FEMALE STARTUPS IN THE ERA OF DIGITAL TRANSFORMATION: A PRELIMINARY STUDY IN VIETNAM45322

Keywords: Female startup, women own business, digital transformation, Facebook, Vietnam.. For instance, Fitzgerald et al., 2013 defined digital transformation as “the use of new digital

TRANSFORMATION: A PRELIMINARY STUDY

IN VIETNAM

Pham Vu Thang", Vu Thi Minh Ngoc’ ABSTRACT

The digital transformation has influenced large enterprises that are shifting from traditional business models to digital enterprises by applying new technologies such as Big Data, the Internet of Things (IoT) and cloud computing Nevertheless, the digital era has also brought business opportunities for women-owned businesses via social

networks According to the Guardian, in US, women-owned businesses

now represent 42% of all businesses — nearly 13 million — employing 9.4 million workers and generating revenue of $1.9 million Women,

on average, started 1,817 new businesses a day in the US between 2018

and 2019 This study explores dynamic aspects of female startups via Facebook in Vietnam Through desk research, an analytical framework

is proposed to identify characteristics and to explore opportunities and challenges that female businesses are facing in Vietnam

Keywords: Female startup, women own business, digital transformation, Facebook, Vietnam

1 Center for Economic Development Studies, VNU University of Economics and

Business, Vietnam

2 School of Economics and International Business, Foreign Trade University, Hanoi, Vietnam

*Corresponding author: thangpv@vnu.edu.vn

214 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION

1 INTRODUCTION

This paper discusses theoretical aspects of female startups

in the context of digital transformation The paper is structured

as follows: Section 2 presents the overview of female startups in Vietnam Section 3 reviews female-founded startups in the era of digital transformation And section 4 concludes with the proposal of

a policy framework to support female-founded startups in the digital transformation in Vietnam

In the paper, a startup is commonly defined as a new and active

business entity (Birley & Westhead, 1994; Luger & Koo, 2005)

Female startups are simply referred to businesses started by female

founders According to OECD (2011), higher female earnings

would lead to greater investment in children’s education, health and

nutrition, consequently contributing to the long-term economic

growth In India, if the female/male worker ratio improved 10%,

GDP could increase by 8% In addition, if entrepreneurship gender

gaps were eliminated, global GDP could rise by as much as 2% or

1.5 trillion USD annually (Blomquist et al., 2014) In addition to

contributing to economic growth, female startups could bring better

decision making (Amason, 1996), new business ideas and innovation (Burgess and Tharenou, 2002), improving cooperation (Kuhn and

Villeaval, 2015), and engage in superior information search and processing (Hillman et al., 2007)

However, the number of female startups is limited in not only developing countries but also developed economies Figure 1 below shows the share of female startups in OECD countries in 2017, the highest shares were about 14% among startup founders in US and Mexico, the lowest share was 7% in Japan Most of female startups were in consumer goods, community lifestyle business sectors Very few female startups were in IT and transportation

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Note: Percentage of females in the sample of founders of companies less than ten years old and for whom gender is known

Source: OECD (2018d), Empowering Women in the Digital Age: Where Do We Stand?, www.oecd.org/going-digital/empowering-women-in-

Figure 1: The share of females among startup founders

In addition, a female startup faces more challenges than a male one In terms of business skills, only 37% of women in OECD countries believe that they have skills to start a business, compared

to 51% of men (OECD and European Union, 2017)

On enhancement of investment, Breschi, Lassébie and Menon

(2018)’s empirical study shows that female startups are significantly less likely to be funded Even if they are funded, they receive on average 23% less funding than male startups

26 PR0DUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION

2 FEMALE STARTUPS IN VIETNAM

According to Global Entrepreneurship Monitor (GEM, 2017), female businesses have grown overtime globally About 163 million women were starting or running new business Regarding to the startup index on gender equality (female startup rate/startup rate)

in 59 economies, Vietnam (along with Thailand and Indonesia) is

one of the countries that has gained equality with men in terms

of capacity to start a career The proportion of women engaged in startup in Vietnam in 2018 is 24.7%, which is higher than the world average (10.2%) and higher men’s startup rate (21.7%) (GEM, 2019) In terms of ages of startup founders, in 59 countries, the highest starting rate in women is in the age range of 25-34 and 35-

44 years old, while in Vietnam the highest startup rate is 18-24 years and the age of 26.8 accounted for 25-34% This can be seen that Vietnamese women starting at a relative young age This indicates that Vietnamese women run a startup at a relatively young age 27% of Vietnamese women work independently, which mean they operate their business without co-founders or employees This rate is only 19% for men, which is a pretty low figure compared

to average when up to 36.4% of women work independently The number of female companies in Vietnam employing over 20 employees is 1.3% while the global average is 2.5%

Moreover, Vietnamese female startups have a high rate of startup skills, 52.8% Noticeably, female founders are not afraid of failure they may expose when running a business Specifically, up to 43.2%

of businesswomen are not discouraged by failure The number is quite high, however, it is still lower than the world average of 55%

In terms of innovation, in most other countries, the average male business rate is 18.2% which is higher than the women enterprises 5 P

of only about 12.3% Vietnamese women are more creative than

Vietnamese men as the innovation rate is indicated at 15% in female and 12.7% in male

In terms of market, most Vietnamese female businesses focus on the domestic market Only 2.3% of them run sales internationally, much lower than the average of 26.1% of the whole world Vietnamese female startups mainly engage in wholesale/retail (68.1%) while their female counterparts in countries with high income engage

in wholesale/retail at a low rate Instead, they operate in financial, professional and consumer services twice higher than the proportion

of women at other national income levels

The largest gender gap in Vietnam is seen in the agriculture, mining and information and communication technologies The number of female businesses operating in these business sectors

is just a few, specifically: Only 0.8 female startups engaged in agriculture, 2.6% in manufacturing industry, and only 1.4% in information technology

In terms of business motivations (business opportunities or essential needs), the female startup rate taking advantage of business opportunities in Vietnam is lower than that of men, 82% versus 87%

In contrast, the incidence of women startups because of the essential needs in Vietnam is higher than men startups, 18% compared to 13% If comparing starting rate to take advantage of women and men, the Vietnam reaches 0.94 times, ranking 27/54

This shows that women in Vietnam are engaged in business due to the requirement of life rather than being proactively to take over business opportunity The majority of women’s business

activities are small and micro-scaled, mainly in the field of trade

with a narrow scope

218 PR0DUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION

3 FEMALE STARTUPS AND DIGITAL TRANSFORMATION

Many studies provide the definition of digital transformation

For instance, Fitzgerald et al., (2013) defined digital transformation

as “the use of new digital technologies (social media, mobile, analytics

or embedded devices) to enable major business improvements (such as enhancing customer experience, streamlining operations,

or creating new business models)” Urbach and Ahlemann (2016)

define digital transformation as the use of technological innovations

in business with the intention of increasing productivity, sales and establishing new forms of cooperation with customers

In general, digital transformation changes the way of business function and production Digital transformation significantly improves a company’s performance through increasing innovation, productivity, business operations, as well as stimulating consumer satisfaction etc (OECD, 2019) Key technologies driving digital

transformation are included the IoT, next-generation wireless networks, cloud computing, big data analytics, artificial intelligence,

block chain and computing power Also the study shows that digital transformation can lower cost of internal operational functions, increase productivity and reduce business operating costs as well as improve wider reach and lower cost of client-facing business functions

in advertising, communications and distribution Hair et al (2012)

shows digital transformation impacts on businesses, for instance improving productivity, accessing to new markets, lowering cost

of operation, improving customer relations through social media,

improved access to existing sales channels Digital transformation brings new business opportunities for female startups to access new markets because it can improve access to market research, business

data and networks In addition, it can provide female businesses with

more opportunities as the entering barrier is relatively low, the cost

of joining is low The lower costs of starting and running a business makes it more feasible for those with lower levels of savings and capital

to pursue digital entrepreneurship This includes, for example, the potential to operate a digital business without a physical location and relatively little equipment As long as costs of starting and managing

a digital business are reduced, more people may consider creating

a business The rise of the digital economy has led to new types of

finance and new ways of accessing startup finance, especially for

women entrepreneurs (Greenberg and Mollick, 2017)

According to Van Welsum (2016), digital transformation and

innovation bring out benefits for female businesses They argue that data is becoming a key input for business innovation and facilitates business responses to market demand Digital innovations can increase the speed of innovation cycles when businesses can speed

up product design, prototypes and testing Collaboration also helps share costs and reduces risks of digital innovation for female entrepreneurship

There are not many studies proposing analytical frameworks

on businesses in the digital transformation Chalons and Dufft (2017) proposes three stages of digital transformation of a company,

which includes: (1) The digital workplace, (2) The digital customer experience, and (3) Digital business models and ecosystem

In the first phase, digital transformation simply means when a company use smart phones and other mobile devices, implementing collaborative tools such as video conferencing and chat as well as using social networks in its business

In the phase of the digital customer experience, the company focuses on its customers and back-end processes namely logistics,

220 = PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION

accounting, warehousing or product development Customers in the business stage can share their experience of buying and using products

with other potential customers, they can switch to a competitor

In the digital transformation, a negative customer experience will

directly and immediately affect a company’s sales, reputation and competition In other words, customer experience becomes the key

to remaining a company’s competition Companies therefore must focus on individualized optimization of the customer experience across all digital and traditional contact points

In the last stage, a company starts with new sale models as well

as new products and new business models which often lead to new digital ecosystems Chalons and Dufft (2017, pp 16) points out:

“Traditional value chains are increasingly being replaced by digital ecosystems and service networks A variety of stakeholders from different sectors will work together in these networks to develop collaborative business models They will share data and information (and even predictions and correlation analyses) so that they can jointly offer a better service or assert themselves against a competitor Such digital ecosystems are already beginning to emerge.”

4, POLICY FRAMEWORK

Very few studies focus on female businesses in the digital transformation in Vietnam Because Facebook is the most popular social network with 58 million users in Vietnam (Nguyen Nguyen,

2018), Vu Thi Minh Ngoc and Le Hong Viet (2019) had studied

impacts of Facebook on Vietnamese female startups The study shows that Facebook and other social networks are not only tools to improve business communication but also enhance low cost e-commerce of female businesses Facebook and social networks are the door to help

women set up their own business fast and stabilize their own financial situation, thereby affirming their role and voice in society

The study suggests a number of factors affecting female startups via social networks namely women’s characteristics (e.g.: family, time, passion and business knowledge), market entry conditions (market conditions, the cost of market entry), social networks, government supports and IT platforms According to Vu Thi Minh Ngoc and Le

Hong Viet (2019), it can be said that female startups in Vietnam are

now in the first stage and moving to the second stage of Chalons and

Dufft (2017)’s model of digital transformation

In order to support female startups in the digital transformation

we propose AfDB/ILO (2007: xi) to suggest key policy framework below in order to minimize barriers to growth of women’s startups as well as enhancing them to access to resources and opportunities for

growth in Vietnam, including:

(i) Policies to remove barriers to female startups

The removal of barriers to women’s entrepreneurship stems from a society's own views on women’s participation in business and politics There should be many measures to strengthen propaganda and encourage women to participate in starting a business, especially women in rural areas Policies on vocational education and training, policies on raising capital for national startup projects should also

focus more on women

(ii) Policies to improve women’s access to markets

Market access is often difficult for many women As most of

startups are small and medium sized, they have limited resources

to promote products and brands Not to mention that some women only start their businesses through a few small projects, do

222 PR0DUCTIVITY AND 0UALITY IN THE ERA OF DIGITAL TRANSFORMATION

not start a business, the customer base is often limited to friends

Therefore, the establishment of women entrepreneurship supporting platforms is highly essential Through Women’s Unions or Women’s

Entrepreneurs Associations, it is necessary to coordinate with online platforms such as Facebook, Google to support training for women

on online business, e-commerce, how to build a page Web, branding,

brand recognition on Google tools, Facebook, can be deployed on two channels: online training and face-to-face training

(iii) Policies to improve women’s access to and control over

economic and financial resources

Capital and finance are acommon problem for startups, not just for women run startups To increase access to economic and financial resources, the State should set up financial institutions or separate funds for female entrepreneurship These funds may be established

in the form of public-private, state-sponsored funds in the first phase, and then may reduce support and allow funds to conduct independent accounting Lessons learnt from other developed countries on digital financing could be applied in Vietnam

(iv) Policies to strengthen social protection and social inclusion,

and to reduce risks and vulnerabilities facing women entrepreneurs

and their women workers

Social insurance policies should focus on women entrepreneurs

to facilitate their businesses in overcoming difficulties and risks in the

business process In addition, Women’s Unions at local and central

levels also need to develop a support system for female businesses so that it may call for financial contributions for feasible women-run projects This approach can help you learn from business experience

in reality, and also create a fund of insurance against the risks that female entrepreneurs may face to