The impact of innovation capability on company’s performance an empirical analysis of smes in vietnam

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS GRADUATION THESIS Major: International Business Economics THE IMPACT OF INNOVATION CAPABILITY ON COMPANY’S PERFORMANCE: AN EMPIRICAL ANALYSIS OF SMEs IN VIETNAM Student full name : Nguyen Manh Hung Student ID 1811150083 Class Intake Supervisor : English 03 – Economics (High-quality program) 57 : Assoc Prof Dr Tran Thi Ngoc Quyen Hanoi, January 2022 FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS GRADUATION THESIS Major: International Business Economics THE IMPACT OF INNOVATION CAPABILITY ON COMPANY’S PERFORMANCE: AN EMPIRICAL ANALYSIS OF SMEs IN VIETNAM Student full name : Nguyen Manh Hung Student ID 1811150083 Class Intake Supervisor : English 03 – Economics (High-quality program) 57 : Assoc Prof Dr Tran Thi Ngoc Quyen Hanoi, January 2022 i STATEMENT OF AUTHORSHIP I certify that except where due acknowledgement has been made, the work is that of the author alone, the work has not been submitted previously, in whole or in part, to qualify for any other academic award; the content of the thesis is the result of work which has been carried out since the official commencement date of the approved research program; any editorial work, paid or unpaid, carried out by a third party is acknowledged; and, ethic procedures and guidelines have been followed Hanoi, January 2022, Nguyen Manh Hung ii ACKNOWLEDGEMENTS For me, this graduation thesis is a valuable gift I would appreciate to give to all of my lecturers, mentors, supporters throughout my university life, and not to mention my family, friends and beloved one, who always put valuable academic, moral support and confidence in me I believe that without the encouragement and support from you all, I could not stand as high as myself today and complete this remarkable milestone in my life First of all, I would be grateful to express my sincere thanks to my supervisor, Associate Professor Doctor Tran Thi Ngoc Quyen, who has accompanied me throughout completing this thesis Her excellence in academic major as well as her warm-hearted personality has transformed me into a dedicated researcher and helped me to harbored my dream to become an honored teacher like her one day I also want to acknowledge support and express my great gratitude towards Dr Vu Minh Ngoc and Dr Pham Huyen Trang, two former teachers who are in charge of my whole class for four years now As the monitor of two classes (English 03 and English 04 – High-quality programme in International Business Economics – Cohort 57) and directly working with you two, I feel your wholehearted support and encouragement that leads our class to success Last but not least, I am grateful for the support given by my dearest friends, Tran Viet Yen, and all of my friends and peers: Lanh Han – Hac Han Group; Cute Cows Group; FYU, MFC brothers, sisters and friends; Nguyen Minh Ngoc, Nguyen Tuan Thanh, etc who have made my university life the most memorable, enjoyable and colorful time To all of those whose name I cannot mention one by one, I would thank all of you for our friendship and good times we ever spent together To the journey ahead, I feel strong support of my family, my friends and especially my beloved one, who grant me substantially devoted love, care, motivation and patience I hope that my success is the most wonderful gift for you all Thank you all for being a part of me iii TABLE OF CONTENTS STATEMENT OF AUTHORSHIP .i ACKNOWLEDGEMENTS ii TABLE OF CONTENTS .iii LIST OF TABLES vii LIST OF FIGURES .vii LIST OF ABBREVIATIONS viii LIST OF APPENDICES .x ABSTRACT xi CHAPTER 1: INTRODUCTION 1.1 The rationale of the study .1 1.2 Literature review 1.2.1 Research into the impact innovation capability on firm performance 1.2.2 Justifications of research gap 13 1.3 The objectives of the study 14 1.4 Research questions .15 1.5 The scope of the research 16 1.6 Research methodology .16 1.6.1 Research methods 16 1.6.2 Data collection sources 16 1.6.3 Data analysis techniques 16 1.7 Research significance 17 1.8 Research structure .18 iv CHAPTER 2: THEORETICAL FRAMEWORK 20 2.1 Theoretical overview of Innovation Capability 20 2.1.1 Conceptual definition of Innovation and Innovation Capability 20 2.1.2 Factors influencing Innovation Capability 22 2.2 Theoretical overview of Firm Performance 24 2.2.1 Conceptual definition of Firm Performance .24 2.2.2 Factors influencing Firm Performance .25 2.3 The Underpinning Theories 27 2.3.1 Resource-Based View (RBV) 27 2.3.2 Dynamic Capabilities .29 2.3.3 Agglomeration Theory 30 2.4 Research hypotheses and research model 32 2.4.1 The relationship between Intellectual Capital, Innovation Capability and Firm Performance 32 2.4.2 The relationship between Organizational Learning Capability, Innovation Capability and Firm Performance 34 2.4.3 The relationship between Technological Orientation, Innovation Capability and Firm Performance 36 2.4.4 The relationship between Innovation Milieu, Innovation Capability and Firm Performance 37 2.4.5 The relationship between Innovation Capability and Firm Performance 38 2.4.6 Conceptual research model 39 2.5 Concluding remarks 40 CHAPTER 3: RESEARCH METHODOLOGY 41 3.1 Research Paradigms and Research Design 41 v 3.1.1 Research Paradigms .41 3.1.2 Research Design .43 3.2 Data collection and time frame 45 3.2.1 Data collection technique 45 3.2.2 Data collection sources 46 3.2.3 Sampling technique and time frame of the research 47 3.3 Measurement scales 47 3.3.1 Measurements of Innovation Capability 49 3.3.2 Measurements of Intellectual Capital .50 3.3.3 Measurements of Learning Capability .50 3.3.4 Measurements of Technological Orientation 51 3.3.5 Measurements of Innovative Milieu 51 3.3.6 Measurements of Firm Performance 52 3.4 Data analysis techniques .52 3.4.1 Data analysis procedures and tools 52 3.4.2 Data analysis techniques 53 3.5 Concluding remarks 54 CHAPTER 4: FINDINGS AND ANALYSIS .55 4.1 The situation of promoting innovation capability and performance among Vietnamese SMEs .55 4.1.1 The significance and performance of Vietnamese SMEs 55 4.1.2 The situation of promoting innovation capability among Vietnamese SMEs 57 4.2 Empirical study on the impacts of Innovation Capability on Firm Performance of Vietnamese SMEs 60 vi 4.2.1 Profile of participants 60 4.2.2 Results of EFA .61 4.2.3 Results of PLS-SEM 62 4.3 Summary of findings 70 CHAPTER 5: RESULT DISCUSSIONS, RECOMMENDATIONS AND RESEARCH LIMITATIONS 71 5.1 Discussions of results 71 5.2 Recommendations to enhance Vietnamese SMEs’ innovation capability and firm performance .72 5.2.1 Managerial implications for Vietnamese SMEs’ owners and managers 72 5.2.2 Managerial implications for Policy-makers 76 5.3 Research limitations and direct for further research 77 5.3.1 Limitations of the research 77 5.3.2 Direction for further research 78 CONCLUSION 79 REFERENCES 80 vii LIST OF TABLES Table 1.1 Findings and limitations of prior studies into the relationship between innovation capability and firm performance Table 4.1 Results of Inner VIF Values of the Structural Model 65 Table 4.2 Results of Path Coefficients of the Structural Model using Bootstrapping 65 Table 4.3 Results of f Square for the Structural Model 67 Table 4.4 Results of R Square for the Structural Model 68 Table 5.1 Summary of hypothesis testing results 72 LIST OF FIGURES Figure 1.1 The process of data collection and data analysis of the thesis 17 Figure 2.1 The conceptual research model 39 Figure 3.1 The “research onion” framework .42 Figure 4.1 The percentage of innovative SMEs firms of Vietnam and regional countries in 2015 57 Figure 4.2 The percentage of innovative SMEs firms with specific innovative approaches of Vietnam and regional countries in 2015 58 Figure 4.3 Results of Bootstrapping of the Structural Model .66 viii LIST OF ABBREVIATIONS Abbreviations Explanation AT Agglomeration Theory AVE Average Variance Extracted CFIC Client-focused Innovation Capability CR Composite Reliability CSR Corporate Social Responsibility DC Dynamic Capability ECDP Employee Engagement, Communication and Participation in Decision-Making EFA Exploratory Factor Analysis ERT Experimentation and Risk-taking FIIS FTU Innovation and Incubation Space FP Firm Performance HMC Human Capital IC Innovation Capability ICT SMEs Information and Communication Technology Small-toMedium IEE Enterprises Interactions with the External Environment IM Innovation/ Innovative Milieu ITC Intellectual Capital LC (Organizational) Learning Capability MFIC Marketing-focused Innovation Capability OECD Organization for Economic Co-operation and Development ORC Organizational Capital PLS-SEM Partial Least Squares Structural Equation Modeling RBV Resource-Based View