positive relationship between innovativeness capability and business performance. Methods Design and sample The research comprised two phases, a pilot and a main survey and was undertaken in Ho Chi Minh City, the principal business center of Vietnam. The single key informant approach, the most commonly used method in organizational research (Kumar et al., 1993), was employed. Respondents were senior managers of rms. The pilot study comprised two steps. First, in-depth interviews were conducted with 11 rms in order to formulate questions for the subsequent survey. Second, face-to-face interviews were used with 96 rms to rene the scales. A preliminary analysis assessed all the scales measuring the constructs in the conceptual model using

Cronbachs alpha reliability and exploratory factor analysis (EFA). The main survey was undertaken by using face-to-face interviews with senior managers of 323 rms. The purpose of the main survey was to validate the measures and to test the structural model. Composite reliability and conrmatory factor analysis (CFA) were used to test the measurement models and structural equation modeling (SEM) was used to test the conceptual model and hypotheses. Measurement Four constructs were examined: business performance, marketing capability, innovativeness capability and expected WTO opportunities. Business performance was measured by ve items, based upon Keh et al. (2007) and Wu and Cavusgil (2006). Innovativeness capability was measured by three items (Covin and Slevin, 1989; Keh et al., 2007). Expected WTO opportunities were measured by three items, based on the theory of organizational expectation (Cyert and March, 1992). Finally, marketing capability was a multidimensional construct comprising four components, i.e. customer responsiveness, competitor responsiveness, macro-environment responsiveness and business relationship quality. The items measuring the components of marketing capabilities were based upon Jayachandran et al. (2004), Homburg et al. (2007), Krasnikov and Jayachandran (2008), Nguyen et al. (2007), Li and Calatone (1998) and Wu and Cavusgil (2006). Customer responsiveness was measured by eight items and competitor responsiveness was measured by nine items. Macro-environment responsiveness was measured by seven items, and business relationship quality was measured by four items. All items were measured by a seven-point Likert scale, anchored by 1: strongly disagree and 7: strongly agree. The questionnaire was initially prepared in English and then translated into Vietnamese by an academic uent in both languages. This procedure was undertaken because English is not well understood by managers in this market. Back translation was undertaken to ensure the equivalence of meanings. Measurement renement The measures were rst rened via Cronbachs alpha reliability and EFA, using the data collected from 96 rms in the pilot study. The results indicated that all scales satised the requirement for reliability. Specically, the Cronbachs alphas of the four components of marketing capability: customer responsiveness, competitor responsiveness, macro-environment responsiveness and business relationship quality were 0.87, 0.94, 0.96 and 0.80, respectively. The Cronbachs alphas of the three unidimensional constructs, i.e. innovativeness capability, expected WTO opportunities and business performance were 0.61, 0.92 and 0.93, respectively. The EFA results (principal components with varimax rotation) indicate that all the scales satised the requirement for factor loadings (. 0.50), total variance extracted (. 50 per cent) and the number of factors extracted. Accordingly, these measures were used in the main survey. Sample A sample of 323 rms in Ho Chi Minh City was surveyed to test the measurement and structural models. This sample size was determined by the rule of ve observations per one free parameter estimated (Bollen, 1989). The highest number of free parameters in all the models to be tested was 72 (the marketing capability measurement model).

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Therefore, the sample size should be around 360 (72 5). In order to achieve such a response rate, 500 questionnaires were distributed. There were 412 completed questionnaires. Among these completed questionnaires, 57 were found to be invalid due to non-qualied respondents (respondents not being members of top management) and 32 contained more than 10 per cent missing values. Consequently, the remaining 323 valid completed questionnaires comprised the sample for this research. Although this sample size was slightly smaller than the size calculated (n 360) based on the rule of ve observations per one free parameter, it was still much larger than the minimum size (n 200) required for obtaining valid results (Hoelter, 1983). The sample, in terms of rm size, comprised 163 (50.5 per cent) rms with fewer than 100 employees, and 160 (49.5 per cent) rms with more than 99 employees. In terms of ownership, there were 33 (10.2 per cent) state-owned rms, 130 (40.2 per cent) joint-stock companies, 131 (40.6 per cent) limited proprietary rms and 29 (9.0 per cent) privately owned rms. In terms of industry, there were 97 (30.0 per cent) rms in the manufacturing industry, 122 (37.8 per cent) rms were in the service industry, and 104 (32.2 per cent) rms doing business in both manufacturing and service industries. Data analysis and results Measurement validation As discussed previously, there were four constructs: business performance; innovativeness capabilities; expected WTO opportunities and marketing capability. The scales measuring these constructs were rened via Cronbachs alpha and EFA using the data set (n 96) collected in the pilot study. We again used EFA with the data (n 323) collected in the main survey. The EFA results (principal components with varimax rotation) again indicate that all the scales satised the requirement for factor loadings (. 0.50), total variance extracted (. 50 per cent) and the number of factors extracted. These scales were then validated using CFA. The screening process shows that the data exhibited slight deviations from normality. Nonetheless, all univariate kurtoses and skewnesses were within the range of [2 1, 1]. It is also noted that all the scales were reective measures. Therefore, maximum likelihood estimation was used (Muthen and Kaplan, 1985). Marketing capability. This was a second-order construct consisting of four components: customer responsiveness, competitor responsiveness, responsiveness to the environment and business relationship quality. The CFA results indicate that the measurement model of marketing capability received an acceptable t to the data: x2 [334] 825.92 ( p 0.000); GFI 0.847; CFI 0.927 and RMSEA 0.068. In addition, all factor loadings were high ($ 0.60) and signicant ( p , 0.001; Table I). These ndings indicate that the scales measuring the components of marketing capability were unidimensional and convergent validity (within-method) was achieved (Steenkamp and van Trijp, 1991). The correlations (with standard errors) between the components of marketing capability indicate that they were signicantly different from unity ( p , 0.001; Table II). Therefore, the within-construct discriminant validity was achieved (Steenkamp and van Trijp, 1991). Saturated model. The saturated model (nal measurement model) received an acceptable t to the data: x2 [83] 165.11 ( p 0.000); GFI 0.936; CFI 0.970; RMSEA .055. It is noted that, because the measures of the components of marketing capability were unidimensional, summated items were used in the saturated model. The use of summated items helps decrease the number of free parameters considerably,

Items Marketing capability: customer responsiveness: composite reliability rc 0.87; average variance extracted rvc 0.46 We regularly meet our customers to learn their needs for new products/services Our knowledge about customer needs is thorough We regularly use market research to collection information about customers We have interdepartmental meetings regularly to discuss customers needs We respond rapidly if something important happens with regard to our customers We quickly implement our planned activities with regard to customers If our customer-related activities do not lead to the desired effects, we are fast at changing them We quickly react to fundamental changes with regard to our customers Marketing capability: competitor responsiveness: rc 0.94; rvc 0.62 We regularly collect information about our competitors We have interdepartmental meetings regularly to discuss our competitors actions We systematically analyze information about competitors We always carefully evaluate information about our competitors when making business decisions Our knowledge about our competitors strengths and weaknesses is thorough Our knowledge about our competitors products/services is thorough We respond rapidly if something important happens with regard to our competitors We quickly implement our planned activities with regard to competitors If our competitor-related activities do not lead to the desired effects, we are fast at changing them Marketing capability: macro-environment responsiveness: rc 0.94; rvc 0.69 We regularly collect information about the macro-environment We systematically analyze information about the macro-environment We have interdepartmental meetings regularly to discuss information about the macro-environment We always carefully assess the macro-environment when making business decisions We respond rapidly if something important happens with regard to the macroenvironment We quickly implement our planned activities with regard to the macroenvironment We always adjust our planned activities with regard to the change of the macroenvironment Marketing capability: business relationship quality: rc 0.70; rvc 0.44 We have established a quality relationship with our customers We have established a quality relationship with our distributors We have established a quality relationship with our suppliers We have established a quality relationship with the local government Innovativeness capability: rc 0.72; rvc 0.46 We always emphasize on R&D, technological leadership and innovations We introduced many new lines of products/services in the last three years Our changes in product/service lines have usually been dramatic

Loadings t-statistic

Vietnamese rms

0.66 0.72 0.60 0.73 0.71 0.71 0.64 0.65 0.77 0.79 0.87 0.83 0.83 0.73 0.79 0.79 0.68 0.74 0.81 0.79 0.91 0.91 0.84 0.81 0.74 0.66 0.72 0.60 0.58 0.75 0.70

11.04 9.51 11.21 10.88 10.88 9.99 10.16 19.33 17.04 15.95 16.07 13.67 15.13 15.00 12.57 21.68 18.58 19.86 20.00 17.80 16.85 10.10 10.85 9.35 8.43 8.29 (continued )

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Table I. CFA loadings (standardized) of items

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Items Expected WTO opportunities: rc 0.89; rvc 0.72 We have expected that Vietnams entry into WTO will help us to nd new markets for our products/services We have expected that Vietnams entry into WTO help us nd more new business partners In general, we have expected that our business would be better off with the entry into WTO of Vietnam Business performance: rc 0.90; rvc 0.64 During the last three years, we have achieved the desired prots During the last three years, we have achieved the desired growth rates During the last three years, we have achieved the desired market shares During the last three years, we have developed the desired markets During the last three years, we have developed the desired new products/services

Loadings t-statistic

0.86 0.92 0.77 0.62 0.75 0.90 0.91 0.79

15.99 16.77 18.22 12.46 12.32 11.33

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Table I.

Correlations Business relationship quality $ customer responsiveness Customer responsiveness $ Competitor responsiveness Competitor responsiveness $ macro-environment responsiveness Business relationship quality $ macro-environment responsiveness Customer responsiveness $ macro-environment responsiveness Business relationship quality $ competitor responsiveness Notes: r, correlation; SE, standard error; t, t-statistic

r 0.58 0.75 0.57 0.37 0.64 0.43

SE 0.089 0.096 0.076 0.072 0.086 0.075

1 2 r t (1 2 r) 0.42 0.25 0.43 0.63 0.36 0.57 4.68 2.55 5.74 8.73 4.22 7.61

Table II. Correlations between the components of marketing capability

which makes the estimation reliable without increasing the sample size (Bagozzi and Edwards, 1998). Consequently, four summated items were formed for marketing capability. The factor loadings of all items were high and substantial (the lowest loading was 0.62), and all were signicant ( p , 0.001). These ndings indicate that the scales used in this study were unidimensional and their convergent validity (within-method) was achieved. The correlations between constructs, together with their standard errors (Table III), indicate that they were signicantly different from unity, thus, supporting the across-construct discriminant validity (Steenkamp and van Trijp, 1991). Further, all the scales had high composite reliability (rc $ 0.70; Table I). Finally, except for the scales measuring business relationship quality and innovativeness capability, the average variance extracted (rvc)
Correlations Expected WTO opportunities $ marketing capability Innovativeness capability $ marketing capability Innovativeness capability $ expected WTO opportunities Business performance $ expected WTO opportunities Business performance $ innovativeness capability Business performance $ marketing capability Notes: r, correlation; SE, standard error; t, t-statistic r 0.58 0.75 0.57 0.37 0.64 0.43 SE 0.089 0.096 0.076 0.072 0.086 0.075 12r 0.42 0.25 0.43 0.63 0.36 0.57 t (1 2 r) 4.68 2.55 5.74 8.73 4.22 7.61

Table III. Correlations between constructs

of other scales was greater than 0.50 (Table I). In sum, all the scales measuring the constructs used in this study satised the requirement for reliability and validity. Structural models The proposed model received an acceptable t to the data: x2 [85] 251.39 ( p 0.000); GFI 0.908; CFI 0.939 and RMSEA 0.078. It is noted that summated items were also used to test the structural model. Further, no improper solution was found in the structural model: Heywood cases were absent; all error-term variances were signicant; and, all standardized residuals were less than j2.58j. Table IV shows the unstandardized estimates of the structural paths and Figure 2 shows the standardized one. Consistent with H1 and H2, expected WTO opportunities had positive relationships with both marketing capability (g 0.41, p , 0.001) and innovativeness capability (g 0.28, p , 0.001). A positive relationship between marketing capability and business performance was also found (b 0.44, p , 0.001), supporting hypothesis H3. Finally, innovativeness capability had a positive relationship with business performance (b 0.31, p , 0.001), supporting hypothesis H4 (Figure 2).
Hypothesis Path H1 H2 H3 H4 Expected WTO opportunities ! marketing capability Expected WTO opportunities ! innovativeness capability Marketing capability ! business performance Innovativeness capability ! business performance Est(SE) 3.47 (0.364) 0.18 (0.048) 0.06 (0.010) 0.37 (0.095) t-statistic p-value 6.51 3.75 5.92 3.84 0.000 0.000 0.000 0.000

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Notes: Est(SE), estimate with standard error

Table IV. Unstandardized regression weights in the structural model

0.52 0.87 0.80 0.67 Marketing capability 0.17

0.41 (H1)* 0.86 0.92 0.77 Expected WTO opportunities

0.44 (H3)*

0.60 0.74

Business performance 0.32 Innovativeness capability 0.08 0.69 0.81 0.53

0.89 0.90 0.78

0.28 (H2)*

0.31 (H4)*

[85] =

251.39 (p = 0.000); GFI = ; CFI = 0.939; RMSEA = 0.078 squared multiple correlation; * significant at p < 0.001

Figure 2. SEM results (standardized estimates)

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Discussion and implications The objective of this study is to explore the impact of Vietnamese rms expectations of opportunities provided by the WTO on their marketing and innovativeness capabilities, and subsequently, on business performance. It was found that expected WTO opportunities had positive relationships with both marketing capability and innovativeness capability. It was also found that marketing capability and innovativeness capability had positive relationships with the business performance of Vietnamese rms. These ndings have several implications for academics and practitioners. First, this study was undertaken during the time Vietnam became an ofcial member of the WTO. However, to the best of our knowledge, no research of this type has been conducted to explore the expectation of Vietnamese rms regarding this special event happening in the market. Based on RBV theory, it was found that marketing and innovativeness capabilities are key rm capabilities contributing to business performance. This study is one of the rst of its kind in Vietnam. A number of other studies in this market examine marketing-related factors, such as market orientation, learning orientation, business relationship quality, knowledge transfer (Hau and Evangelista, 2007; Nguyen et al., 2007) and their impact on business performance. However, little research has been devoted to explore the marketing and innovativeness capabilities in the market. The ndings of this study should encourage further research in this area in transitional markets. The results show that marketing and innovativeness capabilities strongly inuence the business performance of Vietnamese rms (b 0.44, p , 0.001 and b 0.31, p , 0.001, respectively). These results are consistent with previous studies such as Hult et al. (2004), Nath et al. (2008), Song et al. (2005), and conrm the roles of marketing and innovativeness capabilities in the success of rms in a transition market Vietnam. Therefore, Vietnamese rms should optimally deploy marketing and innovativeness resources to obtain capabilities in order to survive and develop in this increasingly competitive market. Specically, rms should enhance their capabilities of understanding, and rapidly responding to, their customers, competitors and macro-environments. Establishing and nurturing quality relationships with business and business-related partners are also of importance for Vietnamese rms to improve their marketing capabilities. In addition, Vietnamese managers are advised to enhance their innovativeness capability in order to obtain superior business performance. The results also indicate that expected WTO opportunities underlie marketing and innovativeness capabilities of Vietnamese rms (g 0.41, p , 0.001 and g 0.28, p , 0.05, respectively). These results give empirical support for the theory of organization expectation (Cyert and March, 1992). WTO membership offers Vietnamese rms several advantages and disadvantages. Firms with a high level of expectation of the opportunities given by the WTO will reallocate their resources to take the advantage created by the WTO and thus, will enjoy a high level of marketing and innovativeness capabilities. Vietnamese rms should pay attention to these results. To be successful in the new business environment, Vietnamese rms should be prepared to take advantage of the opportunities given by WTO membership of Vietnam, i.e. to evaluate its opportunities, as well as threats, in order to design and implement appropriate strategies for doing business in a more severe competitive business environment.

Limitations and direction for future research This study has several limitations. Although the initial test of the model in a major business center of Vietnam, has been encouraging, much work remains to be done. The model needs further replication, extension and critical evaluation within other transitional markets, which have just joined the WTO such as China. Second, the impact of expected WTO opportunities on only two types of rm capabilities marketing and innovativeness capabilities in a transition market, were examined. There are several other rm capabilities that may affect business performance which deserve to be investigated in future research, such as: entrepreneurial orientation; learning orientation; knowledge internalization (Nguyen and Barrett, 2007; Nonaka and Takeuchi, 1995); research and development (Krasnikov and Jayachandran, 2008); and, other market-based assets (Srivastava et al., 2001). Third, the scale measuring expected WTO opportunities is an ad hoc one. It needs a more formal procedure to modify it in future research. Finally, the impact of expected WTO opportunities on marketing and innovativeness activities, and subsequently, business performance for all types of rms, were examined. A comparison of different industries such as services/manufacturing industries, high/low technology industries would be worthy of investigation in future research.
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