Microsoft Word 00 a loinoidau(moi thang12 2016)(tienganh) docx 50 Tang Due Au A PRIMARY RESEARCH ON OPEN INNOVATION ACTIVITIES OF SMEs IN VIETNAM Tang Due Au University of Foreign Language Studies, Th[.]
50 Tang Due Au A PRIMARY RESEARCH ON OPEN INNOVATION ACTIVITIES OF SMEs IN VIETNAM Tang Due Au University of Foreign Language Studies, The University of Danang; tdau@ufl.udn.vn Abstract - Open Innovation (OI) is a new term in the literature of business administration Although OI studies have been widely done in developed or newly industrialized countries, not many are observed in developing economies like Vietnam An analysis of quantitative data collected from a survey of 50 enterprises, in both manufacturing and service sectors in Vietnam in this study presents an overview of the adoption of OI activities in the Vietnamese context It is observed that over thirty years of Doi Moi adoption, more and more enterprises in Vietnam conduct OI activities along with its accelerative process of integration into the global economy Venturing seems a dominant practice while foreign-invested firms are more likely to have more OI activities than the domestic ones Implications from the analysis can help business partners in setting their strategic direction for more competitive capability in the new business context Key words - Closed Innovation; developing country; Open Innovation; SME; Vietnam Introduction In the context of the knowledge-based economy, cooperation and integration have been prioritized trends The cooperation among business actors becomes significantly essential because of the global economic crisis One of the reasons is that the connectivity is considered the driver or framework for innovation (Dutta & Lanvin, 2013) Also, the engagement into global economy allows firms to get access to foreign exchange flow where their interest rates are lower than ones in their domestic markets (Ghosh & Chandrasekhar, 2009) Partnerships among stakeholders and among nations can help developing countries to limit their drawbacks Developing countries can get access to technical infrastructure and financial aids to support their development stages, ranging from economic to educational development Enterprises are motivated to reform their current business models to adapt into the business changes One century ago, most of innovative ideas were brought about by innovative individuals, imitators and Research and Development (R&D) departments of large-scale companies (Chesbrough, 2003) In the present, however, innovative ideas come from different sources, including customers, suppliers, governments, competitors and academic institutes An innovative business model with few boundaries and more linkages is of urgent need Chesbrough (2003) introduced a new term of business model “Open Innovation” that satisfies the rising global demands for outbound connectivity SMEs have played an important role in the national sustainable development The world’ enterprises are dominated by the SME sector and Vietnamese ones are not exceptive According to the Business Results of Vietnamese Enterprises in 2014 (General Statistics Office, 2016), about 98% of enterprises in Vietnam are micro, small and medium enterprises In particular, the number of enterprises having less than 10 laborers accounted for 67.5% of total enterprises, the enterprises having from 10 to 49 laborers made up nearly 25% of total enterprises and about 5.5 % of total enterprises were the enterprises with from 50 to 199 laborers However, OI literatures that focus on SMEs have been under-researched (Vrande et al., 2009; Lee et al., 2010) OI studies in developing countries are under-researched (Lee et al., 2010) Therefore, it is worth considering OI research in various industries and countries in order to “determine the frequency and importance of various practices and context factors” (Huizingh, 2011, p.07) This study aims to fill these research gaps by exploring the OI activities in SMEs’ context in a developing country – Vietnam Regardless of the dominance of SMEs, by number, in the business sector, SMEs face some key obstacles, such as lack of financial and human resources Research results try to identify the important potentials of OI activities in helping low technologybased enterprises to decrease their insufficient resources by combining between internal and external resources (Vrande et al., 2009) Theoretical Background 2.1 What is Open Innovation? The term “Open Innovation” is described as an innovation model in which both internal and external sources including technology and knowledge are involved in the process of creating and commercializing new products, services or processes (Chesbrough, 2003) OI has two main dimensions including inbound and outbound Open dimension Inbound OI refers to the transfer and use of external ideas and technologies into the firm, whereas outbound OI refers to the transfer of internal sources to external firms (Chesbrough & Crowther, 2006) In summary, OI model aims to build up an innovative business environment in which all business stakeholders have been given as many as opportunities to develop their initiatives OI is different from Closed Innovation in many principles, ranging from human resource, mode of production to profit-making ways (Table 1) One of the most important characteristics that distinguish OI from Closed Innovation is that the OI encourages firms to search for appropriate outside partners and take advantage of strengths available in surrounding businesses rather than relying on inside sources Innovation processes are done internally in Closed Innovation model; however, OI encourages enterprises to engage with external partners to most parts or stages of innovation process ISSN 1859-1531 - THE UNIVERSITY OF DANANG, JOURNAL OF SCIENCE AND TECHNOLOGY, NO 12(109).2016 Table Contrasting principles of Closed Innovation and Open Innovation Closed Innovation The smart people in our field work for us; To get profit from R&D, you have to discover it, develop it, ship it by your own; If you discover it ourselves, we will get it to market first; The company that gets an innovation to market first will win; If we create the most and the best ideas in the industry, we will win; We should control our innovation process, so that our competitors don’t profit from our ideas Open Innovation Not all smart people work for us We need to work with people inside and outside our company; External R&D can create significant value; internal R&D is needed to claim some portion of that vale; We don’t have to originate the research to profit from it; Building a better business model is better than getting to market first; If we make the best use of internal and external ideas, we will win; We should profit from the others’ use of our innovation project, and we should buy others’ other intellectual properties whenever it advances our own business model Source: Chesbrough, H (2003) 2.2 Open Innovation in SMEs Most OI studies in SMEs are investigated in European Countries or The USA (Vrande, et al., 2009) Lee et al., (2010) has so far attempted to empirically study OI in South Korea Their investigation showed the current conditions of innovation activities among Korean SMEs and emphasized the role played by networking as one of important factors to facilitate the innovation capabilities (Lee et al., 2010) Because of the financial and technological constraint, OI can help SMEs to capture advanced technology and financial resources form international market Research Questions and Method 3.1 Research Questions The objective of the research is to provide an overview of OI application in the context of Vietnam Two main research questions are addressed in this study: a What kinds of OI activities that SMEs in Vietnam have conducted? b How different the application of OI activities in SMEs is? 3.2 Research Methodology For the purpose of this research, we choose SMEs in manufacturing and services sectors in Ho Chi Minh (HCM) City for our sample Manufacturing and service industries are appropriate for this investigation because of the wide use of knowledge-intensive technologies for production processes (OECD, 2005) HCM City is 51 favorable location for the research because of the two following reasons: (1) the city hosts the most SMEs in the country, about 34 % in 2014 according to the size of capital resources (General Statistics Office, 2016); (2) one of two national science parks, Saigon Hi-tech Park, is in Ho Chi Minh City Saigon Hi-Tech Park also launches Research Laboratories with financial support from various sources Therefore, HCM City provides an appropriate setting for examining the research questions A structured questionnaire was issued for collecting the data in this survey To construct the survey instrument, existing scales from previous studies were extracted and adapted OI variable is measured with eight items which derived from Vrande et al., (2009) These items are (1) venturing; (2) outward intellectual property (IP); (3) employee involvement; (4) customer involvement; (5) external networking; (6) external participation; (7) outsourcing R&D; (8) inward licensing of IP A seven-point Likert-type scale is used to measure these items The respondents are asked to rate each item, ranging from (the lowest) to (the highest) Questionnaire survey is used to collect data Questionnaires, in both English and Vietnamese, were emailed and mailed to a total of 150 high-ranking staff in SMEs A gift and a summary of research results are promised to send out after the research completes in order to increase the response rate Three weeks following the survey delivery, reminder letters were sent out to nonrespondents A total of 55 surveys were completed and returned Five questionnaires were ignored because they were from large-sized enterprises Data Analysis 4.1 Sample Description Table presents the characteristics of the research sample In terms of ownership, 50 percent of participated enterprises are private ones State and foreign invested enterprise account for 24 and 26 percent, respectively Enterprises with 50 – 299 laborers account for up to 80 percent Manufacturing and services enterprises account for 44 and 56 percent, respectively Accountants account for about 45 percent of all participants, followed by 24 percent of project managers Management board and secretary make up the same percent of around percent when engineering and sale executives contribute to the remaining percent In terms of experience, respondents claimed that they had experience in their firms over years and to years account for the same percent (34 percent) Respondents with experience from months to year and from year to years share the same percent (8 percent) Given the tenures as well as the working experience of respondents, the research data is reliable 4.2 Results and Discussion Table shows the average score of eight OI practices in three different types of enterprises It is observed that venturing is the dominant innovation activity Customer involvement and external networking are significantly higher than average level, whereas outward IP, inward IP and outsourcing R&D are underrated Table also 52 Tang Due Au provides, based on the types of enterprise, the differences in innovation practices We can see each type of enterprises conducts OI activities at different levels The survey shows one difference between Vietnamese and foreign enterprises Overall, foreign invested enterprises conduct more innovation activities than private and state ones Foreign enterprises care much about R&D and technology exchange activities in which Vietnamese not evaluate highly The data also indicates differences among state and private enterprise In the one hand, state enterprises conduct more venturing, external networking, external participation and outsourcing R&D than private ones do; on the other hand, the remaining innovation practices conducted by state enterprises achieve less score than ones conducted by private ones Table Characteristics of the sample Characteristics Number of enterprises Percentage (%) Ownership Private enterprises 25 50 State enterprises 12 24 Foreign enterprises 13 26 10 – 49 (Small) 10 20 50 – 299 (Medium) 40 80 Manufacturing 22 44 Service 28 56 50 100 invested Size Industry classification Total for characteristic each Table OI application in Vietnam’s SME Total Foreign invested enterprise Private Enterprise State Enterprise Total Mean Std Deviation Technology exploitation Venturing 50 5.04 4.83 5.7 5.18 1.063 Outward IP 50 4.00 3.92 3.60 3.88 1.438 Employee involvement 50 4.92 4.40 4.08 4.46 1.265 Customer involvement 50 5.61 4.88 4.33 4.94 1.376 External networking 50 5.30 4.56 4.83 4.82 1.155 External participation 50 4.69 4.24 3.41 4.40 1.161 Outsourcing R&D 50 4.00 3.16 3.41 3.44 1.445 Inward IP 50 4.69 3.52 3.25 3.76 1.519 R&D Expenditure 50 3.84 2.96 2.61 3.16 1.765 Technology exploration Table presents that more foreign invested enterprises focus on conducting OI activities than domestic ones Only in terms of venturing activity, foreign invested enterprises stand behind state enterprise, 5.04 and 5.7 respectively Excluding external networking and outsourcing R&D, private enterprises conduct more remaining OI activities than state ones In addition, foreign invested and private enterprises conduct more customer investigations more than state ones One of the possible explanations is that state enterprises are prioritized to get access to customer database of local or national authorities This viewpoint is supported by the data in Table where state firms have greater possibility of finance, human capital and other support services (5.7 versus 4.8 in private ones).According to a study of private SMEs in Vietnam, the access to flows of finance or modern production technology are positively and directly related to success of such kind of enterprise (Nguyen, 2013) A survey investigating the satisfaction of 2,500 enterprises by Vietnam Chamber of Commerce and Industry in 2014 found that two most problematic issues relating tax procedure are information change on tax registration (32%) and tax return (28%) Among 32% of participated enterprises offering “lobbying expense”, 33% are private, 19% are state and 41% are foreign invested enterprises Among eight OI activities, venturing achieves the highest level with the mean of 5.18 Venturing level of private enterprises is only 4.83 because the private SMEs’ ability to get access to financial support and real estate opportunity is not as strong as their counterparts Customer involvement and external networking occupy the second and third places, 4.94 and 4.82 respectively Employee involvement and external participation have attracted the attention of enterprises R&D activities are ISSN 1859-1531 - THE UNIVERSITY OF DANANG, JOURNAL OF SCIENCE AND TECHNOLOGY, NO 12(109).2016 unfamiliar to many SMEs in Vietnam Support for this viewpoint is provided by the fact that R&D intensity (3.16) seems low in SMEs R&D expenditure is more underestimated in private and state enterprises than foreign invested ones Obviously, R&D expenditure enables firm to have a better capacity to innovate new products, new services and new processes Also, a study conducted in Vietnam demonstrated that industry profitability is positively related to the involvement of firms into R&D activity (Tran & Santarelli, 2013) However there are some possible barriers with which SMEs are confronted Firstly, SMEs are normally at disadvantage position with regard to access to finance in developing countries Large firms are more likely to undertake R&D activities as compared to small firms because of their better access to finance (Cohen and Levin, 1989) Secondly, a survey conducted by Tran &Santarelli (2013) showed that factors motivating firms to get involved in R&D cannot force them to invest more in R&D OI practices with regards to IP, both inward and outward seem weak The table shows that inward and outward IP are very weak in state enterprise One of the reasons may be the lack of relationship between enterprises and educational institutes or research universities It is obvious that university is one of the best places to create scientific inventions; however, the university – industry link seems insufficient An OI forum is launched in Vietnam with the support of the Finnish Embassy in Vietnam in order to help Vietnamese companies build partnership relations with each other and with universities and foreign partners to create new products for the market Conclusion In this paper, an OI investigation has been conducted trying to provide a snapshot of the current status of OI activities from SMEs’ perspectives This paper could serve as a starting point to presenting the essential roles played by OI activities in SME context in a developing economy The adoption of OI activities varies on such aspects as size, ownership and industry SMEs in Vietnam have adopted various OI activities This study has some limitations - some of which, however, offer opportunities for future research The enterprises participating in this survey operate their business in one city Thus, the findings might be province-specific More studies of OI in other provinces are thus welcome A large OI study in different areas in Vietnam needs to be further investigated to get a more complete picture about OI 53 activities The research results have low statistical power because of the small sample size A larger sample size will be better to become a representative group for a broader business community However, the paper is portrayed as a reference for future OI literature in Vietnam The findings reveal that there are still some negative aspects that need to be addressed and dealt with in order to strengthen the successful application of OI The role of the government and research institutes should not be left alone There should be efforts and appropriate strategies from the government in strengthening the university – enterprise linkage REFERENCES [1] Chesbrough, H W (2003a) OI: The New Imperative for Creating and Profiting from Technology Boston, MA: Harvard Business School Press [2] Chesbrough, H., &Crowther, A K (2006) Beyond high tech: early adopters of OI in other industries R&D Management, 36(3), 229236 doi: 10.1111/j.1467-9310.2006.00428.x [3] Cohen W M & Levin R C (1989) Empirical Studies of Innovation and Market Structure In Schmalensee R and Willig R D (eds) Handbook of Industrial Organization, Vol II, pp 10601098 Amsterdam: North-Holland [4] Dutta, S &Lanvin, B (Eds.) (2013) The Global Innovation Index 2013: The Local Dynamics of Innovation Retrieved from The Global Innovation Index 2013 website: http://www.globalinnovationindex.org [5] General Statistics Office (2016) Business results of Vietnamese enterprises in the period 2010-2014 Hanoi: Statistical Publishing House [6] Gassmann, O., &Enkel, E (2004) Towards a theory of OI: three core process archetypes Proceedings of the R&D Management Conference, July -9, Lisbon, Portugal [7] Ghosh, J., & Chandrasekhar, C P (2009) The costs of ‘coupling’: the global crisis and the Indian economy Cambridge Journal of Economics, 33(4), 725-739 doi: 10.1093/cje/bep034 [8] Huizingh, E K R E (2011) OI: State of the art and future perspectives Technovation, 31(1), 2-9 doi: http://dx.doi.org/10.1016/j.technovation.2010.10.002 [9] Lee, S., Park, G., Yoon, B., & Park, J (2010) OI in SMEs - An intermediated network model Research Policy, 39(2), 290-300 doi: http://dx.doi.org/10.1016/j.respol.2009.12.009 [10] Nguyen, T S (2013) A study on the factors influencing the success of SMEs in the private sector in Vietnam University of Danang, Journal of Science and Technology, 4(65), 2013, pp.105111 [11] Tran, T H., &Santarelli, E (2013) Determinants and Effects of Innovative Activities in Vietnam: A Firm-Level Analysis QuaderniWorking Paper DSE No 909 [12] Van de Vrande, V., de Jong, J P J., Vanhaverbeke, W., & de Rochemont, M (2009) OI in SMEs: Trends, motives and management challenges Technovation, 29(6–7), 423-437 doi: http://dx.doi.org/10.1016/j.technovation.2008.10.001 (The Board of Editors received the paper on 04/12/2016, its review was completed on 15/12/2016) ...ISSN 185 9-1 531 - THE UNIVERSITY OF DANANG, JOURNAL OF SCIENCE AND TECHNOLOGY, NO 12(109).2016 Table Contrasting... Statistics Office, 2016); (2) one of two national science parks, Saigon Hi-tech Park, is in Ho Chi Minh City Saigon Hi-Tech Park also launches Research Laboratories with financial support from... networking; (6) external participation; (7) outsourcing R&D; (8) inward licensing of IP A seven-point Likert-type scale is used to measure these items The respondents are asked to rate each item, ranging