Effects of Job Satisfaction on Organizational Commitment and Turnover Intention Among Vietnamese Employees in Foreign Direct Investment Enterprises

Abstract

Purpose: This article focuses on exploring the associations between job satisfaction, organizational commitment, and turnover intention. Specifically, this study estimates the impacts of Vietnamese employees' job satisfaction on their organizational commitment and turnover intention in FDI enterprises. Research design, data and methodology: The measures are adapted from previous studies to develop a questionnaire with a seven-point Likert scale. The dataset is directly collected from 227 respondents who are employees at FDI enterprises situated in the North of Vietnam. The dataset is analyzed by quantitative approaches using SPSS 24.0 and AMOS 24.0. Results: The results show that while turnover intention is positively correlated with monthly income, it is negatively correlated with job satisfaction and organizational commitment. Also, organizational commitment is positively associated with job satisfaction among employees at FDI enterprises in Vietnam. Conclusions: The findings of this study will serve as useful references for administrators of FDI enterprises and policymakers to promote employees' job satisfaction and retain skilled employees.

1. Introduction

Foreign Direct Investment (FDI) is a form of long-term investment by individuals or companies from one country to another, in the form of establishing production and business bases. The foreign individual or company manages this production and business establishment. According to the World Trade Organization (WTO), FDI occurs when an investor from one country (the host country) acquires an asset in another country (the destination country), along with the right to manage that asset. The management aspect is the feature that distinguishes FDI from other financial instruments. FDI enterprises make a significant contribution to the growth of a national economy (Tri et al., 2020) via financial investment, technology transfer, and advanced techniques (Asiedu, 2002). Also, FDI enterprises provide capital sources for the economy, improve production resources, enhance the business ecosystem, foster healthy competitiveness, and diversify the various components of the economy. Thus, FDI enterprises play an important role in economic development, especially in emerging countries such as Vietnam. Human capital, for example workers or employees, is specified as a special and valuable asset, as well as the most reasonable investment of any firm (Wang et al., 2020; Brien, 2010). Thus, understanding how to attract and retain skilled and talented people is crucial to achieving success and developing enterprises sustainably (Buera & Kaboski, 2012). Nevertheless, FDI enterprises in Vietnam face many obstacles when attempting to attract high-quality personnel (Tri et al., 2020) due to factors such as a low salary (Arnolds & Boshoff, 2001), the slim prospects of career promotion (Sempane et al., 2002), or high pressure from work (Khantimirov & Karande, 2018). Employee turnover has become a big challenge for FDI companies in Vietnam. Thus, it is important to establish the main factors that lead to turnover intention in FDI enterprises.

Job satisfaction is a critical factor in attracting talented employees and retaining a skilled workforce (Stamolampros et al., 2020), while turnover has important effects (both positive and negative) on organizations, individuals, and society (Phillips & Connell, 2003). There are many reasons why employees wish to leave an organization (Gaylard et al., 2005), but job satisfaction and organizational commitments are often mentioned as the influential antecedents of this intention and behavior (Luz et al., 2016).

So far, almost all of the previous studies that have examined the factors that influence employee turnover intention have been conducted in the context of tourism (Wang et al., 2020; Jung et al., 2020), IT (Seema et al., 2020), child welfare (Li et al., 2020), or education (Inegbedion et al., 2020). To the best of our knowledge, the relationship between job satisfaction, organizational commitment, and turnover intention in FDI enterprises has received little attention. Thus, this study focuses on that precise topic.

2. Literature Review

Turnover intention is not only regarded as a warning sign of employees who plan to leave their workplaces, but it is also seen as a factor that alter in employees within the company and in working positions might be effectively estimated (Brown & Peterson, 1993). Thus, employee turnover intention is the intent of organizational members to leave or quit their current work (Jung et al., 2020). This intention can result in many serious consequences for a company if they do not employ preventative measures as there is a significant and strong correlation between turnover intention and actual behavior (Cotton & Tuttle, 1986; Cho & Lewis, 2011). Employee turnover intention, therefore, can be acknowledged as an effective precursor of actual behavior, and it has thus often been utilized as a dependent variable in prior studies (Park & Min, 2020; Li et al., 2020).

Many previous studies have demonstrated that higher organizational commitment is closely and significantly related to decreasing employee turnover intention (e.g., Duong, 2022, Erdil & Müceldili, 2014; Tnay et al., 2013). This factor is considered one of the most influential psychological variables in decreasing employees’ turnover intention (Jones & Harter, 2005; Shin & Jeung, 2019). In other words, employees who are actively and enthusiastically committed to their organization have relatively little intention of leaving their current jobs (Hughes & Rog, 2008).

In addition, job satisfaction is frequently defined as an individual’s attitude or feelings about their job or job experience (Locke, 1976). It is also determined as “an individual-level factor reflecting one’s effects and emotions towards his or her job” (Li et al., 2020, p.2). Previous studies have reported a negative correlation between job satisfaction and turnover intention (e.g., Larrabee et al., 2003; Chou, 2012; Adera & Bullock, 2010; Pérez et al., 2015; Schur et al., 2017). Employees are satisfied when their organization provides development opportunities and flexibility in work (Duong et al., 2021, Zopiatis et al., 2014). If this is the case, they exhibit greater organizational commitment and decrease their intention to leave the organization (Kim & Brymer, 2011). In other words, the increase in job satisfaction is of great significance to the reduction of turnover intention of employees (Wang et al., 2020).

Finally, job satisfaction can create positive relationships with employees and retain more engaged employees in the workplace (Tett & Meyer, 1993). Employees who are satisfied with their work tend to stay, in contrast to others who are less satisfied and less likely to stay for any length of time in their organization (Samad & Yusuf, 2012). Employees who experience positive situations in the workplace will be more satisfied with their job, and ultimately this job satisfaction will enhance organizational commitment (Samad & Yusuf, 2012). Thus, job satisfaction is seen as one of the most important factors that can shape organizational commitment among employees (Samad & Yusuf, 2012). In other words, a person with a high level of job satisfaction has positive feelings and emotions in relation to their job, and higher organizational commitment.

From these above arguments, in the context of FDI enterprises in Vietnam, the following hypotheses are proposed:

H1: Organizational commitment is negatively related to turnover intention.

H2: Job satisfaction is negatively related to turnover intention.

H3. Job satisfaction is positively related to organizational commitment.

Figure 1: Research model

3. Methodology

The study questionnaire was directly delivered to employees working for FDI enterprises situated in Northern Vietnam (Bac Ninh, Hung Yen, Bac Giang, Vinh Phuc, Hanoi). The survey was conducted from 20 May to 20 June 2022. The survey team received support from supervisors and managers in various departments at Samsung Electronics Vietnam, Han Sung Vina, Everpia Vietnam, Texco Investment (VN) Company Limited, etc. Employees were selected randomly in order to guarantee the representativeness of the sample. Each employee who participated in the survey received a small gift after they had completed the questionnaire.

Beside demographic information, 16 items (statements) were designed on a seven-point Likert scale (1 = strongly disagree, 2 = disagree, 3 = somewhat disagree, 4 = neutral, 5 = somewhat agree, 6 = agree, 7 = strongly agree), focused on three factors (job satisfaction, organizational commitment, and turnover intention). All the scales and items were modified from prior studies (Wang et al., 2020; Jung et al., 2020; Seema et al., 2020) and they are clearly represented and encoded in Tables 2 and 3. The replications and full answers are recommended to ensure that the dataset does not contain missing data. All of the responses were imported into Excel software before analyzing them with SPSS 24.0 and AMOS 24.0. After excluding unsatisfactory questionnaires, there were 227 valid responses.

The dataset was collected via a two-sectional survey: the first section explores employees’ degree of agreement with statements concerning their job satisfaction, organizational commitment, and turnover intention; the second section focuses on collecting the employees’ demographic characteristics: gender, age, years of working for the company, education, and monthly income (Table 1). The questionnaire took around 10 minutes to complete. The questionnaire and answers are attached in the supplementary files.

Table 1: Respondents’ characteristics

The dataset consists of the employees’ personal characteristics and three factors: (1) job satisfaction, (2) organizational commitment, and (3) turnover intention.

4. Results and Discussion

4.1. Normality, Validity and Reliability of Scales

Table 2 shows that the skewness of all items was lower than 3 while kurtosis values were less than 8. Thus, all the scales achieved univariate normality (Hair et al., 2010). Empirical studies suggest that Cronbach’s alpha, exploratory factor analysis (EFA) and confirmatory factor analysis should be used to estimate the reliability and validity of each scale (Doanh & Bernat, 2019a). In EFA, there are two types of rotation: orthogonal rotation (which is a perpendicular rotation method, often using Varimax combined with the method of Principal Components Analysis) and oblique rotation (which is a non-perpendicular rotation method, usually using Promax combined with the Principal Axis Factoring method). In social science research, orthogonal rotation is most commonly used because it is often the default in popular statistical software programs such as SPSS. Furthermore, the orthogonal rotation method makes it easier for analysts to interpret the results (James, 2009). However, the orthogonal rotation method has the disadvantage that it can give erroneous solutions in situations where these factors are expected to be correlated. Furthermore, when EFA is used as a pre-analysis of CFA, bevel rotation is likely to be appropriate with CFA rather than orthogonal rotation (for example, binding between uncorrelated factors in CFA often makes the model less suitable). In this study, the authors performed EFA with the oblique rotation method as a pre-analysis for the CFA in the next step.

Table 2: Scales and descriptive results of participants’ responses

Table 3 presents Cronbach’s alpha values of all the scales and the pattern matrix, which consists of the factor loadings of each item. Moreover, the EFA indicated that KMO (Kaiser-Meyer-Olkin Measure of Sampling Adequacy) = 0.846, Chi-square of Bartlett’s Test of Sphericity = 1397.510, df = 66, Sig. of Bartlett’s Test of Sphericity = 0.000, Initial Eigenvalues = 1.017, and Cumulative (%) = 69.907. Although TI1 and TI2 have low loading factors (0.598 and 0.457, respectively), Hair et al. (2014) suggest that these values are acceptable since the sample size is larger than 200.

Table 3: Cronbach’s alpha of scales and pattern matrix

The results of the CFA (measurement model) determined that Ch-square = 120.388, Chi-square/df = 2.508; GFI = 0.919; CFI = 0.947; TLI = 0.927, NFI = 0.916; and RMSEA = 0.082. Thus, the model fit was achieved (Hair et al., 2010). The results for the reliability and validity of each scale are presented in Table 4. The composite reliability (CR) and average variable extracted (AVE) values are higher than 0.5, thus all the measures possess reliability and discriminant validity (Hu & Bentler, 1999). Furthermore, Fornell–Larcker analysis was also employed to examine the discriminant validity of all the scales (Fornell & Larcker, 1981; Hair et al., 2014). Specifically, discriminant validity is established if the square root of the AVE of each construct is greater than its highest correlation with any other construct. As shown in Table 4, all of the constructs in the model possess discriminant validity.

Table 4: Estimate the reliability and validity of each scale

Note: N=227, AVE: Average Variance Extracted; CR: Composite reliability; MSV: Maximum shared Variance; Max(H): Bold value in correlation coefficient matrix: Square root of AVE

The structural model is illustrated in Figure 2, where Chi-square = 191.307; Chi-square/df = 1.952, GFI = 0.909, CFI = 0.934, TLI = 0.909 and RMSEA = 0.065.

Figure 2: Structural Model

Table 5 demonstrates the correlations between variables. The results show that monthly income was positively correlated with turnover intention (γ = 0.206; p-value = 0.001 < 0.01), while the other controlling variables (gender, age, education, years of working) were not related to the intention to leave the organization. The results also show that job satisfaction (γ = -0.856; p-value < 0.001) and organizational commitment (γ = -0.244; p-value = 0.005 < 0.01) were negatively associated with turnover intention. Moreover, job satisfaction was found to be positively correlated with organizational commitment (γ = -0.244; p-value = 0.005 < 0.01).

Table 5: Correlations between variables

Note: *** < 0.001.

Many previous studies have suggested that the bootstrapping approach should be used to estimate the indirect relationship (e.g. Doanh, 2021; Doanh & Bernat, 2019b). Thus, 2,000 bootstrapping samples with a confidence degree of 95% were employed to indicate the indirect path. The findings showed that the relationship between job satisfaction and turnover intention was partially mediated by organizational commitment (γindirect JS-TI = -0.056; p-value = 0.014 < 0.05).

5. Conclusion

The main objective of this research is to explore the associations between job satisfaction, organizational commitment and turnover intention among Vietnamese employees of FDI enterprises in Vietnam. Our findings demonstrate that job satisfaction and organizational commitment are negatively associated with turnover intention, while job satisfaction is positively related to organizational commitment. These findings are consistent with many previous studies (Jones & Harter, 2005; Shin & Jeung, 2019; Hughes & Rog, 2008; Adera & Bullock, 2010). In addition, these results confirm that in order to retain skilled employees, FDI enterprises should take measures to improve job satisfaction and organizational commitment, for example by enhancing the working environment and increasing career promotion opportunities. Furthermore, the results also show that monthly income is positively and significantly associated with turnover intention; thus, offering a relatively low salary is a huge obstacle to retaining talented employees in FDI enterprises.

Although this study makes a significant contribution to both theoretical and practical perspectives, there are several limitations to our research. First, the sample of this study is rather small, and further studies should increase the size of the sample. Second, this study only focuses on two antecedents of turnover intention: job satisfaction and organizational commitment. However, there is still the question of which other factors influence the job satisfaction and organizational commitment of employees in FDI enterprises, thus future research should expand the research model to fill this gap.