Based on the above evidence, combined with the desire to conduct deeper and more specific research on the relationship between leadership cognitive capacity, employee engagement with the
RESEARCH OVERVIEW
RATIONALE FOR CHOOSING THE TOPIC
The cognitive capacity of managers is essential in determining the strategies and policy directions of an organization, making it a vital skill for senior executives.
According to Vũ Thị Huyền Trang in Issue 03, February 2024, the General Statistics Office reports that Vietnam is home to around 800,000 enterprises, with small and medium-sized enterprises (SMEs) making up approximately 97% These SMEs employ 51% of the workforce and contribute over 40% to the country's GDP.
Vietnamese SME leaders exhibit significant management competence limitations, primarily due to a low percentage of leaders possessing college or university degrees and a lack of formal training in business management knowledge.
The competitive capacity of small and medium-sized enterprises (SMEs) is crucial for their survival and growth Despite their significant contribution to national economic development, SMEs face various subjective and objective challenges that limit their competitiveness As highlighted by Lê Mạnh Hùng (2022), these limitations hinder the overall potential of this vital sector.
SMEs are currently experiencing significant challenges, particularly due to the severe effects of the COVID-19 pandemic over the past two years The hardest-hit sectors include tourism, services, transportation, and manufacturing within industrial zones, highlighting the vulnerabilities faced by these enterprises.
According to Saigon Economic Online (June 2024), recent data from the Business Registration Agency reveals that nearly 97,300 enterprises exited the market in the past five months, marking a 10.5% increase compared to the same period in 2023 In contrast, approximately 65,000 new enterprises were established, reflecting a 4.5% rise from the previous year This indicates that the number of businesses leaving the market significantly surpasses the number of new startups by about 32,500.
The cognitive capacity of leaders is evident in their ability to identify organizational issues, understand necessary actions, and assess internal conditions By recognizing existing challenges and adapting to both internal and external environments, leaders can effectively navigate and thrive in difficult circumstances This adaptability is crucial for ensuring organizational survival and success.
Vietnamese SMEs face significant challenges in competitiveness, as their management capabilities and standards fall short of international business practices Many of these enterprises operate without strategic planning, relying heavily on experience and individual orders for their business operations (Nguyễn Thị Như Quỳnh and Nguyễn Thị Thủy, 2016).
The SME sector faces significant challenges due to limited operational management capacity A small number of enterprises adopt scientific management practices, such as developing long-term business strategies and building strong brands for market positioning, both domestically and internationally Many private enterprises, limited liability companies, and small-scale joint-stock companies often operate reactively and opportunistically, prioritizing short-term profits through illegal activities like tax evasion, smuggling, and the production of counterfeit goods.
The limitations in financial resources, operational management capacity, and innovation capacity lead to low production and business efficiency in SMEs (Nguyễn Quang Huy, 06/2024)
To thrive in today's challenging business environment, SMEs must focus on leveraging their internal resources, as highlighted by Penrose (1959) This approach underscores the importance of understanding the relationship between leadership cognitive capacity, employee engagement, and business performance Therefore, developing a research model and proposing methods to explore these dynamics within small and medium-sized enterprises in Ho Chi Minh City is both essential and valuable for enhancing organizational effectiveness.
RESEARCH OBJECTIVES
This dissertation aims to assess how leadership cognitive capacity and employee engagement influence the business performance of small and medium-sized enterprises (SMEs) in Ho Chi Minh City.
To achieve the general objective of the dissertation, the author needs to accomplish the following specific objectives:
Identify the relationship between leadership cognitive capacity, employee engagement with the organization, and the business performance of SMEs
Measure the relationship between leadership cognitive capacity, employee engagement with the organization, and the business performance of SMEs
Propose managerial implications to enhance leadership cognitive capacity and employee engagement with the organization, with the ultimate goal of improving business performance.
RESEARCH QUESTIONS
Is there a relationship between leadership cognitive capacity, employee engagement with the organization, and the business performance of SMEs?
How does the relationship between leadership cognitive capacity, employee engagement with the organization, and the business performance of SMEs manifest?
What managerial implications can contribute to enhancing leadership cognitive capacity and employee engagement with the organization, with the ultimate goal of improving business performance?
RESEARCH SUBJECT AND TARGET
This study investigates the connection between leadership cognitive capacity, employee engagement, and business performance, focusing on small and medium-sized enterprises (SMEs) in Ho Chi Minh City By conducting empirical research, the findings aim to highlight how effective leadership can enhance employee involvement and, in turn, improve overall organizational performance.
Survey Target: Middle-level managers in SMEs located in Ho Chi Minh City.
RESEARCH SCOPE
From this perspective, the study focuses on evaluating the impact and analyzing the factors of leadership cognitive capacity that influence the business performance of SMEs in
Ho Chi Minh City, from the perspective of leadership levels within the enterprise, through the engagement of managers with the organization
The study is conducted at SMEs in Ho Chi Minh City
Primary data collection through surveys was conducted in the first quarter of 2024.
RESEARCH METHODS
In-depth one-on-one discussions were held with seven experts, comprising four doctors and associate professors of business administration from various universities, along with three senior managers from SMEs in Ho Chi Minh City, all possessing postgraduate qualifications The primary objective of these discussions was to collaboratively develop and finalize the research model.
In a series of group discussions involving 10 representatives from various SMEs in Ho Chi Minh City, the study aimed to evaluate the clarity and relevance of each observed variable These middle- and lower-level managers provided insights that led to necessary adjustments, ensuring that survey respondents could easily comprehend and accurately respond to the questions posed.
Quantitative research was conducted in two phases: preliminary quantitative research and formal quantitative research
A preliminary quantitative study surveyed 78 managers, followed by formal research utilizing pre-designed questionnaires for data collection The analysis will be performed using SPSS 22.0 and SmartPLS statistical software.
RESEARCH CONTRIBUTIONS
This study contributes a new perspective, deepening the academic understanding of organizational effectiveness and business performance, through analyzing the simultaneous impact of leadership capacity and employee engagement
This discovery highlights the critical importance of leadership in enhancing employee engagement and establishes a theoretical basis for future research aimed at optimizing leadership thinking capacity Ultimately, this contributes to the effectiveness of organizational management and operations in today's competitive global landscape.
The research results bring significant practical value, providing managers with a clear perspective on the role of thinking capacity in enhancing employee engagement with the organization and improving business performance
The findings of the study serve as a valuable resource for policymakers in designing programs that foster the growth of Vietnamese SMEs in Ho Chi Minh City and across Vietnam.
DISSERTATION STRUCTURE
The dissertation is organized into 05 chapters as follows:
Chapter 2: Theoretical Framework and Research Model
Chapter 4: Research Results and Discussion
Chapter 5: Conclusions and Proposed Managerial Implications
Chapter 1 has presented the context and urgency of the dissertation topic It also outlined the general objective and four specific objectives, which led to the formulation of four research questions The chapter also provided a brief overview of the research subject, scope, and methods.
THEORETICAL FRAMEWORK AND RESEARCH MODEL
THEORETICAL FRAMEWORK
Thinking is a subject of study in various disciplines such as philosophy, psychology, pedagogy, advanced neurophysiology, and cybernetics, with each field exploring a specific aspect of thinking
Various types of thinking exist, including political, economic, scientific, and artistic thinking While individuals may excel in one or more of these areas, logical thinking is essential for success in any field (Vũ Thị Nga, 2020).
This dissertation examines senior leadership within organizations, utilizing a definition from the Institute of State Organizational Sciences that characterizes positional leadership as authority stemming from one's role, rituals, traditions, and organizational frameworks Such leaders leverage their positions to exert influence; however, their sway diminishes once they exit their roles, as followers typically do not align with them beyond their designated authority Effective leaders craft a clear vision for the organization and implement strategic processes to meet established goals.
2.1.1.3 Leadership Cognitive Capacity a Cognitive Capacity
Competence, as defined by Jordan (2012), encompasses the experience, skills, and abilities necessary for specific job roles, enabling leaders to execute tasks with optimal proficiency and efficiency (Tajpour & Salamzadeh, 2019) This highlights the importance of leadership cognitive capacity in achieving high performance in various professional settings.
This study examines leadership cognitive capacity through the lens of dynamic capabilities, emphasizing that a company's competitive advantage is closely linked to the strength of its dynamic capabilities It asserts that effective leaders must first develop and understand these cognitive capacities to successfully navigate and guide their enterprises To highlight the significance of dynamic capabilities and their impact on leadership cognitive capacity, the study will present a comprehensive overview of enterprise dynamic capabilities.
This study aims to evaluate leadership thinking capacity by assessing the impact of specific competencies held by leaders, ultimately determining their influence on management effectiveness and business outcomes This approach clarifies the significance of leadership thinking and offers a fresh perspective on how individual competencies relate to organizational success.
2.1.2 Employee Engagement with the Organization
Robinson et al (2004) define employee engagement as a positive attitude that goes beyond mere commitment, highlighting employees' awareness of their organization's values and business context This engagement reflects a proactive approach where employees actively seek to enhance both work and organizational effectiveness, underscoring the importance of a two-way relationship between employees and their organization.
Under Vietnamese law, an employee is defined as an individual aged 15 or older who is capable of working and is engaged under a labor contract Employees receive a salary and are subject to the management and direction of their employer This category includes manual laborers, skilled workers, and intellectual workers.
2.1.2.3 Employee Engagement with the Organization
This study examines employee engagement within organizations, drawing on Trần Kim Dung's (2005) research that adapts Allen & Meyer's (1990) framework to the Vietnamese context The theoretical section will detail the components of the engagement concept from both the original model and its Vietnamese adaptation.
2.1.2.4 The Role of Employee Engagement with the Organization
In today's competitive landscape, the role of employees is vital for boosting the competitiveness of an enterprise's products and services To maximize their potential and commitment, it is essential to address employees' needs effectively Understanding these needs is crucial for aligning company policies with employee desires and concerns When this alignment is achieved, it enhances job satisfaction and organizational loyalty, ultimately leading to increased contributions from employees.
2.1.2.5 Measuring employee commitment to the organization
In this study, the author builds upon T K Dung's (2005) research, integrating Maslow's hierarchy of needs (1943) and Smith's Job Descriptive Index (1969) to assess employee commitment to the organization Dung's study identified five key factors influencing commitment: Job characteristics, Training and promotion opportunities, Leadership, Colleagues, and Salary and Benefits The current study retains these factors but modifies them by merging Leadership and Colleagues into a single Working Environment factor, combining Salary and Benefits, maintaining Job Characteristics and Training and Promotion Opportunities, and introducing an additional Evaluation and Reward factor.
2.1.3 Business Performance and Small and Medium Enterprises
This study defines economic efficiency as the relationship between outcomes achieved and costs incurred, emphasizing that business performance is a reflection of resource utilization in reaching set objectives A greater disparity between the results and the costs indicates higher efficiency.
2.1.3.2 Measuring employee commitment to the organization
In this study, the author builds upon T K Dung's (2005) research, integrating Maslow's theory of needs (1943) and Smith's Job Descriptive Index (JDI) model (1969) to assess employee commitment to the organization Dung's study identified five key factors influencing commitment: Job characteristics, Training and promotion opportunities, Leadership, Colleagues, and Salary and Benefits The current study retains these factors but modifies them by merging Leadership and Colleagues into a single Working environment factor, combining Salary and Benefits, maintaining Job characteristics and Training and promotion opportunities, and introducing an additional factor for Evaluation and Rewards.
2.1.3.3 Small and Medium Enterprises a Concept
Small and medium enterprises (SMEs) are viewed differently across countries, with definitions and classifications varying based on specific national contexts This article utilizes the latest definition of SMEs as outlined in Article 4 of the 2017 Law on Support for Small and Medium Enterprises, highlighting the importance of context in understanding these businesses.
According to the current regulations in the 2017 Law on Support for Small and Medium Enterprises, SMEs have the following characteristics:
First, SMEs are independent production and business entities operating under various business forms
Second, SMEs are small in scale and employ a limited number of workers
2.1.4 Theories Related to Employee Engagement with the Organization
Before Maslow, numerous studies proposed theories about human needs and motivations, such as those by James & Dewey (1880), Freud (1930), and Adler (1925)
Despite variations in research, a cohesive understanding has yet to emerge Abraham Maslow's Hierarchy of Needs, first presented in 1943 and later popularized in his 1954 work "Motivation and Personality," continues to be a significant framework that can effectively motivate and support team members in contemporary settings.
2.1.4.2 Job Descriptive Index (JDI) Model by Smith et al (1969)
The Job Descriptive Index (JDI), developed by Smith, Kendall, and Hulin at Cornell University, is a highly regarded tool for assessing job satisfaction, known for its robust and reliable concepts It evaluates satisfaction across five key factors: salary, promotion opportunities, coworkers, supervision, and the nature of the work However, the JDI has notable weaknesses, including its lengthy 72-item questionnaire, which complicates data collection, a yes/no response format that fails to capture varying levels of satisfaction, and a lack of questions addressing overall job satisfaction.
THEORIES ON THE INFLUENCE AND RELATIONSHIPS AMONG
2.2.1 The Influence of Leadership on Performance
The effectiveness of an organization relies heavily on senior management's ability to adapt organizational strategies and leadership styles to the evolving external environment In the realm of business, leadership continues to be regarded as an art form.
Organizational performance, particularly in strategy implementation, relies heavily on collaborative leadership efforts to achieve optimal effectiveness Leadership is defined as the skillful practice of efficiently reaching goals by mobilizing and coordinating the efforts of others, with the understanding that effective leadership techniques enhance subordinates' performance and contribute to overall organizational success A well-structured organizational plan identifies a leadership style that promotes company progress, while strategy encompasses the deliberate actions taken by leaders to meet specific objectives Although most research focuses on leadership behaviors and styles, there remains a significant gap in exploring leadership cognitive capacity Nonetheless, existing evidence highlights the substantial impact of leadership on collective performance.
2.2.2 The Influence of Engagement on Performance
In a military context, Oliver, Harman, Hoover, Hayes, and Pandhi (1999) conducted a study using meta-analysis techniques The authors concluded that group engagement significantly contributes to desired outcomes in military units
Research indicates that group engagement significantly enhances organizational performance, with consistent findings across various contexts, including businesses and non-profit organizations Notably, studies by Shaw (1981) and Dorfman & Stephan (1984) reinforce the positive correlation between high group engagement and improved performance outcomes.
2.2.3 The Relationship Between Leadership and Engagement
Leadership is one of the most studied topics in organizational science, while employee engagement is a more recent focus
There is a significant gap in identifying the leadership behaviors that promote cultures of engagement and the mechanisms by which these behaviors enhance follower engagement levels This highlights the lack of direct research connecting leaders' behaviors to the engagement of their followers (Xu & Thomas, 2011).
Research indicates that leadership has a positive impact on employee engagement in organizations However, the effect of employee engagement on leadership is not well-documented, with limited studies providing insight, such as Hartog & Belschak (2012), who suggested a potential influence of engagement on leadership This gap highlights the need for further exploration, prompting this dissertation to specifically examine the one-way relationship from leadership to engagement, focusing on how leadership cognitive capacity affects employee engagement within organizations.
RESEARCH OVERVIEW
2.3.1 Overview of Studies on Leadership Capacity Influencing Performance
Noor Afza Amran (2011) conducted a study examining the impact of the owner's gender and age on the performance of publicly listed family businesses in Malaysia Utilizing a secondary data approach, the research analyzed a sample of 182 family firms listed on Bursa Malaysia.
Between 2003 and 2007, a study in Malaysia revealed notable differences in firm performance based on the gender of leaders, highlighting the impact of male versus female leadership However, the research was limited as it primarily concentrated on the leaders' gender and age, neglecting to examine other important leadership characteristics.
Pang, NS-K., & Pisapia, J (2012), Hong Kong School Leaders’ Strategic Thinking
This study investigates the strategic thinking skills that set effective school leaders apart in Hong Kong, focusing on three key areas: strategic thinking skills, organizational-personal characteristics, and school leadership effectiveness The findings reveal that senior managers utilize strategic thinking skills significantly less than principals and vice-principals However, the research does not account for other cognitive abilities essential for management, highlighting a gap that future studies should explore.
In their 2015 study, Combe and Carrington explored how leaders' cognitive models shape their interpretations and responses during crises, revealing that managerial thinking significantly affects decision-making However, the research did not categorize the types of thinking or detail their specific influence on leaders' actions.
Michael D Mumford (2016), Cognitive Skills and Leadership Performance: The Nine
This study identifies nine essential leadership skills crucial for addressing situational challenges: problem identification, cause/goal analysis, constraint analysis, planning, forecasting, creative thinking, idea evaluation, wisdom, and sense-making/visioning Additionally, the research introduced a new skill—connectivity—which, along with cognitive skills, significantly impacts leadership effectiveness However, the study also acknowledges that it did not explore other cognitive capacities within the framework of competitive cognitive capacity.
Phan Bùi Gia Thủy et al (2017) investigated the influence of CEO characteristics on firm performance in Vietnam, analyzing a sample of 120 companies listed on HOSE from 2009 to 2015, resulting in 840 observations The findings revealed a non-linear relationship between CEOs' age and ownership ratio and firm performance However, the study is limited by its emphasis on demographic factors and ownership ratios, neglecting the cognitive capacities of leaders.
2.3.2 Overview of Studies on Employee Engagement with the Organization and Organizational Performance Đinh Phi Hổ (2020), The Relationship Between Engagement, Loyalty, and Organizational Performance at Agribank’s Bình Thuận Branch This study aimed to identify the relationship between employee engagement and loyalty and their impact on organizational performance at the Vietnam Bank for Agriculture and Rural Development’s Bình Thuận Branch In the context of fierce competition for survival and development, human resources—specifically employee engagement and loyalty—are key to sustainable growth for commercial banks
A survey of 320 employees revealed a positive linear relationship between engagement, loyalty, and organizational performance, highlighting key factors that influence employee engagement, such as career development, trust in the organization, work motivation, coworkers, and income Notably, career development and trust emerged as particularly significant contributors This study offers valuable insights for managers seeking to improve organizational performance through enhanced employee engagement and loyalty However, it is limited by its narrow focus on employee engagement and loyalty, without considering the influence of leadership.
In a study by Võ Khắc Thường et al (2023), the relationship between corporate culture, employee engagement, loyalty, and organizational performance was examined in small and medium enterprises (SMEs) within the commerce and service sectors of Phan Thiết City, Bình Thuận The findings revealed that corporate culture significantly influences employee engagement, with the most impactful factors being rewards and recognition, internal communication, training and development, and teamwork Furthermore, the study found that higher levels of employee engagement lead to increased loyalty among staff.
A positive linear relationship exists between engagement, loyalty, and organizational performance Although the study highlighted the impact of engagement on enterprise performance, it did not examine the influence of leadership on engagement or its overall effect on organizational performance.
2.3.3 Overview of Studies on Leadership Influencing Engagement
Jindong et al (2011), Factors Affecting Organizational Commitment Among Bank Officers in Pakistan This study was based on a survey of 147 bank employees in Lahore,
A study conducted in Pakistan identified five key factors that influence organizational commitment among bank officers: income and benefits, relationship with leadership, training and promotion opportunities, job characteristics, and work-life balance While the findings highlighted the importance of leadership relationships in enhancing employee engagement, the research did not specify how leaders' cognitive capacities impact this engagement.
Trần Kim Dung (2005) conducted a study on employee needs, satisfaction, and organizational commitment, refining the Job Descriptive Index (JDI) scale by adding a satisfaction with benefits component to develop the AJDI scale, which includes six factors: job characteristics, training and promotion opportunities, leadership, coworkers, salary, and benefits This research provides organizational leaders with a valuable tool to assess employee satisfaction and engagement, facilitating the identification of strategies to boost motivation While the findings highlighted the significant influence of leadership on employee engagement, the study noted a limitation in not addressing the impact of leaders' cognitive capacity on this engagement.
GENERAL ASSESSMENT OF RELATED RESEARCH, RESEARCH GAPS,
2.4.1 General Assessment of Related Research
Based on the research overview, the author observes:
Regarding studies on leadership and business performance, most focus on psychological factors and personal characteristics of leaders Combe, IA, & Carrington, DJ
(2015) noted that leaders need cognitive thinking skills in management and decision- making Michael D Mumford (2016) stated that leadership effectiveness is influenced by cognitive and connectivity skills
Understanding strategic thinking and decision-making capacity is essential, as strong strategic capacity is associated with improved organizational performance (Russell, 2001) Despite a lack of consensus in the literature, this study highlights the impact of cognitive capacity on managers Additionally, Đinh Phi Hổ (2020) offers valuable theoretical insights for enhancing organizational performance through employee engagement and loyalty Furthermore, research by Choi et al establishes a connection between employee engagement and organizational performance.
Regarding studies on leadership and employee engagement, the results indicate various factors influencing employee engagement, including leadership
First, to date, no study has comprehensively examined the influence of leadership cognitive capacity on organizational performance
Second, there are no specific research results on how leadership cognitive capacity affects employee engagement.
HYPOTHESES AND RESEARCH MODEL
A company's performance is crucial for determining its future trajectory, target scale, and market sectors (Koỗel, 2003) It reflects the outcomes achieved over a specific period in meeting the company's objectives Operational performance, therefore, involves evaluating all efforts aimed at reaching business goals (Zerenler, 2005) Assessing performance is vital for fostering company growth, understanding the effectiveness of leadership and staff, and identifying failure factors, all of which are essential for long-term success (Kara, 2010) In the current economy, the significance of performance evaluation is on the rise, as shifting market dynamics emphasize the need for market-oriented indicators like competitiveness, in addition to traditional financial performance metrics.
Leadership capacity significantly impacts employees' perceptions and behaviors, as the quality of leader-subordinate relationships predicts outcomes at individual, group, and organizational levels This relationship serves as a crucial precursor to various factors, including employee engagement, ultimately contributing to improved organizational performance and individual well-being.
Based on the above evidence, the author proposes the following two hypotheses:
Hypothesis H1: Leadership cognitive capacity positively affects the business performance of SMEs in Ho Chi Minh City
Hypothesis H2: Employee engagement with the organization positively affects the business performance of SMEs in Ho Chi Minh City
Xu and Thomas (2011) conducted a study on 414 employees in New Zealand to explore the connection between leadership capacity and employee engagement Utilizing a web-based survey, they measured leadership capacity with John Robertson & Associates’ 360-degree feedback scale and assessed employee engagement using JRA’s Employee Engagement Scale The findings revealed a significant positive relationship, indicating that higher leadership capacity enhances employee engagement.
Trần Kim Dung's 2005 study revealed that leadership significantly influences employee engagement Nonetheless, it did not address the impact of leaders' cognitive capacity on this engagement, highlighting a critical limitation in the research.
Based on the above evidence, the author proposes the following hypothesis:
Hypothesis H3: Leadership cognitive capacity positively affects employee engagement with the organization
Cognitive capacity enables leaders to accurately interpret market information and predict customer reactions to changes, allowing businesses to anticipate customer needs ahead of competitors By effectively gathering and utilizing market insights, leaders can make informed decisions regarding product and service demands Therefore, it is hypothesized that enterprises with strong cognitive capacity will have a competitive edge in understanding and fulfilling customer requirements.
Hypothesis H4: Cognitive capacity positively affects leadership cognitive capacity
Leadership adaptability is crucial for navigating new work environments, market fluctuations, and internal organizational changes To maintain a competitive edge, businesses must respond swiftly to changes, often restructuring resources and processes more rapidly than their competitors (Zhou & Li, 2010) If leaders do not facilitate quick adaptation, their enterprises risk obsolescence Ongoing development and restructuring of valuable assets are essential for establishing a competitive advantage (Augier & Teece, 2008; Teece, 2007) Therefore, the author posits the following hypothesis:
Hypothesis H5: Adaptive capacity positively affects leadership cognitive capacity
Creative capacity in leadership involves the ability to identify real-world challenges and adapt to the environment, enabling leaders to innovate and effectively utilize both personal and organizational resources This skill is crucial for developing actionable plans tailored to diverse contexts, fostering innovative ideas in management and operations to enhance overall effectiveness.
Creative capacity is essential for businesses to innovate and grow, encompassing the development of new products, services, and production methods, as well as fostering risk-taking among key executives and embracing market and strategic innovation Emphasizing creative capacity enables enterprises to achieve significant advancements in their offerings, enhance customer satisfaction, and boost overall business performance Therefore, the author posits the following hypothesis:
Hypothesis H6: Creative capacity positively affects leadership cognitive capacity
Integrative capacity refers to leaders' ability to effectively combine organizational resources to achieve or surpass their goals This concept encompasses the seamless coordination of both internal and external resources, fostering valuable outcomes in a constantly changing environment Based on this understanding, the author puts forth the following hypothesis:
Hypothesis H7: Integrative capacity positively affects leadership cognitive capacity
Connectivity capacity is crucial for organizations as it enables them to effectively coordinate inter-organizational relationships, offering a significant competitive advantage globally This capacity allows businesses to forge strategic partnerships and cultivate beneficial relationships with key stakeholders Social relationships serve as a vital resource management capability and are integral to dynamic capabilities Consequently, connectivity capacity reflects a leader's proficiency in establishing and nurturing relationships with all stakeholders—such as customers, suppliers, and partners—to enhance organizational reputation, influence, and performance Based on this understanding, the author proposes a hypothesis regarding the impact of connectivity capacity on organizational success.
Hypothesis H8: Connectivity capacity positively affects leadership cognitive capacity
Income and Benefits: In this study, income includes all payments employees receive from the organization, such as basic salary, allowances, and bonuses According to Kovach
(1987), to foster engagement, the salary must be commensurate with work results, ensure personal livelihood, and include bonuses or raises for good performance Barzoki et al
(2012) found that income not only meets basic needs but also higher-level needs Pinder
In 1998, it was identified that income ranks as the second most significant factor affecting employee engagement This study distinguishes between mandatory benefits, which are legally required such as insurance and sickness allowances, and voluntary benefits, which encompass housing programs, healthcare, support services, and additional allowances Based on these findings, the author proposes a hypothesis regarding the influence of income and benefits on engagement levels.
Hypothesis H9: Income and benefits positively affect employee engagement with the organization
The work environment encompasses both working conditions and coworker relationships, which significantly impact employee engagement Barzoki et al (2012) highlight that favorable working conditions—characterized by safety, hygiene, and reasonable working hours (Kovach, 1987)—are essential for fostering a productive workplace Additionally, supportive and friendly relationships with coworkers are crucial, as they provide necessary assistance and comfort (Islam & Ismail, 2008) Therefore, it is proposed that the quality of the work environment plays a vital role in employee engagement.
Hypothesis H10: Work environment positively affects employee engagement with the organization
Training equips employees with essential skills for their roles, while promotion involves advancing to higher positions within an organization This study emphasizes the connection between training and promotion, highlighting that training not only prepares employees for future promotions but also improves their overall capabilities and work efficiency.
Training and promotion are crucial for organizational success, as highlighted by Dung (2005) and other studies from 2007, which reveal a strong positive correlation between satisfaction in these areas and overall job satisfaction Implementing clear training and promotion policies fosters a proactive workforce, motivating employees to excel in their roles and develop their skills Furthermore, a well-defined environment for promotion and professional growth plays a significant role in enhancing employee retention Based on these findings, the author proposes the following hypothesis.
Hypothesis H11: Training and promotion positively affect employee engagement with the organization
Job characteristics significantly impact employee satisfaction and engagement by presenting challenges and opportunities to utilize personal skills Research by Dung (2005) highlights the strong correlation between job reality and overall employee satisfaction Yousef (2000) and Bellingham (2004) identify key design elements that enhance job satisfaction and engagement, including the use of diverse skills, clarity in the work process, job significance to the organization, employee authority and responsibility, and feedback mechanisms from superiors Meeting these criteria is essential for fostering employee engagement within the organization Based on this evidence, the author proposes a related hypothesis.
Hypothesis H12: Job characteristics positively affect employee engagement with the organization
RESEARCH DESIGN
DETERMINING THE RESEARCH PROCESS
The research process of the thesis includes the steps summarized in the diagram below:
- Scale validation (CA, CR, AVE)
- Model validation using structural equation modeling (SEM),
Adjust the draft model and scale
Reliability testing of scales, scale adjustment, exploratory factor analysis (EFA)
Group discussion (10 members) Official scale
QUALITATIVE RESEARCH
Qualitative methods were utilized for initial research to enhance measurement scales through in-depth interviews with experts, selected via convenience sampling These experts comprised academic researchers and senior managers from small and medium-sized enterprises (SMEs) in Ho Chi Minh City The aim of these interviews was to refine the research model and create a preliminary draft of the measurement scale.
Group discussions were held with 10 management professionals, including both senior and middle management, who had at least 12 months of experience in managerial roles at SMEs in Ho Chi Minh City The primary objective was to evaluate the survey questionnaire's accuracy, clarity, and logical structure to ensure respondents comprehended the questions effectively Additionally, the discussions sought to identify any essential content that may have been overlooked, suggest necessary additions, and assess the suitability of the language used in the questionnaire.
After conducting a preliminary survey, we organized additional group discussions for a comprehensive review, refining the measurement scale in accordance with Cronbach’s Alpha and Exploratory Factor Analysis (EFA) results, which led to the establishment of the official measurement scale.
In a series of one-on-one discussions with seven experts, including four doctors and associate professors of business administration and three senior managers from SMEs in Ho Chi Minh City, a research model was proposed and finalized Each 60-minute discussion followed a structured five-step process: introducing the purpose and significance of the discussion, detailing the factors in the proposed research model, soliciting opinions on the influences of leadership cognitive capacity and employee engagement through open-ended questions, and summarizing the collected opinions The outcomes of these discussions were compiled and filtered to capture common viewpoints, ensuring a comprehensive understanding of the model's suitability and any necessary adjustments.
(Details of the one-on-one discussions are presented in Appendix 2)
Group discussions were held with 10 middle- and lower-level managers from various SMEs in Ho Chi Minh City to assess the clarity and relevance of observed variables in a survey The goal was to ensure that employees could accurately understand and respond to the questions Additionally, the discussions sought to identify and incorporate new variables that participants believed impacted leadership cognitive capacity and employee engagement Any opinions that garnered approval from at least 5 out of 10 participants were documented for further consideration.
(The outline for group discussions is presented in Appendix 4)
Qualitative Research Results on the Research Model
The compiled results of the group discussions indicated that the factors in the proposed model were suitable for the research objectives and subjects, with no further adjustments required
To effectively measure leadership cognitive capacity and employee engagement, it is essential to evaluate various influencing factors and develop new measurement scales Experts have identified five key capacities that affect leadership cognitive capacity: Cognitive, Adaptive, Creative, Integrative, and Connectivity Additionally, five critical factors influencing employee engagement include Income and Benefits, Work Environment, Training and Promotion Opportunities, Job Characteristics, and Reward and Recognition Policies.
The initial findings indicated that the preliminary scale, derived from international studies, needed modifications to certain observed variables to enhance clarity and relevance for survey respondents in enterprises Additionally, the group suggested incorporating extra observed variables that were considered pertinent to the model and research subject.
3.2.2.1 Measurement Scale for Leadership Cognitive Capacity
To achieve a competitive advantage, businesses should prioritize their internal resources over external ones According to Barney (1991, 2001b), dynamic capabilities highlight that competitive advantages arise from both internal and external resources By leveraging dynamic capabilities, organizations can establish differentiation, which ultimately enhances their competitive edge and overall business performance (Nguyễn Phúc Nguyên).
Dynamic capabilities within an organization encompass five key types: Cognitive, Adaptive, Creative, Integrative, and Connectivity capacities To effectively harness these capabilities, leaders must cultivate a mindset that enables them to guide the organization and make timely, appropriate decisions Consequently, this study developed a measurement scale for leadership cognitive capacity based on existing dynamic capabilities research.
3.2.2.2 Measurement Scale for Employee Engagement with the Organization
An employee's exceptional performance directly contributes to the overall success of a company Key factors that drive outstanding employee performance include possessing high skills, receiving fair compensation, and maintaining positive future expectations.
Motivating employees is essential for enhancing their work spirit and dedication, leading to improved performance and job satisfaction (2012) Research indicates that motivated employees are more enthusiastic and committed to their roles, as seen in studies by Alnıaỗık et al (2012), which showed a positive correlation between career motivation, job satisfaction, and organizational commitment Similarly, Arasli et al (2014) found a strong link between intrinsic motivation and job satisfaction However, not all studies agree, as Anghelache (2015) reported no correlation between motivation and job satisfaction.
3.2.2.3 Measurement Scale for Business Performance
Dess & Robinson (1984) and Gupta & Govindarajan (1984) strongly advocate for the use of perceptual measurement methods as viable alternatives to objective measurement methods, despite potential measurement errors highlighted by Keh et al (2007).
Govindarajan (1984) emphasized that when objective secondary data on financial indicators is lacking, businesses can evaluate their performance by collecting primary data This can be achieved by directly inquiring about performance based on the perceptions of the enterprises or by making comparisons with competitors.
Measuring business performance is highly significant, but the issue lies in the equivalence between objective and perceptual measurement methods (Murphy & Callaway,
2004) By using two different data collection methods to compare the measurement of business performance, many prior studies have shown a positive relationship between the two methods (Keh et al., 2007).
QUANTITATIVE RESEARCH
The author employed an adjusted measurement scale derived from qualitative results to conduct a pilot survey, collecting a sample of 87 questionnaires After filtering, 78 valid responses were analyzed quantitatively in two phases: first, assessing scale reliability with Cronbach’s Alpha, and second, performing Exploratory Factor Analysis (EFA).
The preliminary quantitative analysis indicated that all observed variables demonstrated reliability, with correlation coefficients exceeding 0.6 Although the Cronbach’s Alpha coefficients increased slightly when variables were removed, the differences were minimal (less than 0.05) Consequently, the author opted to retain the original scale for the formal study without eliminating any variables.
The EFA results indicated no changes in the initial scale groups, which were retained for the formal quantitative research
In this study, a 5-point Likert scale was used to measure observed variables, with scores ranging from 1 to 5 to gauge respondents’ level of agreement:
1 Strongly Disagree; 2 Disagree; 3 Neutral; 4 Agree; 5 Strongly Agree
The official scale was developed based on the preliminary quantitative research results with a sample size of 78 analyzed questionnaires (Appendix 7)
According to Hair et al (2014), the minimum sample size for EFA is 50, preferably
To conduct an effective Exploratory Factor Analysis (EFA), researchers recommend a minimum sample size of 150 to 300 participants, depending on the ratio of observations to analyzed variables A common guideline is to maintain a ratio of 5:1 or 10:1, with some experts suggesting even a 20:1 ratio For instance, if a survey includes 30 Likert-scale questions, representing 30 observed variables, the required sample size would be 150 at a 5:1 ratio and 300 at a 10:1 ratio This ensures the analysis is robust and reliable, surpassing the minimum threshold of 50 or 100 participants.
Using this formula, the research sample size is:
For effective multivariate regression analysis, a minimum sample size is essential, as outlined by Tabachnick and Fidell (1996) The formula for determining this size is n = 50 + 8m, where m represents the number of independent variables In this study, with 10 independent variables, the calculated minimum sample size is 50 + 80, emphasizing the importance of adequate data for robust analysis.
PLS-SEM analysis requires a large sample size To enhance scale reliability and representativeness, the author planned to collect over 500 responses after filtering
The reliability of the scale was assessed using SMARTPLS, focusing on two key indicators: Cronbach’s Alpha and Composite Reliability (CR) Many researchers favor CR over Cronbach’s Alpha because it provides a more accurate estimation of reliability, as Cronbach’s Alpha tends to underestimate this metric.
(1998) stated that for exploratory research, CR should be 0.6 or higher For confirmatory research, a threshold of 0.7 is appropriate for CR (Henseler & Sarstedt, 2013)
Exploratory Factor Analysis (EFA) is a statistical method used to uncover hidden structures in observed variables, helping researchers identify complex correlation patterns that may not be obvious (Hoàng Trọng & Chu Nguyễn Mộng Ngọc, 2008) By grouping correlated indicators, EFA assesses the reliability of internal factor structures The technique typically employs the principal components extraction method with Varimax rotation, ceasing when the eigenvalue of extracted factors reaches 1, effectively simplifying multiple correlated variables into a single linear factor.
Discriminant validity refers to the distinctiveness of a construct in relation to others within a model Traditionally, this validity has been assessed using the square root of Average Variance Extracted (AVE), as proposed by Fornell and Larcker (1981); however, this method has limitations Henseler et al (2015) demonstrated through simulation studies that the HTMT index offers a more accurate evaluation of discriminant validity While SMARTPLS utilizes both approaches, it places greater emphasis on the HTMT index According to Garson (2016), discriminant validity between two latent variables is confirmed when the HTMT index is below 1.
3.3.3.5 Model Fit Testing (Explanatory Power of Independent Variables for Dependent Variables)
In the SEM model, the author assessed the influence of independent variables on a dependent variable by utilizing the R-squared and adjusted R-squared indices, with a preference for the more precise adjusted R-squared.
3.3.3.6 PLS-SEM Estimation Model Analysis
PLS-SEM (Partial Least Squares Structural Equation Modeling) is a favored technique among researchers for estimating model parameters and developing theories, particularly when explaining variations in dependent variables This second-generation analysis method is supported by efficient software and is especially useful for models involving latent variables measured through observed indicators, small sample sizes, and non-normal data distributions.
3.3.3.7 Linear Structural Model Analysis (PLS-SEM)
In PLS-SEM, the relationships between research variables and their indicators are depicted by unidirectional arrows, indicating direct and predictive relationships When supported by strong theoretical foundations, these relationships can also be interpreted as causal.
Chapter 3 provides an overview of the research methods, including qualitative and quantitative approaches It briefly outlines data collection and analysis methods Additionally, the chapter discusses the development of measurement scales through expert discussions and group discussions Based on the qualitative research results from expert interviews and preliminary quantitative analysis of 78 survey responses, the proposed research model was retained, and the official measurement scale was adjusted and finalized for the formal quantitative research.
RESEARCH RESULTS AND DISCUSSION
OVERVIEW OF SMALL AND MEDIUM ENTERPRISES IN HO CHI MINH
In January 2024, Ho Chi Minh City set a record with 66,239 newly established and re-entering enterprises, marking an 11.6% increase from 2022 This impressive figure is double the number of businesses that exited the market in 2023 and represents over 30% of the national total of 217,700 enterprises.
In 2023, Ho Chi Minh City experienced a remarkable surge in foreign direct investment (FDI), with an increase of nearly 50% compared to the previous year The city topped the nation by securing a total registered capital of $5.85 billion, representing approximately 16% of the total committed foreign capital of $36.6 billion across all 63 provinces and cities.
According to tapchitaichinh.vn (07/2023), the contributions of SMEs to Ho Chi Minh City’s economic growth are evaluated as follows:
Small and medium-sized enterprises (SMEs) are vital to the economic development of Ho Chi Minh City, representing over 98% of all businesses in the area The growth of SMEs has been remarkable, increasing from 313,031 enterprises in 2015 to more than 400,000 by 2020, according to the Ho Chi Minh City Department of Planning and Investment.
Small and medium-sized enterprises (SMEs) play a crucial role in the economy, significantly contributing to job creation and the local GDP A report from the Ho Chi Minh City People’s Committee highlights that SMEs accounted for around 60% of the workforce and contributed more than 23.34% to the city’s GDP in 2021.
Small and medium-sized enterprises (SMEs) exhibit remarkable flexibility, allowing them to swiftly adapt to market changes This agility promotes diversity and drives growth across multiple industries, ultimately improving the quality and productivity of the urban economy.
Small and medium-sized enterprises (SMEs) play a crucial role in the supply chain for larger companies by providing essential products and services Their contributions not only enhance the value chain but also boost the competitiveness of larger firms.
Thus, it is affirmed that SMEs significantly contribute to Ho Chi Minh City’s economic development and are a primary force in driving the city’s economic growth
According to vneconomy.vn (07/2024), the Q2/2024 enterprise situation report by the
According to the Ho Chi Minh City Business Association (HUBA), 57.1% of enterprises are currently operating stably, despite a concerning trend in market indicators Notably, the proportion of businesses facing revenue declines has risen significantly, now affecting 30.4% of enterprises.
The Q2/2024 enterprise survey conducted by HUBA revealed that 57.1% of businesses were operating stably, marking a 6% increase from Q1/2024 Conversely, the proportion of enterprises experiencing reduced revenue surged to 30.4%, while inventory levels climbed to 34% and outstanding debt rose to 42%.
QUANTITATIVE RESEARCH RESULTS
Data was collected through an online survey using Google Forms The author leveraged personal connections at enterprises, classmates, and lecturers from universities in
Ho Chi Minh City to distribute the survey link to SMEs in the area
A total of 618 responses were collected After filtering and removing invalid responses (e.g., those with patterned answers or missing questions), 591 valid responses were accepted for analysis, accounting for 95.63%
A recent survey of 591 respondents revealed that 78.20% were male and 21.80% were female The age group of 31–45 years represented the largest segment at 65%, followed by 19.1% in the 46–55 age range, 8.1% in the 18–30 group, and those over 55 years old These findings reflect current demographic trends.
Regarding educational attainment among the 591 respondents, the highest proportion held a university degree (314 respondents, 53.1%), followed by vocational or college degrees (171 respondents, 28.9%), master’s degrees (99 respondents, 16.8%), and doctoral degrees (7 respondents, 1.2%)
For research on SMEs, these figures are consistent with the current trend of pursuing higher education to meet job requirements in the context of digital transformation
To ensure high scale reliability, the author used both SPSS 22.0 and SMARTPLS, testing reliability through Cronbach’s Alpha
Scale testing results using SPSS 22.0 indicated that all observed variables had a total-item correlation coefficient exceeding 0.3 Most variables demonstrated a Cronbach’s Alpha if item deleted that was lower than the overall group’s Cronbach’s Alpha However, the variables TNPL4, MTLV4, DTTT4, and CSKT4 exhibited a higher Cronbach’s Alpha if item deleted than the group average, though the differences were minimal (