MỤC LỤC
The time within the concept of innovativeness of small- and medium sized industrial enterprises gives the opportunity to notify the following: degree of newness of innovation, delay in the reactions of SME to changes in environment and in the information about them, time-related development of a SME , time dependent innovation process, the delay between the output and impact and input of innovation activities. When it comes to innovation in different departments of firms, there are five types of innovation: product, process, marketing, organizational and social innovations (Hyvarinen, 1990).
There are four criteria which are usually used to classify innovation: time, influencer (firm/entrepreneur), market, and technology. When influencer or causer of innovation is analyzed, the typical classification is innovation caused by entrepreneur or caused by firm.
There is no complementing relation between small and large firms as found in developed country (Fontes and Coombs, 1997). • Most of innovation activities result from adapting techniques which are initially created or invented in developed countries.
Definition of product innovation
This is however, not a problem as it has been proved that a regular and steady innovation on existing products is more important than a sudden substantial change in products. In fact, many industries across the world tend to favor product improvement than inventing a whole new one since the seventy.
Due to such transaction costs which constrain flow of technology between firms, between researchers and firms, it is recommended that innovation should be internalized rather than transact through third party organization. To minimize information asymmetry, agency theory suggest to constrain open corporation and knowledge/ technology transfer as these relations may create deviation in interest of manager and shareholder and reduce firm's effectiveness.
In small business, the manager/owner is mainly responsible for strategic decision then his role is more significant as compared to large business where the decision is made through various levels of assessment Drucker (1985) and Urban & Hauser (1980) stated that small firms' innovative behavior tend to be influenced by individual features while large firms innovation is determined by characteristics of firms such as product, capital, investment. "Firms with more capital intensive technologies will tend to innovate more if, as expected, the rents of innovation are less threatened as, to exploit the innovation, high investment in physical capital is required" (Martinez-Ros, 1999).
In general, innovation level of firms is measure by a category of four values, which is based on their outcome from innovation activity (regardless of product or process) and their expenditure on R&D. The first group consists of entrepreneurial characteristics (age, science qualification, firm experience), skill of the workforce (number of qualified technical staff, number of managerial and professional staff, % qualified technical staff, % managerial and professional staff) and investment in know how ( training cost, marketing cost). The second group includes services outsourced (administrative, marketing and technical consultants) and source of innovation ( similar firms, supplier, customers, contractor).
Innovation in general is considered as consequence of interaction between technological capital at the early stage of the period, technological opportunity from market and other factors relating to features of firms and market. In which I is innovation in product or process of firms, G is technological capital, τ represents technological opportunities and X refers to group of variables involving in market and firm's characteristics. IPROD*it/ IPROC*it is underlying latent propensity variable for the product/process innovation activity; IPROD it / IPROCit is whether product/process innovation is carried out or not.
The second group relates to characteristics of market or information sources outside such as competition level, outsourcing and employing external assistant, networking.
Size: is expected to positively affect product innovation as large firms will have sufficient financial resource to invest on expensive R&D activity as well as on advanced technique and equipments. This factor is proxied by quantity of scientist and engineers employed in a study of Hadjimanolis(2000) and technical personnel in research of Meeus, Oerlemans& Hage (1999) and Avermaetea, et al. As skill of staff and investment of enterprises for such skill is foundation for innovation activity, these variables are expected to be positively correlated with product innovation.
R&D activity: In the research of Baldwin and Sabourin (1999), this determinant is represented by a dummy variable which take value of one when firm has R&D department and zero when firm doesn't have. Export orientation: In the study of Matinez (1999),export is proxied by revenue from export activity. In this study, binary variable is utilized. This variable takes value of 1 when firm export and zero when not. III.2.2 External factors. a) Competition level: in the paper of Baldwin and Sabourin (2000), competition level is measured by categorical variable representing number of firms in the industry with three value : 0 when there are under 5 firms, 1 when there are 6-20 firms and 2 when there are over 21 firms. In SME survey, competition results from 5 rivals, each has four levels (from 1-4). To simplify, competition here is the average of five rivals in the survey. Thus, competition take numerical value from 1-4. b) Outsourcing: Although the finding of Martinez-Ros (1999) and Rothwell & Dodson (1991) are opposite, both measure outsourcing by expenditure on outsource. My study also utilizes this method of measurement. c) External assistant/Networking: In the study of Freel (2000), these factors are defined as relationship of firms with supplier and subcontractor, with customer, with competitor/other firms, with university/colleges, with government/support agencies. Each relationship is measured by average number of person firm usually has monthly contact. In this study, external assistant is proxied by number of technical consultant firm use while network is proxied by total number of supplier/ partner/ competitor firm usually contact with. Both variables is expected to be in line with innovation. d) Knowledge of market: this determinant is defined as firm's awareness of its customers demand.
(2004), proxy of market awareness is spending on marketing activities as % of the firm’s turnover. In this study, this factor is measure by expenditure of firm on marketing activity. In fact, it will be more correct when measuring spending on market analyzing instead of marketing cost in total. However, data is not available so marketing cost in whole sum is utilized finally. e) Country environment: Whitley (2000) analyzing innovation across various country, thus economic type is included in the model. However, this study scale is within Vietnam, country environment is not examined here. f)Industry : four binary variables are added to control difference of innovation cause by variation across different industries, including Food, Textile, Mechanics, Wood and other industries.
Most of previous author applied single-equation techniques which assume that error term follows univariate normal distribution, with ρhk =0 ( h,k = I,N ; h≠k). The general specification given in equation above allows for the correlation of disturbances for the same firm across decisions of innovation.
There are high correlation between three variables proxied for human resources and firm's size (all correlations are total 0.6%).There are also strong relationship between these variables, especially for Technical staff and MPstaff, the correlation is 0.9%. Except for four industry control variables, there are only five out of eleven determinants having significant impacts on improving product activity at significance of 10%, including size, export, age, competition level, network. When recognizing the positive impact of size on firm's innovation, this result implicitly imply that finance is a key issue for Vietnamese firms and it plays an important role in determining innovation activity of firms.
For dummy variables, marginal effect relates to discrete change in the probability of each option happens from zero to one in response to an unit increase of explanatory variable; holding all other variables at their means. Unconditional marginal effect Pr (New product =1), Pr (Improving =1) is computed to measure how much happening probability of each type of innovation will change regardless of the other happens or not. Conditional marginal effect including four cases Pr(New product=1, Improving =1), Pr( New product=0, Improving =1), Pr( New product=1, Improving =0), Pr( New product=0, Improving =0) calculate how much occurrence probability of each innovation will change providing that the other option will take certain value of 1 or 0.
Regarding to age of entrepreneur, if owners/managers of firms gain one more age, the rate their firms proceed improving product (without making new one) will reduce 0.26% with other variables hold at reference points.
Conclusion
More efficient law on micro finance should be applied so that SME firms can approach capital from these sources easily and effectively. Maintaining a competitive market is another method competent authority can apply to ensure enhance innovation activities of firms. A monopoly market where firms are not freely to enter will discourage existing firms from innovating their product.
Once a purely competitive market are maintained monopoly or government support are removed, firms will be stimulated to create better product to gain more market share. In sum up, this study proposes some policies that should be applied or continued to promote innovation among SME firms. Such policies will not only enhance firm's performance but their consequences will increase government budget, increase wealth fare of the whole society.
An investigation of innovation antecedents in small firms in the context of a small developing country. Innovation and the quality of labour factor: An empirical investigation in the French food industry. The Institutional Structuring of Innovation Strategies: Business Systems, Firm Types and Patterns of Technical Change in Different Market Economies.
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