MINISTRY OF TRAINING AND EDUCATION FOREIGN TRADE UNIVERSITY SUMMARY OF PHD THESIS MANAGEMENT INNOVATION TO IMPROVE THE COMPETITIVE CAPABILITY IN STATE OWNED ENTERPRISES Discipline: Business Administration LE QUOC KHANH HANOI - 2020 MINISTRY OF TRAINING AND EDUCATION FOREIGN TRADE UNIVERSITY SUMMARY OF PHD THESIS MANAGEMENT INNOVATION TO IMPROVE THE COMPETITIVE CAPABILITY IN STATE OWNED ENTERPRISES Discipline: Business Administration Code number: 9340101 LE QUOC KHANH Supervisor: Assoc Prof Dr Tang Van Nghia HANOI - 2020 LIST OF PUBLICATIONS Lê Quốc Khanh, 2019, Quản trị doanh nghiệp nhà nước Việt Nam học kinh nghiệm số quốc gia, Tạp chí Dân chủ pháp luật số (323) tháng năm 2019 Lê Quốc Khanh, 2019, Đổi cạnh tranh doanh nghiệp Nhà nước, Tạp chí kinh tế đối ngoại số 115 tháng năm 2019 INTRODUCTION Rationale of the topic In the context of market economy and international integration, the competitive capability of an enterprise is a factor that determines the success of that enterprise Competitive capability is also the key of enterprises to penetrate the world market and grow The prerequisite for reforming and improving the performance of enterprises is the need to improve corporate governance efficiency in enterprises, especially in SOEs State-owned enterprises (SOEs) hold a number of key sectors and fields, the most important infrastructure system for industrialization and modernization of the country, and master the lifeline of socio-economic infrastructure Most of the big enterprises are those in construction, electronics, chemicals, communications, rail transport, consumer technology manufacturing industries, etc., so they play an important position in orbit as well as economic development orientation of Vietnam SOEs are holding key resources and sectors of the economy and contributing greatly to the country's GDP At present, many SOEs have made many positive changes, showing their leading role in the economy, however, many SOEs still show weaknesses, exist and are not commensurate with the requirements and availability of SOEs The current mechanism of SOEs governance is unclear and coherent, leading to inefficient SOEs restructuring in the past One of the reasons is that SOEs governance activities are slowly renovated, not keeping up with the requirements of development according to market mechanisms and international practices, failing to meet the requirements of the restructuring process of enterprises From the above analyzes, the PhD student has chosen the topic of "Management innovation to improve competitive capability in Stateowned enterprises" as my doctoral dissertation project with the desire to contribute to administrative innovation through which improve operational efficiency and improve the competitive capability of SOEs Research objectives and missions 2.1 Research objective The thesis researches, additionally contributes to a number of theoretical issues about corporate governance in SOEs today On the basis of assessing the current situation of corporate governance in Vietnamese SOEs, analyzing its impact on the competitive capability since the period of economic mechanism transformation, the thesis proposes innovative solutions to SOE governance to improve high competitive capability in the context of strong competition in the market economy and international integration of Vietnam 2.2 Research mission In order to achieve the research objectives, the thesis addresses the following specific research tasks: - Clarifying theoretical issues about SOEs and SOE governance including corporate governance and business administration; on the competitive capability of the business; clarify the characteristics and role of corporate governance for the competitive capability of SOEs; - Systematize and supplement the theoretical basis for the governance of SOEs and the competitive capability of state-owned enterprises, reform of SOE governance as well as the relationship between corporate governance innovation and the competitive capability of SOEs in Vietnam; - Analyze and assess corporate governance practices, evaluate some key governance contents in Vietnamese SOEs, factors affecting corporate governance efficiency in these enterprises; - Proposing solutions to SOE governance innovation, thereby raising the competitive capability and finally, improving the efficiency of Vietnam's SOE activities, contributing to improve the quality and efficiency of enterprises' operations and promote economic development Research subject and scope 3.1 Research subjects The research object of the thesis is SOE governance, SOE governance innovation, SOE competitive capability as well as the role of governance innovation on SOEs' competitive capability (theory and practice) In addition, the thesis also studies the policy framework, laws, state management of SOEs, SOE governance, as well as factors affecting SOE governance efficiency The thesis also mentions and studies corporate governance practices in the world in order to draw some relevant lessons for Vietnamese SOEs 3.2 Research scope - Regarding the content: The research scope of the thesis is limited to corporate governance and focus on SOE governance, some aspects of business administration related to competitive capability as well as performance of SOEs and the current situation of SOE governance in Vietnam, factors affecting corporate governance efficiency and solutions of management innovation to improve the competitive capability of SOEs in Vietnam Research Methodology 4.1 Research methodology The thesis is based on the research methodology of dialectical materialism and historical materialism The Party's views on market economy development, corporate governance and SOE development are also a guideline for the research methodology of the topic 4.2 Specific research methods To implement the thesis, the author has used qualitative research methods that are mainly combined with quantitative research methods The qualitative research methods are basically including: analytical synthesis method, comparison - comparison method, statistical method, systematization method and interpretation method New contributions of the thesis - Clarify and contribute to additional academic issues on corporate governance, SOE governance and SOE competitive capability; conceptual issues, characteristics of the role of SOEs as well as governance activities, performance of SOEs - Clarify the impact of SOE governance activities on the competitive capability of SOEs theoretically and practically, emphasizing the important and core role of governance innovation in improving the competitive capability of SOEs in Vietnam - Clarify the inadequacies, challenges and even weaknesses of current SOE governance, based on which highlights the issues posed and challenges when implementing governance reforms to improve the competitive capability and efficiency of the SOEs - The solutions and recommendations in the thesis contribute to the renovation of SOE governance, especially large economic corporations in order to improve the competitive capability of SOEs in the era of strong competition with private sector enterprises The structure of the thesis This thesis, in addition to the introduction, conclusion, list of references, appendices and structures of the thesis, includes: Chapter I Overview of the research situation and the theoretical basis of the topic Chapter II Theoretical issues on SOE governance and State-owned enterprises' competitive capability Chapter III Current situation of SOE governance in Vietnam and lessons learned from a number of countries Chapter IV Perspectives, goals and solutions to renovate governance to improve the competitive capability of state-owned enterprises CHAPTER 1: OVERVIEW OF RESEARCH SITUATION RELATED TO THE THESIS THEMES 1.1 Literature review of the topic 1.1.1 Oversea researches In the world, there have been many research works, articles addressing each individual issue of corporate governance, SOE governance and SOE competitive capability Typically, there are the following works: 1.1.1.1 Corporate governance and business administration research group There are many studies in the world that have mentioned the concept of corporate governance One of the earliest studies was The Modern Corporation and Private Property by Berle and Means (1932) This work began to address the concept of corporate governance and later became the basis for many other studies Corporate governance here is understood as the process, procedures, policies, regulations, laws and institutions to guide organizations and enterprises how to act, operate and control their activities to achieve the set goals 1.1.1.2 Research group on SOE governance and SOE governance innovation SOE governance has always been a concern of many countries, international organizations and scientists Regarding the management of SOEs, typically the 2006 Guide to Corporate Governance of SOEs, OECD provides six basic guidelines Research by World Bank (2014), Transparency of SOEs in Vietnam - current status and ideas for reform 10 but with the idea of information transparency starting from "Economic group, then expanding to general corporations, and finally the remaining 100% state owned SOEs" indirectly agreed to the concept 1.1.1.3 The group of studies on the relationship between corporate governance and improving the competitive capability of stateowned enterprises The research on corporate governance in the world has been very popular in recent years, especially since the 2000s when corporate governance practices in the world have generated many problems and activities of joint stock companies are increasingly complex and diverse The above studies have created a fairly complete theoretical basis for corporate governance and suggest theoretical and practical issues in the governance of State-owned enterprises 1.1.2 Researches in Vietnam 1.1.2.1 Research group on corporate governance and SOE governance In Vietnam, there are many studies on corporate governance and SOE governance The author Hoang Van Hai (2018) has a corporate governance project, based on the research related to institutions, policies and laws to guide, operate and control the company and the public 1.1.2.2 Group of research works on management innovation and raising the Competitive capability of SOEs The book of Corporate Governance Management, Listed for Enterprises and Investors (Le Minh Toan, 2010) provides the most 13 SOEs need to to renovate governance towards improving the competitive capability and increasing the efficiency in their operations? Question 3: Are there any solutions to renovate governance to improve the competitive capability for SOEs in the context of Vietnam's typical market economy and international integration? 1.2.3 Research hypotheses - The first research hypothesis: SOE governance has many differences compared to other corporate governance Stemming from the role and characteristics of SOEs, SOE governance is more complex than governance at other types of enterprises - The second research hypothesis: from the deep integration into the global economic system (accession to the WTO, new generation FTAs), the regulations on SOE governance of Vietnam must be changed in accordance with the law in the WTO, create equal competition of SOEs with private sector enterprises in the economy - The third research hypothesis: Inadequacies in the provisions of the law on SOE governance and the poor awareness of SOEs on governance activities, weak compliance is the main reason leading to SOE Competitive capability is still limited - The fourth research hypothesis: SOE governance reforms towards efficiency will help Vietnamese SOEs avoid business weaknesses and improve competitive capability in domestic and international markets 1.2.4 Research approach of the thesis 14 The dissertation's topic is in Business Administration, so the approach is to study corporate governance in combination with business administration, based on that propose SOE innovation and innovation to improve the competitive capability and performance of SOEs CHAPTER II THEORETICAL ISSUES ON THE MANAGEMENT OF STATE ONWED ENTERPRISES AND COMPETITIVE CAPACITY OF STATE OWNED ENTERPRISES 2.1 Conceptualizing on SOEs and SOE governance 2.1.1 Overview of state-owned enterprises 2.1.1.1 State enterprise concept SOE is a type of enterprise whereby the state invests capital or controls to perform economic functions and objectives set by the State Basically, SOEs are expanded by the State with at least the majority of capital (over 50%) of the total contributed capital of the enterprises and accordingly the State is the owner with the right to dominate the enterprises SOEs are not a concept that only appear in countries with transition economies but exist in most countries in the world 2.1.1.2 Characteristics of state-owned enterprises In the economy, SOEs are also a type of enterprise, so they bring all the characteristics of the enterprise in general, such as an organization with its own name, assets, transaction offices, established in accordance with the law 2.1.1.3 The role of state-owned enterprises SOEs play an important role in the economy in particular and in the society SOEs play a multifaceted role with many goals both 15 economically, politically and socially as well as other development orientations 2.1.2 Overview of corporate governance 2.1.2.1 Corporate governance concept Basically, governance is concerned with the process of planning, organizing, leading and monitoring the activities of its members, using resources to achieve success in the set goals 2.1.2.2 Characteristics of corporate governance Governance is the necessary process of activities carried out when people work together in organizations aiming at certain goals 2.1.2.3 Principles of corporate governance Corporate governance is the operation of a system of rules, internal processes and the implementation of such content to guide, operate and control the company, in relation to the relationships between the Board of Directors Director, Board of Directors / Members' Council and shareholders of a company with related parties 2.1.3 State owned business governance 2.1.3.1 State owned enterprise governance concept Corporate governance is a big category, can approach CG in many different angles such as: management purpose, management mechanism or through governance entities 2.1.3.2 State owned enterprise governance characteristics Legally, SOEs operate like a normal business, taking responsibility for all their activities in the production and business process 16 2.1.3.3 Content of state owned enterprise governance In Vietnam, according to the new regulations, SOE is legally a state-owned enterprise and exists as a one-member limited liability company Therefore, SOE governance is mainly based on the principles of corporate governance (rather than public companies) 2.2 Corporate governance innovation 2.2.1 Concept Management innovation including innovation of business management and administration is the path to success and sustainable development of enterprises Management innovation is also attached and towards good governance, whereby a competent, timely, comprehensive and transparent management system is implemented in an organization 2.2.2 Content of corporate governance innovation In the face of unpredictable changes in the business environment and competition, innovation of business management thinking must be considered as a vital line of business, especially for large enterprises and public enterprises 2.3 Issues of competitive capability of state-owned enterprises 2.3.1 The concept of the competitive capability of SOEs Competitive capability of SOEs is their ability to maintain and improve their competitive advantages in production and consumption of products, expanding markets, attracting and using effectively factors of production (capital, energy, labor, technology) to achieve high economic benefits (maximize development of SOEs profits) and ensure sustainable economic 17 2.3.2 Criteria for assessing the competitive capability of stateowned enterprises General competitive capability of businesses in the market economy is the core factor to survive This factor especially plays an important role in the complete market economy conditions, international economic integration, businesses will have to compete to survive in the market with international elements and increasingly fierce When competing equally, SOEs will also have to improve the Competitive capability to maintain their existence At the same time, the competitive competence of SOEs must also rely on the same evaluation criteria as private sector enterprises 2.4 The effect of governance innovation on SOE competitive capability Corporate governance plays a special role in maintaining efficiency, sustainable development and thereby maintaining the competitive capability of your business In this relationship, in order to improve competitive capability, management activities need to be renewed in the following contents: management capacity, administration, improving the quality of human resources, improving product quality to meet Market demand, compliance, businesses also need to have appropriate production strategies to take advantage of production and business opportunities The Board of Directors, Board of Members, and Board of Directors need to be identified as the nucleus of the innovation and creativity process in all aspects of governance to improve the competitive competence of the enterprise 18 CHAPTER THE CURRENT SITUATION OF STATE ENTERPRISE GOVERNANCE IN VIETNAM AND EXPERIENCE LESSONS FROM SOME COUNTRIES 3.1 Overview of production and business activities of SOEs in Vietnam 3.1.1 The process of formation and development of SOEs In addition to SOE innovation and development, the policy of building large-scale economic corporations and groups and holding a leading position in a number of important industries and fields is determined by Government 3.1.2 Some production and business results According to data from the National Enterprise Registration Database (Ministry of Planning and Investment), as of December 31, 2018, the whole country had 714,755 operating enterprises, an increase of 9.2% compared to the same period in 2017 The total number of operating enterprises having production and business results (business and production) surveyed and updated on December 31, 2017 on the whole scale, there are 560,417 enterprises, an increase of 11% compared to December 31, 2016 (MPI 2019, p 26) 3.2 Actual state of SOE governance innovation 3.2.1 On corporate governance innovation The transformation of SOEs to operate under a market mechanism and in a legal framework equal to those of other economic sectors is a consistent policy of the State 3.2.2 Some governance strategies affect the competitive competence of SOEs 19 When assessing the effectiveness of strategic governance in SOEs, the survey results show indicators on the professional qualifications of strategy developers, coordination of management levels, and strategy implementation, the level of supervision and handling of arising problems are assessed at a fairly high level with an average score of points or more on a 5-point scale 3.3 Evaluate the impact of corporate governance innovation on the competitive competence of SOEs Changes in SOE governance to aim at are improving the competitive capability, business efficiency, and profitability in both short, medium and long term; compliance, meeting environmental, social and sustainable development requirements New and popular strategic trends in the world are of interest to corporate executives, including in SOEs 3.3 Assess the impact of corporate governance innovation on the SO's Competitive capability Changes in SOE governance to aim at are improving the competitive capability, business efficiency, and profitability in both short, medium and long term; compliance, meeting environmental, social and sustainable development requirements New and popular strategic trends in the world are of interest to corporate executives, including in SOEs 3.4 Experience of management innovation to improve the competitive capability of SOEs in some countries around the world 3.4.1 Experience of China 3.4.1.1 Securing the basis for an effective governance framework 3.4.1.3 Responsibilities of the board of directors 20 The Chinese government has realized that good corporate governance is necessary to improve the competitive capability of the company and attract international capital (Hong Kong Economic Journal, 2001) 3.4.2 Experience of Korea 3.4.2.1 Securing the basis for an effective governance framework 3.4.2.2 Information disclosure and transparency 3.4.2.3 Related parties and unusual transactions 3.4.2.4 Responsibilities of the board SOE governance has been mentioned in South Korea since the Asian financial crisis in 1997 A series of reform measures were introduced after the collapse of more than one-third of SOEs in Korea Quoc because of weak corporate governance 3.4.3 Experience of Singapore 3.4.3.1 Temasek State Capital Investment Corporation 3.4.3.2 Changes in organizational structure 3.4.3.3 Changes in management 3.4.3.4 Changes to information disclosure In Singapore, state-owned enterprises (SOEs) are called government-linked companies (GLCs) GLCs are partly or wholly owned through Temasek, State Capital Investment Corporation (SWF Sovereign Wealth Fund), so they are also called TLCs (Temasek-linked companies) 3.4.4 Lessons learned for Vietnam 3.4.4.1 A solid legal framework is a prerequisite to improving the governance of state enterprises 3.4.4.2 Public and transparent information about the business 21 3.4.4.3 Improve the professionalism of the board of directors/ board of members 3.4.4.4 About SOE management agencies Through studying the experiences of some countries as above, it can be seen that many models of state property management and supervision, in which, some countries have many similarities in the environment and economic institutions that Vietnam can consult as well as learn from experience China has built a centralized model of state asset management through the establishment of a system of State Asset Management and Supervision Commission (SASAC) at both the central and local levels In Vietnam, it is very necessary to continue to consider and perfect the management model and functions of the Committee above 22 CHAPTER IV VIEWPOINTS, OBJECTIVES AND SOLUTION FOR MANAGEMENT INNOVATION TO IMPROVE THE COMPETITIVE CAPABILITY CAPACITY OF STATE OWNED ENTERPRISES 4.1 Viewpoints on innovation and improvement of governance of Vietnamese SOEs The Government has implemented many measures to arrange and renovate SOEs and has achieved some positive results The restructuring of SOEs was promoted, the number of SOEs was narrowed, focusing on key industries and fields The operational mechanism of SOEs has been renovated in the direction of business autonomy, fair competition, more openness and transparency 4.2 Indicators of competitive capability of SOEs should be directed 4.2.1 Targets of growth The average growth rate in the period of 2010 - 2015 of the SOE sector was lower than that of the private sector, not commensurate with the State resources invested and advantages compared to other economic sectors 4.2.2 Targets of market share and ability to dominate the market Market share is the market share that enterprises have occupied; In other words, this is the market segmentation of enterprises to competitors in the industry), banks, telecommunications 4.2.3 Targets of profitability 4.2.4 Targets of capital 23 4.2.5 Targets of science and technology level 4.2.6 Targets of human resource 4.2.7 Targets of on production strategy, distribution and product development 4.3 Management innovation solutions to improve the competitive capability of state-owned enterprises 4.3.1 Governance reform is associated with the policy of restructuring State enterprises Since SOE governance is heavily influenced by SOE management policies, a change in SOE rearrangement policy will have a great impact on this corporate governance system 4.3.2 Improve the professionalism and operational efficiency of the Board of Members In order to properly exercise their authority, the Board of Members of SOEs requires members to behave for the common interests of the enterprise, without conflicts of interest when performing their assigned functions, with sufficient experience and appropriate expertise, including experience in the private sector 4.3.3 Strengthening the capacity of the contingent of state enterprise administration To perform well the governance functions, SOEs strengthen training and training to gradually improve the governance capacity and quality of the management team to meet the requirements of corporate governance in the market mechanism and current extensive international integration 24 4.3.1 Raising awareness about the policy of organizing and renovating state-owned enterprises' administration The arrangement and innovation of SOE governance is a big policy, and it is also a very sensitive and complex field because it changes a habit and a management mentality in a long time of the mechanism 4.3.2 Improve the professionalism and operational efficiency of the Board of Directors In order to properly exercise its authority, the Board of Directors of SOEs requires its members to behave for the common good of the enterprise, without conflicts of interest in the performance of their assigned duties, with appropriate experience and expertise including experience in the private sector 4.3.3 Strengthening the capacity of state management enterprises In order to perform well the management functions, the SOEs enhance their training and fostering to gradually improve the management capacity and quality of the management team to meet the requirements of business administration in the market mechanism and extensive international integration today 4.3.4 Separate ownership and administrative rights of SOEs SOE governance is only truly radical and effective when there is a separation between state management and SOE governance, and state capital trading; between administrative management and business management 4.3.5 Improve the efficiency of business administration 25 Financial management is one of the key aspects of corporate governance in general to improve the competitive capability of businesses At present, financial management is the most difficult issue in SOEs due to many outstanding debts and bad debts 4.3.6 Improve the publicity and transparency in SOE governance activities SOEs need to improve the quality of information, and the figures must reflect the actual financial situation and production and business activities of the enterprises 4.3.7 Strengthen the application of modern international standards on corporate governance In order to improve competitive capability in the domestic and international market, the innovation of governance in thinking as well as strategy and management capacity is close to the principles and standards of corporate governance 4.4 Recommendations for state management agencies supervision of compliance with the law on SOE governance The competent authorities continue to direct the strict handling of violations in the management and use of state capital and assets in SOEs, direct the ministries and branches to implement the conclusions of the Government Inspectorate and State Audit 26 CONCLUDSION Corporate governance in general is a key factor to enhance operational efficiency and improve the competitive capability of enterprises in the conditions of fierce competition of the market economy and international integration Corporate governance is not only a system that resolves relationships between company institutions (BOD / Board of Directors), shareholders and other stakeholders, but also resolves conflicts Strengthening governance and corporate governance innovation help establish a governance structure, set goals, and monitor the implementation of corporate goals SOEs are enterprises that are assigned to business in key sectors, hold key sectors of the economy and at the same time are determined to play a leading role in the economy However, in the past few decades, the performance of SOEs in many fields has not been high, posing many problems that need to be solved The cumbersome and ineffective SOE governance, the loss of resources, and low competitiveness are one of the most prominent problems, mainly due to poor SOE governance, stagnation and slow innovation Vietnam's transformation of economic management mechanism and participation in globalization has forced SOEs to increasingly innovate, including governance reform to effectively use state budget funds Through that, the competitive capability of SOEs is improved and enhanced - the key condition for SOEs to compete fairly and equally with private sector enterprises and especially foreign-invested enterprises Only by improving the competitive capability without 27 relying on the State's preferences, the state-owned enterprises can dominate the market and develop sustainably Survey results of over 102 SOEs and interviews with more than 20 typical SOE officials show that SOE governance is still heavily traditional, has not yet applied advanced governance principles and models, subject to differentiation of governance functions to promote the operational efficiency of state-owned enterprises, not approaching modern governance standards in the world This leads to the low competitiveness of SOEs compared to private sector enterprises, especially compared to FDI enterprises Reforming governance and improving the operational efficiency of SOEs are current concerns not only in Vietnam but also in many countries around the world Raising awareness and renovating management thinking in SOEs is the decisive factor contributing to changing the mode of competition in the market and enhancing the competitive capability of SOEs This issue must also be agreed and supported by the current state management of SOEs Innovation of SOE governance is a topic with a wide research scope, difficult to reach research subjects, so the shortcomings in research results cannot be avoided, the PhD candidate is looking forward to receiving comments of scientists, business leaders and those who are concerned about specific solutions to innovate governance in SOEs to improve the efficiency of state capital use as well as enhance the competitive capability of SOEs ... nghiệm số quốc gia, Tạp chí Dân chủ pháp luật số (323) tháng năm 2019 Lê Quốc Khanh, 2019, Đổi cạnh tranh doanh nghiệp Nhà nước, Tạp chí kinh tế đối ngoại số 115 tháng năm 2019 INTRODUCTION Rationale... Administration Code number: 9340101 LE QUOC KHANH Supervisor: Assoc Prof Dr Tang Van Nghia HANOI - 2020 LIST OF PUBLICATIONS Lê Quốc Khanh, 2019, Quản trị doanh nghiệp nhà nước Việt Nam học kinh nghiệm số... innovative solutions to SOE governance to improve high competitive capability in the context of strong competition in the market economy and international integration of Vietnam 2.2 Research mission