Innovation in Vietnamese ethnic entrepreneurship

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Business School

INNOVATION IN VIETNAMESE ETHNIC ENTREPRENEURSHIP

Master’s Thesis, Innovation Management Nguyen Thi Mai 277226 April 23, 2018

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ABSTRACT

UNIVERSITY OF EASTERN FINLAND Faculty of Social Sciences and Business Studies Master’s Program in Innovation Management

NGUYEN THI, MAI: Innovation in Vietnamese Ethnic Entrepreneurship Master’s Thesis: pages 59 and 1 appendix (1 page)

Supervisor: Dr. Ville-Veikko Piispanen April 2018

Keywords: Innovation, ethnic entrepreneurship, human capital, communication

The purpose of the study is to explore the innovation in Vietnamese ethnic entrepreneurship in Finland regarding aspects: innovation, human capital and communication. The study aims to answer how Vietnamese ethnic entrepreneurship embraces innovation in terms of human capital, and communication. The theoretical framework of this study is based on innovation in entrepreneurship, ethnic entrepreneurship, human capital, and communication.

According to previous literature, innovation plays an important role to facilitate entrepreneurship to improve the performance and to get the further development. Ethnic entrepreneurship may contribute to innovation and can be reputational intermediaries enabling the partnership to give access to the international market or to locally embedded communities.

Human capital is a key service input to service innovation process. Human capital enhances performance, knowledge and leads to innovation. Besides that communication plays an important role to facilitate human capital to achieve better results and lead to new discoveries.

The qualitative methodology is guided and semi-structured interview. I conducted the semi- structured interviews with three Vietnamese entrepreneurs in Finland. With guided questions in the interview, the interviewees can provide answers associated with the theoretical literature. I used the deductive content analysis to analyze data and the coding categories are based on the theoretical framework. Data is sorted based on the similar characteristics.

This study addressed the importance of human capital and communication in achieving innovation in entrepreneurship. The empirical study forms a comprehensive overview of how Vietnamese entrepreneurs utilize human capital and communication to enable initiatives and effectiveness in performances. The results show that Vietnamese entrepreneurs, who were found to express a higher level of human capital and communication, have perceived opportunities,applied suitable strategies, implemented new things, and facilitate new ideas.

Finally, managerial implications are made regarding theoretical discussion and findings.

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ACKNOWLEDGEMENTS

I would like to thank my thesis supervisor – Dr. Ville-Veikko Piispanen for the support, guidance, and advice through the process of writing thesis

I would like to thank three Vietnamese entrepreneurs who participated actively in the interviews, spent the time to share with me stories and experience, which contributed

significantly to my thesis.

I also would like to thank my parents for supporting me to study and caring for me.

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1. INTRODUCTION

1.1. The topic

Previous studies have shown that ethnic entrepreneurship has faced many disadvantages such as the racial discrimination, blocked mobility, limited access to finance or limited human capital (Light, 1979; Ram & Jones, 1998; Waldinger et al., 1990; Ishaq et al., 2010).

Moreover, much of the literature on ethnic entrepreneurship is related to social capital. Many of them indicated that social capital is an important factor to entrepreneurs while the social, economic and political contexts affect the benefits of the social capital (Kloosterman, 2010;

Kloosterman et al., 1999; Nakhaie et al., 2009; Ram et al., 2008). Ethnic entrepreneurship has also been studied about forces affecting entry, factors underlying the heterogeneity in behavior and performance in the ethnic minority (Basu, 2008). Some recent studies have conducted about the role of high skills migrants to contribute knowledge across regional (Max et al., 2015) and support host country productivity (Canello, 2016). However, this study focuses on the significance of human capital and internal communication in order to facilitate initiatives and innovation in ethnic entrepreneurship that previous studies have not focused on considerably before.

Most of the research about immigrant and ethnic minority businesses have been studied in the USA and the UK where have a long history and a large number of immigrants (McEvoy et al., 2010). Recently, there are some studies, which have been conducted about ethnic businesses but in Finland, ethnic community and their businesses are quite fragmented and new when comparing to other countries. Finland gradually becomes a promising country for ethnic entrepreneurs because of its potential and open new policies from the government towards starting a business for immigrants. There are some studies of previous researchers about Chinese, Turkish ethnic businesses in Finland which make up a big proportion in the market (Katila & Wahlbeck, 2011) while Vietnamese ethnic entrepreneurship is less known by many people here because the Vietnamese immigrant community in Finland is not so strong and popular. The first Vietnamese refugees came to Finland in 1979 (Forsander, 2002). According to the statistics Finland in 2012, the number of Vietnamese entrepreneurs was 111 which occupied 10,2 % in the total of 1090 employed Vietnamese in Finland (Joronen, 2012).

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Vietnamese community has accumulated a culture that provides useful advantages for business (Ekholm, 1994). The language skills, cultural knowledge and contacts of immigrants may have advantages. Foreign trade, related service, restaurant and retail trades are found as main operating sectors among immigrant entrepreneurs. In Finland, immigrant business concentrates on wholesale trade and expert services such as perishables trade and restaurant industry (Joronen, 2002).

In recent years, many Vietnamese students and immigrants choose to become entrepreneurs to start their own business in Finland and develop Vietnamese ethnic business more and more popularly. There are some Vietnamese students who have done the research about Vietnamese entrepreneurship in Finland such as their motivation, advantages and disadvantages or factors affecting to their business (Trinh, 2013; Dinh, 2013). However, no one focuses on the study of innovation in ethnic entrepreneurship about human capital and communication aspects. This study will be a new contribution to the previous empirical studies about ethnic entrepreneurship in general and Vietnamese ethnic entrepreneurship in particular. This study goes deep down into human capital and internal communication in entrepreneurs’ business to explore new significances and findings.

1.2. The purpose of the study

In my master thesis, I will focus on innovation in ethnic entrepreneurship, which lacks empirical literature review. I will concern ethnic entrepreneurship in this study including these aspects: innovation, human capital, and communication with interrelated relationships. With the aims to explore the innovation in Vietnamese ethnic entrepreneurship in Finland, how Vietnamese ethnic entrepreneurs’ human capital and communication in their business can enable innovation in performance and development. The study can provide significant contributions and implications to existing literature about innovation in ethnic entrepreneurship.

Research question: How human capital and communication facilitate innovation in Vietnamese ethnic entrepreneurship?

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For answering the research question, I will conduct the semi-structured in-depth interviews with Vietnamese ethnic entrepreneurs in Finland to clarify how their human capital and the communication in their business facilitate to achieve better performances, new accomplishments.

In the existing literature, other researchers give empirical literature about innovation and entrepreneurship in general, ethnic entrepreneurship, the relations between human capital and innovation, the relations between communication and human capital and innovation. There is little literature about relations between ethnic entrepreneurship and human capital; relations among communication, human capital and ethnic entrepreneurship.

As innovation in entrepreneurship and ethnic entrepreneurship have been studies as separate research areas, the knowledge about innovation in ethnic entrepreneurship can be acquired by combing them and understanding the connection they have in literature and practice. To my knowledge, innovation in ethnic entrepreneurship has not been studied before and there is no research that provides the understanding of innovation in ethnic entrepreneurship regarding human capital and communication aspects. This thesis also provides practical relevance from ethnic entrepreneurs by increasing their understanding about innovation. The results of this study give the entrepreneurs the opportunity to understand their human capital and communication to improve performances and effectiveness in business and in organizations.

1.3. Key concepts and structure of the study

The key concepts of this study are ethnic entrepreneurship, innovation, human capital, communication. They are main concepts of this study in order to understand innovation in ethnic entrepreneurship.

Innovation is an idea, practice, or object that an individual or another unit perceives it as new (Roger, 2003). Innovation is the process of bringing an idea into practice to solve problems.

Innovation is the generation, acceptance, and implementation of new ideas, process, products, or services (Kanter, 1984). Innovation can come from existing knowledge, it does not need to be new but it has not been used previously (Hebert & Link, 2006). Innovation process may utilize the existing knowledge to produce new combinations, which can be creation or

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adoption of new products and services, new production methods, or new management techniques (Hall, 2009). Innovation in entrepreneurship can be exploited from existing knowledge to produce or adopt a new kind of products or services or methods, techniques or management ways. They do not need to invent something new. The important thing is they can know how to take advantage of previous knowledge to come up with something that has not been used previously. Something is new to them or new to their organization.

The definition of ethnic entrepreneurship remains open and there is no universal agreement on this concept (Basu, 2008). In the context of ethnic entrepreneurship, ethnic refers to a set of connections and interactions among people who have similar common national backgrounds or migration experiences (Waldinger et al., 1990). Strong group solidarity is an important factor to help ethnic entrepreneurship to grow such as team spirit, intra-group bonds (Andrejuk, 2016). Ethnic entrepreneurship includes people from the same country, culture and backgrounds so that they generally share strong solidarity among others so that they have a close-knit relationship to connect to each other.

Human capital is intangible resources belong to individuals and groups. These resources include the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom (Huff, 2007). Human capital has been evaluated by five indicators in entrepreneurship research: education, work experience, entrepreneurial experience, industry experience, and managerial experience (Bruderl et al., 1992; Unger et al., 2011).

Communication is an important form towards personal and professional relationships (Wood, 2010). Communication process is related to work motivation, job satisfaction and productivity of the organization (Chiang, 2006). Communication is a process which forms the behavior of human to gain common objectives (Kumar, 2010). From communication, human capital perceives and transmits information, and understanding of tasks to achieve the organizational goals and solve the issues.

1.4. The structure of the thesis

Chapter 2 discusses the literature of innovation in entrepreneurship, ethnic entrepreneurship, human capital, communication. This will give diverse opinions of many researchers about the

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importance and necessity of innovation to gain the efficiency and develop reputation and quality. Moreover, this chapter discusses the connection among human capital, communication, ethnic entrepreneurship, and innovation.

Chapter 3 discusses the methodology that I applied in this study and how I applied Guided and Semi-Structured Interview in my study in order to support the research. Moreover, this chapter shows information about data collection and the analysis of the study.

Chapter 4 presents the analysis of three Vietnamese entrepreneurs. It provides the analysis and relevant answers of interviewees related to the topic of the thesis.

Chapter 5 discusses the conclusions of this study and presents and empirical results. This chapter also gives suggestions for future study and managerial implications and indicates some limitations of the study.

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2. LITERATURE REVIEW

2.1. Innovation in Entrepreneurship

Innovation and entrepreneurs have the supporting relationship. Entrepreneurs apply new ideas into practice, entrepreneurial culture facilitates to create wealth from knowledge and enable innovation (Veeraraghavan, 2009). When an idea is innovated and entrepreneur is the person to put it into practice. Entrepreneurship helps to create new ideas and generate an entrepreneurial culture of independence, risk-taking, and confidence (Veeraraghanvan, 2009).

Entrepreneurship is defined as a set of processes that embrace many elements as opportunities, proactive people, risk, innovation and enterprise that can result in new values, new products and processes, start-ups, growths, profits (Lages, 2010). Hebert and Link (2006) indicated that entrepreneurs could create innovation by developing new products, a new method of production, discovering new markets, finding sources of new materials or applying new structures. They can use these ways to escape the stable status in order to implement change and forming a competitive advantage. The capacity enables the culture of evaluating change, risk-taking and continuous learning such as appreciating special knowledge, expertise and diverse opinions, sharing decision-making (Harrington, 2004). Innovation and entrepreneurship have an interrelated relationship when entrepreneurs can enable an innovative culture to embrace and develop new things and new changes while innovation helps entrepreneurs to adapt, develop, enhance, and compete.

Innovation is a factor which helps enterprises to adapt with changes in social, cultural and economic aspects, especially in the context with the globalization of markets and fast changes in technology (Castaño, Méndez & Galindo, 2015). There is a fact that many entrepreneurs with conservative perception are afraid of risk and they also have problems with limited size (Miles, 2008). Innovation is a factor which helps enterprises to adapt with changes in social, cultural and economic aspects, especially in the context with the globalization of markets and fast changes in technology (Castaño, Méndez & Galindo, 2015). Innovation supports to avoid imitation and go ahead of competitors and set up a long-term advantage in competition (Ottenbacher & Harrington, 2007). Innovation plays a key role to improve output and

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employment performance in service industries. There are environmental factors affecting indirectly to innovation such as product markets and the availability of sufficient human capital and the knowledge infrastructure. Human capital is a key input in the service innovation process (Arket al, 2003).

Veeraraghavan (2009) suggested that entrepreneurs should be able to take risks, not afraid of failures, grow a plan to make a venture from ideas into practice. To generate new ideas, entrepreneurs should create a culture of independence, risk-taking, and confidence. In order to encourage a culture of innovation, the organization should have the ability to transform knowledge into innovation, which is facilitated by communication enabling exchanges of information and experiences. That leads to strengthening communicative competence (Macedo, Porem & Andrelo, 2014).

2.2. Ethnic entrepreneurship

In modern multi-cultural society, ethnic entrepreneurship becomes a popular concept. In urban areas, multi-cultural society is a trend, which enables new entrepreneurial activities.

Entrepreneurial individuals are crucial to innovation process in organizations (Schumpeter, 1962). Migrant status affects positively to entrepreneurship (Nathan & Lee, 2013). Ethnic entrepreneurs can be reputational intermediaries that enable partnerships to give access to international markets or to locally embedded communities (Kapur & McHale, 2005; Saxenian

& Sabel, 2008; Honig et al, 2010). Nathan and Lee(2013) claimed that diversity is important to approach the international market and migrant status affects positively to entrepreneurship.

Culturally diverse leadership teams are usually good at creating new ideas and problem- solving (Fujita & Weber, 2003). Through the network, an ethnic business can access additional upstream and downstream market (Saxenian 2006; Zhou & Tseng, 2001). Ethnic entrepreneurship may contribute to innovation and help link companies in different countries (Saxenian & Sabel, 2008). Migrant-run companies may have benefited from diasporic community membership and ethnic entrepreneurship. Ethnic-diverse firms have a positive relationship with innovation activity. Ethnic diversity has significances to the success of new processes and to a new way of working commercialization (Nathan & Lee, 2013). Ethnic

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entrepreneurs are like a bridge to connect international markets and ethnic communities. With the diverse culture and migrant status, ethnic entrepreneurship can generate good business ideas and solutions and strengthen networking among communities. Moreover, there is a good positive relationship between innovation activity and ethnic entrepreneurship if the ethnic business can exploit the diversity to run business in a new way.

In modern multi-cultural society, ethnic entrepreneurship becomes a popular concept. In urban areas, multi-cultural society is a trend, which enables new entrepreneurial activities. People with ethnicity bring out their origin in particular socio-cultural habits to the society. Ethnic entrepreneurship is considered as a new form of self-employment (Delft et al., 2000). Ethnic entrepreneurship can get benefits from social bonds with the cultural network, which enables them to be flexible to attract human resources and capital (Wilson & Portes, 1980). Ethnic minorities are living in two cultures and it will be their potential to start a business with the combination of those cultures such as restaurants or travel agencies. Moreover, ethnic entrepreneurship could create opportunities to provide cultural ethnic goods. Ethnic entrepreneurship contributes to solving employment problems of ethnic people in the community and to the development of urban society. It is necessary to have tailor-made incentives and policy strategies to support ethnic groups (Masurel et al., 2002).

There is a special relationship between ethnic business and their co-ethnic customers. The intra-cluster ethnic loyalty and high communication with ethnic community create potential competitive advantages for ethnic business (Dyer & Ross, 2000). Socio-cultural bonds facilitate a specific relationship with loyalty to customers for ethnic firms (Masurel et al., 2002). Furthermore, network relationship with co-ethnic groups supports labor and finance for ethnic companies. Social networks with ethnic attributes and structures could provide the advantage to implement new economic activities (Delft et al., 2000). To be specific, social network supplies flexible human resources and capital, ethnic firms can mainly count on personnel from co-ethnic group and family to run business and the capital can get from co- ethnic group and family also in an informal way (Masurel et al., 2002). Ethnic business can be successful because of social resources including rotating credits, a protected market, personnel (Lee et al., 1997). In addition, the successful diversification is related to access to resources, finance and new market (Deakins et al., 1997). The networks from relatives, co-nationals or

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co-ethnics enable new companies to have the privilege to reach information, capital, and labor (Kloosterman et al., 1998). Basu (1998) also supposed that entrepreneurial entry relies significantly on the access to sources of capital, information and previous experience. Ethnic entrepreneurship has benefits from their culture and origin, they have a social network to get human resources and finance and have co-ethnic customers.

In an ethnic community, ethnic resources provide reliable, trustworthy and inexpensive. They are intangible resources with information and advice (Mars & Ward, 1984; Waldinger et al., 1990). They share information, experience, contacts because they have a feeling of solidarity and trust (Basu & Parker, 2001). Ethnic resources share cultural values; close and strong relationship will support and encourage business growth (Portes, 1995). High investment in human and financial capital can boost the success (Lee et al., 1997). To sum up, ethnic entrepreneurs consists of people with specific cultural, geographical, linguistic and socio- economic backgrounds. Ethnicity is considered as a source of value (Andrejuk, 2016).

Vietnamese appreciate honesty, hard work, loyalty and family as important cultural values (Morris & Schidenhutte, 2005). Strong group solidarity is an important factor to help ethnic entrepreneurship to grow such as team spirit, intra-group bonds (Andrejuk, 2016). Ethnic resources with a lot of strengths have significant impacts on ethnic business. They have a strong feeling of solidarity and trust when sharing the same cultural values.

The ethnic resources support the ethnic entrepreneurs to compete and survive in the host country market (Mars & Wards, 1984; Waldinger et al., 1990). Innovation development process is the generation of new ideas (Hyland, Marceau & Sloan, 2006). The ideas come from internal and external sources inside and outside the firms (Bommer & Jalajas, 2004).

Ideas can also from employees in the firm (Zhou, Hong & Liu, 2013). The employees are the people who understand well about the business, operation and routine works, they can see innovative ideas from their work every day. In addition, they contribute to the improvement and development of the firm due to their human capital such as expertise and knowledge.

However, it can be considered that due to the limitation of human capital, some employees or entrepreneurs cannot perceive opportunities or new potential ideas and projects.

On the other hand, some studies argued that relying too much on ethnic resources may bring negative influences (Ram, 1994; Bates, 1994). The values of co-ethnic and family networks

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rely on the depth and diversity of members’ experience, knowledge, and contacts (Basu &

Altinay, 2003). Masurel et al. (2002) found out that informal network is a competitive advantage for ethnic entrepreneurs in incubation phase but it may be an obstacle in development. To achieve success, an entrepreneur should implement break-out strategies to access mature market sector with diversification strategies. However, with a high level of work experience and human capital, the entrepreneurship is unlike to rely on ethnic resources in development; they will not hire co-ethnics for long-term growth (Bagwell, 2015). Ethnic resources may have drawbacks. Sharing common values can hinder risk-taking and innovativeness in a family business. If the knowledge and experience from the ethnic resource are not valuable, it can affect negatively to the entrepreneurship (Basu, 2008). The distant relationship can provide valuable and diverse information to create new ideas (Granovetter, 1995). The co-ethnic relationship has the substantial role in the starting phase but it becomes less significant for business development (Basu & Goswami, 1999). Furthermore, it depends on the deep and diverse experience of members to evaluate the value of ethnic networks.

(Basu & Altinay, 2003).

2.3. Human Capital

Education influences positively to knowledge and ability to identify opportunities, strategies (Basu, 2008). High education offers entrepreneurs skills and knowledge to manage a business effectively, choose a suitable market, prepare for business growth (Ganotakis, 2012; Goedhuys

& Sleuwaegen, 2000). Entrepreneurs who have experience in the same sector which they did before will have the knowledge to identify suitable strategies (Ganotakis, 2012). Experience in a field will contribute to the understanding of strategies which let them perform effectively (West & Noel, 2009). Education in a similar sector is an important factor for entrepreneurs to understand an appropriate market and perform well (Ganotakis, 2012). Previous researchers show that human capital is important to discover and create entrepreneurial opportunity (Alvarez & Barney, 2007; Marvel, 2013). Human capital helps to exploit opportunities (Bruns et al, 2008; Dimov, 2010). Human capital also supports to accumulate new knowledge and make advantages for new companies (Bradley et al., 2012; Corbett et al., 2007).

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The person who gets a high formal education can improve capabilities and skills in management and leadership to become an entrepreneur (Le, 1999). Nelson and Phelps (1966) supposed that education level facilitates individuals to approach innovation such as understanding, evaluating, aware of promising ideas. Davidsson and Honig (2003) showed that increasing human capital is a way to perceive innovation to improve performance.

Bandura (1997) indicated that past experience helps enhance capability. Maritz and Brown (2013) claimed that entrepreneur can gain success in business by human capital with education and experience. Lee, Hallak and Sardeshmukh (2016) indicated human capital including ownership experience. Entrepreneurship education impacts on performance through innovation and entrepreneurial self-efficacy. Knowledge, experience, capability are developed through formal and non-formal education, business performance, practice. They help form the human capital of an entrepreneur. Human capital impacts on productivity and efficiency which eventually leads to behaviors and outcomes (Davidsson & Honig, 2003).

Work experience and education in host country enhance human capital and create access to social networks. The educated and experienced entrepreneurs can increase communication and negotiation skills beyond their own ethnic community (Basu, 2008). Other theory supposed that the survival of ethnic entrepreneurs relies on ethnic resources and opportunities (Mars &

Ward, 1984; Waldinger et al., 1990). Some theories of entrepreneurship found prior knowledge and experience (Shane, 2000; Shane & Venkatraman, 2000) in exploring new entrepreneurial opportunities. Prior knowledge and experience of different countries and cultures may have considerable significances on the business entry of ethnic entrepreneurs (Basu, 2008). Empirical previous research provided positive findings of the influence of education on entrepreneurship to business development (Basu & Goswami, 1999; Basu &

Altinay, 2002; Bates, 1994; Saxenian, 2000). Education and background of migrants facilitate entrepreneurial entry and survival (Light, 1984). The survival of ethnic entrepreneurship depends on the strategies that they apply (Basu, 2008). People with higher levels of human capital will likely to perceive opportunities to start and implement business (Shane &

Venkataraman, 2000). Ethnic entrepreneurs with education and experience in host country have many advantages. They have time to get acquainted with the culture and environment in the host countries, education enables them to recognize the opportunity and know how to collect and utilize their knowledge to have better performance. Human capital is an important

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factor, when it is improved and enhanced by education and experience, it will be the strengths of entrepreneurs, when they have the ability to perceive opportunities and innovation. Their communication and negotiation skills also are affected significantly by their human capital.

Human capital such as skills, education, and experience is one of the main factors such as market capital and social capital which foster solidarity, trust and mutual obligation in order to facilitate ethnic entrepreneurship (Valdez, 2008). Kinship ties strengthen social capital regarding solidarity, trust, and reciprocal obligations. Social capital relates to networks of kinship, friendship and communities ties which are important to set up and develop business among ethnic entrepreneurs. Human and market capital are essential for economic success (Ilhan-Nas et al., 2011). Human capital is a key input in the service innovation process (Ark et al, 2003). Human capital is important to discover and create entrepreneurial opportunity (Alvarez & Barney, 2007; Marvel, 2013).

Learning from past experience is a way to avoid mistakes, develop skills, predict situations and plan to apply suitable strategies (Farmer, Yao & Kung-Mcintyre, 2011). Education contributes to the process of innovation because, with the technological era and economy development, people with education will have the ability to access new information and identify promising ideas. Through the past experience, the entrepreneur could create innovation. Knowledge of education and new knowledge from experience could encourage creating insights and anticipating opportunities (Winne & Sels, 2010).

Winne and Selc (2010) suppose that human resources and human resource management plays an important role as drives of innovation. Especially, small businesses have transparent nature and small distance between an individual and performance of the firms. Innovation is related to human capital because formal education and experience generate unique skills and knowledge for the organizations, highly educated people perceive new ideas better, prior experience affects to opportunity recognition. To sum up, the unique set of knowledge and skills, receptivity to new ideas and opportunity recognition are essential facilitators for innovation (Hambrick & Mason, 1984). Innovation influences firm’s ability to create, manage and maintain knowledge (Smith, Collins & Clark, 2005). They assume that human resource and practices, which affect the value and behavior of human resources, have an important role in an innovation process. Marvel et al. (2016) indicated that human capital aspect affects to the

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transition in the entrepreneurial process from one stage to another stage. Moreover, a particular type of human capital may be crucial to achieving a milestone. The influences of human capital in an entrepreneurial process are of unequal value in different phases or milestones. Employee mobility is considered as a positive element that enables the utility of individuals, enhances new venture performance and drives knowledge flows and innovation (Campbell et al, 2017).

Many small firms depend on mainly managers’ knowledge to develop innovation (Burton, 2001). They do not utilize much knowledge from employees, the managers usually suppose that their own knowledge is enough and not often involve employees in the process of innovation development (Klass et al, 2010). The small structure of business lets entrepreneurs keep powers in hand and make decisions independently (Minzberg, 1979). Furthermore, human capital programs are not operated widely in small firms (Cook, 1999). Andries and Czarnitzki (2014) found out that the ideas from both managers and employees have a positive influence on the innovation performance of the companies. Small firms should engage employees on innovation process, not only their actions and ideas. Moreover, their contributions depend on their functional section of expertise and knowledge and on desired innovation and on innovation process or performance. When the firms would like to involve employees in the innovation process, it had better take the functional difference and the differences between product and process innovation into consideration (Andries & Czarnitzki, 2014).

The abilities, skills, knowledge, an intelligence of employees from education and job experience are considered to be an important part of the firm’s human capital (Grant, 1997).

Organizational employees’ everyday routine practices enrich the competence of employees (Orlikowksi, 2002). Employees are considered to recognize opportunities (Mintzberf & Water, 1985) and manage performance (Barlett & Ghoshal, 1993). Non-managerial employees’

human capital affect significantly to the knowledge creating capability of the firms (Smith et al., 2005). In a small business like in entrepreneurs’ business, due to the small structures, the managers are easy to control and make decisions on their own. It is argued that the employees are the people who work directly with the process and customers should be considered to

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involve in innovation process and performance when they can be the best contributors to the innovation.

2.4. Communication

Communication helps the human capital to perceive, understand and perform to leaders’

orders and tasks. By communication, leaders transmit change from environment to employees to manage continuous change needs of the customers and encourage employees to perform well. Leadership communication is an effective way to motivate human capital (Florea &

Gilmeanu, 2016). Communication is the base of interactions between leaders and followers. It is a method to transmit the content between them. The applications of innovations are new and barely known. Leaders have to face challenges regarding innovation communication.

Communicating innovative spirit enhances the culture and empowers employees.

Communicating new ideas, processes, and technologies help shape the meaning of innovations (Zerfass & Huck, 2007). Communication promoters are the people who have the ability to transmit innovation in an easily understandable way for others to perceive the aims and opportunities with new achievements. Communication promotes know how to persuade and involve people. They are images and examples to show possibilities (Huck, 2004).

Communication plays a role in supporting innovation management as an important process in modern society. Leadership communication has multi-dimensional effects on innovation process, which is supported by communication management (Zerfass & Huck, 2007).

Communication is proved to be an integral part of an innovation process. It facilitates each phase from the creation of ideas to the market access. It strengthens the relationship among employees, partners, customers, competitors and other related stakeholders (Zerfass, Sandhu

& Huck, 2004). Organizational communication is considered as an important factor in the process of combining communication and innovation to create expected outcomes (Cajazeira

& Cardoso, 2009). Innovation can be aware, generated and maintained by relationship inside company and relationship of the company with external objects (Costa, 2011).

Communication allows members to gain a collective mind (Weick & Robert, 1993) that extend individual mind. The communication about tasks, informal and freestyle in

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entrepreneurial organizations or team enables to come up with important decisions (Bennis &

Bierdman, 1998; Haskins et al. 1998). Active, dynamic communication plays an important role in small business’s capability to facilitate innovation and they affect the commitment of members to organizations (Yan & Sorenson, 2003).

Every-day supervisor-subordinate exchange enhances significantly to the company’s entrepreneurship intensity. The direct, extensive, open form of communication enables entrepreneurship activity. Open team communication is proved to have a significant correlation. Diverse and frequent routine communication among colleagues supports considerately to entrepreneurship intensity. When people feel free to initiate communication with whomever they need to exchange information and motivate each other, they show entrepreneurship behavior frequently (Zur & Walega, 2015).

It is important to keep the employees’ commitment to the innovation process to enable everyone to have more responsibility without being frustrated (Dougherty, 1996). Innovation process needs a deeper commitment then routine work from leaders and their followers. The followers should be given chance to be self-responsible (Adler, 1993; Westley, 1990).

Leadership should facilitate employees to bring their scope and input to the innovation and create conditions for them to have their own ideas and decisions (Zerfass & Huck, 2007).

Communication set up a foundation to create strong building relied on information, education, learning, teamwork, training, respect, confidence, motivation, and satisfaction. The employees have to communicate in an internal environment with leaders, co-workers, and other internal stakeholders. The vision needs communication to share and influence people. They must understand the mission, vision, objectives, policies, rules, and standards of the company and then they will act and respond to an external environment (Florea & Gilmeanu, 2016). They have to create their own vision of innovations and strategies to get people participate, follow and support new ideas (Zerfass & Huck, 2007).

To encourage communication, a company has many ways such as creating supportive environment, establish efficient network communication, enhance trust in leaders and management, develop and choose appropriate ways of communication, encourage to participate, active listening… (Florea & Gilmeanu, 2016). Communication is the main factor

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to be great leaders. Leaders should have the ability to motive his team to work and maintain a healthy environment. Leaders should motivate employees to gain positive changes and influence on their behavior. Human capital is a valuable resource, which helps the company to have competitive advantage and performance. The leadership should know how and have a strategy to keep the talented employees for the long time (Florea & Gilmeanu, 2016).

One more thing that encourages innovation is empowerment. When the managers trust employees and give them autonomy to let them deal with working situations and decisions.

The managers share responsibilities with their employees, which enables for personal initiatives (Ottenbacher & Gnoth, 2005). Bowen and Lawler (1992) indicated that when service delivery includes relationship such as a relationship with customers to get ideas to improve the service and ideas for new services. Employees should have the flexibility to manage to work with customers effectively. The level of decentralization and involvement influences to the productivity and innovation performance of the companies when employees have the ability to take part in decision making, share responsibilities (Kalleberg & Moody, 1994; Michie & Sheehan-Quinn, 2001; Hayton, 2003).

Small business can face challenges and obstacles in the innovation process because of the limited resources and expertise (Hadjimanolis, 1999). Small businesses have less hierarchy and flatter structure, which enable closer relationships between the owners and employees.

These relationships facilitate open communication and exchanging of ideas which enhancing innovation output (Bommer & Jalajas, 2004). Small business different with a big company with high hierarchy and controls, the small business can facilitate communication and decision making which enables the ability to perceive new things and cooperation of activities and enhance the commitment of teams (Benito-Hernandez et al., 2012; Silveira, 2013; Tidd et al., 2008). Yan and Yan (2016) indicated that communication of members in small business influences positively to collective entrepreneurship and contributes to individual entrepreneurs’ knowledge of markets, products, and technologies. Communication in small business affects positively on innovation through positive impact on knowledge of products, markets, technologies of entrepreneurs. Yan and Yan (2016) supposed that communication of member in small business would collect wisdom and transfer it into the knowledge of the entrepreneur. Active communication will give advantages to the entrepreneurs with

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knowledge of products, markets, technologies and eventually support entrepreneurs to make innovation performance. When the entrepreneurs’ businesses are quite small and less hierarchical layers, that condition will create an encouraging environment for the staff and managers to build a close interaction. Therefore, it can be facilitated to strengthen the innovative culture. Ethnic entrepreneurship also feels more comfortable to strengthen their close relationship when they share same culture and behaviors. For ethnic entrepreneurship, with ethnic resources, they can easily have a sense of solidity and trust among members. They can come up with new things and innovation when they know how to take advantage of their human capital from their entrepreneurs and employees, from open and close-knit communication and exchanging ideas in less hierarchical layers, they can result in innovation results.

2.5. Theoretical framework

Innovation and entrepreneurs have the supporting relationship (Veeraraghavan, 2009). When an idea is innovated and entrepreneur is the person to put it into practice. (Veeraraghanvan, 2009). Innovation is a factor, which helps enterprises to adapt to changes in social, cultural and economic aspects (Castaño, Méndez & Galindo, 2015). Entrepreneurship and innovation have a two-side relationship. The entrepreneur is the person who generates and brings new things, and new ideas into practice and application when innovation supports entrepreneurs to create development, improvement, adaptation and competitive advantages. Entrepreneurship with its distinct features such as confidence, risk-taking, and independence provides a convenient environment to nurture and facilitate innovation.

Ethnic entrepreneurs can be reputational intermediaries that enable partnerships to give access to international markets or to locally embedded communities (Kapur & McHale, 2005;

Saxenian & Sabel, 2008; Honig et al, 2010). Ethnic entrepreneurship can get benefits from social bonds with the cultural network, which enables them to be flexible to attract human resources and capital (Wilson & Portes, 1980). Ethnic entrepreneurs are like a bridge to connect international markets and ethnic communities. With the diverse culture and migrant status, ethnic entrepreneurship can generate good business ideas and solutions and strengthen

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the networking among communities. Moreover, there is a good positive relationship between innovation activity and the ethnic entrepreneurship if ethnic business can exploit the diversity to run business in a new way. Ethnic entrepreneurs with education and experience in host country have many advantages. They have time to get acquainted with the culture and environment in the host countries, education enables them to recognize the opportunity and know how to collect and utilize their knowledge to have good strategies and better performance. Human capital is an important factor, when it is improved and enhanced by education and experience, it will be the strengths of entrepreneurs, when they have the ability to perceive opportunities and innovation. Their communication and negotiation skills also are affected significantly by their human capital.

In an ethnic community, ethnic resources provide reliable, trustworthy and inexpensive. They are intangible resources with information and advice (Mars & Ward, 1984; Waldinger et al., 1990). Sharing common values can hinder risk-taking and innovativeness in a family business (Basu, 2008). Ethnic entrepreneurship has the benefits of their culture and origin. They have a social network to get human resources and finance and to have co-ethnic customers. Ethnic resources with a lot of strengths have significant impacts on ethnic business. They have a strong feeling of solidarity and trust when sharing the same cultural values. But hiring ethnic resources also has some drawbacks and limitations. In a small business like in entrepreneurs’

business, due to the small structures, the managers are easy to control and make decisions on their own. It is argued that the employees are the people who work directly with the process and customers should be considered to involve in innovation process and performance when they can be the best contributors to the innovation. The ethnic resources in ethnic entrepreneurship are the people who understand well about the business, operation and routine works, they can see innovative ideas from their work. They contribute to the improvement and development of the firm due to their human capital such as expertise and knowledge.

However, it depends on the level of their human capital.

Human capital is important to discover and create entrepreneurial opportunity (Alvarez &

Barney, 2007; Marvel, 2013). Communication is proved to be an integral part of an innovation process. It strengthens the relationship among employees, and other related stakeholders (Zerfass, Sandhu & Huck, 2004). Communication helps the human capital to perceive,

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understand and perform to leaders’ orders and tasks. Leadership communication is an effective way to motivate human capital (Florea & Gilmeanu, 2016). Communication plays an important role to facilitate human capital to achieve better results and lead to new discoveries.

When the entrepreneurs’ businesses are quite small and less hierarchical layers, that condition will create an encouraging environment for the staff and managers to build a close interaction.

They can come up with new things and innovation when they know how to take advantage of their human capital from their entrepreneurs and employees, from open and close-knit communication and exchanging ideas in less hierarchical layers, they can result in innovation results. Communication can facilitate innovation in many ways such as collective thinking, free forms of exchanging information and knowledge, autonomy and empowers, sharing values and visions or building an encouraging environment.

Figure 1: Empirical study framework.

Work experience and education in host country enhance human capital and create access to social networks (Basu, 2008). Human capital is important to discover and create entrepreneurial opportunity (Alvarez & Barney, 2007; Marvel, 2013). Education and background of migrants facilitate entrepreneurial entry and survival (Light, 1984). Leadership communication is an effective way to motivate human capital (Florea & Gilmeanu, 2016).

Human capital is the crucial sources to implement and initiate new things and contribute significantly to the development of ethnic entrepreneurship. Communication plays an important role to facilitate human capital to achieve better results and lead to new discoveries.

Both human capital and communication play roles as facilitators to innovation in ethnic entrepreneurship.

Innovation in ethnic entrepreneurship

Human Capital Communication

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3. RESEARCH METHOD

3.1. Methodological approach for the research question

This thesis is aimed to answer to research question “How human capital and communication facilitate innovation in Vietnamese ethnic entrepreneurship?”A qualitative phenomenography research approach was chosen due to its appropriateness. Phenomenographic interviews are typically semi-structured, including questions designed for interviewees in order to direct the target phenomenon and topic. Open-ended questions in semi-structured interviews enable participants to be flexible to share their understandings and experiences about the phenomenon openly. On the other hand, the structure helps to keep the interview on track (Kettunen &

Tynjälä, 2018).

Phenomenographic data analysis is supposed to explore the various that candidates experience and understand a particular concept or phenomenon. The chosen quotations are extracted from the transcripts combining with analysis, from which the categories are obtained (Marton, 1986).

Phenomenographic researchers can analyze date individually by reading the transcripts, developing a set of categories. The transcripts are reread and the categories are rearranged until the researchers eventually form the final categories of description for a particular phenomenon and concept (Bowden & Green, 2005). Through the analysis, various meanings will appear into categories of description (Marton, 1981).

3.2. Guided and Semi-Structured Interviews

I am going to use guided and semi-structured interview because it includes both “what” and

“how” questions. I will prepare questions about the topics, themes related to my study but I will open the interview to widen the content. Because besides of answering all the questions related to my study and I also can know more about other aspects of interviewees in in-depth

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responses. The questions will concern not only about the information but also about the perceptions, understanding, opinions, and emotions (Eriksson & Kovalainen, 2016).

The semi-structured interview is a method of data collection and the quality of interview guide will impact on the findings and results of the research. The strength of the semi-structured interview is an interaction between the interviewer and interviewee. Furthermore, the interviewer can extend their follow-up questions according to the answers of the interviewees (Harbon et al. 2004, Rubin & Rubin 2005, Polit & Beck 2010) and let the interviewees have more freedom to expose their verbal expressions (Robert Wood Johnson Foundation, 2008).

I decide to use semi-structured interview because it is based on the literature review related to the topic. I will form the research questions and interview questions in order to support for the topic that I pursue. With guided questions in interviews, the interviewees can provide answers to clarify for the theoretical backgrounds. So it will help to avoid the case that the interviewees do not know what to say to support the study and prevent them start to say too far from the topic with irrelevant information. However, apart from guided questions, the semi-structured interview also facilitates the interviewees to express their opinions, perceptions and have an extension for their answers, which may open new information to support the study. Instead of only answering the fixed questions, the researchers will have the change to discover new things from the interviewees. The semi-structured interview will be suitable for my thesis when I would like to interview Vietnamese entrepreneurs to support for my theory and to reveal more interesting information.

3.3. Data Collection

Using qualitative content analysis, the data are sorted by categories to analyze. A qualitative content analysis will help to clarify the data in detail and depth. The in-depth data provides more information, support analysis.

All the participants were asked the same questions. However, according to the situations and how the conversation went on. I rearranged the order and modified the way to ask as well as added more some related questions. The purpose is still focusing on the main themes of the

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topic and gaining more knowledge about the interviewees and the relevant information. I met the participants face to face so that I could easily talk and discuss with them friendly and extend the conversation. The interviews were recorded and held in Vietnamese so I could understand exactly what the interviewees meant. Then I translated the recorded data into English. The interview data were transcribed and analyzed in English.

I formed the interview questions based on the theoretical review. The semi-structured interview theme enables to describe the performance of each entrepreneur and their staff in their business. The interviews were modified depending on the participants and situations. The concentration of the interviews was on human capital, communication. Those factors are important to clarify how innovation in ethnic entrepreneurship is facilitated. It is important when the entrepreneurs perceive the crucial values of human capital from themselves entrepreneurs and from their employees and the functions of communication to boost the human capital to acquire innovation in performance.

At first, I sent the request to 14 Vietnamese entrepreneurs to ask them to participate in the interviews. I contacted the participants by sending to them messages on Facebook. There were 3 people responding to the messages. Then I shortly presented my background as a master student and the topic of my thesis. After receiving the acceptance of the entrepreneurs, I sent to them in advance the common interview questions and those questions were general and not too detailed to reveal the purpose of the study obviously. Three conversations held by meeting in person in Helsinki. I met the participant 1 (entrepreneur A) in a coffee shop, the participant 2 (entrepreneur B) in her restaurant when it was closed and the participant 3 (entrepreneur C) in her restaurant when it was opened. Three interviewees are hereinafter to as “entrepreneur A”, “entrepreneur B” and “entrepreneur C”.

Table 1: Data collection

Method Date of interview Duration Case A Face to face 18/07/2017 65-70 minutes Case B Face to face 22/07/2017 55-60 minutes

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Case C Face to face 17/08/2017 45-50 minutes

I asked for permission when recording the interview and tell the narrator needed information about the project, how and where the data will be used and who can read it. The narrator has the right to withdraw and refuse to answer the questions (Wengraf, 2001). About particular identifying details (name, place, age, occupation...) of narrators can be changed so they cannot be recognized. I asked the interviewees about which information I can use to publish and which information I cannot publish in the interviews clearly when the interviews ended.

3.4. Analysis of the data

I used the deductive content analysis to analyze data and the coding categories are based on the theoretical framework. I read all the responses to each question. After that, I applied coding procedure, highlighted important words or phrases, and took notes to notice important things in responses. When I understood the transcript comprehensively, I can start sorting.

Keeping categories broad, data is sorted based on the similar characteristics (Campbell, Quincey, Osserman & Pedersen, 2013).

Table 2: Categories and Codes.

Main categories Code themes

Human capital Education, experience, opportunity recognitions, strategy, learning, employees

Communication

Collective thinking, exchange information, vision and core values, autonomy, empower,

environment

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4. ANALYSIS

In this chapter, I will present the results of the empirical study. First, I will describe how education, experiences, strategies, and employees were analyzed in the study of human capital.

Then I will describe how collective thinking, exchange information, autonomy – empowerment, vision, core values, and environment were analyzed in the study of communication. The research is studied from the perspective of managers’ views. My analysis is based on the interviews with direct quotations from the interviewees’ answers. The analysis combines the interpretations and quotations to have reasonable explanations. The analysis relied on various expressions, interactions, and interviews, not only the quotations. The quotations are written in italics.

For Vietnamese ethnic entrepreneurs, the concept of innovation is too far theoretical and hard for them to perceive it clearly. The knowledge and experience of the entrepreneurs are from reality and they do not have a concept of innovation in their business even though they operate to facilitate innovation in their organization. In my interview and my analysis, even though innovation is not mentioned many times by the interviewees, actually innovation still exists through the new things that those entrepreneurs implement in their business. According to the theories about innovation in the key concepts, I used them to consult for this study. Innovation in Vietnamese ethnic entrepreneurship can exist in many forms. It can be an idea, concept, process or object that is perceived and implemented as new to Vietnamese entrepreneurs.

Innovation can come from existing knowledge of Vietnamese ethnic resources that has not been used before. It can be new products, new ideas, new concepts, new service, new ways of solving problems, new techniques or new management ways. The important thing in this study is that it focuses on the way that facilitates Vietnamese entrepreneurs to come up with the new things which are not necessarily totally new, however, new to their organizations. Innovation may not be mentioned through the interviews or through interviewees’ responses. Innovation is perceived as new ideas, new concepts, new strategies, new changes, or new ways of working of Vietnamese entrepreneurs that are enabled to happen by human capital and communication and are analyzed in this study.

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4.1. Human Capital

Education and experiences

Three cases of the study, three entrepreneurs all possess high education at the bachelor degree.

They can evaluate the opportunity and the possibility of implementing potential ideas to practice. They choose appropriate strategies and market to launch their business. We can see they all analyze the Finnish market, what their advantages and challenges, why investing in Finnish market is potential, how they are courage to bring their ideas into business and how they manage to perform well in the business. Depending on their perception and analysis, they choose different strategies to launch their business and implement the performances which they evaluated to be appropriate to them most.

Entrepreneur A: “I used to study International Hospitality in Luxemburg, I took the exchange study Double Degree in Savonia in Tourism Management. With many experiences with different positions at different organizations and countries, I used to be a receptionist in a spa in Vietnam, an administration assistant in non-profitable organization ADRA. I took an internship as a Night Auditor in Hotel Brussel and another internship in Hotel Art Barcelona in serving parties and finance department. When studying in Savonia, I was one of the main organizers hosting an event Asti about food, culture, fashion”.

Entrepreneur B: “I am studying Marketing in Hanken as a second-year student. My bachelor Degree was Importing-Exporting Major in Foreign Trade University. My working experience is Marketing and Retail field in Fast Moving Consumer Goods. I also worked as a waitress in Chinese restaurant and cleaner in Hotel in Finland.”

Entrepreneur C: “I am studying BIT (Business Information Technology) at Laurea University of Applied Sciences. I have the experience in the kitchen at a Chinese restaurant. From April and September in 2016, I sold spring rolls, Banh Mi, pickles, fish sauce in a mobile trolley to get to know about the market.”

The education and work experience support to enhance human capital and understand about the environment, customers, operation. Eventually, they also contribute to improving

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communication and negotiation. Education and related background of entrepreneurs to hospitality sector support them to perform well in the business. To be specific, most of the entrepreneurs in interviews are young and new in this market. They are students with academic knowledge about business in general and some of the candidates who have accumulated experiences from working life.

In the case A, the person studies and has experience in hospitality field, it really enables her to approach strategies, customers and has outstanding performance in competition with others.

Entrepreneur A, she has more related education and experience, we can see how she identifies the possibilities obviously, chooses the potential market and prepares well for the business growths. From the knowledge that she accumulated from the study and working practice, she somehow knew to evaluate promising ideas, set up suitable strategies and performance.

On the other hand, with less favorable experience, entrepreneurs B and C still have the capability to analyze the market, choose strategies and manage operation well through learning from the past, from mistakes, from the real practice so that they can improve skills and build their competences to predict situation and establish future strategies.

Work experience in Finland can give entrepreneurs knowledge about the environment and business market. All entrepreneurs have worked in Finland, they all get to know about Finnish, lifestyle, behaviors that affect their business and strategies to attract and maintain the customers’ loyalty. Knowing that Finland is open for cultural diversity and people are curious and interest about Asian food in general and Vietnamese food in particular, all entrepreneurs in three cases are quick to catch up with the trend and start up their business. With experience from work in case A and experience from current work in case B and C, we can see it obvious that they gradually know how to socialize with customers and strengthen their networks.

Opportunity recognitions and business entry

Recognizing the potential opportunity in Kuopio where there are not so many ethnic restaurants and coffee shops and entrepreneur A can bring a new wind to the small city. Using Vietnamese ethnicity as her competitive advantage and attract customers to the new things.

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Cultural diversity is more and more aware, hospitality takes advantage of the theme of authenticity to attract customer with authentic identity and exotic experience.

A:”In the previous time, Finnish did not pay attention too much to the quality of the coffee.

When starting a Vietnamese coffee shop, I identified my strengths and weaknesses. I think that I should bring different unique and outstanding things that none of the coffee shop in Kuopio has had.”

For B and C, it is the same for her, she saw the opportunity and there are not so many Vietnamese food restaurants in Helsinki, it is a potential sector for her to open the business.

Besides that, there are also challenges and risks when Vietnamese food is not known by many Finnish people.

B: “In far countries, there are not so many Vietnamese people. It is an opportunity for us to open a business. Recognizing opportunity, we started to open a sushi restaurant together and when we were still studying. My restaurant gets customers’ interest and attention for new ideas to sell sushi.”

C: “In Finland, there are not so many Vietnamese restaurants. We found it a potential to open Vietnamese restaurant. But we still face challenges when not so many people know about Vietnamese food.”

Strategies

The strategies that Vietnamese entrepreneurship applied resulted from the analysis of their strengths and weaknesses. It is a reasonable and new strategy when they did not bring original products to market but bring Vietnamese features as an outstanding theme to combine with local features to make the customers feel interested in new things but still feel familiar. Their strategies have not been used previously and it can be considered as innovation. Most of the Vietnamese entrepreneurs usually do not use 100% Vietnamese authenticity to run business in food cuisine, preparation, decoration or serving way because they feel that customers may not accept 100% strange authenticity and it is hard for Finnish to frequently visit the restaurant if the favor and atmosphere are unfamiliar to them. So most of the Vietnamese entrepreneurs

Innovation in Vietnamese ethnic entrepreneurship