Implications for sustainable entrepreneurship in Vietnam service sector in the context of 4th industrial revolution

d 
Industry-Commerce sector1 show decreasing tendency, it can be seen that the 
number of suspended and dissolved firms in the service sector slightly increased.
The number of suspended and dissolved firms was largest in the industries of
wholesale and retail trade; repair of motor vehicles and motorcycles industry, 
which accounted for 57.1% (29,420 firms) of the total number of suspended and 
dissolved firms in the service sector. This is also the industry with the largest 
number of firms registered in recent years.
Table 2. The number of suspended and dissolved firms in 2016 - 2017 by 
sectors, compared to the number of newly registered firms
Unit: Firms 
Sectors
The number of suspended 
and dissolved firms
Compared to the 
number of newly 
registered firms
2016 2017 Change 2016 2017
Total 73,145 72,666 -0.65% 66.44% 57.28%
Agriculture, forestry and 
fishery
1,547 1,424 -7.95% 82.16% 72.84%
Industry-Commerce 21,232 19,684 -7.29% 69.13% 58.00%
Services 50,366 51,558 2.37% 64.99% 56.68%
Source: Agency for Business Registration - Ministry of Planning and 
Investment
It can be seen that although the service sector observed the most impressive 
growth in number of registered firms in 2017, only the service sector had 
increasing number of suspended and dissolved firms and it accounted for roughly 
71% of suspended and dissolved firms of all three sectors. In order to improve 
1 According to VCCI (2017): Agriculture, forestry and fishery sector includes the 1st industry in Table 1 
Industry-construction sector includes 4 industries, from the 2nd industry to the 5th industry in Table 1 
Service sector includes 12 industries, from the 6th industry to the 17th industry in Table 1 
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the survivability of Vietnamese service firms, orientation towards the direction of 
sustainable development (for existing firms) and sustainable entrepreneurship 
(for new/about-to-establish firms). 
3.2. Lost-making firms
According to VCCI (2015), the service sector witnesses the highest number 
of loss-making firms. The smaller scale of firms, the higher loss-making ones; 
this fact shows the vulnerability of Vietnamese firms because most enterprises in 
this sector are SMEs.
Table 3. Loss-making firms by industries from 2011-2015
Unit: %
Industries 2011 2012 2013 2014 2015
1 Agriculture, Forestry and Fishery 31.6 28.5 35.1 34.9 39.6
2 Mining and quarrying 35.5 33.3 36.8 36.8 39.2
3 Manufacturing 39.2 23.8 42.1 42.1 45.0
4
Production and supply of electricity, water and 
gas
30.3 28.7 28.3 31.5 34.8
5 Construction 35.0 15.8 38.4 38.6 43.8
6
Wholesale and retail trade; repair of motor 
vehicles and motorcycles
42.6 12.4 43.6 44.6 49.4
7 Transportation and storage 42.7 25.9 43.4 43.2 50.8
8 Accommodation and Food service activities 47.2 51.2 54.0 55.5 56.1
9 Information and communication 53.3 51.1 59.2 59.3 57.8
10 Financial, banking and insurance activities 36.4 22.0 38.5 42.5 50.2
11 Real estate activities 60.2 31.7 60.4 57.7 60.4
12 Professional, scientific and technical activities 50.6 34.8 50.7 50.5 54.8
13
Job and travel services; rental of machinery, 
equipment and other support services
53.3 27.3 55.2 55.8 57.2
14 Education and training 64.9 54.7 63.3 64.0 63.9
15 Human health and social work activities 48.1 26.1 50.9 53.8 55.5
16 Arts, entertainment and recreation 55.3 52.4 53.0 53.7 52.5
17 Other service activities 58.2 29.2 52.7 55.2 57.3
Source: Vietnam Business Annual Reports 
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Although the number of newly registered firms has been growing fast in the 
recent years, the issue of suspended and dissolved firms, especially in the service 
sector, is of great concern. While the concentration of newly established firms in 
the the service sector is a common trend in the world, the managerial weakness
and the limitation in access to external resources may lead to the exposure of
young businesses to potential internal and external threats.
4. Enterprises on the service sector and the 4th Industrial Revolution
Currently, the service sector contributes to national income and employment 
as well as becoming the center of policy-makers’ attention in both developed and 
developing countries. In OECD countries, the service sector account for about
80% of employment and 75% of GDP; in major emerging markets, it represents 
40% and 70% of employment and GDP, respectively (OECD, 2014). Also,
developing the service sector is the engine of growth for Asia (Noland et al., 
2012) and Vietnam is unexceptional. In Vietnam, the service sector is growing 
fast in both quantity and contribution to employment creation and GDP. The fast-
paced development of the service sector shows optimistic outlooks if the sector is 
well-regulated and directed.
In the context of the 4th Industrial Revolution, Vietnam with higher focus on 
technological advancement will experience better future of economy and society. 
One prominent characteristics of the 4th Industrial Revolution is the replacement 
of human force by machinery due to the need of automation to save labor costs 
and elevate the precision of production process. As a result, this replacement 
causes labor reallocation in transitional economies, from labor-intensive 
industries to the service sector. This trend is inevitable and occurs in all the 
nations which have been through this stage of development. This partly explains 
for the fact that the number of firms established in the service sector noticeably 
increased in the past years and so did the number of business fail in this sector. A
number of possible reasons can explain the failure of Vietnamese service firms,
both from the outside and inside of the business. First of all, regulations in 
Vietnam have not kept up with the development of science and technology to 
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capture the positive effects brought about by the 4th Industrial Revolution. New
emerging digital technologies, such as crypto currencies and online-based 
services, cannot be managed in a traditional manner but require additional
regulatory framework. If regulatory framework is incomplete and cannot catch 
up with the rapid development of the digital technology in particular and the 4th
Industrial Revolution in general, it will slow down the access of local firms to 
modern technologies and make them unable to compete with foreign firms, even 
in the Vietnam markets.
Moreover, many Vietnamese firms either cannot grasp the useful information 
for them or cannot make use of provided information to enrich their firms due to 
the information ambiguity and confusing administration procedures. Relating to
government’s encouragement on technological renovation, the government has 
established two funds to support firm’s access to advanced technology, which are 
National Foundation for Science and Technology Development (NAFOSTED) 
and National Technology Innovation Fund (NATIF). These funds intend to boost 
the technology capacity of Vietnamese firms through providing applicable and 
practical technological ideas with sufficient fund to be implemented. These funds 
are undoubtedly helpful, nonetheless the publicity level of information and strict
conditions of the funds hinder the borrowing intention of firms. 
From the business side, it can be easily seen that the number of people 
working in the service sector sharply increases in the past years. The tendency of 
labor concentration to the service sector is actually not newly happened in 
Vietnam. It is a necessary stage to transform Vietnam from a factor-driven 
economy to an efficiency-driven economy and it is also supported by the 
widespread of the 4th Industrial Revolution. Although the labor reallocation is 
essential, it also comes with negative consequences of business failures as shown 
in the data analysis. In fact, despite the practicality of the ideas, the prerequisite 
for success of current entrepreneurial activities lies on careful preparation and 
especially, innovation-and-technology-based development. The competitiveness 
of firms operating in the service sector very likely rests on customer satisfaction, 
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which is hugely influenced by technology and innovation factors during the 
ongoing 4th Industrial Revolution. 
To some extent, labor reallocation also affects regional population. The
development of service sector may indicate increasing flow of migrants from 
countryside to urban areas. This movement possibly causes shortage of personnel 
working in the primary sector (agriculture, forestry and fishery) and secondary 
sector (industry-construction), which in turn results in the decline in efficiency of 
these sectors. Therefore, reasonable allocation of resources to remain balanced
development of the three sectors is among the keys to achieve sustainable 
development. 
Unfortunately, the awareness of the business community about the Industrial 
Revolution 4.0 is limited. According to Bui (2017), a recent survey conducted 
with a sample of 2,000 firms of the Hanoi Association of Small and Medium 
Enterprises revealed that 79% of respondents did not prepare for the 4th Industrial 
Revolution; 55% of respondents said they were preparing; 19% of businesses had 
built plans (but not yet implemented) and only 12% of respondents were 
implementing adaption measures. For businesses which are not interested in the 
4th Industrial Revolution, the common reasons are (i) they did not feel the 4th
Industrial Revolution would affect their firms and their industries; (ii) they do not 
understand the nature of the 4th Industrial Revolution; and (iii) there is no need 
for concern about it. Furthermore, a significant proportion of Vietnamese 
businesses have not paid much attention to their image, reflecting through the 
fact that only 49% of firms have their own websites, reported by VECOM 
(2017). VCCI’s (2015) study on technology management also pointed out low 
awareness regarding technology development and application of Vietnamese 
firms: only 34% of firms surveyed had R&D department and only roughly 14% 
of firms was applying new technology from the leading developed countries. In 
an era when technology and innovation are gradually being seen as prominent 
development pillars of businesses, firms need to become more proactive in R&D
in order to shape their competitive advantages against competitors in the market.
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5. Implications for sustainable entrepreneurship in Vietnam’s service sector
in the 4th Industrial Revolution
In the service sector, the number of newly established firms is huge but the 
amount of suspended, dissolved and loss-making ones is not small. As mentioned 
above, there are many reasons underlying this fact. In the light of the 4th
Industrial Revolution, some suggestions for sustainable entrepreneurship in the 
service sector are proposed as follows:
Firstly, the awareness of the business community about the 4th Industrial 
Revolution is limited as shown above. Thus, enhancing the awareness of firms in 
the service sector on the Industrial Revolution 4.0 must be put in priority. It is 
needed to understand that this is not just a digital transformation, it's an 
intelligence transformation. 
Secondly, equipping appropriate business management skills in the 4th
Industrial Revolution is necessarily. Computer processing power has reached its 
limits, silicon chips are the size of atoms now, and they can’t get any smaller.
Automation, digital platforms, and other innovations are changing the 
fundamental nature of work. This requires businessman appropriate skills to 
manage businesses. 
Lastly, Vietnamese entrepreneurial service firms must apply modern 
technology in doing business. Global development trend shows that 
entrepreneurial businesses need to be technology-integrated, especially during 
the 4th Industrial Revolution. An increasing number of businesses is using 
software tools, such as Enterprise Resource Planning (ERP) and Customer 
Relationship Management (CRM), to improve management efficiency. More 
technology-oriented firms may apply a complex system of operations and 
management tools to run the businesses. The active application of technological
advancements from the beginning, nonetheless more expensive, will help 
entrepreneurs firmly build the foundation for their business. 
6. Conclusion
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The development can be a double-edged sword. If the development is well-
planned and managed, it will generate a wide range of benefits in various aspects 
for a society; inversely, the society may suffer from asynchronous development, 
which in turn creates unfavorable economic, social and environmental effects. 
Two major shifts in Vietnam economy are witnessed in this transitional phase, 
which are the shift from the state-owned business sector to private business 
sector and the concentration of firms in service sector. Both of these are 
indispensable tendency of any markets when reaching certain development 
stages. Using the statistical figures relating to entrepreneurship in the recent 
years, this paper is a reference for individuals who are having intention to engage 
in entrepreneurial activities and looking for sustainability approach to the 
business. 
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