Credit Access And Innovation Activity In Vietnamese Sme.pdf

Microsoft Word Final thesis Full docx 0 UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM NETHERLANDS PROGRAMME FOR M A IN DEVELOPMENT ECON[.]

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CREDIT ACCESS AND INNOVATION ACTIVITY IN VIETNAMESE SME BY TRƯƠNG BẢO DUY MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, JANUARY 2015 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CREDIT ACCESS AND INNOVATION ACTIVITY IN VIETNAMESE SME A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By TRƯƠNG BẢO DUY Academic Supervisor: NGUYỄN HỮU DŨNG HO CHI MINH CITY, JANUARY 2015 ABSTRACT In the wake of Vietnam banking crisis 2008-2010, there has been more focus on access to finance for small and medium sized firms Even though some studies has already suggested that limit access to credit might stagnate innovative process, scarce studies has put their focus on small firms in developing countries For this reason, our study is tended to reduce that gap by analyzing how credit could have affected innovation activities of Vietnamese’s small and medium sized enterprises (SMEs) using data between 2007 to 2011 Our hypothesis is having access to credit allows Vietnamese SMEs aid their innovation process Since, it would allow them to import new machineries, upgrade outdated production line, to cut cost, produce new products and/or improve their old products In this paper we uses logit models and Fixed-effect models to test the hypothesis Among others, logit models allow us analyzing effect of credit on firms each year, and fixed-effect models help us take advantage of our Vietnamese SMEs panel data sets This study results suggest that easing credit access increased the likelihood of introducing new technology or applying new production line of Vietnamese SMEs However, the effect of credit access on other types of innovation, like introducing new products and improving old products is inconsistent over the year, thus it needs to be studied further Key words: Vietnamese SMEs, credit access, innovation TABLE OF CONTENTS CHAPTER I INTRODUCTION5 8 CHAPTER II 10 10 16 21 CHAPTER III 24 24 24 29 CHAPTER IV 32 32 39 40 CHAPTER V 53 53 54 REFERENCE: 56 APPENDIX: 56 LIST OF TABLES Table 3.1: expected sign of independent variables 27 Table 4.1: the share of Vietnamese SME by ownership category for the period 2000-2008 Table 4.2: the share of SMEs on total number of firms in Vietnam Table 4.3: the share of SME by kind of economic activity Table 4.4: SME Average share of debt Table 4.5: Debt average of Vietnamese SMEs Table 4.6: Average SME innovation activity Table 4.7: Logit model, marginal effects - year 2007 Table 4.8: Logit model, marginal effects - year 2009 Table 4.9: Logit model, marginal effects - year 2011 Table 4.10: Checking for Multicollinearity 31 33 34 36 37 38 41 42 43 46 LIST OF FIGURES Figure 2.1: Interest rate and expected return Figure 2.2: Enterprise Innovation – Offensive strategy Figure 2.3: Enterprise Innovation – Offensive strategy Figure 3.1: Analytical Framework Error! Bookmark not defined 13 14 23 CHAPTER I INTRODUCTION For better audience experience, introduction chapter is used to state out the causes and the range of this study Problem statement section is used to briefly describe theories and empirical studies behind firm innovation as well as reveal any possible connections between credit access and innovation It also indicates the need to conduct this research in Vietnam as well as the research objects and the scope of the study They, therefor, determine the goals and the scope of this thesis Problem statement Although firm innovation got its very first attention in the early twentieth century via the book of Schumpeter’s book (1934), yet public and research interest is disproportionate Unsurprisingly, large and multinational enterprises got the most attention from both governments and scholarships around the world It is properly because when it comes to innovation, we tend to think about breakthrough technologies, which might be creating a whole new industry or dramatic changes of an old industry For example: internet industry or big jumps of agriculture Innovation is also seen as the result of heavy R&D investment which can only be done by large enterprises Yet, innovation is not necessarily breakthrough technologies (Hadjimanolis, 2000) In fact, more studies and better definition (Archibugi & Iammarino, 2002) pointed out that innovation is not large enterprises’ exclusive right, instead it happens anywhere despite size and region through self-learning or adapting That opened the gateway for more recent studies toward innovation activities in small and medium enterprises (SMEs) Nevertheless, most research around this topic (Beck & Demirguc-Kunt, 2006; Hoffman, Parejo, Bessant, & Perren, 1998; March-Chorda, Gunasekaran, & Lloria-Aramburo, 2002) were still conducted primarily in developed countries, for instance in Western Europe and North American countries Their contribution as a result were limited within the developed countries’ boundary Thus, there are many areas around this topic need to be explored Investigating the effect of credit access on SMEs’ innovation in developing countries is an interesting yet challenging task It is interesting because a clear connection between them seems to exist While credit is a main external financial resource of SMEs; Innovation is an indicator of firm’s adaptation ability and sometime growth ability, but it may require heavy investment Yet in developing countries, credit application process may not be transparent thus may require personal connection Beside a firm can use credit for multiple reasons not just innovation, for instance, enlarging its labor force instead of investing on automatic machine This topic is challenging because while many studies has been done so far, they are still limited partly because they only used data of developed countries The reason could be due to the nature of developing countries, data of SMEs is not collected easily As a result, it is difficult to measure credit access and firm’s innovation For this reason, our study tries to narrow that gap by investigating the link between credit and enterprise innovation using Vietnamese SME dataset conducted by the Central Institute for Economic Management (CIEM) of the Ministry of Planning and Investment of Vietnam (MPI); the Institute of Labour Science and Social Affairs (ILSSA) of the Ministry of Labour, Invalids and Social Affairs of Vietnam (MoLISA); and the Development Economics Research Group (DERG) of the University of Copenhagen This dataset provides rich information about Vietnamese SME from 2005 to 2011, thus allowing us to build our panel models We hope that our result can be used as reference for government intervention then There is one more reason that urged us to this study There was a banking crisis in Vietnam from 2008 to 2010 which might limit access to credit from small firm After the crisis, a report of Rand et al (2012) used 2011 Vietnamese SME survey data implied a reduction in number of SME innovation activities Although this might have been an coincident and did not necessarily reflect the real connection between those factors, since credit is just one of many barriers of firm’s innovation Many studies (Hall, 2005; Hoffman et al., 1998; Madrid‐Guijarro, Garcia, & Van Auken, 2009) shared the same result where it indicated that financial resource are one of the main causes However, it should be noticed that most of the studies were conducted outside developing countries’ boundary therefore we not expect our study would share the same result Though there are only a small number of study investing the role of innovation in Vietnam, this study considers it to be an important factor of firm growth for two reasons It is claimed to give firm a temperate absolute advantage in the market (Schumpeter, 1934) and also increasing firm survival chance (Christiansen, 1997) Consequently, our study finds its duty to further investigate the existence of credit access and innovation relationship in Vietnam environment Research objects The first step of our study was finding the best measurement for firm credit access This was considered as a crucial step due to the fact that credit access was difficult to measure and there was still no broaden accept on the way to measure it After that we investigate to see if the firm had better credit position would have innovated more than the firm who did not We were also take into account difference between high technology and low technology firms which consequently influence decisions of the head of the enterprises on innovation Thus, in the end we separated the firms in our data into two groups to see how credit access had affected innovation within each group In more detail, this study tries to unveil the link between credit access and SME innovation activities and to investigate if the magnitude of that link was different among technology and non-technology oriented firms For this reason, there are two objects our study is aimed for - Firstly, it examines the impact of credit access, official and unofficial, on SMEs’ innovation activities Unofficial credit still be a source of firm credit, therefore it should be considered - Secondly, it investigates whether the effect of the external financial access differed across firms by industry type Ultimately, basing on the final results, we expect to propose better policies for Vietnam government To solve the study’s research objectives, the main question raised by this paper is: “Is there a relationship between access to credit and SMEs innovation in the case of Vietnam?” Two sub questions are also raised to clarify our objectives: “Is there any difference between official and unofficial credit access to SME innovation activities?”; and “Whether the effect differ across firms by type of technology level (high technology and low technology)?” Scope of study This study reviews innovation activities of SMEs as well as their credit access using Vietnamese SME data from 2005 to 2011 Then, a logit fixed effect model would be conducted to examine the relationship between access to finance and the SMEs innovation activities This methodology is expected to take advantage of our panel data we got by removing all fixed effects and thus highlight the real effect of credit access on innovation in SMEs’ environment Research Outline CHAPTER II is used for literature review Most of it would go through behind theories and share the result of previous empirical studies, in which we also try to explain the fundamental difference of innovation between technology and non- technology oriented SME We consider it as vital step due to the fact that the need of innovating is unevenly across different types of firm; Furthermore, different types of firm might also require different kinds of financial resource At the end of this chapter, we would explain how innovation is defined, which would leading to our discussion on how it should be measured CHAPTER III would be used to explain our methodology This part would therefore content our Analytical Framework, the Econometric model that we conduct and the data that we use in this study Via this step, we want to discuss the advantages and disadvantages of the Vietnamese SME panel data In CHAPTER IV, we would discuss the results that we found in our study The beginning of this chapter would be used to review Vietnamese economic situation, focusing on SMEs’ innovation and their credit access conditions It is intended to supply reader a full picture of Vietnamese economy, Innovation , Credit status and events that might be linked to this study The rest of it is used to describe the data and our regression result With this step, we expect to bring up all vital indicators, their trend and their association that we has discovered CHAPTER V is for our conclusion and policy implication All of our study is summarized here It is also used to indicate the advantages and disadvantages of our methodology, our data as well as our suggestion for future researches Policy implication is where we suggest intervention policies that influenced by this study’s findings manufacturing sector of 10 provinces Even though the first survey was made in 1991, our study only uses the data since 2005 up to 2011 This is because previous surveys not capture data we need to measure enterprise innovation This data set has many advantages which makes it useful for any SME study in Vietnam The questionnaire is well constructed and covers many aspect of Vietnamese SMEs even some rare data like informal credit The survey is divided into three modules which record not only firms’ characteristics, but also other factors that may have impacts on firm like owners’ characteristics (age, gender, education, etc.); And business environment factors (competition, economic crisis, government support, etc.) This allows a wide range of studies to be conducted One of the most advantages of this data set is it was built for panel data analysis For this reason, it supplies information of firm across many years (if it is available) which allows researchers to observe firm’s change over the years This makes the data suitable for our research However, it also contains some certain disadvantages For example, even though the survey were trying to remain its consistency of the questions over the year, due to the need to keep the data up to date and be suitable for new methodologies, there are some slight changes in the data every time the survey questionnaire was constructed Some new variables has been added, while some other variables has been removed and some has been changed the way it was recorded This leads to the inconsistency in some variables that requires to be treated carefully The changes in name, order or unclear variable description also make it difficult to be assembled and error may occur For instance, firm’s network is changed from quantity recording to range recording “Percentage of management's working time is spent each month dealing with government regulations and officials” is removed completely in the 2011 survey We not know the reason of removing, but we consider that variable is a good indicator of government’s effect on firms Furthermore, like any public survey, 30 some variables, that our study needs, are absent However, those variables are less important or can be replaced to warrant the accuracy of the final result 31 CHAPTER III RESULT This section is for our conclusion and policy implication All of our study is summarized here We also discuss the advantages and disadvantages of our methodology and our data we used, as well as suggestion for future researches Policy implication is where we suggest possible policies that are influenced by this study’s findings Overview of Credit and Innovation activity in Vietnamese SME Four years after “Doi moi”, Vietnam economic reforms happened in 1986, Vietnamese government for the first time, since the union of north and south Vietnam in 1975, introduced the Private Enterprises and Companies Law (PECL) in 1990 This action liberated private sector by giving it a legal guideline The PECL was latterly strengthened with the Law on Enterprises in 1999 and 2005 by defining more clearly about the type of enterprise and investment With the PECL, the government created Legal framework for Vietnamese private enterprises to flourish According to Enterprise Census 2000-2008 of GSO of Vietnam, up to 01 January 2009, there were 196,779 active non state enterprises in Vietnam, and they account for 95.7% of the total enterprises in Vietnam at that time Private sector also created 4.72 million jobs and accounted for 57.1% total jobs of the country Although this sector showed the lowest business efficiency with the profit before tax is only 16.6% of total revenue in 2008, comparing to state owned enterprises and FDI enterprises which account 35.3% and 48.1% respectively Still on economic aspect, it can still be considered a big success of Vietnamese economy in moving from centrally planned economy toward a free market economy Moving along with the growth in the private sector is the increasing number of FDI enterprises and the reduction of state owned enterprises The number of active FDI enterprises was 5,625 in 2009, which was 5.3 times more than in the year 2000 And 32 even though the share of FDI sector was only 2.7%, it created jobs for 1.83 million workers and contributed 40.4% of the state budget The number of state owned enterprises was dropped significantly from around 7,395 in 2000 to 3,328 in 2009 This showed the effort of Vietnamese government in reforming its economic Though there was a huge change in structure of Vietnamese economic, small and micro enterprises was still dominated the economy Based on the employment size, on the 1st January 2009, SMEs accounted for 97.1%, while the large enterprises accounted for only 2.9% Among three types of ownership, the highest rate belongs to non state owned enterprises with 98.4% Table 4.1 presents the share of Vietnamese SME by ownership category for the period 2000-2008 The first row indicates the rapid growth in number of SME in years with the average growth rate is nearly 54% per year The reduction in the share state owner SME could be explained by reasons Firstly, it is because of the reduction of state owner SME in general, resulted from the government effort of privatizing its enterprises Secondly, it is the result of increasing in number of the non-state owner and foreign enterprise, in which the non-state owner enterprise plays a major role The fifth row shows an increasing share of non-state enterprise SMEs’ number over the years, this may explain the low level of business efficiency of this sector Because small business owners usually lack experience in doing business, producing and finding finance resources Table 4.1: the share of Vietnamese SME by ownership category for the period 20002008 Year Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 39897 4906 59831 68687 88222 10933 12759 15221 20199 10.5% 7.6% 6.1% 4.6% 3.4% 2.4% 1.9% 1.8% 1.3% Ownership structure State owner enterprise 33 Non-state owner enterprise Foreign investment enterprise 86.4% 89.0 % 90.9% 92.5% 93.9% 94.9% 95.5% 95.6% 96.5% 3.0% 3.4% 3.0% 2.9% 2.7% 2.6% 2.6% 2.5% 2.2% Source: Author’s elaboration based on Enterprise Census 2000-2008 of GSO of Vietnam Table 4.2 reveals the share of SMEs on total number of firms in Vietnam It indicates a significant growth in term of share of SMEs when it reached 98.2% in 2008 This could be a concern sign of Vietnam economy, since the number of larger enterprises is comparative more lower than other sectors This sign is more clear in the non-state enterprise area when the share of SME occupies 99.1% of the total number in 2008 The third row shows a reduction of state owner SME from 2000 to 2004, this could be the result of privatizing process Yet the increasing trend since 2005 could be the result of the government attempting to divide big state owned enterprises into smaller enterprises which for better efficiency and speeding up the privatization process 34 Table 4.2: the share of SMEs on total number of firms in Vietnam Year 2000 Total 2002 2003 2004 2005 2006 2007 2008 95.1% 95.4% 96.1% 96.8% 97.2% 97.7% 98.2% 67.7% 64.9% 64.4% 65.5% 66.3% 79.5% 79.6% 72.8% 94.9 % 70.1 % 98.5% 98.5 % 98.5% 98.4% 98.6% 98.7% 98.8% 98.8% 99.1% 79.5% 81.8 % 78.0% 76.4% 76.8% 77.6% 77.3% 77.7% 79.2% 94.3% State owner enterprise Non-state owner enterprise Foreign investment enterprise 2001 Source: Author’s elaboration based on Enterprise Census 2000-2008 of GSO of Vietnam Table 4.3 shows the share of SME by kind of economic activity Manufacturing, construction, wholesale and retail trade take the largest shares over the years The increasing in number of Construction SME may be the results of the high demand of infrastructure development in Vietnam Even though there seems to be a reduction of SME number in Manufacturing and Wholesale And Retail Trade activities, it is because of the increasing number of SME in other activities In fact, the number of Manufacturing and Wholesale And Retail Trade, SME in 2008 is 3.9 and 4.7 more than 2000 respectively 35 Table 4.3: the share of SME by kind of economic activity Yea r 2000 2001 2002 2003 2004 2005 2006 2007 2008 Agriculture, Hunting And Forestry 2.0% 1.5% 1.4% 1.1% 1.0% 0.9% 0.8% 0.7% 3.5% Fishing 6.1% 5.2% 4.0% 2.1% 1.5% 1.2% 1.0% 0.8% 0.7% Mining And Quarrying 0.9% 1.2% 1.3% 1.4% 1.3% 1.1% 1.0% 1.1% 1.1% 23.0% 22.4% 22.0% 21.9% 20.9% 20.0% 19.3% 18.8% 17.8% 0.3% 0.3% 0.3% 0.3% 1.6% 2.2% 2.0% 1.8% 1.5% 8.9% 10.5% 12.0% 13.2% 13.2% 13.4% 13.5% 13.4% 13.7% 42.4% 40.9% 40.2% 40.3% 40.1% 40.2% 40.5% 39.9% 39.7% 4.5% 4.6% 4.5% 4.6% 4.3% 4.2% 3.9% 3.8% 3.4% 3.3% 4.2% 4.6% 5.0% 5.5% 5.7% 5.6% 6.1% 4.4% 2.3% 2.0% 1.7% 1.5% 1.2% 1.0% 1.3% 0.9% 0.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 3.1% 4.1% 5.1% 5.7% 6.7% 7.6% 8.4% 9.7% 10.7% Education 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% 0.6% 0.5% 0.5% Health And Social Work 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.4% 0.4% 0.5% 0.5% 0.5% 0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Manufacturing Electricity, Gas And Water Supply Construction Wholesale And Retail Trade; Repair Of Motor Vehicles … Hotels And Restaurants Transport, Storage And Communications Financial Intermediation Science And Technology Activities Real Estate, Renting And Business Activities Cultural And Sport Activities Other Community, Social And Personal Service Activities Private Households With Employed Persons Source: Author’s elaboration based on Enterprise Census 2000-2008 of GSO of Vietnam 36 On the contrary with the remarkable growth in the number of SME, Enterprise Census 2000-2008 of GSO of Vietnam, the average growth of innovation activities within SME was declining, Vietnamese SME data 2005-2011 While there are many innovation studies (Cefis & Marsili, 2005; Geroski, 1989; Murphy, 2002) around the world has been indicated the importance of innovation and its vital role; the study of Hansen (2006) based on a panel data of Vietnamese SMEs from 1990-2000 confirmed a positive relationship of innovation and the likelihood of SME survival For this reason, if we consider innovation as the strength of SMEs in competition market, Vietnamese SMEs were losing their power However, it should also be noticed that Vietnamese SME data has its own disadvantage Although it captures the SME innovation in quantity, it fails in capturing the quality of innovation Consequently, we could not measure the innovation in its full dimension Yet the decreasing of innovation activities still could be a warning sign Financial Crisis and Credit access in Vietnam Like we has mentioned in previous part, one cause for us to make this study is because of the joint report of CIEM, DoE, ILSSA and UNU-WIDER (Rand et al., 2012), where it showed the reduction of SMEs’ innovation activities in 2011 This could have been the consequence of the Vietnamese financial crisis starting in 2008 The crisis could be traced back to the end of the year 2006 when a large amount of capital inflow flew into Vietnam While the central bank tried to follow its fixed exchange rate policy but the government failed to open an efficiency bond market, money supply increased rapidly by March 2008 M2 growth rate reached 45 percent and bank credit reached 63 percent Along with the failure in sterilizing the interventions, MOF failed to control the increasing of SOEs’ loan in an attempt to stimulate their aggressive expansion in 2007 As a result, inflation reached its peak at 28 per cent by July 2008 The macroeconomic stability seems to be restored in short run after a lot of administrative intervention like set ceilings on banks’ credit growth by 37 increasing reserve requirements, compulsory bank purchase of treasury bills on the monetary side, and direct government limitations on SOE non-core spending on the fiscal side (Leung, 2009) Because of this, the risk of non performing loan and lack of credit histories might result difficulty in bank lending activities after 2008 Up to now there is no study supplying clear evidences proving a direct effect of credit access on innovation activities in Vietnam As a result, this is the main target of this study Similar to other under developing financial markets, informal credit appear in Vietnam to fill the void where formal credit cannot fulfil This was caused mostly by the existence of information asymmetries and high transaction costs When it occurred, small enterprises tend to rely on their own internal resources, or informal credit source (Claessens & Tzioumis, 2006) While there is no official survey on informal credit in Vietnam at that time, Vietnamese SME Survey is still able to supply a small part of the picture In the table below we can see that in average, informal short term debt accounts for more than forty percent of the SME total debt across the year except 2007 Though informal long term debt takes a smaller share of the total debt and reducing over the years, yet it takes around ten percent This means if we want to learn about credit access and its effect, we cannot not leave out informal access Table 4.4: SME Average share of debt Average share of debt 2005 2007 2009 2011 Formal Short term debt 23.08% 27.72% 28.78% 28.94% Informal Short term debt 42.16% 37.34% 45.19% 48.28% Formal Long term debt 22.46% 24.51% 16.96% 17.53% Informal Long term debt 12.24% 10.43% 8.53% 5.18% 100% 100% 100% 100% Total debt Source: Author’s elaboration based on Vietnamese SME data 38 Data description When we only observe the average SMEs’ debt over the year and the movement of firm innovation we see a very weak correlation This is opposite to what we learn from theory and empirical research Tải FULL (86 trang): https://bit.ly/3QOpMWk Dự phòng: fb.com/TaiHo123doc.net Table 4.5: Debt average of Vietnamese SMEs The debt average of SMEs 2005 2007 2009 2011 Formal short debt 337658.9 445675.4 400896.0 559399.4 Informal short debt 181882.2 180443.4 213143.4 183453.3 Formal long debt 318754.4 399689.0 445401.1 468265.3 61254.9 172411.1 110015.2 51096.8 585509.8 684371.7 732037.3 684337.2 Informal long debt Total debt Source: Author’s elaboration based on Vietnamese SME data 2005 - 2011 Table 4.5 shows a changing in the debt structure in firms It points out an increasing of firm’s total debt from 2005 to 2009 and its slight drop in 2011 However, the diminution seems to result by a huge change in the debt structure where firms’ informal long-term debt drop significantly The size of average informal long-term debt in 2011 is only 46.4% and 29.6% the size in 2009 and 2007, respectively The drop of total debt in 2011 also be caused by the drop of informal short debt however the diminution is smaller Informal short debt in 2011 only drops 13.9% On the contrary, we can see a constant growth of formal debt, both short and long term, across the years This raises a question which is outside of this study: “Does Vietnamese financial crisis affect SME at all?”, Since the data suggests that firms got better access to credit every year, at least from formal sources Whether the financial crisis impact existed, it should have found an indirect way to affect Vietnamese SMEs may be through informal channel 39 Table 4.6: Average SME innovation activity Average SME innovation activity 2005 2007 2009 2011 Introducing new product Improving old product 0.401631 0.593761 0.052372 0.436053 0.028593 0.405944 0.043103 0.379702 New process 0.293513 0.154080 0.139202 0.132053 Source: Author’s elaboration based on Vietnamese SME data 2005 - 2011 While formal credit maintained its growth from 2005 to 2011, we can see a consistent drop of innovation activities in table 4.6 Furthermore, the first thing that catches our attention is a huge drop in firm’s innovativeness in 2007 The average of introducing new product of Vietnamese SMEs reduced nearly 87 percent in 2007 and keeps dropping every year, except the slight increasing in 2011 Meanwhile the average of product improvement and new process introducing reduce 26.6% and 47.5% in 2007, respectively, and there is no sign of stopping In an attempt to find the cause of this significant reduction, we checked the data set to see if there is any big change in firm type structure or the number of surveying firms in each province but there is none Though the data and our hypotheses suggest differently, it is not a final conclusion Innovation as we have studied is a subject of many factors and external finance is just one of them Thus, by putting more factors like firms’ characteristics, size, firm’s profit, etc to control for their effects on innovation, we expect to get a better explanation Tải FULL (86 trang): https://bit.ly/3QOpMWk Dự phòng: fb.com/TaiHo123doc.net Final result Before directly jumping into explaining our finding, we would like to mention a few issues which might affect the result and therefore should be noticed Firstly, to this study we have to rely on enterprises’ debts which has been surveyed Nevertheless, up to 40% of them failed to provide this information; or the surveys, for some reasons, could not capture it At first, we jumped to an assumption that this issue only happened 40 in micro and small enterprises which did not financial records decently This phenomenal occurs in most of Vietnamese household enterprises where financial records are not required and monitored by government tax officers However, while we were going through the SME collected data, we found that those cases were distributed almost equally across the dataset despite the size and the type of main productions of enterprises To be specific, we see the number of micro size enterprises drop 7% while the number of small size enterprises and medium size enterprise increase 4% and 3%, respectively Beside from this, we saw no significant change in the data structure when we check for province and type of firm technology Consequently, we have to drop those cases off our data before running regression Due to this there is a small chance that our finding did not accurate since our sample were modified Secondly, credit access may be encouraged by firm innovating instead of vice versa For example, creditor may want to see firm introducing their new products, processes or technologies before lending them money Therefore, it is not always a causal relationship between credit and innovation, and for this reason, we planed to use Instrumental Variables (IV) methodology to solve this problem However, we were unsuccessful in finding any instrumental variable which is suitable for our study The best variable that we found among empirical studies were firm network (Girma et al., 2008) In the study, the authors suggests that enterprises that have more relationship with bankers and government officers will get better access to credit This makes sense in countries where the banking system is not independent and does not run entirely on market’s will In these countries, state creditors’ decision may not rely solely on firm’s activities and its history performance, but sometime under the instructions of government officers And since that study was conducted using the data of Chinese enterprises, which share similar context with Vietnamese enterprises, we expected to find the same result Yet, we could not find any association between firm’s network and credit access using the data we got It could be because such privilege belong to 41 large enterprises only while our data is SMEs’ data All of our attempt going around this problem was resulted unsuccessfully We tried other variables like land’s accounting value, capital’s accounting value, and other variables but none of them gave significant result Eventually, we had to accept that we could not find an IV suitable for our model, and this obviously become the weakest link in the study Finally, omitted variables may occur in our model SME innovation study is still young topic and therefore it still needs more contribution from academic scholars around the world Consequently, at the moment, this kind of study has to follow the steps of large enterprises innovation studies Although large and small enterprises share some common characteristics they still have their distinguished attributions Consequently, we assume there could be omitted variables Furthermore, our study is limited by the data we had Some variables, which we believe to have influences on innovation, does not exist in our data For instance, academic institution is believed to be the source of innovation It is the key supplying source for skilled works Furthermore, they can play as a bridge connecting new technologies and enterprises For this reason, some empirical studies used the relationship (or the distance) between enterprise and education institutions in the region as independent variable for their models (Hadjimanolis, 2000) However, in our case these types of data cannot be used because they were not in the data set Some other factors like manager/owners’ skills or their personal vision clearly could influence firms’ adapting decisions yet they cannot be measured These disadvantages, nevertheless, can be removed by using panel data fixed effect method 42 Table 4.7: Logit model, marginal effects - year 2007 Debt growth Introducing new product dy/dx 2007 Improving old product dy/dx Applying new progress dy/dx 00057 (1.56) 00001 (0.01) 00277** (2.82) Formal short term debt growth Informal short term debt growth Formal long term debt growth Informal long term debt growth -.0026 (-0.84) 0074* (1.73) 00507* (1.85) -.00071 (-0.43) -.00753* (-1.93) -.00076 (-0.29) 00135 (1.48) 00093* * (2) 00732* (1.9) 00308 (1.44) -.00291 (-1.33) 00372* (1.85) -.00038 (-0.28) Total debt -.00433* (-1.69) 00252 (1.19) Owner age -.00014 (-0.19) -.00012 (-0.17) 00002 (0.03) 00524** * (-3.25) Finishing High school 01073 (0.61) 01876 (1.07) 01671 (0.48) 01712 (0.5) 01333 (0.39) 12065*** (3.86) 12145*** (3.89) 12330*** (4.01) 07804** (1.97) 00007 (0.84) 00898 (0.51) 09821* * (2.42) 00007 (0.86) 08798** (2.21) 00008 (0.87) 1694 (1.02) 00065 (1.26) 16288 (0.98) 00068 (1.3) 16186 (0.99) 00100* (1.78) 06212 (0.63) 00010 (0.45) 06728 (0.69) 00009 (0.44) 09961 (1.05) 00005 (0.25) R&D investment -1.9327 (-1.49) 26211 (0.92) -.00000 (-1.34) 00000 (0.73) -1.797 (-1.22) 2784 (0.77) -1.5439 (-0.77) 29212 (0.3) -1.6474 (-0.8) 32038 (0.33) -1.6100 (-0.77) 26106 (0.26) -.02070 (-0.01) 30296 (0.49) -1.6474 (-0.02) 32038 (0.52) -.02380 (0.13) 31644 (0.55) Firm age 00006* (1.74) 00004 (1.43) 00011 (0.99) 0001 (1.01) 00013 (1.25) -.00247 (-1.43) -.0025 (-1.47) -.0023 (-1.4) 00323** (2.17) 02006** (2.85) 0203** (2.86) 02175*** (3.01) 01020** (2.99) 01014** (2.98) 00886** (2.51) Percent export 00342** (2.35) 01889** (-2.45) 00037 (0.94) 00006* (1.7) 00339* * (2.33) -.0000** (-2.49) 00038 (0.97) -.0175** (-2.31) 00033 (0.83) -0.0000 (-0.91) -.00036 (-0.32) -.00594 (-0.88) -.0004 (-0.36) -.00615 (-1) -.00077 (-0.7) 00179 (0.88) -.00087 (-1.02) -.00615 (0.86) -.00088 (-1.03) 00173 (0.66) -.00097 (-1.15) Competition N Pseudo R2 07670 (1.62) 915 0.0610 07879* (1.67) 915 0.0970 07745* (1.65) 957 0.0526 0.723** (2.83) 915 0.0451 1697** (2.77) 915 0.0540 18698*** (3.17) 957 0.0487 246417** (2.92) 957 0.0946 24825** (2.94) 957 0.0704 25265*** (3) 957 0.0842 Higher Education Firm size Human investment Professional Lag profit 00531*** (-3.32) 00543*** (-3.43) 00032 (0.24) 00028 (0.22) 0003 (0.25) at-Values in brackets; *p 0.1; **p 0.05.; ***p 0.001 43 Table 4.8: Logit model, marginal effects - year 2009 Introducing new product dy/dx Debt growth -.00020 (-0.33) Formal short term debt growth Informal short term debt growth Formal long term debt growth Informal long term debt growth Total debt 2009 Improving old product dy/dx Applying new progress dy/dx 00024 (0.55) -.00028 (-0.54) -.00029 (-0.21) -.00160 (-0.9) -.00097 (-0.84) -.00210 (-0.62) 00144 (0.38) 00288 (1.2) -.00009 (-0.16) 00083 (0.47) -.00125 (-0.47) -.02124* (-1.71) 00776 (1.06) -.00652 (-0.69) -.00081 (-0.64) 00005 (0.02) -.00135 (-0.82) -.00129* (-1.88) -.00126* (-1.83) -.00132* (-1.94) -.00447** (-2.51) -.00441** (-2.48) -.00459** (-2.63) -.00062 (-0.47) -.00067 (-0.51) -.00070 (-0.55) -.00019 (-0.01) -.02921* (-1.66) 00013 (0.9) 00037 (0.02) -.02915* (-1.67) 00012 (0.78) 00314 (0.2) -.03065* (-1.76) 00015 (1.06) 04792 (1.18) 06155 (1.4) 00104 (1.47) 04666 (1.16) 05949 (1.35) 00112 (1.56) 05212 (1.32) 06983 (1.61) 00110 (1.54) 12991*** (3.4) 06935** (2.42) 00057 (1.59) 12900*** (3.39) 06919** (2.42) 00058 (1.58) 12800*** (3.47) 06974** (2.51) 00061* (1.69) R&D investment 00183 (0.01) -.02562 (-0.19) 01178 (0.07) 09352 (0.42) 00898 (0.05) -.03716 (-0.25) -.59556 (-0.81) 5.6025 (1.43) -.58626 (-0.8) 5.6160 (1.44) -.59644 (-0.81) 5.5876 (1.43) -.07682 (-0.26) -.12533 (-0.43) -.08003 (-0.27) -.06685 (-0.21) -.05916 (-0.2) -.13581 (-0.45) Firm age 00028 (0.43) 00032 (0.48) 00016 (0.24) -.00470** (-2.36) -.00489** (-2.45) -.00431** (-2.2) -.00255 (-1.46) -.00261 (-1.49) -.00248 (-1.46) Professional 00310** (2.68) 00315** (2.79) 00318** (2.81) -.00274 (-0.46) -.00330 (-0.54) -.00253 (-0.42) 00776** (2.04) 00796** (2.12) 00817** (2.12) 05029 (0.86) -0.000 (-0.01) 06126 (1.04) -.00004 (-0.14) 05668 (1) -.00002 (-0.07) -.01888 (-0.07) -.00107 (-0.96) -.03453 (-0.13) -.00105 (-0.95) -.02676 (-0.1) -.00105 (-0.94) -.10645 (-0.65) 00020 (0.3) -.10085 (-0.6) 00019 (0.29) -.08485 (-0.53) 00019 (0.29) 02064 (0.6) 835 0.0792 01857 (0.54) 835 0.0964 02184 (0.64) 860 0.0807 03668 (0.56) 835 0.0391 0372 (0.57) 835 0.0421 02720 (0.43) 860 0.0401 -.06241 (-1.25) 835 0.0973 -.06089 (-1.22) 835 0.1008 -.0579 (-1.2) 860 0.1012 Owner age Finishing High school Higher Education Firm size Human investment Lag profit Percent export Competition Debt growth Pseudo R2 at-Values in brackets; *p 0.1; **p 0.05.; ***p 0.001 44 6667149 ... drawing 21 attention on the importance of innovation within firms In his book he defined types of innovation as following: Introducing a new product or adjusting old product Introducing a new industrial... the firms in our data into two groups to see how credit access had affected innovation within each group In more detail, this study tries to unveil the link between credit access and SME innovation. .. topic need to be explored Investigating the effect of credit access on SMEs’ innovation in developing countries is an interesting yet challenging task It is interesting because a clear connection