Integrating of PLS-SEM and the Importance Performance Matrix Analysis to Exploring the Role of Provincial Competitiveness Index to Growth

Provincial competitiveness was one of the engines of growth under the institutional theory. The Vietnam Provincial Competitiveness Index (PCI) has been surveyed since 2005 to reflect the perceptions of local business environments, categorized into 10 sub-indices with 128 indicators. The current PCI has challenged the governance due to its broad construction. This study aimed to reconstruct the indicators in each PCI sub-index to be more specific for improving governance. The paper further explored the importance-of performance of both the PCI sub-index and its indicators to the provincial growth in Vietnam. Secondary data of 63 provinces during the period of 2017-2020 have been used with the employment of Exploratory Factor Analysis (EFA), Partial Least Square Structural Equation Model (PLS-SEM), and the extension of the importance-performance matrix analysis (IPMA). Our results showed the reliability and validity of 21 measured items under 5 PCI sub-indices. The findings confirmed the positive impact of the PCI index on growth. Moreover, the highest importance but lowest performance of SLO (law and order) was implied. SLA (land access and security of tenure), on the contrary, peaked the performance with the lowest importance. The importance of STC (time costs and regulatory compliance), SPA (proactive provincial leadership), and SLP (labor quality) has been ranked with the former sharing the highest priority while similar performance of the four sub-indices has been found. The results implied that the provincial authorities should prioritize their efforts to improve governance based on the importance-performance analysis of PCI sub-indices. Moreover, the importance and performance of each sub-index indicator reflected the great governance improvement with an average performance of 50%. However, special attention should be focused on vocational training, effective state officials, and legal support to the business due to their high importance but low performance.