6.1 Estimation Method
We applied the treatment effect on the treated (TOT) estimation in this study. The TOT estimates show effects of the Kaizen training program on outcomes of the enterprises randomly selected and participated in the program. These outcomes include willingness-to-pay, business practice score, and business performance. We measure performance of enterprises by several indicators including sales revenue, value added, and gross profit. Value added is calculated as by subtracting material cost and other intermediate costs from sales revenue. Gross profit is equal to value added minus labor cost. As we expect that application of Kaizen practices will help improve productivity of the enterprises, we also measure their performance by calculating labor productivity, which is value added divided by the total number of working months of permanent workers. The calculation of labor productivity requires taking the owner and his or her spouse as permanent workers because they always participate in daily management and production of their enterprises. This inclusion also helps to avoid a problem of some enterprises that do not employ any workers. During the Kaizen training program, we emphasized the reduction of inventory as an important practice to reduce cost. We, thus, take the reduction in the number of products in inventory as an indicator to measure performance of enterprises. Additionally, we analyze the current value of products in inventory to see how enterprises improve management of inventory as they often have multiple kinds of products.
The estimate of the TOT can be obtained by the following regression:
$$ {y}_{it}={\alpha}_0+{\alpha}_1{P}_{it}+{\alpha}_2{S}_{it}+{\alpha}_3{X}_{it}+{u}_i+{\gamma}_t+{\varepsilon}_{it}, $$
(11.1)
where
yit is the outcomes of enterprise
i at time
t, which is before the
Kaizen training program or after the
Kaizen training program, containing performance of enterprises and quality
of management, which will be explained below;
Pit is the participated or treated status dummy that is equal to 1 if enterprise
i participated in the
Kaizen training program and 0 otherwise;
Sit is a dummy variable for business communication of the owners of enterprises, which takes the value of 1 if the owner of enterprise
i talked with the owner of any treated enterprise and 0 otherwise
2;
Xit is a vector of variables representing the characteristics of enterprise
i and of the owner of enterprise
i, of which many are time-invariant in our sample;
ui is the fixed effect of enterprise
i;
γt is the time effect common to all the enterprises; and
εit is an error term.
To estimate Eq. (
11.1), we applied the Fixed-effects or Random-effects model
.
3 Our main variable of interest is
Pit. We expect that
α1 will be statistically greater than zero, meaning that the
Kaizen training program has positive effects on various indicators of outcomes of the treated enterprises.
Our questionnaire included a set of detailed questions about different business practices including business records, quality improvement
, labor management, marketing activities, and
Kaizen-related practices in both prior and post-training surveys. We follow Bloom et al. (
2011), De Mel et al. (
2012), Suzuki et al. (
2014), and Higuchi et al. (
2015) to construct a
Kaizen practice score (KSC)
from a subset of these indicators, which are directly related to the main content of the
Kaizen training program. During each survey, we counted how many of the 20
Kaizen practices each sample enterprise has adopted by the time of the survey.
4 We used these indices to proxy for the quality of management of the enterprises.
In this study, to measure performance of enterprises apart from sales revenue, we used value added and labor productivity. Labor productivity is measured as value added divided by the total working months of all permanent workers including the owner and his or her spouse.
6.2 Effects on Willingness-to-Pay of the Owners
We collected
data about willingness-to-pay for the
Kaizen training program by asking all the owners of enterprises a question: “Are you willing to pay 3 million VND (about 132 USD using the official exchange rate as of 2017) to participate in the
Kaizen training program” after briefly explaining the main content of the
Kaizen training program. We asked the same question to the owners in both surveys before and after the
Kaizen training program. This is a hypothetical question and the owner does not actually have to pay to participate in the training program if his or her answer is yes. As a result, answers to this question can exaggerate demand for the training program. We follow Blumenschein et al. (
2008) and Suzuki et al. (
2014) to reduce this exaggeration by further asking the respondents whether they are sure about their answer. We ask them: “Are you definitely sure about your answer?” and their answer could be either “definitely sure” or “probably sure.” We took the “definitely sure” answer as the affirmative one.
Table
11.2 presents the estimation of the willingness-to-pay of the owners. We pooled the data for the regression in Column 1. Column 2 shows the intention-to-treat (ITT), which is the same as TOT, estimation with the Fixed-effects model
. The coefficients of the variable for participating in the
Kaizen training programs are all positive and significant at 1% significance level. The estimation results confirm our expectation that the
Kaizen training program increases the willingness-to-pay of the owners. The high appreciation of the training program is not only among the owners who have never attended any other training programs but also among those who have attended other training programs before. This finding is similar to results in other previous studies in other locations in Vietnam (e.g., Suzuki et al.
2014). It, thus, confirms the unawareness of many entrepreneurs, especially of small- and medium-sized enterprises, in developing countries
like Vietnam about importance of management training
. Also, the finding shows that our
Kaizen training program was successfully conducted. The program has raised awareness of the entrepreneurs about management knowledge and skills.
Table 11.2
Willingness-to-pay of the owners
Participated in the Kaizen training program dummy (yes = 1) | 0.485∗∗∗ (5.90) | 0.496∗∗∗ (6.03) |
Talked with treated enterprises about Kaizen dummy (yes = 1) | 0.029 (0.31) | 0.033 (0.35) |
Registration status dummy (company = 1) | 0.064 (1.07) | |
Years of operation | 0.003 (0.77) | |
Who established the enterprise dummy (parent = 1; own=)? | 0.009 (0.15) | |
Initial number of workers | 0013 (1.45) | |
Initial capital invested | 0.001 (0.30) | |
Age of owner (years) | −0.004 (1.29) | |
Gender of owner dummy (male = 1) | 0.070 (1.43) | |
Years of schooling of owner | −0.004 (0.61) | |
Birthplace of owner dummy (in village = 1) | −0.104 (1.46) | |
Prior job related to the industry dummy (Yes = 1) | −0.029 (0.66) | |
Parents having worked in the industry dummy (Yes = 1) | −0.035 (0.48) | |
No. of blood siblings in the industry | 0.002 (0.14) | |
No. of in-law siblings in the industry | 0.001 (0.06) | |
Having been trained about doing business in the industry dummy (yes = 1) | 0.001 (0.00) | |
Having been abroad for business-related purpose dummy (yes = 1) | −0.024 (0.27) | |
Year dummy (2017 = 1) | 0.001 (0.02) | −0.007 (0.11) |
Constant | 0.893 (0.02) | 13.663 (0.11) |
No. of observations | 159 | 159 |
No. of groups | | 80 |
R-squared/R-squared overall | 0.48 | |
6.3 Effects on Kaizen Practices of Enterprises
Tables
11.3 reports the TOT impacts of the
Kaizen training program on the
Kaizen practice score
(KSC). Columns 1 and 2 in Table
11.3 show that the training program significantly increased the
Kaizen practice score
by about 0.76–1.03 points (out of 20 points).
Table 11.3
Effects of the Kaizen training program on Kaizen practice score (KSC)
Participated in the Kaizen training program dummy (yes = 1) | 0.756∗ (1.87) | 1.025∗∗∗ (2.64) |
Talked with treated enterprises about Kaizen dummy (yes = 1) | 1.222∗∗ (2.38) | 0.911∗∗ (2.08) |
Registration status dummy (company = 1) | 3.595∗∗∗ (9.70) | |
Years of operation | 0.042∗∗ (2.50) | |
Who established the enterprise dummy (parent = 1; own=)? | −0.382 (1.07) | |
Initial number of workers | 0.086 (1.50) | |
Initial capital invested | −0.020∗ (1.69) | |
Age of owner (years) | −0.038∗∗ (2.31) | |
Gender of owner dummy (male = 1) | −0.344 (1.21) | |
Years of schooling of owner | −0.034 (0.72) | |
Birthplace of owner dummy (in village = 1) | −2.150∗∗∗ (3.12) | |
Prior job related to the industry dummy (yes = 1) | −0.315 (1.08) | |
Parents having worked in the industry dummy (yes = 1) | −0.931∗∗∗ (2.63) | |
No. of blood siblings in the industry | 0.212∗∗∗ (2.95) | |
No. of in-law siblings in the industry | −0.008 (0.09) | |
Having been trained about doing business in the industry dummy (yes = 1) | −0.292 (0.38) | |
Having been abroad for business-related purpose dummy (yes = 1) | 1.322∗∗∗ (2.44) | |
Year dummy (2017 = 1) | 0.503∗ (1.83) | 0.454 (1.58) |
Constant | −1007.085∗ (1.82) | −911.572 (1.57) |
No. of observations | 159 | 159 |
No. of groups | | 80 |
R-squared/R-squared overall | 0.65 | 0.08 |
Table
11.3 additionally presents the effects of exchanging information about
Kaizen practices among the owners. The dummy for discussing about
Kaizen practices with the treated enterprises has positive and statistically significant coefficients in Table
11.3. The magnitude of these coefficients is similar to that of the coefficients of the variable for participation of the owners in the
Kaizen training program. This result is not surprising as our training program focused mainly on
Kaizen management
practices
. This finding suggests that good management practices
not only were adopted by participation in the training program but could also be acquired through exchanging information within the network of the enterprise owners in the village. In other words, our training program has shown a spillover effect
among the non-treated enterprises. Spreading of good management practices
among family relatives, friends, and neighbors is an important mechanism to sustain impacts of training program in developing countries
, where a dense social network exists. Such rapid spreading of
Kaizen management
practices among enterprises in this village is nothing but a result of information spillovers, which has been considered one of the advantages of enterprises being located in industrial clusters since Marshall (
1920).
Column 1 in Table
11.3 provides more information about effects of the social network of the owners on their adoption of
Kaizen management
practices. The dummy variable for the enterprises having been inherited from parents has negative but not statistically significant in Column 1. The dummy variable for the owners whose parents used to work in the same industry has negative and highly statistically significant coefficients in Column 1. Similarly, the coefficient of the dummy variable for the owners having born in the village is negative and highly statistically significant in Column 1. These findings indicate that the owners who had been influenced more heavily by their parents and by their family relatives applied more traditional management style than their counterparts. In other words, having been born in the village and having been influenced by previous generations of owners including their parents is an important determinant of lower application of
Kaizen management practices
, which are more modern than traditional management
practices.
In contrast, in Column 1 in Table
11.3 the variable for the number of blood siblings of the owners, who are doing similar businesses in the industry, has positive and significant effect on the adoption of
Kaizen practices.
5 It is also noted that the age of the owner variable is negative and significant in all regressions. The production organization of old enterprises in the village, of which many have been established by parents of the current owners, was only based on experience of the previous generation. Modern business practices in general and
Kaizen management practices
in particular were largely unknown to the owners of this old generation. Recently, together with the open and development
of the economy of Vietnam, new management
practices have been imported from abroad. The current generation of owners has gradually had access to such new management practices
and adopted them. Therefore, these findings in Table
11.3 suggest that many of the owners in the village who inherited the businesses from their parents and are influenced by the experience and the old management style of their previous generation tend to be lacking information of and/or unaware of the value
of
Kaizen management
practices.
Column 1 in this table also shows that formal or registered enterprises adopted more Kaizen management practices than informal or unregistered enterprises. The former had 3.5 points in the Kaizen practice score (out of 20 points) higher than the latter. It is reasonable to observe this finding as formal or registered enterprises tend to have better capacity to adopt Kaizen management practices.
In addition, the dummy variable for the owners who have attended other business-related training programs before has negative but not statistically significant coefficient in Column 1 in Table
11.3. This finding indicates that previous training programs attended by the owners might have not focused on
Kaizen management
practices
. Therefore, our
Kaizen training program was new to them.
6
In order to qualitatively assess the impacts of the
Kaizen training program, during the post-training survey we asked the owners open-ended questions
to see how they perceived about benefits and challenges of adopting
Kaizen management
practices. As presented in Table
11.4, not all owners fully understood what
Kaizen management practices
can bring about and not all of them have actually implemented all elements of
Kaizen yet. Nevertheless, many of them have started to apply and realize the benefits of
Kaizen management
practices for their businesses in different aspects. Particularly many of them reported that the adoption of
Kaizen management
practices helped them arrange materials, parts, and final products more neatly and more organized. As a result, they themselves and their workers could easily identify production areas. Better arrangement reduced time to search for materials, spare parts, tools, and final products. Also, implementation of 5S
reduces waste and cost. Interestingly, 5 out of 40 owners shared their views about would-be benefits of
Kaizen management
practices by mentioning that they believe
Kaizen management
practices
will be useful for them in the future when their businesses are expanded. Such awareness of the owners is a good sign of sustaining the impacts of
Kaizen management
practices.
Table 11.4
Summary of benefits and challenges from Kaizen adoption reported in 2017
Benefits |
Arranged, neat, well organized | 10 |
Saving materials | 2 |
Easy to know the production areas; easy for searching things; saving time and cost to search for materials, parts, tools, and products | 14 |
Removal of unused things; more space for production | 3 |
More production; more profit | 2 |
Clean; saving time and cost to remove dust and waste from products | 5 |
More responsible workers | 1 |
Faster movement of materials and products | 2 |
Will be very useful in the future when production is expanded | 5 |
Challenges |
Workers do not follow instruction; workers think their experience is good enough; workers are not discipline, not responsible; frequent job quitting | 13 |
Have not found effective ways to encourage and force workers to apply Kaizen | 6 |
Characteristics of the production and need to serve orders quickly results in messy workshops and difficulty in applying Kaizen | 4 |
Not enough space; small scale so that Kaizen application is not efficient | 6 |
There is nobody to implement Kaizen | 1 |
Shortage of capital leads to underinvestment in tools, space | 2 |
Kaizen is useful only in some certain stages of production | 1 |
Many workers are not in fixed shifts | 1 |
Gradual improvement from Kaizen so that the effect cannot be realized immediately | 2 |
There is no difficulty | 3 |
Many difficulties in applying
Kaizen practices have also been reported by the owners. Among these, the notable difficulty is related to the work attitude and discipline of workers. As most of workers have just quit farming and some of them are even farming part-time, they are not well trained to be industrial workers. Also, enterprises in the village are competing with each other for labor so that workers’ turnover rate is high and workers’ commitment is low. Additionally, lack of knowledge to motivate and control workers is considered a major weakness of many owners in the village. As a result, many owners indicated during our survey that it is not easy to implement and sustain
Kaizen even though they are aware of benefits of
Kaizen management
practices after the training. This finding suggests that our future training (if any) to the enterprises should contain an element on labor management to be more effective. Other challenges including limited space for implementing
Kaizen management practices, lack of capital, and gradual impacts of
Kaizen management
adoption have also been mentioned by the owners during our survey.
7
We estimated the effects of participation in the
Kaizen training program on performance of the enterprises, which are measured by sales revenue, value added, and labor productivity
, for paired sample enterprises. Results of the estimation are presented in Table
11.5. According to this table, participation in the
Kaizen training program did not help the treated enterprises to have higher sales revenue or value added. It is not out of our expectation as we conducted the post-training survey right after providing the on-site training
. As such, it was too soon for the training program to have any effect on the operation size measured by sales revenue or value added of the enterprises. This finding is consistent with other previous studies (Suzuki et al.
2014; Higuchi et al.
2015).
8Table 11.5
Effects of the Kaizen training program on performance of paired sample enterprises
Participated in Kaizen training program dummy (yes = 1) | −0.166 (0.64) | −0.022 (0.21) | −0.041 (0.18) | 0.023 (0.26) | 0.087 (0.77) | 0.091∗ (1.81) | −1.105 (1.58) | −1.153∗∗∗ (2.58) |
Talked with treated enterprises about Kaizen dummy (yes = 1) | −0.152 (0.50) | −0.019 (0.18) | −0.155 (0.58) | 0.018 (0.17) | −0.074 (0.59) | 0.004 (0.07) | −1.575∗∗ (1.99) | −1.012∗ (1.86) |
Registration status dummy (company = 1) | 0.520∗∗ (2.39) | | 0.503∗∗ (2.44) | | 0.041 (0.39) | | 0.683 (1.00) | |
Years of operation | −0.021 (1.58) | | −0.015 (1.50) | | −0.012∗∗ (2.19) | | −0.058∗∗ (2.11) | |
Who established the enterprise dummy (parent = 1; own=)? | −0.200 (0.79) | | −0.165 (0.76) | | −0.068 (0.71) | | 0.266 (0.38) | |
Initial number of workers | 0.156∗∗∗ (5.11) | | 0.158∗∗∗ (5.49) | | 0.038∗∗∗ (2.91) | | 0.580∗∗∗ (3.78) | |
Initial capital invested | −0.04∗∗ (2.11) | | 0.001 (0.08) | | 0.01∗∗ (2.37) | | 0.100 (1.61) | |
Age of owner (years) | −0.026∗∗ (2.07) | | −0.024∗∗ (2.37) | | −0.009∗ (1.81) | | −0.077 (0.24) | |
Gender of owner dummy (male = 1) | 0.427∗ (1.91) | | 0.498∗∗ (2.50) | | 0.297∗∗∗ (2.95) | | 0.256 (0.53) | |
Years of schooling of owner | 0.046 (1.36) | | 0.052∗ (1.69) | | 0.031∗∗ (2.08) | | 0.175∗∗ (2.11) | |
Birthplace of owner dummy (in village = 1) | 0.866 (1.10) | | 0.690 (1.26) | | 0.337∗ (1.66) | | 0.268 (0.37) | |
Prior job related to the industry dummy (yes = 1) | −0.046 (0.23) | | −0.066 (0.37) | | 0.007 (0.08) | | −0.961∗ (1.77) | |
Parents having worked in the industry dummy (yes = 1) | 1.546∗∗∗ (4.53) | | 1.144∗∗∗ (3.97) | | 0.542∗∗∗ (3.66) | | 1.551∗∗ (2.39) | |
No. of blood siblings in the industry | 0.095∗∗ (2.21) | | 0.099∗∗ (2.48) | | 0.016 (0.89) | | −0.107 (0.53) | |
No. of in-law siblings in the industry | −0.021 (0.34) | | −0.011 (0.20) | | 0.006 (0.23) | | 0.459∗∗ (2.39) | |
Been trained for doing business in the industry dummy (yes = 1) | −0.026 (0.10) | | 0.014 (0.06) | | 0.090 (0.71) | | −3.741∗∗∗ (4.46) | |
Having been abroad for business-related purpose dummy (yes = 1) | −0.606∗∗∗ (3.00) | | −0.725∗∗∗ (3.49) | | −0.348∗∗∗ (3.22) | | −2.183∗∗ (2.08) | |
Year dummy (2017 = 1) | 0.400∗ (1.85) | 0.231∗∗ (2.13) | 0.327∗ (1.73) | 0.200∗∗∗ (2.62) | 0.085 (1.17) | 0.035 (1.24) | 0.653 (0.94) | 0.445 (1.12) |
Constant | −800.806∗ (1.84) | −458.242∗∗ (2.09) | −655.592∗ (1.72) | −395.002∗∗∗ (2.58) | −169.904 (1.15) | −68.345 (1.18) | −1318.734 (0.94) | −894.156 (1.11) |
No. of observations | 159 | 159 | 159 | 159 | 159 | 159 | 159 | 159 |
No. of groups | | 80 | | 80 | | 80 | | 80 |
R-squared/R-squared overall | 0.58 | 0.005 | 0.60 | 0.01 | 0.87 | 0.01 | 0.87 | 0.03 |
We could, however, detect that participation in the training program has positive effect on labor productivity
as the coefficient of the variable for participating in the training program is positive and statistically significant in Column 6. The treated enterprises might have utilized workers more efficiently to get higher labor productivity
after having participated in the training program. Another aspect we have focused on during the training program is to help the owners cut operation costs and reduce waste by lowering inventory. As the production in the village is still seasonal due to the nature of the products and weather in different locations in Vietnam, stocking products for sales during winter is often practiced by the enterprises. Given limited space for production in many enterprises, such inventory creates high costs during production. Findings in Table
11.5 suggest that the treated enterprises have adopted the idea of reducing the value of inventory after the training program more than the enterprises in the control group. Findings on the immediate significant effects of the
Kaizen training program on management
practices
and performance of the treated enterprises, even though still limited, confirm the effectiveness and success of our training program.