RESEARCH ON THE IMPACT OF DIGITAL CAPABILITIES ON BUSINESS SUSTAINABILITY OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM

Therefore, deeper studies are needed to clarify the role of digital capabilities in promoting sustainability and propose appropriate policies and solutions for Vietnamese SMEs in their e

MINISTRY OF EDUCATION AND TRAINING

FOREIGN TRADE UNIVERSITY

-

SUMMARY OF PHD THESIS

RESEARCH ON THE IMPACT OF DIGITAL CAPABILITIES

ON BUSINESS SUSTAINABILITY OF SMALL AND MEDIUM

The thesis is completed at: Foreign Trade University, 91 Chua Lang Street, Dong Da District, Hanoi

Science instructor: Assoc Prof Dr Nguyen Thi Hien

Reviewer:

Reviewer:

Reviewer:

The thesis will be defended before the University-level Thesis Evaluation Council meeting at

At hour date month year

The thesis can be consulted at the National Library and the Foreign Trade

University library

LIST OF AUTHOR'S RESEARCH PAPERS

1 Hoang, D V., & Hien, N T (2024) Digital capabilities, firm performance, and

innovation capabilities: A combined approach of PLS-SEM and ANN International

Journal of Innovation Management, 28(01n02), 2450007

2 Hoang, D.V., Ngoc, D.B., Ha, V.H and Trang, L.H (xxxx) ‘Digital skills, adaptive performance and sustainable employee performance: the case of social science graduates in an emerging market’, Int J Innovation and Learning, Vol X, No Y, pp.xxx–xxx

3 Van Hoang, D., Minh, T T K., Toan, N Q., & Mai, V T (2024) Digital

capabilities and innovation capabilities in Vietnamese SMEs International Journal

of Data & Network Science, 8(2)

4 Huong, P T., Hoang, D V., Minh, T T K., & Hien, N T (2024) Digital capabilities and SMEs' performance under technological uncertainty: empirical

evidence from an emerging market International Journal of Innovation and

các doanh nghiệp vừa và nhỏ Việt Nam Tạp chí Khoa học Quản lý và Kinh tế, Trường

Đại học Kinh Tế, Đại học Huế, (28)

7 Đinh Văn Hoàng (2023) Nghiên cứu ảnh hưởng của năng lực số và lãnh đạo số

đến năng lực ĐMST của các doanh nghiệp vừa và nhỏ Việt Nam Tạp chí Kinh tế và

Kinh doanh Châu Á, 34(10)

8 Đinh Văn Hoàng (2023) Nghiên cứu ảnh hưởng của các hoạt động quảng cáo trên

TikTok đối với ý định mua hàng Tạp chí Kinh tế và Kinh doanh Châu Á, 34(03)

9 Đinh Văn Hoàng, Bùi Khánh Phương, Trịnh Thị Thu Trang, Trần Như Quỳnh & Nguyễn Thị Phương (2023) Tác động của năng lực đổi mới sáng tạo đến năng lực

phát triển bền vững của các SMEs tại Việt Nam Tạp chí Khoa học Thương mại, Số

183/2023

10 Đinh Văn Hoàng, Trần Thị Tú Uyên, Võ Thị Phương Thảo, & Nghiêm Vũ Thu Hiền (2023) Nghiên cứu các yếu tố ảnh hưởng đến việc áp dụng thương mại điện tử

tại các hộ kinh doanh Việt Nam Tạp Chí Khoa học Quản Lý và Kinh tế, Trường Đại

học Kinh Tế, Đại học Huế, (26)

INTRODUCTION

1 Rationale

Sustainable development (SD) is a development goal that most countries, including Vietnam, have strongly committed to implementing according to the United Nations' "2030 Agenda for Sustainable Development" (UN, 2015) Sustainable development goals revolve around three main pillars: economic, social, and environmental Small and Medium Enterprises (SMEs) in Vietnam, as important social actors, are working towards these goals (Doang & Dai, 2023) Currently, SMEs are pursuing sustainable development through various activities such as job creation, fostering innovation, and realizing scientific and technological achievements (Arruda

& Vila, 2007)

In today's digital age, businesses are applying digital transformation with the help of digital technologies like IoT, big data mining, and artificial intelligence to successfully achieve their objectives (Khim & Ho, 2019), especially sustainability goals Oliveira et al (2023) show that digital transformation in SMEs requires both technological assimilation and business model innovation Meanwhile, Zamani (2022) highlighted the challenges of technology adoption in SMEs and suggested that the application of advanced technology is still a process being analyzed for new technological development

Vietnam, considered an emerging market, possesses many unique characteristics such as rapid economic growth, increasing foreign investment, and a young, dynamic workforce (Sheldon & Kwon, 2023) Vietnam's digital environment has many notable features with digital orientations, though still incomplete, and living standards are gradually improving SMEs play a crucial role in Vietnam's economy, accounting for 97% of total enterprises and contributing over 40% to Vietnam's GDP (Ministry of Planning and Investment, 2023b)

Meanwhile, SMEs in emerging markets are characterized by small scale, limited capital, restricted access to funding and markets However, they possess quick

adaptability, flexible management and operations, and typically focus on light industry, services, and manufacturing On the other hand, digital capabilities - defined

as an organization's ability to use digital technology to improve business efficiency, create new business forms, and enhance customer experience (Westerman et al., 2014)

- plays a key role in improving SMEs' operational efficiency and competitiveness Theoretically, previous studies indicate that digital capabilities are the starting point of business digital transformation and the combination of digital technology advantages and digital experts, representing the enterprise's capability to effectively use digital technologies in the digital transformation process (Xu et al., 2022) Antonuik and Boateng (2019) further suggest that digital capabilities provide scientific support tools for evaluating current digital resources of businesses, thereby enhancing competitive advantage and investment capacity to achieve sustainability Moreover, business sustainability is an increasingly important topic among researchers, especially in emerging markets Business sustainability refers to the integration of environmental, social, and economic factors in business strategy and operations (Figge et al., 2002), while SMEs typically face more challenges and barriers in implementing sustainable practices (Kumar et al., 2023)

However, research on the impact of digital capabilities on SME sustainability hasn't received adequate attention, particularly in emerging markets like Vietnam Therefore, deeper studies are needed to clarify the role of digital capabilities in promoting sustainability and propose appropriate policies and solutions for Vietnamese SMEs in their early stages of digital application to achieve comprehensive sustainable development

2 Research objectives and tasks

The research objective is to evaluate the impact of digital capability on the sustainable development of Vietnamese Small and Medium Enterprises (SMEs) Based on the research results, the author proposes solutions to help Vietnamese SMEs achieve sustainable development through their digital capabilities

3 Research subject, object, and scope

Research subject: The impact of digital capabilities on sustainable development

of Vietnamese SMEs

Research object: Vietnamese SMEs, which account for 97% of total enterprises and contribute approximately 45% of national GDP These enterprises often face challenges in digital transformation and sustainable development due to limited resources and expertise

Research scope:

- Content scope: Research on the impact of digital capabilities on sustainable development of Vietnamese SMEs, based on a digital capability analysis framework built from Resource-Based View theory, Dynamic Capability View theory, and Digital Dynamic Resource Management Perspective (Warner & Wäger, 2019)

- Geographical scope: Research with SMEs in three regions: North, Central, and South Vietnam

- Time scope: From October 2023 to June 2024

- Phase 1 - Initial qualitative: Semi-structured in-depth interviews with 10 SME managers; Each interview lasting 30-45 minutes; Data analysis using coding method and NVivo analysis

- Phase 2 - Quantitative: Collected 557 responses (55.7% response rate); Selected 372 qualified responses for analysis; Used SPSS, SmartPLS for PLS-SEM analysis and Artificial Neural Network analysis (ANN)

- Phase 3 - Supplementary qualitative: In-depth interviews to validate and clarify results; Deeper explanation of quantitative results; Propose and refine solutions

6 Research contributions

This research makes significant theoretical and practical contributions in several aspects:

First, important theoretical contributions:

- Supplements theoretical knowledge about enterprise digital capability (components, influence, and structure) with the concept of absorptive capacity from aspects: acquisition, assimilation, transformation, and exploitation

- Expands knowledge on effectively leveraging digital capability to enhance business sustainability

- Considers sustainable competitive advantage as a factor in SME business environment

- Clarifies the role of digital leadership in developing and applying digital capabilities and absorptive capacity, contributing to theory and clarifying relationships between capabilities and influence

Second, practical contributions providing guidelines for specific action programs:

- Provides guidance for SMEs on developing and leveraging digital capability to achieve sustainable business development

- Proposes research results providing practical strategies helping SMEs enhance competitive advantage

- Provides important conclusions for policymakers about crucial factors supporting digital transformation and enhancing SME digital capabilities

Third, research results identify 7 points for policymakers and important factors

in supporting digital transformation, including:

- Enhancing SME digital capabilities

- Proposing theoretical support programs

- Financial incentives

- Knowledge sharing networks for sustainable development

Fourth, academic and business practical contributions through:

- Proposing solutions for training program development

- Developing models that can be designed to enhance digital leadership skills

- Focusing on building capacity in perceiving, capturing, and restructuring digital opportunities

- Promoting continuous learning culture and innovation

Finally, research provides perspectives for developing sustainable frameworks integrated with digital capabilities:

- Key performance indicators

- Helping SMEs monitor and report progress

- Enhancing transparency and accountability in achieving sustainable development goals

Chapter 3: Research model, hypotheses, and methodology

Chapter 4: Results and discussion on the impact of digital capabilities on business sustainability of Vietnamese small and medium enterprises

Chapter 5: Solutions to strengthen digital capabilities to enhance business sustainability for Vietnamese small and medium enterprises

CHAPTER 1: THEORETICAL FOUNDATION ON THE IMPACT OF DIGITAL CAPABILITIES ON BUSINESS SUSTAINABILITY OF SMALL

AND MEDIUM ENTERPRISES

1.1 Theoretical foundation of small and medium enterprises

1.1.1 Concept, characteristics, and role of small and medium enterprises

1.1.1.1 Concept of small and medium enterprises

According to Law on Support for Small and Medium Enterprises No 04/2017/QH14, Small and Medium Enterprises (SMEs) are businesses established and operating under legal regulations, classified into three groups (micro, small, and medium) based on average annual social insurance-participating employees (10 to 200 people) and total revenue or capital (3 billion to 300 billion VND) depending on the field of operation

1.1.1.2 Characteristics of small and medium enterprises

SMEs have distinct characteristics that affect their operational strategies and economic contributions According to the European Commission (2020), SMEs

typically have fewer than 250 employees and annual turnover below 50 million euros, but often face resource constraints, particularly in accessing capital (Beck & Demirguc-Kunt, 2006)

1.1.1.3 Role of small and medium enterprises

SMEs play a crucial role in global economic development through various important contributions Research shows that SMEs account for over 60% of total manufacturing employment across 99 countries (World Bank, 2020)

1.1.2 Small and medium enterprises in emerging markets

SMEs in emerging markets have distinct characteristics compared to developed economies Their biggest challenge is access to finance due to lack of formal development and strict lending criteria according to Nykos et al (2020)

1.2 Theoretical foundation of enterprise digital capabilities

1.2.1 Concept, characteristics, and role of enterprise digital capabilities

2.2.1.1 Concept of digital capabilities

Enterprise digital capabilities are defined as the sum of enterprise abilities to identify, capture digital opportunities, and restructure digital resources to create new value, improve operational efficiency, and promote innovation in the digital business environment

1.2.1.2 Role of digital capabilities

Digital capabilities play a key role in the success and business sustainability of companies across various industries These capabilities include a range of technological and management skills that enable organizations to effectively leverage digital tools and platforms to drive innovation, efficiency, and growth

1.2.1.3 Characteristics of digital capabilities

Digital capabilities require organizations to adapt to technological changes and develop strategies to effectively implement digital technologies and platforms These

capabilities are crucial for companies seeking to enhance operational efficiency, innovation, and maintain competitive advantage in an increasingly digital economy

1.2.2 Foundational theories of enterprise digital capabilities

1.2.2.1 Resource-based view - RBV

RBV is a prevalent theory in strategic management and information systems research According to Barney (1991), resources must meet VRIN criteria (Valuable, Rare, Inimitable, Non-substitutable) Wernerfelt (1984) defines resources as

"anything that can be considered a strength or weakness of a particular company." Sustainable competitive advantage is defined as the ability to "implement a value-creating strategy that no current or potential competitor is simultaneously implementing and when other firms cannot duplicate the benefits of this strategy" (Lippman & Rumelt, 1982)

1.2.2.2 Dynamic capabilities view - DCV

DCV by Teece et al (1997) extends RBV to explain adaptability to changing environments Digital capabilities play a crucial role in this process, enabling SMEs

to identify opportunities and threats in the digital context Mastering these capabilities ensures that SMEs can continuously arrange and rearrange resources to meet changing market demands

1.2.3 Measuring digital capabilities

1.2.3.1 Based on dynamic capabilities view

DCV focuses on companies' adaptability and innovation to respond to changing environments According to Warner and Wager (2019), digitally-oriented strategic leaders need to develop and execute strategies that meet company criteria and align with changing market conditions

1.2.3.2 Based on resource-based view

RBV emphasizes the essential importance of unique resources in mobilizing resources to achieve sustainable competitive advantage For digital capabilities, RBV emphasizes the need to evaluate critical digital assets and assess how they contribute

to company strategic goals

1.3 Theoretical foundation of business sustainability

1.3.1 Concept, characteristics, and role of business sustainability

1.3.1.1 Concept of business sustainability

Business sustainability is defined in various ways, from focusing on economic aspects to expanding to environmental and social dimensions Based on evolving definitions, the author proposes: "Business sustainability for small and medium enterprises includes strategic integration of economic, environmental, and social activities to create long-term value and resilience, enabling companies to adapt to dynamic market conditions and contribute positively to society and environment"

1.3.1.2 Role of business sustainability

Business sustainability addresses a company's ability to create long-term value

by managing environmental, social, and economic impacts (Dyllick & Hockerts, 2002) It plays important roles at three main levels: organizational level as a strategic driver of innovation and resilience; social level through contribution to global sustainable development goals (Sachs et al., 2019)

1.3.2 Foundational theories of business sustainability

1.3.2.1 Triple bottom line (TBL)

TBL, proposed by Elkington (1994), includes three fundamental dimensions: economic, environmental, and social The economic dimension focuses on financial performance and company viability The environmental dimension relates to company impact on natural resources The social dimension addresses company impact on people and communities

1.3.2.2 Natural resource-based view (NRBV)

NRBV extends RBV to incorporate environmental considerations According to Hart (1995), companies can achieve sustainable competitive advantage by developing capabilities in pollution prevention, product management, and sustainable development NRBV provides theoretical foundation for examining how digital capabilities can help SMEs promote sustainable operations and initiatives

1.3.2.3 Institutional theory

Institutional theory examines external pressures and motivations shaping SMEs' sustainability activities and performance (DiMaggio & Powell, 2009) Companies must comply with rules, norms, and values of institutional environment, including legal frameworks, industry standards, and social expectations to maintain legitimacy and ensure long-term survival

1.3.3 Measuring business sustainability

Business sustainability includes three main dimensions: economic, environmental, and social (Elkington, 1994) Measurement criteria are designed based

on 5-point Likert scale, from 1 (Strongly disagree) to 5 (Strongly agree), helping measure digital capability aspects in business quantitatively and objectively

1.4 Theoretical foundation of the impact of digital capabilities on business sustainability of small and medium enterprises

1.4.1 Impact of digital capabilities on economic sustainability of small and medium enterprises

Digital capabilities play important role in promoting economic sustainability of SMEs through sustainable competitive advantage factors Based on RBV perspective, digital capabilities can be seen as crucial strategic resources helping enterprises create sustainable competitive advantage (Teece et al., 1997)

1.4.2 Impact of digital capabilities on environmental sustainability of small and medium enterprises