MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY VIETNAM --------------------------------- Phùng Minh Thu Th y DISSERTATION FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS HANOI – 2020 luan an MINISTRY OF EDUCATION AND TRAINING NATIONAL ECONOMICS UNIVERSITY VIETNAM --------------------------------- Phùng Minh Thu Th y Major: Economic Management Code: 9310110_QL DISSERTATION FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN ECONOMICS Scientific instructors: 1. TRẦN THỌ ĐẠT HANOI – 2020 luan an i DECLARATION I have read and understood the violations of academic honesty, and I commit by my personal honor that this research is my own and does not violate the requirement of honesty in academic. Dissertation author Phùng Minh Thu Thủy luan an ii ACKNOWLEDGEMENT I would like to express my sincere appreciation and thanks to Professor Tran Tho Dat, for his regular provision of invaluable pieces of advice, guidance, correction, and encouragement to me throughout this research. I could not finish this PhD course without his supports and encouragements.
I also like to extend my heartfelt thanks of gratitude to Professor Joris Knoben and Professor Patrick Vermeulen from Radboud university in The Netherlands, who guided me from my first step to set up this research and spent a countless amount of time to support me. This dissertation could not have been successfully accomplished without their contributions. Finally, I would like to dedicate this success to my beloved husband and lovely daughter, who all the time stay beside me. I would not be able to achieve this success without their continuous supports and great deal of understanding.
luan an iii ABBREVIATIONS AND ACRONYMS ADB : Asian development bank EU : European Union Eurostat : European Statistical System GDP : Gross Domestic Product KBV : The Knowledge-based view OECD : Organization for Economic Co-operation and Development R&D : Research and Development RBV : The resources-based view SMEs : Small and Medium Enterprises SMEs : Small and Medium Enterprises The ES : The Enterprise Survey The ICS : The Innovation Capabilities Survey USD : United States Dollar luan an iv TABLE OF CONTENTS DECLARATION. ii ABBREVIATIONS AND ACRONYMS. iii LIST OF TABLES. vi LIST OF FIGURES.
vii TABLE OF CONTENTS. iv CHAPTER 1: INTRODUCTION. Scope of Study. Contribution of Study.
Limitation of Study. Organization of the Dissertation .12 CHAPTER 2: LITERATURE REVIEW. Research on Innovation in the world. Ground theory research.
Determinant of innovation research. Product innovation research. Research on Innovation in Vietnam .30 CHAPTER 3: THEORY FRAMEWORK. Definition of Innovation.
Types of Innovation. Determinants of Innovation. Following Resources Based view theory. Following Knowledge based view theory.
Internal Knowledge Sources. Collaborative Knowledge Sources. Regional Knowledge Sources. Internal knowledge sources.
Collaborative knowledge sources. Regional knowledge sources .55 CHAPTER 4: METHODOLOGY AND DATA COLLECTION. Innovation research used logit regression .75 CHAPTER 5: RESEARCH RESULTS. General description of the ES and ICS sample.
Distribution of firms by sector and region. Descriptive statistics of the sample merged from ES and ICS. Knowledge Sources and Product Innovation .93 CHAPTER 6: CONCLUSION AND RECOMMENDATION. Recommendation for firms.
Limitations of the research .112 LIST OF RESEARCH BY THE AUTHOR REFERENCES APPENDIX luan an vi LIST OF TABLES Table 2.1: List of innovation models .2: List of main innovation research categorized by theory .1: Key Policy Documents related to innovation in Vietnam .1: Distribution of firms by region .2: Distribution of firms by sector and region .3: Distribution of firms by size and region .6: Product Innovation orientation .7: Objectives of product innovation .9: Sources of information for innovation .10: Barriers to innovation .11: Descriptive statistics and correlations.12: Logistic Regression Result of the baseline model .13: Logistic Regression Results of each individual knowledge source models .14: Logistic Regression Results of the all independent variables simultaneously model .99 luan an vii LIST OF FIGURES Figure 2.1 Research model in Nguyen Van Thang et al.1: Research model with all the variables. Distribution of the realized sample by region .1: Product innovation and using knowledge sources from the supply chain.100 luan an 1 CHAPTER 1: INTRODUCTION 1. Background There is no doubt about the advantages that innovation can bring to a nation. OECD (2007) reported strong evidence for a positive relationship between innovation and national competitiveness.
Innovation plays an essential role in economic growth and is an indispensable factor to contribute to creating more jobs. More broadly, both past theory and practice suggest that countries will follow different development trajectories, depending on their ability to identify and capture technological progress. Applying new technology translates technological and scientific advances into more productive economic activity. As such, it is not surprising that many OECD member countries have adopted national strategies to boost innovation and enhance their economic performance though increased productivity and growth.
The vital role of innovation is not only affirmed in OECD countries but also developing countries OECD (2012). There is a plethora of reasons why innovation is important for developing and emerging countries (OECD, 2012). For example, innovation in agriculture plays an important role in reducing poverty and promoting economic growth. Other advantages that innovation can bring to those countries are creating more jobs, improving welfare, access to business opportunities, reaching the world technological frontier in many industries, and especially having the way to avoid “middle income traps”.
The Asian development bank (ADB) (2014) states that countries fall into the middle-income trap if they are unable to move from a low-cost to a high-value economy, making it difficult for them to compete with both low-income and high- income countries. The ADB (2014) also stresses the vital role of innovation to avoid the middle-income trap as it raises productivity and promotes structural change. The ADB (2014) mentions Vietnam is a lower-middle-income country, which needs to increase the productivity of capital, land and other resources to avoid falling into the middle-income trap as well. Eric Sidgwick, Country Director of ADB in Vietnam, luan an 2 said it was too early to say whether Vietnam was trapped in the middle-income trap, but the country needed policies to create higher incomes and increase labor productivity.
Recently, some emerging economies have become significant actors in the global innovation system. Given the importance of innovation for economic growth, it is of utmost importance to understand the determinants of successful innovation. In order to gain that understanding innovation needs to be studied at the level at which it is generated, namely the firm level. At firm level, the ability to innovate leads to the wealth generation capacity.
Innovations reduce production cost and improve quality of firms’ goods and services. Numerous empirical studies suggest that innovation enhances firm performance because the product of innovation increases firm competitiveness and the process of innovation transforms a firm’s internal capabilities making it more adaptive to change (Neely & Hii, 1998). De Jong and Brouwer (1999) confirmed the same idea in their empirical research with small and medium enterprises (SMEs). Those SMEs work in an environment of changing consumer preferences, increasing competition and changing technological requirements, in order to achieve business goals such as profit and growth, having a continuous flow of successful innovations is crucial for them.
They build their competitiveness position by offering high quality products and services that match their customers’ demand, so they need a permanent flow of innovations. As mentioned above, there are plentiful studies on innovations. However, only a limited number of studies are conducted in developing countries especially in the case of Vietnam. Vietnam has been known as a poor country that suffered many wars along its history.
In 1975, Vietnam became independent, but the economy was in an atrocious condition. The first five - year plan mission was to build a technical infrastructure and form a new economy that could improve people’s lives. However, the economy was not improved significantly and after two five – year plans it fell into luan an 3 crisis. From 1975 to 1985, Vietnam had low economic growth with an annual increase of 4.6% and domestic production did not meet demand (Nguyen Quang Ngoc, 2006).
In 1986, the Vietnamese Government started “Doi Moi” period to change the situation. After more than 20 years of economic reform, changing from a centrally planned economy into the market economy, Vietnam has undergone significant economic growth and become a lower ‘middle-income’ country in 2010. Vietnam has been one of the fastest growing countries in the past 20 years, but in terms of "development quality", it has not been achieved like other countries such as Korea, India or China. According to Nguyen Xuan Thanh from Fulbright University in Vietnam, the country can develop more only thanks to technology enterprises although this journey may last for decades more.
Notwithstanding, the Government of Vietnam has set a target, namely, to become a middle-income industrialized country by 2020. To achieve this ambitious goal, there is a need for a more effective application of science, technology and innovation in the economy in order to drive productivity growth and diversification in production (Nguyen Anh, Nguyen Mai, & Doan Hung, 2013) or in the other words, this is the time the country should pay attention to innovation. In lieu of the lack of research regarding innovation in developing countries, In Vietnam, there is a specific dearth of firm-level innovation studies (Nguyen Ngoc Anh, Nguyen Dinh Chuc & Nguyen Duc Nhat, 2011; Nguyen Ngoc Anh, Pham Quang Ngoc, Nguyen Dinh Chuc & Nguyen Duc Nhat, 2008; Nguyen Thi Phuong Linh, Nguyen Ke Nghia, Do Thi Dong, & Nguyen Thi Tuyet Mai, 2019). Moreover, firms are the dominant economic actors that drive innovation, and particularly the commercialization of innovations, it is necessary to have a study on innovation at the firm level.
In addition, with innovation firms can develop and create more value for the nation such as creating jobs, improving welfare, access to business opportunities, reaching the world technological frontier which could bring social benefits for a country. Hence, there is a call for more innovation studies in Vietnam than ever before. luan an 4 Previous studies have shown that some firms are more capable of developing innovations than others. This research attempts to understand the reason behind that and aims to fill in the gap in research in firm level innovation generally and contributes to literature regarding the significance of firm’s innovation determinants by deeply investigating the relationship between innovation and one of the key determinants – knowledge sources for innovation at firm level.
By doing so, the author expects to provide empirical evidence for policy makers in Vietnam to foster innovation at macro level. Problem Statement Innovation has received much attention over the last decades as it is considered as a source for economic development. Most studies conducted in this area focus on developed countries even though for (firms on) developing countries innovation also is of crucial importance in order to grow and become internationally competitive. However, the difference in stages of development can be a barrier when applying the outcomes of studies in developed countries and in developing countries.
Moreover, most of these studies, also those done in Vietnam, are about understanding innovation process at the macro level and provided limited or out of date empirical evidence for policy makers. They predominantly focus on national innovation systems and government innovation policies. Researches on innovation in Vietnam begins from early 2000s, though, most of the examinations is about innovation in agriculture field (Chairatana & Sinh, 2003; Martin, Castella, Anh, Eguienta, & Hieu, 2004; Spielman & Kelemework, 2009; Van Linh, 2001). Recently, innovation studies are getting more attention in macro level and other fields as well (Nguyen Ngoc Anh et al., 2011; Nguyen Ngoc Thang et al., 2013; Phan Thi Thuc Anh, 2014.
However, there is still very little evidence about what drives firm level innovation in countries like Vietnam.