Advertisement

Product and Process Innovation of Micro, Small and Medium Manufacturing Enterprises in Vietnam

  • Trang Thi Thu PhamEmail author
  • Nobuaki Matsunaga
Chapter
Part of the Kobe University Monograph Series in Social Science Research book series (KUMSSSR)

Abstract

Innovation promotion is relatively new to the Vietnamese society. It took several decades to develop the science, technology and innovation system and to gradually shift the science and technology strategy towards innovation. This chapter examines the factors driving product and process innovation of manufacturing micro, small and medium enterprises (MSMEs). We employ the SME surveys from 2005 to 2015—conducted every 2 years in ten cities and provinces—to create unbalanced panel data with 7399 observations and apply the probit model for the study. The findings suggest that firm experience in innovation and accumulated knowledge are crucial for future innovation; human capital of both entrepreneurs and employees (upper secondary and higher level education) and social capital are important for innovation; SMEs are apt to be more innovative given that they have higher capital intensity (production technology) or face intense competition; uncertainty of public policies and insufficient policy implementation are hindrance to innovation. Consequently, there is a need for improving the education and training system, including reinforcement of higher education, enhancing the inter-firm linkages and firm-research institute-university cooperation, and providing effective innovation incentives and support for enterprises.

Keywords

Vietnam Probit model Panel data Product and process innovation SME 

References

  1. Acs, Z. J., & Audretsch, D. B. (1988). Innovation in large and small firms: An empirical analysis. American Economic Review, 78(4), 678–690.Google Scholar
  2. Amin, M. (2011). Labor productivity, firm-size and gender: The case of informal firms in Argentina and Peru (Enterprise Note Series No. 22). World Bank Group.Google Scholar
  3. Becheikh, N., Landry, R., & Amara, N. (2006). Lessons from innovation empirical studies in the manufacturing sector: A systematic review of the literature from 1993–2003. Technovation, 26, 644–664.Google Scholar
  4. Bhattacharya, M., & Bloch, H. (2004). Determinants of Innovation. Small Business Economics, 22(2), 155–162.Google Scholar
  5. Biggs, T., & Shah, M. K. (2006). African SMEs, networks, and manufacturing performance. Journal of Banking & Finance, 30(11), 3043–3066.Google Scholar
  6. Black, G. (2005). The geography of small firm innovation. Boston: Kluwer Academic Publishers.Google Scholar
  7. Brundenius, C., Aguirre-Bastos, C., Tran, N. C., Diyamett, B., & Dgedge, M. (2016). Emerging innovation systems in developing countries: Bolivia, Vietnam, Tanzania and Mozambique. In B. Göransson, C. Brundenius, & C. Aguirre-Bastos (Eds.), Innovation system for development (pp. 39–83). Cheltenham: Edward Elgar Publishing Limited.Google Scholar
  8. CIEM, DoE, & GSO. (2012a). Firm-level competitiveness and technology in Vietnam: Evidence from a survey in 2010. CIEM.Google Scholar
  9. CIEM, DoE, & GSO. (2012b). Firm-level competitiveness and technology in Vietnam: Evidence from a survey in 2011. CIEM.Google Scholar
  10. CIEM, DoE, ILSSA, & UNU-WIDER. (2012c). Characteristics of the Vietnamese business environment: Evidence from a SME survey in 2011.Google Scholar
  11. CIEM, DoE, & GSO. (2013). Firm-level competitiveness and technology in Vietnam: Evidence from a survey in 2012. CIEM.Google Scholar
  12. CIEM, DoE, & GSO. (2014). Firm-level competitiveness and technology in Vietnam: Evidence from a survey in 2013. CIEM.Google Scholar
  13. Carland, J. W., Hoy, F., Boulton, W. R., & Carland, R. A. C. (1984). Differentiating entrepreneurs from small business owners: A conceptualization. Academy of Management Review, 9(2), 354–359.Google Scholar
  14. Coad, A., Segarra, A., & Teruel, M. (2016). Innovation and firm growth: Does firm age play a role? Research Policy, 45, 387–400.Google Scholar
  15. Cohen, W. M., & Levinthal, D. A. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–152.Google Scholar
  16. Diez, J. R. (2000). Innovative networks in manufacturing: Some empiricals evidence from the metropolitan area of Barcelona. Technovation, 20, 139–150.Google Scholar
  17. Fletschner, D. (2009). Rural women’s access to credit: Market imperfections and intrahousehold dynamics. World Development, 37(3), 618–631.Google Scholar
  18. Girma, S., Görg, H., & Hanley, A. (2008). R&D and exporting: A comparison of British and Irish firms. Review of World Economics, 144(4), 750–773.Google Scholar
  19. Goedhuys, M., & Sleuwaegen, L. (2000). Entrepreneurship and growth of entrepreneurial firms in Coote d’Ivoire. The Journal of Development Studies, 36(3), 122–145.Google Scholar
  20. Gronum, S., Verreynne, M.-L., & Kastelle, T. (2012). The role of networks in small and medium-sized enterprise innovation and firm performance. Journal of Small and Business Management, 50(2), 257–282.Google Scholar
  21. Ho, T. M. A., & Pham, D. L. (2014, June). Innovation and productivity of Vietnamese small and medium enterprises: Firm level panel data evidence. Presented at the Seventh Vietnam Economist Annual Meeting (VEAM 2014), University of Economics, Ho Chi Minh City, Vietnam.Google Scholar
  22. Jarrar, N. S., & Malcolm, S. (2011). Product diversification: The need for innovation and THE Role of balanced scorecard. Journal of Applied Management Accounting Research, 9(2), 43–60.Google Scholar
  23. Koellinger, P. (2008). Why are some entrepreneurs more innovative than others. Small Business Economics, 31(1), 21–37.Google Scholar
  24. Lachenmaier, S., & Wößmann, L. (2006). Does innovation cause exports? Evidence from exogenous innovation impulses and obstacles using German micro data. Oxford Economic Papers, 58(2), 317–350.Google Scholar
  25. Lasagni, A. (2012). How can external relationships enhance innovation in SMEs? New evidence for Europe. Journal of Small Business Management, 50(2), 310–339.Google Scholar
  26. Lee, S.-C. (2016). A Bayesian inference for fixed effect panel probit model. Communications for Statistical Applications and Methods, 23(2), 179–187.Google Scholar
  27. Lu, Y., Tsang, E. W. K., & Peng, M. W. (2008). Knowledge management and innovation strategy in the Asia Pacific: Toward an institution-based view. Asia Pacific Journal Manage, 25(3), 361–374.Google Scholar
  28. Madrid-Guijarro, A., Garcia, D., & van Auken, H. (2009). Barriers to innovation among Spanish manufacturing SMEs. Journal of Small Business Management, 47(4), 465–488.Google Scholar
  29. McCormick, D., & Antieno, R. (2002). Linkages between small and large firms in the Kenyan food processing sector. Innovation and small enterprises in the third world (pp. 223–248). UK: Edward Elgar Publishing Limited.Google Scholar
  30. Nguyen, K. M., Giang, T. L., & Bach, N. T. (2007). Technical efficiency of small and medium manufacturing firms in Vietnam: Parametric and nonparametric approaches. The Korean Economic Review, 23(1), 187–221.Google Scholar
  31. Nguyen, N. A., Nguyen, P. M., Nguyen, D. N., & Nguyen, D. C. (2011). Trade liberalization and innovation linkages micro-evidence from Vietnam SME surveys. In Globalization and Innovation in East Asia (pp. 315–340). ERIA.Google Scholar
  32. Nguyen, N. A., Doan, Q. H., & Nguyen, T. P. M. (2013). The Viet Nam national innovation system—A diagnostic review. Asia-Pacific Tech Monitor, AprJun 2013, 42–52.Google Scholar
  33. Nix, J. (1992). Wealth-creating entrepreneurship innovating entrepreneurs and new ventures. The Journal of Entrepreneurship, 1–2, 241–248.Google Scholar
  34. OECD/Eurostat. (2005). Oslo manual-guidelines for collecting and interpreting innovation data.Google Scholar
  35. OECD/World Bank. (2014). Science, technology and innovation in Vietnam. OECD Publishing.Google Scholar
  36. OECD. (2013). Vietnam: Innovation profile. In Innovation in Southeast Asia (pp. 281–305). OECD Publishing.Google Scholar
  37. Parrilli, M. D. (2002). Innovation and competitiveness within the small furniture industry in Nicaragua. Innovation and small enterprises in the third world (pp. 143–165). UK: Edward Elgar Publishing Limited.Google Scholar
  38. Piva, M., & Vivarelli, M. (2009). The role of skills as a major driver of corporate R&D. International Journal of Manpower, 30(8), 835–852.Google Scholar
  39. Radas, S., & Božíc, L. (2009). The antecedents of SME innovativeness in an emerging transition economy. Technovation, 29, 438–450.Google Scholar
  40. Salomon, R. M. (2006). Spillovers to foreign market participants: Assessing the impact of export strategies on innovative productivity. Strategic Organization, 4(2), 135–164.Google Scholar
  41. Schumpeter, J. A. (1934). The theory of economic development—An inquiry into profits, capital, credit, interest, and the business cycle. Harvard University Press.Google Scholar
  42. Smolny, W. (2003). Determinants of innovation behaviour and investment estimates for West-German manufacturing firms. Economics of Innovation and New Technology, 12(5), 449–463.Google Scholar
  43. Szirmai, A., Naudé, W., & Goedhuys, M. (2011). Entrepreneurship, innovation, and economic development: An overview. In Entrepreneurship, innovation, and economic development (pp. 3–32). Oxford University Press.Google Scholar
  44. Sørensen, J. B., & Stuart, T. E. (2000). Aging, obsolescence, and organizational innovation. Administrative Science Quarterly, 45, 81–112.Google Scholar
  45. Terziovski, M. (2010). Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: A resource-based view. Strategic Management Journal, 31(8), 892–902.Google Scholar
  46. Thai, T. M., & Hjortsø, C. N. (2015). How institutions influence SME innovation and networking practices: The case of Vietnamese agribusiness. Journal of Small Business Management, 53(S1), 209–228.Google Scholar
  47. Tran, T. B., Grafton, R. Q., & Kompas, T. (2008). Firm efficiency in a transition economy: Evidence from Vietnam. Asian Economic Journal, 22(1), 47–66.Google Scholar
  48. Tran, N. C. (2016). The national innovation system in Vietnam and its relevance for development. In B. Göransson, C. Brundenius, & C. Aguirre-Bastos (Eds.), Innovation system for development (pp. 138–183). Cheltenham: Edward Elgar Publishing Limited.Google Scholar
  49. Tran, T. H., & Santarelli, E. (2013). Determinants and effects of innovative activities in Vietnam. A firm-level analysis (Working Paper No. 909). Department of Economics, Universita di Bologna.Google Scholar
  50. Tran, T. H. & Zaninotto, E. (2010). Product diversification, corporate entrepreneurship, and firm performance: An empirical study of Vietnamese firms. Retrieved from http://ssrn.com/abstract=2143813.
  51. Utterback, J. M., & Abernathy, W. J. (1975). A dynamic model of process and product innovation. The International Journal of Management Science, 3(6), 639–656.Google Scholar
  52. Vixathep, S., Matsunaga, N., & Luong, V. K. (2017). Human capital, innovation, and productivity in Vietnam’s SMEs—Evidence from the manufacturing industry. Discussion Paper No. 96, University of Hyogo, Institute for Policy Analysis and Social Innovation, February.Google Scholar
  53. Vu, H. N. (2014). The role of human and social capital in the development of manufacturing SMEs in Vietnam. Journal of Economics and Development, 16(1), 5–22.Google Scholar
  54. WB (2017). World development indicators 2017 (The World Bank). Available from: http://databank.worldbank.org/data/source/world-development-indicators. Accessed June 4, 2018.
  55. Wooldridge, J. (2013). Introductory econometrics: A modern approach (5th ed.). Mason: South-Western.Google Scholar
  56. World Economic Forum. (2015). The global competitiveness report 2014–2015.Google Scholar
  57. Zhu, Y., Wittmann, X., & Peng, M. W. (2012). Institution-based barriers to innovation in SMEs in China. Asia Pacific Journal Management, 29, 1131–1142.Google Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  1. 1.National Centre for Socio-Economic Information and Forecast, Ministry of Planning and InvestmentHanoiVietnam
  2. 2.Kobe UniversityKobeJapan

Personalised recommendations