Problemstatement
Vietnam initiated its economic renovation, known as Doi Moi, in 1986, but significant progress did not occur until after the Asian financial crisis in 2000 This reform process has been closely linked to international economic integration, with a strong emphasis on the private sector Vietnam has achieved remarkable milestones, including steady economic growth, rapid foreign trade and investment development, and a reduction in poverty levels A key player in this success is the small and medium-sized enterprises (SMEs), which, according to the General Statistics Office, numbered 286,468 formal firms in 2012, accounting for 98.34% of total firms SMEs contributed approximately 40% of the country's GDP and provided 51% of the labor force, playing a crucial role in sustainable economic development.
However,t h e V i e t n a m e s e S M E s alsoh a v e t o strugglem a n y obstacles.T h e total numberofnewlyestablishedfirmshaddecreasedsharplyfrom83.600to77.500between2 0 1 0 and2012.Moreover,theexitingthemarketofcurrentfirmsisanupwardtrend.
Forexample,th e numberofdisbandedanddiscontinuedo p e r a t in g firmswasincreasedby 1
1 9 % in2012whichaccountedfor60.700companies.Understandingthisurgentsituation,m a n y de velopingcountries’legislatureareimplementingalotofpolicyinordertofortifyt h e developmentofi tsSMEs.However,thebigquestionishow theycouldmotivatethed e v e l o p m e n t ofSMEsbyenhancingitsperformance.Manyresearcher sfoundoutthatthei n c r e a s i n g p r o d u c t i v i t y couldb e conductedb y innovation.Innovat ionwillc r e a t e t h e c o m p e t i t i v e advantagesandbetheessentialsourceoftheincreasin ginproductivity.
Morales(2010),Stametal(2014)emphasizedtheconsequentialityofthetechnicalforeconomicandd eterminantsofinnovationwhilethesocialcapitalhasonly beennoticedoverthepastfewyears.ThemostfamouscasestudyisthePutnamNanni7
Lanzetti(1993).Asperthispaper,thesocialcapitalischaracterizeastheessentialresourcef o r firmand whichcooperateamongindividuals.Becauseofthispossibility,theindividuals o c i a l capitalcouldi nfluencefirm’sinnovationbyusingdifferentindicatorstomeasuret h e socialcapital.Moreo ver,throughsocialcapital,s o m e c a p a b i l i t i e s a l l o w f i r m s t o i n t e g r a t e theirre sources,engenderingandsharingknowledgetomaketheirimprovement.T h e r e isanetworkconnect ionwhichconnectpeopleandsolvethemattertogether.
Inthisstudies,thesocialcapitalofowner/ managerofenterpriseswillbementionedaswell.However,thereareafewofthescientificresearchappro vethatthesocialcapitalhavet h e influenceoninn ovation, especiallySMEsi nVietnam.T h i s researchalsoillustrate delineateafewkeycomponentshavingswayonSMEsinnovation.The datacollectedfromt h e surveysofViet nam SMEsconductedin20 13willbeacclimatedtoa ccentu ate thei m p a c t s ofsocialcapitalontheinnovation.Thequalitativeresultswillbeusedtointro ducet h e differentaspectsofpotentialfactorsinfluencingtheinnovationandsomesuggestionsa b o u t t h e d e v e l o p m e n t ofSMEsinVietnamwillalsobe mentioned.The enterpriseswillrefertothisresearchwhenpromotinginnovationfortheirproduct.
Researchobjectives
Thispaperaimstoclaimtheneedofsocialcapitalfortheproductinnovationactivitiesandd e t e r m i n e whichelementse x h i b i t t h e significantimpacto n producti n n o v a t i o n activit iesofVietnameseSMEs.Throughouttheunderstandingofwhich elementsimpactt h e productinnovation,theenterprise’sowner/managercanadjustthef irm’sstrategytogaint h e competitivea d v a n t a g e s n o t o n l y i n residentialmarketb u t also i n worldwidemarket.Besides,thepolicymakersmightbeabletocontroltheinfluentialelementsofeachi n d u s t r y inordertomakesuitabledecisiontoassisttheinnovationofspecificsector.
Researchquestions
Scopeof thestudy
TheSMEsSurveyinVietnam,whichisfinancedbytheRoyalEmbassyofDenmarki n Vietna m(hereafterDanida)undertheBusinessSectorProgrammeSupport(BSPS)hasb e e n conducted sixtimes,thelatestistheperiod2007-
2013.TherearethreedepartmentthatorganizedthissurveytogethersuchastheCentralInstituteforEc onomicManagement( C I E M ) oftheMinistryofPlanningandInvestmentofVietnam(MPI);theInstituteofLaborScienceandSocialAffairs(ILSSA)oftheMinistryofLabor,In validsandSocialA f f a i r s ofVietnam(MoLISA);andtheDevelopmentEconomicsResearchGroup(DERG)o f theUniversityofCopenhagen.
structureof thestudy
Inmoredetail,Chapter2isusedfortheliteraturereview.Itisusedtoreviewtheoriesandtodispla ysomeresultofempiricalstudies.Themeaningsofinnovation,socialcapitalandsomedesignatorseff ectoninnovationwillbeintroducedaswell.Inthischapter,wewillabletoconsidertheneedofinnov atinginSMEs.
Chapter3willbefocusedonexplainingourmethodologyanddata.Thispartwillconten ttheEconometricmodelthatweconductedandmoredetailsaboutthedatathatweu s e d inthispape r.
Chapter4willillustratetheresultsthatwefoundthroughinourresearch.Thevariablesdescriptionan ddescriptivestatisticwillbestatedattheopeningofthischapterwhichhelpu s tounderstandclearlyab outallvariablesandstatistics.Therestofthechapterisusedtod e s c r i b e theregressionresult andmarginaleffects.
Chapter5isfortheconclusionandpolicyimplication.Allofthisresearchwillberevie wed,analyzedt h e advantagesa n d d i s a d v a n t a g e s o f o u r m e t h o d o l o g y and
9 recommendationforthe futureresearches.Thischapterwillalsosuggestthe policiesforp o l i c y makersandforenterpriseswhentheywanttoincreasetherateofinnovatingproduct.
Innovation
Theconceptofinnovationhasevolvedradicallyoverthelastfortyyearsandoneisknown astheknowledge- basedinnovation.Therearealotofconceptsaboutthistypess u c h asknowledge- basedinnovationderivedfromscience;knowledge- basedinnovationd e r i v e d frommarketneeds;knowledge- basedinnovationderivedfrom linkagesbetweena c t o r s inmarkets;knowledge- basedinnovationderivedfromtechnologicalnetworksorknowledge- basedi n n o v a t i o n derivedf r o m s o c i a l networks.A c c o r d i n g t o Hyvarinen( 1 9
9 0 ) , innovationincludesbothinternalandexternalactivitiesoffirmswhicharecreatingn e w pr oducts,enhancingexistingproducts,process,governanceormarketing…
Thefirsttypeofinnovationisveryfamiliarwithanybusinessoperation,theresearchandd e v e l o p m e n t (R&D)process.Inaddition,theseinnovationactivitieswillbeconsideredasa crucialc omponentsdecidedthe“lifeofSMEs”whiletechnologyisappliedatabroaders e n s e ratherthan relatingtoproductsonly.Healsoclassifiedinnovationintofivetypes:p r o d u c t , process, marketing,organizationalandsocialinnovations.Asaresearchscale,wej u s t focusonproductin novation.
Productinnovationisdefinedasthedevelopmentofnewproducts,changesindesigno f esta blishedproductsorusenewtechnologyinthemanufactureofestablishedproducts.I t takesmanyad vantagesforfirmsuchas:inventinganewproduct,improvingaproduct'squality,enhancingproduct's technicalfeaturesoraddingnewparts,inputandexpectingfunctionst o anestablishedp r o d u c t h e n c e f i r m cangrowth,e x p a n s i o n a n d g a i n i n g a c o m p e t i t i v e a d v a n t a g e Especiallyi n smalle n t e r p r i s e s t h e i n f l u e n c e o f i n d i v i d u a l s i s considered,t heindividualsoragroupofthemwhogettheideas,makedecisionsofbuyingt h e newproducts.Drucke r(1985)ismentionedtheinfluenceoftime,theentrepreneur’srelationshiptoindividual’senvir onment.
Whilesubstantialstudieshavebeeninvestigatingandprovidingproofsofrelationshipbetweencou ntries’exportandt h e i r i n n o v a t i o n activitiesatmacrolevel( G r e e n h a l g h , 1 1 9 0 ) , lesseffortandpapersonthiscorrelationatmicrolevelhavebeenpresented.Ontheo n e view,acon siderablestudieshaveshowedevidenceforasignificantpositiveinfluenceo f innovationwhicharere presentedbyR&Dexpenditureornumberofinnovationsontheperformanceofexport.
(technical)i n n o v a t i o n referst o eithera t e c h n o l o g i c a l l y newproduct/ processoranexistingproduct/ processwhichareexperienceda substantiallytechnologicaladvancement.
Aroughdistinctioncan bemadebetweenproductinnovation(including bothnewp r o d u c t i n n o v a t i o n andmodificationo f ane x i s t i n g p r o d u c t ) a n d processinnova tion.Processinnovationsareawaytoimproveproductivityandreduceproductioncosts,whilep r o d u c t innovationgivestheinnovatingfirmsacompetitiveadvantage.FollowingU t t e r b a c k andA b e r n a t h y ( 1 9 7 5 ) a n d C a s s i m a n andM a r t í n e z - Ros( 2 0 0 4 ) wec o u l d h y p o t h e s i z e thatproductinnovationsandprocessinnovation shaveadifferenteffectone x p o r t performance.Butoften,productinnovationandprocessi nnovationarelinkedasnewlydevelopedproductsormodifiedproductsoftenrequiresnewproductionte chnology.
Innovationistreatedasanunderlyingdeterminantofaquality,suchasfirmperformanceor productivity.Theadaptablewithchangingmarketconditionneedsfirmsaccumulaten e w k n o w l edg e andc o n s t a n t l y m od i f y t h e i r productsandprocesses.I n n o v a t i o n isalsoc onsideredasatoolofentrepreneurstoexploitchangeasanopportunityf o r aneworadifferentbusi nessandservice(OECD,2005).
Innovationisevaluatedinvariousways.Ontheonehand,theinput- orientedm e a s u r e m e n t o f i nn o v ati o n usesdataon R& D (researchanddevelopment).
B u t R&De x p e n d i t u r e tendstooverestimateinnovation,becauseitincludesabortede ffortsthatdo notnecessarilyleadtonewproducts/processesorimprovedproducts/ processes.Ontheo t h e r hand,theoutput- orientedmeasurementappliespatentdata,innovationcountandfirm- basedsurveys.However,apatentwo u l d betterrepresentaninventio nrather thaninnovatio n.Themethodofinnovationcountisdeemedanobjectapproachwhichreliesoninnovationdatafrom varioussources,suchnewproduct/processannouncements,database,journals,etc.(Becheikhetal.,2006). Reguia(2014)hasshowedsomeadvantagesofproductinnovation:
- Growth,expansionandgainingacompetitiveadvantage.Enterprisescanmakethedifferen cebetweentheirproductandmarketwillbeabletoearnprofits.Theresearchandf i n d o u t wayt o makingp r o d u c t moreattractiveb y c o n t r a s t i n g i t s u n i q u e v a l u e anddifference withothercompetingp r o d u c t s Therefore,smallfirmsc a n d e v e l o p theirbusinessesb yexplo itprodu ct in nov ati on effectively,g aini ng acompetitiveadvantage,attractcusto merasuniqueorsuperior.
- Brandswitching:thesuccessfullyproductinnovationwillattractcustomersfromr i v a l brands.Th e introd uction o ft he iP honem ake m ob il e p hone usersto switchfr om Nokia,Motorola,Sony,etc.istheexample.
- First,innovationwillcontainhighcostsandhighr i s k o f failure:W h e n a f i r m engages toinnovateitsproduct,itwillspendalotofcapital,resourcesintoinnovationprocessanditcou ldtaketimesforabusinesswhichanuncertainreturn.
- Second,lostconnectwithotherspartners:thefirmschangethewayoperate,andtherelations hipsbet ween the businessincludin gcu stom ers, suppliers andcou nterpart willb r e a k downtoo.
Yeniyurt(2014),todeterminetheneedsofcommunitieswhicharec h a n g i n g fromtimetoti me,theindustryleadersalwaysneedstomaketheadaptationtomaintaintheeconomy.Bothsma llandlargebusinessplaytheimportantroletohelpthe
13 economysurvivethechangingtimes.Inotherwords,itisnecessaryforabusinesstobeproducti ve,innovativeandingenious.
Creatingnewproducts,enhancingtheexistingoneorimprovingthemanufacturer processarethesamplesrevealedtheimportanceofinnovationinentrepreneurship.Forex amples,abusinesswillhavetoconsidertoexpandtheircurrentproductsandservicetos a t i s f y thechangingprerequisiteoftheirclients.Theyalwaysseektheopportunitytofinda waytomaketheir productbetterthroughtheinnovation.
Firstly,asasmallenterprise,theywillbeabletocompetewithlargecompaniesbyimplementinglowerp ricestrategywhichmeancost- effectiveandqualitative.Inaddition, theyincentivetheiremployeescreatesomething usefulforthecompany.Bothofitmightbeachievedbyinnovation.
Nowadays,theglobaleconomyhasbeentransformedtotheknowledgeeconomy.Att h e b e g i n n i n g , t h e economyc o m m e n c e s f r o m anagriculturale c o n o m y t o t h e p o s t - i n d u s t r i a l / m a s s productioneconomyanditis continuouslydevelopingastheknowledgeeconomy.Technologyingeneralandknowledget echnologyinparticulararethehighlyimportantelements.I t willhelpt o createt h eeducationa la n d i n n o v a t i v e p rodu ct s andserviceswhichwillgainsmorereturnstobusiness,especially inexportation.Itmarkedbytechnologicalinnovationsmovement andtheglobal competitiveforinnovationwithnewp r o d u c t s andprocesses.
TheP r o d u c t i o n – possibilityfrontier( P P F ) curvei s t h e clearlyillustrationf o r t h e i m p o r t a n c e ofinn ovation.Aproduction– possibilityfrontier(PPF)isagraphicalexhibitofc o n c e i v a b l e c o m b i n a t i o n o f twoc o m p o n e n t s whichi s t h e c o n s t a n t resourcesandt h e t e c h n o l o g y ( S a m u e l s o n , 1 9 6
7 ) I n bellowedpicture,t h e A,B , C , D aret h e p o i n t s t o p r o d u c e Itmeansthattheincreasin gtheamountofproductXwillmakethedecreasingthea m o u n t ofproductY.However,byaddingtechn ologicalprogress,thePPFcurvewillmovet o therightandthepossiblepointwillnowbetheEwhi chmeanswecanproducemore.
First of all, knowledge-based innovation open up the ability to improve the products
Theeconomicwillbe abletoproducemoreproductsandservicesthanbefore.Thus,theinnovationinentrepreneurshi pwillalsomaketheincreasetheproductivity,thenGrossD o m e s t i c Productwillincr easetoo.
Limitedresourcesandcapabilities,weakexternalcontacts,underdevelopededucation,t r a i n i n g andespeciallythecostarethedisadvantagesthatallenterpriseshavetoface.Theinvoca tionprocessisrequireinordertosolvethesenegativeeffects.Forexample,throughinnovation,firms mightfindthebestsolution forcostreductionthentheywillbeable toe n h a n c e thefirm’scompetitivenessintheglobalmarkets.Basedonliteratureandca ses t u d i e s ofinnovations,theauthorsillustratesomefactorsdeterminationinnovationwhich willbestatedbelow. ortheprocessesofmanufacturing.Thebasesofnew processandimprovedproductsare theresearchanddevelopment(R&D).Theinnovationprocessnormallystartsfromthe
R&Dactivitiessuchasdemandanalysis,marketsurvey,developingthenewidea,testing itwithassessment,learningandapplyingnewtechnology,designing thenewproduct
.R&Dis consideredasth e keyfact oren cou ra gin gtechnologicalchange(Grunertet al.,
1997).M o s t o f t h e researchclaimt h a t c h a n g i n g i n t e c h n o l o g i c a l i s a necessar yf o r innovationoffirms(Huiban&Bouhsina,1998) Butsomeresearchershaveshowedthat innovationinsmallfirmsisnotprimarilyR&Dbased(LeBarsetal.,1998).Thisstatement seemstobetrueforthispaper.Inparticular,accordingtoVietnam2013SMEs’survey, therearealargeamountofmissingdatabecause R&Dcostcannotseparate clearlyfrom othercosts.
Secondly,thecharacteristicsoftheentrepreneursuchasbackgroundandskillsandarebelieve dtohaveasignificantimpactoninnovation.Thesecharacteristicsareconsideredt o bemoreim portantinsmallfirmsthanlargefirmswhicharecomplexanddifficulttom a k i n g d e c i s i o n s Thesefactorsrelatedtoenterprise'scharacterssuchas:firmsize,firmage,t r a i n i n g cost,a m o u n t o f labor,f i r m asset,f i r m p r o f i t , exportactivity…
Empiricalf i n d i n g s s h o w t h a t y o u n g owner/ manageraremorel i k e l y t o innovatet h a n t h e olderowner/ manager(Mascitelli,2000;Avermaete,Viaene,&Morgan,2002).Moreover,manys t u d i e s h aveemphasizedtheimportanceofowner/ manager’seducationalbackgroundforinnovation.Theysuggestedthatowner/ managerwithpost-schoolqualificationaremorel i k e l y toinnovatethanotherowner/ manageroffirms(Cohen&Levinthal,1989).
Theinnovatingfirmshavetendencytoexpand theirmarketstoearnhigherprofitsf r o m theirinvestment(Teece,1986).Thus,thepositiverel ationshipbetweenexportandinnovationisexpected.
Inmanytheories,networksandcommunitiesisthesourceofknowledge,andsocial capitalistheindispensablefactoroftheinnovation.AccordingtoMolina‐
Moralesetal( 2 0 1 0 ) , theyc o n s i d e r e d t h e r o l e o f socialc a p i t a leffecto n firms’innova tiont h r o u g h processandproductinnovation.
AccordingHyvarinen(1990),thetablebelowdescribesthreeindicatorsofinnovationwhenthey arestudiedbasedonfourdimensionsincludingtechnology,individual,e n t e r p r i s e , marke t/environment.
Table1:TheinnovativenessindicatorsforSMEsindifferentdimensionsDime nsion Input Output Impact
*Developmentofe n t er p r i se I n t er n at i o n a l i z at i o n
Therearewidelyrecog nized descriptionsaboutt h e sm all andm ed i u m enterprises(
S M E s ) Itmightbefoundedintheproducingagricultureinvillage,asmallcoffeeshopatt h e cor nertoaproductionbaseinsmalltownorautomotivepartsmanufacturersellingtod o m e s t i c an doverseasmarkets.Theownermight comefrommanydifferentsocialback- g r o u n d , markets(urban,rural,local,national,regional),differentlevelsofskills,capital andmanyothers.
AccordingtoOECD(2005),Smallandmedium-sizedenterprisesarenon- subsidiary.I n statistics,itisusuallybasedonamountofemployeesandvalueofassetstoclassifyt hes i z e ofenterprises.Thegivennumberofemployeesaredifferentinacrosscountries.IntheE u r o p e a n Union,theupperlimitemployeesofSMEsis250,whiletherearearound500int h e U nitedStates.Smallfirmsaremostlywithfewerthan50employees.Even,thereisalsodefinedas“mic ro”enterprises,withfewerthan10employees.
Accordingtherecentempiricalstudies,inhigh- incomecountries,SMEscontributetoo v e r 55%ofGDPandover65%oftotalemployment.Inmid dle- incomecountries,theyc o n t r i b u t e about70%ofGDPandover95%oftotalemployment.Inlo w-incomecountriesi s over60%ofGDPandover70%oftotalemployment(figure2).
Table3showthatSMEsareanimportantsourceofexportinsomeEastAsia,Africand e v e l o p i n g economiesandOECDcountries.TheshareofexportinmoreindustrializedEastAsian economies(Taipei–56%,China–40%,India–
< 1 % ) O n e importantt h i n g i s thatsmalle n t e r p r i s e s withemployeesmorethan50 havelowerexportpotentialthanmedium-sizede n t e r p r i s e s
Studies:Korea(KimandNugent,1999),India(BadrinathandOthers,1997),M a u r i t i u s (Wi gnarajaandO’Neil,1999),TanzaniaandMalawi(estimatesbasedonWignaraja’sfieldwork), theremainingcountries(OECD,1997).
TheSMEshavesomeadvantagestoadaptsocioeconomic situation– theyconstituteani mport antdyn am i c elementin economy.Becauseofth esmallpro d uc ti o n, theyare
20 flexibleandeasytomakeadjustmenttotheeconomicshock.Theyarealsomoreactive andresponsivetochangesinthemarket,changesintheiractivitiesandproductstomeet marketdemand–itisalsotheinnovationofSMEs Commented[KH3]:TínhnăngđộngcủaSMEs
SMEsplayedanimportantpartintheenhancingpovertyalleviation,especiallyinruralareas.Anoth erpointisnarrowingthedevelopmentgapsamongprovinces,urban,andrurala r e a s Itcreatemorejob opportunitieswithlowcost.Thesavingsolutionandallocationinm a n y areasfromSMRscanmak ealotofoccupationsformanycandidatesinthewholecountry.Especiallyinruralarea,theyalsot akepartinreducingthejobmigrationtotheb i g city.Besides,firmscant a k e advantageso f t h i s localr e s o u r c e s t o operationsa n d c o n t r i b u t e d intheeconomicsgrowth.
Moreover,inordertogainthecomparativeadvantageswithlargefirmsandc o r p o r a t i o n s , goodsandservicesofSMEsmustbediversifiednotonlyinquantitybutalsoi n quality.Th eyentrythenichemarketwhichthelargefirmsskipped.
TheS M E s i s alsocontributioni n i n d u s t r i a l i z a t i o n a n d m o d e r n i z a t i o n p r o c e s s i n V i e t n a m , speedingtheurbanizationprocess,supportingandencouragingthedevelop mento f largeenterprisesthroughtheir networks withtheseenterprises.Confrontingwith tradebarriers,transportcostsfallandglobalization,SMEsarerequiredtocreatetheproducts whichmoreaddedvaluetostayaheadandcompetewithrivalswithlowercost.Thisisthemainreason offirmstoapplyinnovation.
Socialcapital
Theprincipaltheoryaboutthesocialcapitalisthat networksofrelationships.Thisist h e intangibleassetsoffirmswhichcanbeappliedfortheindivid ualorthegroup.Fortheindividuallevel,socialcapitalisone’srelationshipswithothers.AsPortes
(1998) definet h e socialcapitalconsistso f twoelements:f i r s t t h e networko f t h e relationshipswhi challowsi n d i v i d u al st o a cc es s resourcesp o s se s se d b y the ir associates,ands e co n d l y th e q u a n t i t y andqualityofresourcespossessedbymemberofanetwork.Adler&Kwon,200
21 relationships.Definitionsalsovarydependingonwhethertheyfocusonrelationships,thes t r u c t u r e oftherelationshipsorthetypeofrelationshipsbetweenpeople(e.ginformationrelationships,pe rsonalrelations,oreconomicrelationships)
Networksize:Intheliteratureitisoftenassumedthatt h e moresocialrelationsanentreprene urhas,t h e bettert h e entrepreneuri s connected,t h e moreandbetteraccesst h e entrepreneu rsh a s t o informationandotherresources,andc o n s e q u e n t l y t h e bettert h e entrepreneur willperform.Eachindividualcontacto f anentrepreneurcanb e r e g a r d e d asa channelo f communicationb e t w e e n thatentrepreneurandmanyotherindirectcontacts(Ahuja,2000).
Networkbased:Membershipo f organizations,engagementi n v o l u n t e e r activities,c o n v e r s a t i o n s withotherparents.
NetworksandNormsSeparately:politicalefficacy,generalizedtrust,trust ingovernme nt,andoptimism
Thebenefitsofthi s relationshipis accumulatesfromone’snetworkofformalandinfor maltieswithothers(Burt1992).Next,socialcapitalhasbeendefiniteasthevaluewhichorgani zationisexploitingfromeachmemberwhentheyjoiningoforganization,
Accordingtopreviousstudies,socialcapitalisproxybybusinessnetworkingcanleadt o long- termp e r f o r m a n c e Dyer& Singh( 1 9 9 8 ) f i n d s o u t thatfirmn e t w o r k i n g cangen erateasustainablecompetitiveadvantage,relation- specificassets,conductknowledge,andp r o v i d e s u p p l e m e n t a r y resourcesande f f e c t i v e governance.Therefore,b u s i n e s s n e t w o r k i n g canboostthesuper- normalprofit.Watson(2007)findsaninterestingrelationshipbetweenthenetworksandSM Espossibilityofsurvivalandgrowth.SMEs’survivalandgrowthratecan b e bo ost u n t il t h e y gainenought h e optimumnumbero frelationshipsandreducewhenthenetworksarecongested.
Stametal (2014) conducted a meta-analysis of 59 studies to explore the impact of entrepreneurs' personal networks on small firm performance The research focused on four key aspects of social capital: network size, strong ties (relationships with family, friends, and close contacts), weak ties (connections with distant businesses and acquaintances), and structural holes (the degree of connectivity among network contacts) The findings revealed a positive relationship between social capital and the performance of firms, highlighting the importance of personal networks in enhancing business success.
Basedonastudyof1,700newbusinessventuresGermany,BruderlandPreisendorfer( 1 9 9 8 ) givesanempiricaltesto f t h e n e t w o r k s u c c e s s hypothesisthatc o n c l u d e socialcapitalenh ancest h e su ccessf u l start- upf i r m s T h ey co n sid er t h e effecto f networkb y d i v i d e d intothestrong- tiesandweak-ties.
Althoughtherearenoeffectsofhumancapitalo n theamountofsocialcapital,therelationshipbet weenhumancapitalandthesuccessofn e w businessesaresignificant.Inaddition,humancapitalsto ckplaysanimportantroleinordertoimprovetheproductivityandincreasethesalariesaswell.Itisa lsoasourcenoto n l y tomotivateandboostupemployees’responsibilitybutalsotocreateexpen ditureinR&D.Consequently,firmwillbeabletoachievetheirobjectiveseasier.Thus,Richardson(
Relationship between social capitalandinnovation
In today's business landscape, firms increasingly invest in social capital due to its significant impact on innovation Social capital enhances collaborative learning, facilitating the flow of information and knowledge while reducing uncertainty and transaction costs, which fosters collaboration among companies Research indicates that higher levels of social capital can lead to decreased transaction costs, ultimately promoting innovation Various forms of social capital have been shown to influence the innovation process positively, with increased participation and relational assets enhancing the likelihood of innovative outcomes.
Mostrecentresearchemphasizethepositiverelationshipbetweenofsocialcapitalandt h e i n n o v a t i o n p r o c e s s O n t h e otherside,thereares o m e n e g a t i v e i m p a c t a s w ell(Dasgupta,2 0 0 0 ) Firstly,t h e socialnetworksandt h e geographicfactoro f f i r m s has impactedinnovation offirms(Molina‐Morales 2010).Ther o l e ofsocialcapitalis examinedvariousaspectssuchastrust,socialinteractions,sharedvisionandinvolvement oflocali n s t i t u t i o n s i n t h e p r o d u c t andp r o c e s s i n n o v a t i o n o f f i r m s T h e resulta l s o c o n f i r m e d theviewthatsocialcapitalindices,tosomeextent,canrevealtheinnova tion.
Itisunderlinedthatinsocialnetworktheoriesofinnovation,therelationaltoolsism o r e importantthantechnicaltoolsintermsofcreatingcompetitiveadvantages(LengrandandChatrie, 1999).Inspecific,whiletherelationaltoolsmightbeabletoapplyinbothi n t e r n a l andext enaltermoffirms,thetechnicaltoolscanonlybeusedinexternalsidesuchasaddingvaluebyacquiringcom municationtechnologiesandnewinformation.Incaseofs m a l l firms,theyhaverarelynotenoughca pabilitiestoinvestontheirowninnovationsothattheywillhavetorelyontheoutsidesources.M ostofthemalwaystendtofindandconnectwith otherpartners/supplier inordertocollecttheinformationandcreateacloserelationship.Itisobviousthatfirmsalwaysnee dtostrengthentheirrelationshipsinbothi n t e r n a l andexternalenvironment.
Anotherfacti s thatf i r m witha l arg esto ck o fsocialcapitalwilli n c r e a s e r eli ab le i n f o r m a t i o n , helpt o reducemisbehavior,allowmembero f f i r m cansharei m p l i c i t i n f o r m a t i o n , andmoreconveniencenegotiations.Meanwhile,thefunctionofsocialcapitali s th atthevalueandknowledgeofbusinesswillbecreatedbytheintegrationbetweentherelationshipan dthetrusttoeachotherinbothrelationandcreditbetweenfirms.
Hence,socialcapitalenhancethefirm’sinnovation.Whenthespecializationhappensandthepro cessofglobalizationdevelops,itmakesthisadvantagegetsbigger,hencebootst h e essentialbetw eendifferentfirms(Maskell,1999).
Infact,itmightnotnecessaryforfirmtoapplyanyinnovationtypeatanytimeduringi t s circlelif e.Itmightreferonemorethananotherorevenchoosetobothinnovationtypes.A s statedabove,thei nnovationisveryimportantandtheywillalwaysneedmakeresearchc a r e f u l l y beforedecidi ngwhichtypeofinnovationwillbesuitableforthefirm.
Socialrelationshipstogetherwithconfidenceamongworkerspositivelyaffectproductinnovation( T s a i andHuang,2 0 0 8 ) Higherlevelo f beliefi n o t h e r s appearst o b o o s t innovation.Thisis alsoevidencedbythestudyofSubramaniamandYoundt,2005astheyf i n d thatexchangingideasan dunderstandingsamongstaffsstimulateproductinnovationasthehigherleveltheinterractions inacompanyare,thefasterthenewtechnologicali n f o r m a t i o n andunderstandingoc cur.Besides,LeBas et al.
(1998)alsoshowsthattheseactivitiesarealsoassumedt o p r o m o t e trustworthyandefficien tchannelsf o r c o m m u n i c a t i o n a c r o s s demarcationl i n e s o f o r g a n i z a t i o n s I n particular,Nahapieta n d Ghoshal(1998)indicatesthatcommonlanguageassistsinenhanci ngaccesstoindividualsandob t ai ni n g theirknowledge.Furthermore,beliefsalo n g withrecipr ocalrespectandsharedperceptionsamongstaffsalsofosterlearningandinnovationinorganizatio ns(Wuetal.,2008).Hence,theinteractionbetweenemployeesaccelerateproductinnovations.
Despitep u t t i n g a l o t o f effort,t h i s s t u d y h a v e n o t s o l v e t h e e n d o g e n e i t y a m o n g v a r i a b l e s , whicharementionedinliteraturethatcompetitionontheinternationalmark etswouldforceexportingfirmstoinnovatetoremaincompetitiveness;moreover,thee x p o r t i n g f i r m s m a y ‘learnb y e x p o r t i n g ’ a s t h e y areexposedt o a richers o u r c e o f knowledge,expertiseandtechnologythatisoftennotavailableinthehomemarket.
Gender Age High school diploma
Thischapterwillprovideasimplereviewoftheproblemsthatshouldbeconsideredwhenprepa ringastudy ofcommonpoolresourcelikemangroves,theapproachesthatisu s e d inconductingthestudy, adescriptionofhowtocollectdataaswellasdescriptivestatisticso f t h e s e d at a I n a d d i t i o n , s o m e explanationsands u g g e s t i o n s f r o m previousresearchesareincluded.
Inthis study,thedependent variable"innovationactivity"cantakeoneoutoftwovalues“i m p rov i ng exi sting products
”or“ a p p l y n ewprocess”.A s o n e firmcan s i m u l t a n e o u s l y enhanceproductandap plynewprocesstocreatethenewone,orhavenop r o d u c t innovationatall,twovaluesofdepende ntvariablethushavetwolevels:yes/no.T o m e a s u r e n o m i n a l v a r i a b l e s withsuchf e a t u r e s , wecannotu s e t h e O L S , s o t h e multinomiallogi tmodelisapplied.
Multinominal logitmodel
Multinomiallogitmodel(MNL)isappliedtoanalyzetheassociationbetweencategoricalva riablesandotherexplanatoryvariables.Withthismodel,theprobabilitiesthatdifferentpote ntialresultsoftheregressandhappencouldbepredicted,givenagroupo f explanatoryvariables.
� �= 1,2,3,…,𝐽 Thisappliesusuallytoacontext(individual,household,firm,decisionmaker ).The multinomiallogitmodelrequiresvariableshavevariousalternativesandpossiblyacrosst h e i n d i v i d u a l s Someexamples:T h e customerc h o o s e a m o n g stateo f loanaccount:“de fault”,“prepayment”,“active”.Orthechoiceoffinancing:“internalfinance”,“bankl o a n ” , “shareissue”,“bondissue”.Orfirmschoosefromdifferenttechnologies.
Avermaete( 2 0 0 4 ) hasappliedmultinomiall o g i t modelt o analyticst h e p r o d u c t innovationandprocessinnovationinsmallfoodmanufacturingfirms.Thereare177firmswhichare dividedi nto f o u r groups:N o n- in n ova ti v einclu dingfirms havingnonew ori m p r o v e d p r o d u c t i o n T r a d i t i o n a l groupp r o x y f i r m s h a v i n g n o investmento n R&Da c t i v i t y , butthemapplyi ngimprovementfortheirproducts/ process.FollowerandLeaderg r o u p isfirmwhichconductR&Dactivityandhaveatleastoneinnovation intheirproduct/process.
Forthisresearch,themultinomiallogitmodelcanbebelievedofassimultaneouslye s t i m a t i n g binarylogitsforallcomparisonsamongthedependentcategories.Thepurposei s disti nguishedbetweentwocategories:improvementofexistingproductsandapplyingn e w proce ss.Theindependentvariablesare:
- Firmfactors:firmage,export.laborforce,competitive
- Characteristicso f owner/ managero f e n t e r p r i s e s : gender,age,education,highschool
Pr(innovations)=f(GENDER,AGE,FIRMAGE,HIGHSCHOOL,EXPORT,N E T W
O R K SIZE,ASSISTANCE,LABO RFORCE,NE TW OR K P AR TIC IP AT IO N , C
Dataandvariables
A Small and Medium-sized Enterprise (SME) in Vietnam is defined as a business with registered capital not exceeding 10 billion VND (approximately USD 630,000) or a workforce of no more than 300 regular employees SMEs are further categorized into three types: micro enterprises (fewer than 10 employees), small enterprises (10 to 49 employees), and medium enterprises (50 to 299 employees) However, challenges remain in the categorization of SMEs, particularly regarding the capital for production activities and employment, which often show minimal variation.
A survey conducted in 2011 revealed that microenterprises make up approximately 70% of SMEs and include a significant number of household enterprises, while medium enterprises account for only about 6% of the total SME count SMEs represent 97% of all enterprises and are responsible for generating 50% of total employment across various sectors Previous research indicates that the productivity of private sector SMEs is lower than that of state-owned enterprises (SOEs) and foreign-invested firms Additionally, SMEs face numerous challenges, including a lack of financing.
,land,technology,high-qualityemployment,marketcompetitive,technologicallybackward,high transaction costsandespeciallythelackofR&Dandinnovationactivities.Infact,SMEs2 9
Commented[KH5]:CóbổsungdữliệuvềInnovationvàn e t w o r k s ofSMEsVNkhông? arenotfocuson developingnewproductsorapplyinganykindsofinnovation.Onefaulto f SMEsaretoomainlyfo cusingonimprovingqualityofproduct(Phi,2013).Asaresult,S M E s don’thavethecompetitiveadvan tagestosurviveinamarket.
A survey was conducted involving over 2,800 observations from small and medium-sized private enterprises in Vietnam, covering ten provinces including Ho Chi Minh City, Hanoi, and Hai Phong The study utilized four questionnaires: Main (firm-level), Employee (sub-sample), Economic accounts, and Exit The sample comprised various ownership types, including officially registered households, private firms, cooperatives, limited liability companies, and joint-stock enterprises Notably, family business households represented the majority, accounting for two-thirds of the enterprises included in the data.
SMEs’survey2013reportisturnedaroundseveraltopics:Internationaleconomicc r i s i s , Enterprisegrowthanddynamics,Bureaucracy,Informalityandinformalpayments,I n v e s t m e n t andaccess tofinance,Production,
Between 2011 and 2013, there was a slight increase in firm ownership structure, rising from 2,419 firms in 2011 to 2,461 in 2013 Different legal forms experienced varying changes during this period Private sole proprietorships, limited liability companies, and joint stock companies saw an increase in their numbers, while household enterprises and partnerships/collectives/cooperatives experienced a decline Specifically, the number of household enterprises decreased from 1,571 in 2011 to 1,553 in 2013, whereas limited liability companies grew significantly from 498 to 546.
Inaddition,themajorityoffirmsizeisthemicrocompanywhichhavelessthan10e m p l o y e e s Thereisasignificantreducefrom1,763in2011to1,660in2013.Thenextf i r m sizei ssmallcompanywhichincreasefrom566to614.Thelastoneisthemediumc o m p a n y whic halsohavearisefrom132to145.
Inensurefordatacollectionobjectively,thesurveywasconductedindifferentregionso f Vietn am,f r o m t h e N o r t h t o t h e S o u t h side.T h e m a j o r i t y o f surveys a m p l e s werec o l l e c t e d inHoChiMinhCity(24%),NgheAnandHaTay(14%),HaNoi(11%)andPhuT h o (10%).Theot herlocationssuchasHaiPhong,QuangNam,LongAn,KhanhHoaandL a m Donghavelesssa mplesthantheregionabovebuttherewerestillhaveatleast3samplesineach.
Basedo n t h e resulto f t h e survey,3 1 % o f t h e s a m p l e wascollectedi n Food& Bev eragesfield.TheFabricatedMetalfieldwasthesecondplacewhichhad17%ofsamplec o l l e c t e d ThenextsignificantsectorsareWood(10%),Furniture(8%),RubberandPlasticandApparel(5%).Th eothersareminoritysectorswhicharedescribedinthetableabove.
Smaller10billionVNDLabor force Over300employees Smaller300employees
Easytoapplyinnovation.C r e a t i v e andadapttomarketf l u c t u a t i o nLackofbureaucracyD ep end i ng ontheheadofe n t e r p r i s e s ofmanagement.
According to Greenhalgh and Rogers (2010), innovation is defined as the application of new ideas to products, processes, or other firm activities that enhance the value of products There are two types of innovation: production innovation and process innovation This paper focuses specifically on product innovation, which involves the introduction of new products, improvements in quality, or redesigns of existing goods and services If firms have not introduced anything since the last survey or within the previous two years, their value for applying new processes is considered 0 However, if they successfully implement at least one new process, the value is marked as 1 Additionally, innovation can reinforce existing products and lead to significant improvements or changes in specifications If a firm delivers major improvements or alterations to existing products since the last survey or within the two-year period prior, they also receive a value of 1, while others that do not achieve this are assigned a value of 0.
According to Putnam (1993), social capital encompasses the relationships and networks that enhance business convenience and positively impact firm performance This research, based on a survey of SMEs, categorizes the effects of social capital into four key aspects First, network participation is treated as a dummy variable, where a value of 1 indicates involvement in one or more networks, and 0 indicates otherwise Second, network size is classified into four groups based on regular contact: business individuals within the same industry, those in different industries, bank officials, and mass organizations Lastly, the number of assistants is measured by the total instances of assistance received related to business operations.
The characteristics of owner/managers significantly impact innovation in small and medium-sized enterprises (SMEs), as highlighted by Mascitelli (2000) Due to the unique traits of SMEs, owner/managers often engage directly in major business decisions, including the implementation of innovative strategies Research indicates that the age of an entrepreneur negatively correlates with innovation, while extensive experience is a crucial indicator of innovative capability Younger owner/managers tend to exhibit a greater incentive for innovation Additionally, gender plays a vital role in influencing innovation activities within SMEs; male owner/managers are generally expected to have a higher motivation to pursue innovative practices compared to their female counterparts.
Firmageisrepresentfo rthefirm’ssurvivalabilitywhenitsuffermanyfinanciald i f f i c u l t i e s andcutthroatcompetition.Wealsoexpectedapositiverelationship.Hence,theinnov ationcouldmakefirmsperformbetterthanayoungerone(Girmaetal.,2008).
Theknowledgeandexperiencethatisalsoneededforinnovation.Thisisapprovedbym a n y s t u d i e s suchasR o m i j n andAlbaladejo,2002.H e gavet h e h y p o t h e s i s t h a t a m a n a g e r / o w n e r whoispostgraduatewillbemoreeagertoinnovatethanothers,sowealsoe x p e c t e d a p o s i t i v e association.F u r t h e r m o r e , wea l s o u s eH i g h schoolvariable,i s a d u m m y vari ablewhichvalueequal1ifowner/managerfinishedhighschooland0foro t h e r s
Thefirmsizehavemanyargumentabouttheinfluenceoninnovation.Someresearchersil lustratedwiththepositiverelationshipthatfirmswithridiculousbudgetcans p o n s o r innovati veactivitiessuchasFrits(1989).Besides,largefirmshavemanywaystoi m p r o v e comparativea dvantagesuchastakingover,merging,acquiringandthey havealargermarket.Ontheopposite,therealsohaveoppositeargumentsbyMartinez-
Ros(1999)thatsmallfirmswithlesshierarchycanquicklyresponsetoanychangeofmarket.Inthisre searchfirmSize ismeasuredbythenumberofemployeesofenterprises.Inthispaper,
35 weusetheamountoflaborforceproxyforfirmsize.Thismentionstheefficientofhumancapitalonfirm’ sperformance.Althoughthecontributionofindividualisinappreciable,theaccumulatedinfluenceofa lllaborforceisconsiderable.Theircontributionindevelopingn e w productcanbediscoveredb ygeneratingideas,developing,tryingandexploringinmarket.T h e skillsandknowledgeo f e mployeesj u s t v a l u a b l e f o r specificfirms.Forinstance,previousauthorshaveinvestigatedthe waysetuptheemployeesintoteamonthehighestsuccessrate.(Sandberg1986).
The advantages of export are well-documented, with numerous studies indicating that firms engaging in international trade experience increased capital gains By expanding their markets overseas, companies not only compete in foreign markets but also enhance their competitiveness in the domestic market This necessitates the promotion of various business aspects, such as adopting new technologies and improving product quality and design As firms enter international trade, they also benefit from various advantages, including receiving technical assistance from foreign customers to enhance production processes Consequently, a positive relationship between innovation and export activity is anticipated.
TheassumptionsofTeece(1986)s h o w innovatingfirmsearnhigherreturnsfromtheirinvestm entwhenthayexpandintoo t h e r markets.Theexportvariablehadvalue=1iffirmshaveanypro ductisexportedand
Togaincomparativeadvantages,innovationisoneofthesolutionwhencompetitivel e v e list oohigh.ButaccordingSchumpeter(1942),competitionimprisonfirm’sprofit,sof i r m s d o n o t eagert o carryo u t i n n o v a t i o n i n h i g h l y competitiveenvironment.T h e c o m p e t i t i v e b a r r i e r i s o n e o f t h e problemso f S M E S Meanwhile,S M E s preferredt o i n n o v a t e i n a competitivemarketwithoutentry’sbarrier.Itsv a l u e e q u a l 1 i f o w n e r / m a n a g e r facedcompetitioninhisfieldofactivityand0ifhedidnot.
Descriptivestatistics
Among 2341observations,thereare409improveexisting product,whilenumberofe n t e r p r i s e applynewprocessjust155,associatedwith16.64% and6.4%oftotal sample.T h i s tableaboveshowsthesharplydeclineinimprovetheexistingproduct.
Thetable7illustratemostoffirmsdonotapplyinnovation,1866firms.Toremain,thereare 324enterprisesapplyjustimproveproductanddonotcreatenewprocess,70e n t e r p r i s e s inventingnewprocessbutdonotcarryoutimproveproduct,just85firmsuseb o t h i m p r o v e productandnew process.Thisresultisalsotruewiththree- fourthsofthep o p u l a t i o n workinginanagriculturalareaeconomylikeVietnam.
Variable Mean Std.Dev Min Max
Regarding“age”variable,theaverageageofowner/ manageris46.5.Theyoungestowner/managerisjust19yearsold.Andtheoldestowner/ manageris94yearsold.
Regarding“firmage”variable,theaveragebusinesslifetimeis15yearsold.Upto2 0
Intermofsizewhichismeasuredbytheamountofemployees– the“laborforce”v a r i a b l e , theaveragenumberoffirm’semployees15employees.Maxi mumamountoflaboris1700andminimumis1.Thefirmsseemhavetendencytoexpansionthesizew hent h e maximumamountoflaborin2011justabout500labors.
Fort h e “humanc a p i t a l ” v ar i ab l e , “networksi z e ” variable,m a x i m u m t o t a l p e o p l e w h o m thefirmsregularcontactwithis1437andtheaverageis37people.Theaverageco ntact“assist”totheoperationoffirmsin2012is203andthemaximumis9073.
Themaleowner/managerhavehigherpercentagesthanthefemaleowner/ manager,with60%than40%.Thetableisillustratedthe percentagesoffirmswhichhaveproductexportedistoosmall– just6.4%.Butthedomesticmarkethavethehighlycompetition,8 7 7 6 % therespondentisa nswertheyfacedthehardcompetitionintheirfieldofactivity.
Thenumberofowner/ managerhavefullyeducationisnothigh.Thepeoplewhofinisht h e highschooljustmorethan23%.M eanwhilethepeoplewhohavetheuniversitydegreei s lower–18%.
The“networkparticipation”showthatjust8.27%firmsismemberofoneormoreb u s i n e s s associations.
RegressionResults
Therearen i n e o u t o f tendeterminantsh a v i n g s i g n i f i c a n t i m p a c t s o n i m p r o v i n g p r o d u c t activitye x c e p t t h e assistancev a r i a b l e T h e summaryo f regressio nresultsi s presentedinTablebelow:
Table11:Multinomiallogisticresult innovation=1( Im p r ov eproduct=1,n ew pr ocess=0) innovation=2( Im p r o v eproduct=0,n e w pr ocess=1) innovation=3(Improve p r o d u ct =1,new process=1) gender 0.269** -0.184 0.508**
FiguresinparenthesesareWaldstatistics.***Significantat1%,**significantat5%,*significantat10%. Source:Author’scalculation
Thegenderhaspositiverelationshipwithimprovingproductactivityandwhenfirma p p l y bothofinnovationtypes.Thisshowsthemaleowner/ managerwouldhavehigherrateofapplyinnovationthanfemaleowner/manager.
Ageofowner/ managerhavenegativeimpactonapplyingnewprocess.Thismeantheo l d e r entrepreneurtendsto benegativelyrelatedtotheinnovationactivityoffirms.Thisresultisalsoreasonablewithopini onsofmanyresearches(Mascitelli,2000)
T h e youngerowner/ managerhavemoreenthusiasticandeasiertoapproachanewthingr a t h e r thantheelderly. Andtheircommitmenttimeislongerthanolderone.Thereforetheyh a v e moreincentivetoinn ovate.However, thereistheoppositeargumentthattheoldowner/ managerarehavemoreknowledgeandexperiencethanyounger.Theconclusion hereisthe commitmenttimeandenthusiasm willdeterminetheproductimprovementofe n t e r p r i s e s
Theprobabilityofinnovationisnegativeassociatedwithfirmage.Thisresultshowp r o b a b i l i t y ofproductinnovationdecreasewhenthefirmlifeisincreasing.Theirresultsissimilarw hentheyprovethatyoungfirmsaredisposedtoinnovate,whereas,theoldestonesmotivatetoinnovatelesst hantheentrants.
Highschoolhasthenegativeimpactoninnovation’sprobabilitywhenfirmapplybothtypesofinnova tion.Someofpreviousstudiesalsodonotshowapositiverelationshipbetweenth e ed ucationallevelo ft h e own er/ m anager o f e nt e r p r i s es andt h e inn ov ati o n (Diederenetal.;Romijn&Albaladejo,2002).
Exportactivityisalsohavethepositivelyaffectinnovation.TheresearchofBraga&W i l l m o r e (1991)isalsoprovethesameresultlikethat.Itillustratethefirmswhichdob u s i n e s s withoverseafirmswouldneedmoreincentivetocarryoutinnovationthanfirmswhichtradedomesti callyonly.
Thenumberofemployeeshasjustthepositiveaffectonthefirmwhichusei m p r o v e m e n t andapplynewprocess.Thisiscoincidencewiththeexpectedsigntable.TheSchumpeter(1942) andMartinez-
Ros(1999)explainedthatlargerfirmswiththeprofusefinancialandlaborwouldbeinvestmoreint oinnovation activities.Thisresultmeanthatt h e moreemployees,thefirmswillhavemoreincentivetoa pplyimproveproducts.Buta n o t h e r importantpointisthatsmallfirmshavelimitedchoicestoex pandthescale.Sothatt h e solutionstheychooseismerging/acquiring.
Competitivelevelh a v e t h e p o s i t i v e r e l a t i o n s h i p withp r o d u c t i m p r o v e m e n t F r i t z ( 1 9 8 9 ) isalsoprovethatintheseverecompetitionenvironment,firmsneedmoreincentivet o innovateforsurvival.Butthisisnottheuniquesolutionsforfirmstoovercomedifficult.T h e y mayredu cingpriceandcreatingmorepromotionsevents.
Manypapersprovedthatthesocialcapitalplayedanimportantrolefortheinnovationprocess.F irstly,thenetworkparticipationhavethepositiveeffecttotheproducti m p r o v e m e n t Thememberinbusinessassociationwillreceivemoresupportthanthenon- members.Therearenotonlythefinancialsupport butalsoth erelationshipwithoth er me mbers.ThegovernmentcontrolthemajorityofformalbusinessnetworksinVietnamf o r poli ticalr e a s o n s Forexample,whent h e n e w lawso r r e g u l a t i o n implements,t h e n e t w o r k membersu s u a l l y gainsp o l i t i c a l b e n e f i t s t o t h e f i r m rathert h a n t h e b u s i n e s s advantages.
Itisalsoobviousthatthenetworkparticipationwouldbringmoreprogressiveresultt h r o u g h thenetworksizemuchbetterthanthenetworkintensity.Inotherwords,forthen e t w o r k assistance,thequality;suchasthehighvaluableinteractionortimelyactionwithdailyo p er a t i o n o f t h e company,i s alwaysm o r e significantthant h e q u an t i t y ; s u c h asfrequencylowval uablecontacts.
Secondlythenetworksizealsohavethepositiveeffecton theapplyingnewprocess.T h i s meanthesmallfirmwiththelimitresourcesneedtotakeadvantageofex ternalsourceso f informationandcapital.Theyusetheirrelationshipandsocialrelationtoreduce theircost.Theyneedtodirectcontact andmaintaintheconnectionwithpartners,suppliers, customersandevenreceivedtheassistsformbusinessassociations.
Thenumberoffirmsapplyingthenewprocessissmallthatcanbeexplainbytwomainreasons.Firs tly,thecustomerjustneedtheuniquegeneralproductwhichusefulwiththem,d o n ’ t needanyinn ovativeproductisrequired.Next,firmsdon’thaveenoughresourcesandsuitableinnovativeone toapplyingnewprocess.
Marginaleffects
Afteranestimation,amarginaleffectofanindependentvariableshowasapredictionfunction. Fordummyvariables,marginaleffectrelatestodiscretechangeintheprobabilityo f eachoptio nhap pensfromzerotoone inresponse toaunitincrease ofexplanatory v a r i a b l e ; alloth erv a r i a b l e s b e i n g equal.H o w e v e r , f o r continuousvariables,marginal
42 effectrelatesto instantaneousrateo f chance.Itmeasuringt h e a b s o l u t e c h a n g e o f independentvaria blewhenoneunitincreaseofdependentvariables.
Whennonewprocessis appliedandfirmsjustapplyproductimprovem ent,i ftheo wner/managerismale,theproductimprovementwillincreaseby3.4%.
Agehasapositiveeffectontheinnovationthroughwhenowner/ managerolderthan1years,theprobabilityofinnovationactivitiesreduce0.05%.Theyoungerleaderhave morem o t i v e forinnovation,andonemorereasonistheymaylackofskillsorexperienc einh a n d l i n g alltheissuesofoperations.
Thecompetitivehavestrongcorrelationwiththeinnovationactivities,thustheresulth a v e t hesignificant.Whenthecompetitiveexisting,theprobabilityofapplyinnovationwillincreas ing7.5%incaseimprovingproductonlyandtheprobabilityofhavingbothtypesofproducti nnovationwillincrease2.3%.Theprobabilityevenincreasing1.2%ifj u s t newprocesshasa pplied.Thisisthekeypointforpolicymakers,wecanincreasingthe
43 innovationthroughbytheincreasingcompetitiveinthemarket.Therearemanywaytos o l v e thisproblem.Thegovernmentcouldreducethemonopoly,reducethesupport.
Theincreasingnumberofemployeeshasreallyincreasedthe probabilitytoimprovei t s product.Whenfirmsemploymore1person,theproductimprovement willincreaseby0 0 2 % Thi sissimilarwith1 0 0employeesis recruited,t h e productimpro vementwilli n c r e a s e by2%.Thisonlyfeasiblewithlargerfirms,becausesmallfirmswithu nder 500e m p l o y e e s , itverydifficulttoincreasingalargeamountofworkforceatonetime.
Whenfirmshavetheexportactivities,theratewillincrease9%incasejustproducti m p r o v e m e n t applied.Thisisbigprobabilitywhichencouragefirmstoinvolveinexport.T h r o u g h o u t experiencegainfromexportingintheglobalmarket,theenterpriseswoulda c q u i r e thecomparativeadvanceinforeignmarkets.
1 4 8 % whena p p l y i n g productimprovementandn e a r l y 4% whena p p l y b o t h typeso f i nnovation.Thisrepresentthroughthe“networkparticipation”variable.Thismeanthej o i n i n g i n t o businessassociationisverynecessaryforfirmswhoarelookingforwaystoi n n o v a t e theirproduct.
Main finding
AfewstudiesrevealedtherolesofsocialcapitalinSMEs’innovationattransitionecon omies.Thispaperonceagainconfirmstherelationshipbetweensocialcapitalandp r o d u c t i n n o v a t i o n Besidessocialc a p i t a l , gender,firm’sage,graduationf r o m h i g h - school,laborforce,exportandcompetitionlevelh a v e importantimpacto n p r o d u c t i m p r o v e m e n t Finally,characteristicofcompanyownersormanagersisalsoprovedtoaff ecttheinnovation.
Social capital significantly impacts product innovation, with entrepreneurs benefiting from network participation Membership in business associations fosters innovation and collaboration among members, facilitating business opportunities and mutual assistance Additionally, these associations provide updated information on new business regulations While having a robust network aids in overcoming challenges, the precise impact of network size on innovation remains unclear A larger relationship network correlates with increased profitability, yet the extent of assistance measured by frequency of support from networks and its effect on SME performance is not well-defined This ambiguity contributes to the limited popularity of business associations in Vietnam Therefore, the Vietnamese government should invest in establishing and developing business networks to support enterprises in both their daily operations and long-term strategies.
Thee m p i r i c a l resultsstatet h e p o s i t i v e effecto f gender,age,export,firmsize,c o m p e t i t i v e o n i n n o v a t i o n behavioro f firms.I n reality,t h e characteristico f ownero r m a n a g e r isregardedasapotentialelementsforthedevelopmentof
Recommendations
Withthepointouttheimportanceofinnovationforthefirm’sdevelopment,thisstudyresultsugges tsomepoliciesthatthepolicymakerscanapplybasedonfirm’sbusinessn e t w o r k a ndsomedeterminantofinnovationbelow:
Firstofall,MinistryofIndustryandTrade(MIT)shouldsupporttheestablishmentan doperationofbusinessassociationsinspecificindustry.Theseassociationscanincreasef i r m ’ s networkthroughactivitieslikeconnectingproducersandsuppliers,supportingands h a r i n g in formation,organizingmoresettlements,fairs,workspaces.Alltheseadvantageswillbeabletohelpent erpriseshavemoreexperienceandlearnnewtechniquetoimprovetheirproducts.
Secondly,V i e t n a m T r a d e P r o m o t i o n A g e n c y s h o u l d motivateexportactivitie st o V i e t n a m e s e e nt e r p r i s e s Besides,t h e y s h o u l d havet r ad e p ol i ci es whichp r o m o t e l o ca l p r o d u c e r s toexporttheirownproducts.
Finally,governmentshouldrestrictthemonopoly,createthecompetitivemarketwheref i r m s ar egivenfreeaccessto.Thus,firmswillbeencouragedtocreatebetterproductstogainmoremarkets hare.
Therearesomelimitationsofthisresearch.Duetolackingdata,dependentvariablesc o u l d n o t capturet heq ual ity aswellasth eq u an t i t y off i r m innovation A c c o r d i n g to l i t e r a t u r e review,therearemanyothervariableswhichmayhaveeffectoninnovation,butt h e s e var iablesarenotfullycollectedonSMEssurvey
Thisresearchcannotmeasuretheendogeneitybetweenvariablesyet.Thisendogeneityi s duetothe factthatcompetitionontheinternationalmarketswouldforceexportingfirmst o innovatetoremainco mpetitiveandtheexportingfirmsmay‘learnbyexporting’asthey
46 areexposedtoarichersourceofknowledge,expertiseandtechnologythatisnotoftena v a i l a b l e inthehomemarket Infurtherresearch,scholarsshouldfindnewapproachestos o l v e this matter.
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CORRELATIONMATRIX gender age firmage highschool export lf netsize Assit competitive netpar gender 1 age 0.1978*** 1 firmage 0.0679*** 0.3389*** 1 highschool 0.0513* 0.0832*** 0.1301*** 1 export -0.0339 -0.0662*** -0.0283 -0.1137*** 1 lf -0.0941*** -0.0789*** -0.0225 -0.1306*** 0.26*** 1 netsize -0.0936*** -0.0945*** *-0.0441* -0.0715*** 0.071*** 0.1146*** 1
REGRESSIONRESULTOFMULTINORMINALLOGITMODEL innova Coef Std.Err z P>z [95%Conf Interval]
0 (baseoutcome) 1 gender 0.2691743 0.132897 2.03 0.043 0.008701 0.529648 age -0.0024213 0.006226 -0.39 0.697 -0.01463 0.009783 firmage -0.0053309 0.0069296 -0.77 0.442 -0.01891 0.008251 asset 7.15e-08 3.89e-08 1.84 0.066 -4.67E-09 1.48E-07 highschool -.2251087 0.1599585 -1.41 0.159 -0.53862 0.088404 export 6317541 0.2240837 2.82 0.005 0.192558 1.07095 netsize -0.0006331 0.0015791 -0.4 0.688 -0.00373 0.002462
2 gender -0.1840318 0.2606479 -0.71 0.48 -0.69489 0.326829 age -0.0315283 0.0130479 -2.42 0.016 -0.0571 -0.00595 firmage 0.0131797 0.0121837 1.08 0.279 -0.0107 0.037059 asset 1.45e-07 5.00e-08 2.89 0.004 4.66E-08 2.42E-07 highschool -0.1084574 0.3177411 -0.34 0.733 -0.73122 0.514304 export -0.3252307 0.5951888 -0.55 0.585 -1.49178 0.841318 netsize 0.0036808 0.0013571 2.71 0.007 0.001021 0.006341
W PROCESS y=Pr(innova==1)(predict,p,outcome(1))
=0.13052326 variable dy/dx Std.Err z P>z [95% C.I.] X gender 0.0274107 0.01432 1.91 0.056 -0.00066 0.055476 0.606515 age -0.0001946 0.0007 -0.28 0.781 -0.00157 0.001178 46.1629
Assistance 0 0.00001 0.11 0.912 -2.7E-05 0.00003 199.976 lf 0.0001332 0.00016 0.85 0.395 -0.00017 0.00044 15.5778 networkparticipation 0.1722748 0.03475 4.96 0 0.10416 0.24039 0.082726 competitive 0.0807157 0.01673 4.83 0 0.047935 0.113496 0.884269 (*)dy/dxisfordiscretechangeofdummyvariablefrom 0to1
R O V E D PRODUCT y=Pr(innova==2)(predict,p,outcome(2))
=0.02640289 variable dy/dx Std.Err z P>z [95% C.I.] X gender -0.0071119 0.00698 -1.02 0.308 -0.02079 0.006561 0.606515 age -0.0008707 0.00032 -2.73 0.006 -0.0015 -0.00025 46.1629
Assistance 0 0 0.45 0.655 -7.00E-06 0.000011 199.976 lf -0.0000488 0.00011 -0.45 0.652 -0.00026 0.000164 15.5778 networkpar ticipation 0.0190165 0.01538 1.24 0.216 -0.01113 0.049164 0.082726 competitive 0.0145224 0.00787 1.84 0.065 -0.00091 0.029956 0.884269 (*)dy/dxisfordiscretechangeofdummyvariablefrom 0to1