Thesis statement
The electronics industry plays a crucial role in the global economy, marked by swift technological progress and intense competition In response, numerous countries have adopted policies aimed at bolstering their domestic electronics sectors to secure a competitive edge in the international market These initiatives encompass tax incentives, funding for research and development, investments in infrastructure, and trade protection strategies.
The impact of policies aimed at enhancing the electronics industry's growth and competitiveness is still debated While certain studies indicate that these policies have successfully improved the competitiveness of domestic companies and stimulated economic growth, others contend that they have led to inefficiencies, distortionary effects, and market failures.
Therefore, this thesis seeks to assess the impacts of supporting industry development policies in the electronics industry Specifically, this research will investigate the following research questions:
1 What are the different types of supporting industry development policies in the electronics industry?
2 How effective have these policies been in promoting the growth and competitiveness of the domestic electronics industry?
3 What are the implications of the findings for policy makers, industry practitioners, and other stakeholders in the electronics industry?
This research will utilize the Difference in Difference (DID) method, integrating both qualitative and quantitative data collection and analysis techniques, to address the research questions The study will leverage data sourced from various firms.
This research reveals three key findings that enhance the understanding of the effects of supporting industry development policies within the electronics sector These insights will guide policymakers and industry practitioners in crafting and executing effective strategies aimed at fostering the growth and competitiveness of the domestic electronics industry.
Research rationale
The thesis highlights the critical role of supporting industries, particularly the electronics sector, in driving economic growth by supplying vital goods and services to various industries However, the advancement of these supporting industries often necessitates substantial investment and government support, which can be challenging to validate without concrete evidence of their economic impact.
The significance of supporting industries is widely recognized; however, there is a notable absence of empirical evidence regarding the effects of supporting industry development policies, particularly in developing countries such as Vietnam This thesis seeks to address this gap by offering empirical insights into the impact of these policies on the electronics sector in Vietnam.
Evaluating the effectiveness of policies that support industry development is crucial for the efficient use of public resources and for identifying improvement areas This article addresses this need by employing the difference-in-difference method to assess the impact of these policies specifically within Vietnam's electronics industry.
This thesis provides empirical evidence on the effects of industry development policies, specifically targeting Vietnam's electronics sector The study's findings are intended to guide policymakers and researchers in making informed decisions, ultimately promoting sustainable economic growth in Vietnam and other developing nations.
Research objectives
This research evaluates the effectiveness of government policies in fostering the growth of the electronics industry, while also estimating the causal impact of these supportive policies on the performance of firms within the sector, utilizing a Difference-in-Differences (DID) model.
Scope of analysis
The analysis examines the effects of supporting industry development policies on Vietnam's electronics sector from 2010 to 2020, a crucial period for assessing the impact of key initiatives This timeframe includes the implementation of significant policies, such as the "Decision 9028/QD-BCT" by the Ministry of Industry and Trade, which approved the master plan for supporting industries until 2020 with a vision extending to 2030.
The plan aims to boost the competitiveness of the Vietnamese economy by developing supporting industries amidst rising global integration and competition It outlines specific goals, including the establishment of industrial clusters and production zones tailored to particular sectors A key focus is on investing in technology and innovation to enhance the capabilities of Vietnamese firms, particularly in the electronics industry Additionally, the plan proposes various measures to support industry growth, such as tax incentives, investment subsidies, and backing for research and development It also highlights the significance of partnerships between domestic and foreign firms, along with the need for improved supply chain management.
The master plan approved in Decision 9028/QD-BCT demonstrates the Vietnamese government's dedication to advancing supporting industries, particularly in electronics It emphasizes the importance of a holistic strategy that encompasses investment in technology, innovation, and effective supply chain management to foster growth in these sectors.
Several policies have been implemented to support industries, including "Decree No 111/2015/ND-CP," which focuses on the development of supporting industries, and "Decision No 68/QD-TTg," which approves the Supporting Industry Development Program for 2016 to 2025 Additionally, "Decision No 1288/QD-TTg" outlines the National Program on Industrial Extension through 2020, while "Decision No 1881/QD-TTg" further emphasizes industrial extension initiatives for the upcoming years.
2021 – 2025” and “Decision No 598/QD-TTg on approving the Industry restructuring plan for the period of 2018-2020, with a vision to 2025”
Due to limited data on other outcome indicators like productivity, this analysis focuses on the impact of government policy on the revenue of treated firms Revenue serves as a proxy for overall financial performance and success within this group By evaluating revenue changes before and after the implementation of the government policy, the study aims to highlight the policy's effectiveness in generating positive results for the treated firms.
To assess the effect of government policy on the revenue of treated firms, a Difference-in-Differences (DID) regression model is utilized, with revenue as the dependent variable and a dummy variable representing policy implementation as the primary independent variable Incorporating firm-specific characteristics, such as industry type, region, and enterprise type, enhances the analysis's robustness The coefficient linked to the treatment variable reveals the average revenue change resulting from the government policy.
A statistically significant and positive coefficient indicates that the policy notably influences revenue growth for the treated firms Furthermore, incorporating time fixed effects can mitigate potential omitted variable bias and account for unobserved differences among firms and across various time periods.
While revenue is the main focus as an outcome variable, it is crucial to recognize that it may not fully reflect the overall impact of the policy on firms' performance However, examining revenue can yield important insights into the financial effects of government policy and enhance our understanding of its effectiveness in fostering industry development among the firms involved.
Contributions of the thesis
The thesis offers empirical insights into the effects of industry development policies on Vietnam's electronics sector, employing a difference-in-difference method for a thorough evaluation By utilizing quantitative data and advanced statistical techniques, the study examines the correlation between policy interventions and industry performance, contributing significantly to the existing literature This rigorous analytical framework ensures a comprehensive assessment of the impacts of these policies.
The study offers key policy recommendations for the Vietnamese government and policymakers aimed at enhancing the effectiveness of support for the electronics industry's development, ultimately fostering sustainable economic growth in Vietnam.
Thirdly, the thesis focuses on the electronics industry in Vietnam, providing a case study that can be used to inform policymakers and researchers in other
7 developing countries that are seeking to promote the development of supporting industries
The thesis offers a novel contribution to the existing body of knowledge by providing empirical evidence on the effects of industry development policies within the electronics sector It serves as a valuable resource for policymakers, industry practitioners, and researchers, enhancing their understanding of policy effectiveness, highlighting areas for improvement, and guiding informed decision-making in policy formulation and implementation Its specific focus on the electronics industry and its evaluative approach underscore its significance for both academic circles and industry stakeholders.
THEORETICAL AND PRACTICAL BASIS OF SUPPORTING
Theoretical basis of supporting industry
Supporting industries are essential sectors that manufacture raw materials, accessories, spare parts, and semi-finished products for various manufacturing and production processes In recent years, Vietnam's supporting industries have seen significant growth, playing a crucial role in the country's integration into the global supply and value chains Defined as producers of manufactured inputs, these industries focus on creating intermediate and capital goods necessary for final product completion They supply vital components and tools that are integral to the production of parts and components, thereby contributing to the overall manufacturing ecosystem.
Supporting industries encompass a range of industrial activities that provide essential intermediate inputs, such as parts and components, along with some capital goods, including tools necessary for their production These industries play a crucial role in the assembly and processing sectors.
Supporting industries encompass a network of businesses that supply essential goods and services to enhance the efficiency and effectiveness of primary industries (Thuy 2006) These industries play a crucial role by providing vital inputs and components necessary for production processes, as seen in the automotive sector, which depends on supporting industries for parts like engines and transmissions Additionally, they offer specialized services, including logistics, transportation, warehousing, and distribution, which further facilitate the operations of primary industries.
Supporting industries are essential for enhancing the efficiency and cost-effectiveness of primary industries They drive innovation by providing advanced technology and research, fostering the development of new products and services Additionally, these industries often form geographic clusters, enabling interconnected companies and institutions to collaborate and boost their competitiveness Furthermore, supporting industries play a vital role in economic development by creating jobs, generating revenue, and promoting entrepreneurship and innovation.
Supporting industries exhibit several key characteristics that enhance their relationship with the primary industry they serve They are highly interdependent, meaning the success of one directly influences the other, fostering a symbiotic relationship Additionally, these industries often focus on specialization, providing high-quality and tailored goods and services Collaboration is another crucial aspect, as supporting industries work alongside the primary industry to innovate, develop new products, improve efficiency, and reduce costs They are typically at the forefront of innovation, introducing advanced technologies and processes that boost the effectiveness of the primary industry Furthermore, supporting industries tend to cluster geographically, creating concentrations of interconnected companies that facilitate the sharing of knowledge and resources Ultimately, these characteristics help supporting industries establish a competitive advantage for the primary industry, driving overall growth and success.
Supporting industries provide access to specialized goods and services that are often unavailable elsewhere, playing a crucial role in the success of primary industries They significantly impact the economy by contributing to job creation, fostering innovation, and driving economic growth, as highlighted by Novák, Jurigová, and Kozubíková (2017) These characteristics underscore the vital importance of supporting industries in enhancing the overall growth and success of primary sectors.
1.1.3 Factors affecting the supporting industry
The growth and development of supporting industries are influenced by several key factors Firstly, the demand for the primary industry significantly affects the supporting industry; a decrease in primary industry demand can lead to reduced demand for supporting services Secondly, technological advancements drive innovation, enhance efficiency, and result in cost savings, positively impacting supporting industries Additionally, government regulations and policies that encourage investment and innovation create a conducive environment for growth Competition among supporting industries also plays a crucial role; those that differentiate themselves with unique products and services tend to thrive Furthermore, supply chain disruptions can severely hinder growth, as delays in raw material supply can negatively affect production timelines Lastly, the emergence of industry clusters fosters collaboration and growth among supporting industries, further enhancing their development.
The growth and development of supporting industries can be greatly influenced by specific regions Industry clusters promote the exchange of knowledge, resources, and expertise, which enhances innovation and efficiency.
Bi, Xiaoyun Qi, and Wan Su 2009) Overall, these factors illustrate the complex and interconnected nature of supporting industries, and how various external factors can impact their growth and development
1.1.4 Criteria for assessing the level of supporting industry development
Evaluating the development of supporting industries involves several key factors A robust supply chain, characterized by numerous suppliers and complex relationships, is essential for a well-developed industry High specialization within these industries leads to more efficient and cost-effective goods and services, serving as a strong indicator of development Additionally, innovation plays a crucial role, enabling the creation of new products and improved efficiency, which further signifies a mature industry Productivity is another vital aspect; higher productivity reflects the industry's effectiveness in delivering goods and services The formation of industry clusters fosters collaboration and knowledge sharing, enhancing innovation and indicating a thriving supporting industry Finally, the economic impact of these industries, including job creation and revenue generation, underscores their importance in driving economic growth.
12 used to assess the level of development of supporting industries, and to identify areas for improvement and growth
1.1.5 The role of supporting industry development
Improvement in supply chain efficiency
Supporting industry development is crucial for enhancing supply chain efficiency, as it provides high-quality, specialized goods and services that lower costs and boost productivity in primary industries In the automotive sector, a robust supporting industry is essential, offering a diverse array of specialized components, such as metals, plastics, and electronics, alongside vital services from logistics companies and testing agencies This development has significantly improved supply chain efficiency, reduced operational costs, and increased productivity, ultimately enhancing the industry's competitiveness and fostering its growth In summary, the advancement of supporting industries is key to optimizing supply chains, driving down expenses, and elevating the overall performance of primary sectors.
Increased number of locally-produced inputs and services
Supporting industry development plays a crucial role in enhancing the number of locally-produced inputs and services, which are vital for the success of primary industries By fostering a robust supporting industry, primary sectors can minimize reliance on foreign suppliers, thereby boosting their competitiveness In agriculture, for instance, a strong supporting industry can supply essential inputs like fertilizers, pesticides, and irrigation systems locally, which not only reduces dependence on imports but also enhances local farmers' competitiveness Additionally, services such as agricultural research, extension services, machinery repair, and marketing are critical for agricultural success A well-established supporting industry enables farmers to easily access these services, leading to improved output quality and quantity, lower costs, and increased competitiveness.
The growth of the information technology industry has fostered the creation of a variety of locally-produced inputs and services, including software, hardware, and telecommunications equipment, as well as essential services like software development and data analysis By cultivating a robust supporting industry, local businesses can more easily access these resources, thereby decreasing their reliance on foreign suppliers and enhancing their competitiveness in the global market Ultimately, strengthening the local industry not only boosts the availability of domestic inputs and services but also fortifies the overall competitiveness of local enterprises (Momoh 2019).
Reduction in reliance on imports
Developing a robust supporting industry plays a crucial role in minimizing reliance on imports by supplying local industries with essential inputs and services This shift not only lowers costs but also enhances the resilience of local industries against external shocks and fluctuations in the global market For instance, a strong supporting industry in the renewable energy sector can significantly decrease dependence on imported fossil fuels.
A well-developed supporting industry for renewable energy can provide locally- produced inputs such as solar panels, wind turbines, and energy storage systems
Developing a robust supporting industry for renewable energy and manufacturing can significantly enhance local industries by reducing reliance on imported fossil fuels and components This transition not only increases energy security and mitigates the effects of global price fluctuations but also lowers the carbon footprint of the energy sector A well-established supporting industry can supply locally-produced raw materials, specialized components, and precision tools, while also offering essential services such as installation, maintenance, design, engineering, and prototyping Ultimately, fostering a strong supporting industry enhances the resilience of local businesses against external shocks, boosts competitiveness, and contributes to a more sustainable and self-sufficient economy.
Theoretical basis of electronic industry
The electronic industry encompasses the production and sale of electronic components, devices, and equipment, including semiconductors, microprocessors, and consumer electronics This rapidly evolving sector is vital to the global economy and relies on the principles of electronics, which focus on the behavior and control of electrons It involves the design and application of electronic circuits and systems for functions like amplification and signal processing Electronic components, such as transistors and capacitors, serve as the building blocks for devices like computers and smartphones The industry's success hinges on advanced manufacturing processes, engineering expertise, and a strong emphasis on innovation, research, and global collaboration.
The industry is rapidly expanding and evolving, significantly impacting the global economy through high levels of innovation and collaboration (Gereffi, Bamber, and Fernandez-Stark 2022).
The electronic industry is a dynamic sector marked by rapid technological advancements and continuous innovation, driven by significant investment in research and development This industry operates within a highly globalized supply chain, encompassing the sourcing of raw materials, production of components, and distribution of finished products Companies within this field specialize in various areas, including semiconductors, telecommunications, and consumer electronics, while also prioritizing strong intellectual property protection to safeguard their innovations The competitive landscape of the electronic industry fosters ongoing innovation but presents challenges for companies striving to maintain their market position Overall, the sector is characterized by its fast-paced evolution, extensive specialization, and a commitment to advancing technology.
1.2.3 Factors affecting the electronic industry
The electronic industry is influenced by several critical factors, including technological advancements that drive innovation and render existing products obsolete It is also heavily reliant on global economic conditions, such as trade policies and consumer spending, which directly impact growth and profitability Additionally, a complex regulatory environment governing product safety and environmental impact can affect operations and costs The industry's interconnected global supply chain is vulnerable to disruptions from natural disasters and geopolitical events, including those caused by the COVID-19 pandemic Consumer trends and preferences play a significant role in shaping demand for specific products, influencing innovation and market dynamics Finally, competition among companies for market share and talent can significantly alter the industry's landscape Overall, these elements collectively shape the electronic industry's trajectory and performance.
Companies and institutions in the industry must continually monitor and respond to these factors in order to remain competitive and profitable
The development of supporting and electronics industries is essential for economic growth and competitiveness, as it enhances supply chain efficiency, increases local production, and reduces import dependence The electronics industry thrives on innovation, rapid technological advancements, and a commitment to quality, influenced by government policies, competition, and globalization Successful nations highlight the significance of government support, investment in research and development, industry-academia collaboration, and workforce development Insights from global experiences in these industries can guide policymakers and industry leaders Ultimately, prioritizing the growth of supporting and electronics industries can lead to economic diversification, resilience, and enhanced technological innovation.
Supporting industry development policies in Vietnam
Vietnam has introduced a range of policies to bolster its supporting industries, focusing on increasing competitiveness, fostering innovation and technology transfer, and enhancing product quality and localization.
The government provides investment incentives such as tax breaks, preferential loans, and land-use rights to companies investing in supporting industries, as outlined in "Decree No 111/2015/ND-CP on the development of supporting industries" (2015) These initiatives have successfully attracted foreign investment and fostered the growth of the supporting industry.
The government actively promotes technology transfer between foreign and domestic companies to enhance the capabilities of local firms in developing the supporting industry, as outlined in "Decree No 111/2015/ND-CP on the development of supporting industries."
2015) This has resulted in increased collaboration between foreign and domestic firms, which has helped to develop the supporting industry
The government prioritizes education and training by investing in programs that enhance essential skills for the supporting industry, such as technical and language training, as outlined in “Decision No 1288/QD-TTg on the National program on industrial extension to 2020” (2014) These initiatives have successfully cultivated a skilled workforce to bolster industrial growth.
The government prioritizes investment in research and development to foster innovation in technologies and products, which plays a crucial role in advancing the supporting industry, as outlined in Decree No 111/2015/ND-CP on the development of supporting industries.
Lastly, about public-private partnerships, the government works with private sector companies to develop the supporting industry through joint investment and development projects (“Decision No 598/QD-TTg on approving
20 the Industry restructuring plan for the period of 2018-2020, with a vision to 2025”
Vietnam's supporting industry development policies have effectively fostered the infrastructure, knowledge, and skills essential for the growth of the electronics sector Nevertheless, challenges remain, particularly in attracting increased foreign investment and enhancing the quality and efficiency of the supporting industry.
2022) Additionally, the government needs to continue investing in education and training programs to ensure that the workforce has the necessary skills to support the industry
1.3.2 Ongoing supporting industry policies and assessment
The National Program on Industrial Extension (NPIE)
Launched in 2014, the National Program on Industrial Extension (NPIE) in Vietnam is a pivotal initiative designed to enhance the growth of supporting industries This program focuses on boosting local content in products, elevating product quality, and minimizing dependence on imported materials and components, as outlined in Decision No 1288/QD-TTg.
The NPIE played a crucial role in bolstering supporting industries by offering essential financial assistance for research and development, technology transfer, and human resource training This funding was vital for companies to upgrade their technology, boost productivity, and enhance competitiveness In addition to financial support, the NPIE provided non-financial aid, including technical support and consultancy services, to help businesses overcome technical challenges, increase production capacity, and improve product quality The program also fostered valuable connections within the industry.
The NPIE initiative involved 21 domestic and international companies to enhance technology transfer and knowledge sharing A significant focus of the program was fostering collaboration among industry players, encouraging them to unite in developing common standards, sharing resources, and building supply chains This cooperative effort not only created a more competitive landscape for supporting industries but also opened doors to new market opportunities.
The program has significantly boosted investment in supporting industries, resulting in a rise in the number of firms in Vietnam It has also increased local content in products, thereby decreasing reliance on imported materials Additionally, the program has facilitated technology transfer and knowledge sharing between domestic and foreign companies, enhancing the technical capacity of Vietnamese firms This has improved the competitiveness of Vietnamese products in the global market, contributing to the country's economic growth Furthermore, the program has fostered collaboration among industry players, promoting the development of industrial clusters and supply chains.
Challenges and Room for Improvement
The program encountered significant challenges in attracting quality investment due to an underdeveloped legal framework and poor infrastructure Additionally, its focus on large-scale industries resulted in the neglect of small and medium-sized enterprises (SMEs) within supporting sectors Furthermore, the initiative failed to adequately address the human resource challenges, leading to a shortage of skilled labor in these industries Lastly, the program's limited scope concentrated primarily on a few key sectors, including electronics, automobiles, and textiles.
The NPIE has positively impacted the growth of supporting industries in Vietnam by increasing local content, improving product quality, and decreasing reliance on imports It has fostered collaboration among industry players and facilitated technology transfer and knowledge sharing However, challenges remain, such as a shortage of skilled labor, insufficient infrastructure, and the need for legal reforms To ensure sustainable development, the government must continue to implement effective policies and reforms that support the growth of these industries.
Supporting Industry Development Program for the 2016-2025 period Background
The Vietnamese government has launched the Supporting Industry Development Program for 2016-2025, a strategic initiative designed to enhance the growth of essential supporting industries, including electronics, textiles, and high-tech sectors, as outlined in "Decision No 68/QD-TTg."
The program emphasizes enhancing the quality and competitiveness of Vietnamese products in the global market by increasing local content, promoting research and development, and encouraging advanced technology adoption in production This focus is vital for advancing supporting industries in Vietnam, as highlighted by the struggles to meet international standards Additionally, the initiative seeks to foster collaboration among industry players, including domestic manufacturers.
The program promotes the formation of industrial clusters and supply chains among local and foreign companies, enhancing the competitiveness of Vietnamese products and production efficiency A key focus is on human resource development, aiming to train a skilled workforce through vocational training, advanced degree programs, and on-the-job training tailored for supporting industries Additionally, the program seeks to improve the legal framework by simplifying administrative procedures, reducing regulatory barriers, and strengthening intellectual property protection to foster innovation and facilitate technology transfer in supporting industries.
Electronics industry development policies in Vietnam
Vietnam's electronics industry is experiencing rapid growth, becoming a crucial sector for the nation's economy The country is actively attracting foreign investment, resulting in major global technology companies establishing manufacturing facilities there This influx has significantly boosted the production of electronics products, such as smartphones and televisions Additionally, Vietnam is heavily investing in the development of its own electronics industry, focusing on innovation and local manufacturing capabilities.
Vietnam's electronics industry is thriving, bolstered by a rising number of technology startups and government initiatives designed to promote innovation With a robust growth potential and favorable policies, the sector is well-positioned for continued success.
The electronics industry in Vietnam is experiencing robust growth and holds significant potential for the future, driven by several key factors Favorable government policies aimed at attracting foreign investment have created a supportive environment for manufacturing facilities Additionally, Vietnam's low labor costs make it an appealing option for companies seeking to reduce manufacturing expenses Significant investments in infrastructure, including transportation, energy, and telecommunications, have further enhanced the industry's prospects by ensuring reliable access to resources and markets Moreover, the government's commitment to education and training programs has resulted in an increasingly skilled workforce, positioning Vietnam as an attractive destination for companies looking to establish research and development facilities.
1.4.2 Ongoing electronics industry policies and assessment
The Vietnamese government has introduced several policies to foster the growth of its electronics industry, aiming to create a supportive environment that encourages innovation and investment Key incentives for foreign investors include tax breaks, land-use rights, and import duty exemptions Significant investments in infrastructure, such as transportation, energy, and telecommunications, further bolster the industry's development Additionally, the government supports research and development through funding for startups and investments in educational institutions To equip the workforce with essential skills, it has implemented education and training programs focusing on technical, language, and soft skills Furthermore, the government actively promotes electronics exports by participating in international trade fairs and establishing trade offices in crucial markets.
Vietnam's electronics industry policies have significantly boosted foreign investment, attracting major global technology companies to set up manufacturing facilities in the country, which in turn has fostered job creation and economic growth Additionally, these government initiatives have enhanced the nation's research and development capabilities within the electronics sector, driving innovation and the development of new products.
Challenges and Room for Improvement
Firstly, about labor challenges, the Vietnamese workforce, while growing in number and increasingly skilled, still faces challenges such as low wages and
The Vietnamese government must prioritize improvements in inadequate working conditions by investing in education and training programs to cultivate skilled workers and safeguard labor rights Despite significant investments in infrastructure, further enhancements are necessary, particularly in energy and transportation sectors Additionally, the electronics industry faces environmental challenges, including electronic waste and high energy consumption, prompting the need for robust regulations to promote sustainability Lastly, while laws exist to protect intellectual property rights, weak enforcement undermines innovation; thus, the government should strengthen these measures to attract foreign investment.
Other countries' experience in supporting industry development
Japan has adopted a variety of policies to foster the growth of its supporting industries, emphasizing public-private partnerships, research and development investments, and the formation of industry associations The government actively encourages investment through subsidies and tax incentives, particularly targeting small and medium-sized enterprises (SMEs) in these sectors Additionally, collaboration between SMEs and large electronics corporations is promoted, alongside the establishment of research institutions to enhance technology transfer and innovation Policies are also in place to boost the export of electronic components and intermediate goods produced by these supporting industries.
Development of specialized industrial zones, known as "industrial clusters," where supporting industries and electronics industries can co-locate and collaborate (Yoshimatsu 2000)
South Korea's "Creative Economy" initiative has introduced policies aimed at bolstering supporting industries, including the creation of innovation centers and financial assistance for startups and small and medium-sized enterprises (SMEs) (Chen et al 2019).
China has introduced various policies to bolster its supporting industries, including the creation of specialized funds aimed at fostering innovation and advancing key technologies Additionally, the Chinese government offers subsidies and tax incentives to stimulate investment in these sectors (Gereffi, Bamber, and Fernandez-Stark 2022).
Germany's "Industry 4.0" initiative has introduced policies aimed at fostering the growth of supporting industries by promoting digitalization and creating networks that enhance collaboration and innovation.
Countries have adopted various policies to foster the growth of their supporting industries, which typically include financial assistance, investment in research and development, and enhanced collaboration between industry and government.
Germany has launched the "Vocational Education and Training 4.0" initiative to enhance vocational education and training (VET) within its supporting industries, reflecting a broader trend among countries to develop human resources in this sector.
4.0 This initiative includes measures such as the development of new training courses and qualifications, the establishment of training centers and networks, and the promotion of work-based learning (“Federal Institute for Vocational Education and Training (BIBB) - Germany” n.d.)
Japan has taken significant steps to enhance human resources within its supporting industries by establishing specialized vocational schools and promoting work-based learning Additionally, the Japanese government offers subsidies and financial support to facilitate training and education initiatives.
Singapore's "SkillsFuture" initiative focuses on cultivating a skilled and adaptable workforce to meet future economic demands Key components of this initiative include training grants and subsidies, a skills certification system, and a strong emphasis on lifelong learning.
Countries are increasingly adopting diverse policies to enhance human resources in supporting industries, including financial support for training and education, the creation of training centers and networks, and the encouragement of work-based and lifelong learning initiatives.
Countries worldwide are adopting policies to foster the growth of industry clusters and enhance connections among supporting industries A notable example is Japan's "Industrial Cluster Plan," designed to encourage the development of regional industry clusters This initiative features financial support for establishing business incubation centers and promotes collaboration within various industries.
30 academia-government collaboration (“Industrial Cluster Policy / METI Ministry of Economy, Trade and Industry” n.d.)
South Korea's "Regional Innovation Cluster Plan" focuses on fostering regional innovation clusters across the nation This initiative involves financial support for establishing research and development centers and encourages collaboration among industry, academia, and government entities.
The United States has launched the "Advanced Manufacturing Partnership" to foster the growth of industry clusters across the nation This initiative focuses on establishing research and development centers while encouraging collaboration among industry, academia, and government entities.
China has enacted policies to foster the growth of industry clusters through the creation of industrial parks and financial backing for research and development Additionally, the Chinese government supports collaboration among industry, academia, and government entities.
Countries have adopted diverse policies to foster the growth of industry clusters and enhance connections among supporting industries Key initiatives include financial backing for research and development, the creation of business incubation and R&D centers, and the encouragement of collaboration among industry, academia, and government entities.
1.5.4 Lessons learned from other countries’ experience in electronics industry development
Literature review
A literature review examining the effects of industry development policies on the electronics sector indicates that these policies can lead to both beneficial and detrimental outcomes for the industry.
The study by Tuan et al (2016) investigates the impact of innovation on the performance of firms in Hanoi's supporting industries By gathering data from 118 companies within this sector, the research provides valuable insights into how innovative practices influence overall business performance.
A study on multiple regression analysis reveals that innovation significantly enhances firm performance, particularly in sales growth and profitability The research by Sakurada and Nguyen Thi Tue (2019) reviews the evolution and effectiveness of SME development policies in Vietnam, identifying challenges such as limited access to finance, inadequate infrastructure, and low technological capacity Both studies emphasize the importance of examining policy impacts within the Vietnamese context, particularly regarding SMEs and supporting industries While their research focuses on SME development policies, my thesis expands on this by evaluating the effects of development policies using the Difference-in-Differences (DID) method, offering a quasi-experimental approach This methodology allows for a more detailed analysis of how supporting industry development policies affect firm performance specifically in the electronics sector By utilizing firm-level data, my thesis aims to provide a rigorous examination of policy effectiveness in the electronics industry, contributing valuable insights for improving these interventions to foster sector growth in Vietnam.
The evolution of Taiwan's electronics industry is analyzed in Fuller (2005), highlighting the contributions of the state, private firms, international players, and China Additionally, Tung and Wan Jr (2007) explore the co-evolution of the electronics sectors in the United States and East Asia.
This thesis aims to analyze the impact of policy interactions on the growth and competitiveness of Vietnam's electronics industry, drawing comparisons with Taiwan's experiences By focusing on the evolution of the electronics sector in the Pacific, the research will provide insights into how supporting industry development policies influence Vietnam's supply chain and related industries Additionally, it will complement existing studies by offering a targeted examination of regional policy effects, thereby enhancing understanding of the broader context of the electronics industry in Vietnam.
The study by Maidique and Zirger (1984) highlights the significance of product innovation for the competitiveness and long-term success of firms in the U.S electronics industry, analyzing the critical factors that lead to innovation success or failure It offers an in-depth examination of the innovation process, from idea generation to commercialization However, it overlooks the influence of government policies on the industry My thesis aims to fill this gap by evaluating the effects of supportive industry development policies on Vietnam's electronics sector.
The study by Bassanini and Venn (2007) investigates how labor market policies influence productivity across European nations using the Difference-in-Differences (DID) method It highlights that the impact of these policies on productivity is substantial and varies based on several factors, such as the specific type of policy implemented, the institutional environment, and the unique features of each labor market Analyzing data from 16 European countries, the authors conclude that labor market policies play a critical role in shaping productivity outcomes.
Market policies significantly influence productivity, with effects varying based on several factors Research by Alatas and Cameron (2003) highlights the negative impact of minimum wage increases on employment in Indonesia, especially in sectors with many minimum wage workers Similarly, Card and Krueger (1993) analyzed the fast-food industry in New Jersey and Pennsylvania, using a Difference-in-Differences (DID) approach to assess the varying impacts of minimum wage policies during the 1990s In contrast, my thesis focuses on the electronics industry in Vietnam, employing the DID method to evaluate the long-term effects of industry development policies on firm performance Additionally, it will explore the mechanisms through which these policies influence firm outcomes, utilizing firm-level data for a comprehensive analysis.
Recent studies have explored the relationship between policy interventions and carbon emissions in China Pan et al (2020) utilized a Difference-in-Differences (DID) approach to assess the effects of a Smart Logistics policy on carbon emissions, analyzing data from firms before and after the policy's implementation Similarly, Zhao, Wang, and Dong (2023) employed a spatial DID analysis to investigate how innovative city policies can disrupt carbon lock-in, focusing on their impact on emissions Additionally, L Wang and Watanabe (2019) examined the influence of environmental policies on public risk perceptions regarding haze in Tianjin City, using a DID analysis to evaluate changes in public awareness and concern These studies collectively highlight the significance of targeted policies in addressing carbon emissions and enhancing public perception of environmental issues in China.
The study examines 36 perceptions regarding a new environmental policy, comparing responses before and after its implementation with a control group unaffected by the policy change However, the three papers analyzed do not specifically explore the effects of industry development policies within the electronics sector, instead employing a difference-in-differences (DID) approach to assess the causal impact of policy interventions on relevant outcomes.
Supporting industry development policies have varied and intricate effects on the electronics sector, influenced by the specific type of policy, the unique traits of the industry and firms, and the wider economic and social environment To enhance the understanding of how these policies impact the electronics industry, further research is essential in identifying the most effective strategies for fostering sustainable and inclusive growth within the sector.
The development of supporting and electronics industries is crucial for a country's economic growth, as it enhances supply chain efficiency, increases local production, and reduces import dependency This fosters a diversified and resilient economy, mitigating vulnerability to external shocks Additionally, the electronics industry is essential for creating high value-added jobs, driving export growth, and fostering technological innovation By generating high-tech products and adopting advanced manufacturing processes, these industries provide significant economic benefits Key lessons from successful countries emphasize the importance of government support, investment in research and development, collaboration between industry and academia, and investment in human resources.
Governments and policymakers must prioritize the development of supporting and electronics industries to enhance economic development strategies A strong emphasis on quality, specialization, and technological adoption will foster a diversified and resilient economy, generate high value-added jobs, and promote technological innovation.
RESEARCH HYPOTHESIS AND METHODOLOGY
Research hypothesis
The research hypothesis of the thesis is that there is a significant impact of supporting industry development policies on the electronics industry since the implementation in 2016
This hypothesis aims to find evidence that supporting industry development policies significantly impact the electronics industry The analysis will explore the relationship between policy implementation and various outcomes, including total labor, firm location, and enterprise type The objective is to gather sufficient evidence to reject the null hypothesis, which posits no significant effect of these policies, and to support the alternative hypothesis, suggesting that such policies have meaningfully influenced the electronics sector.
Methodology
The difference-in-differences (DID) method is a statistical approach used to evaluate the effects of policy interventions on specific groups or outcomes By comparing the results of two similar groups—one that receives the intervention and one that does not—DID estimates the policy's impact based on the differences in outcomes This method allows for the assessment of supporting industry development policies in the electronics sector by analyzing the treated group's outcomes against those of a control group before and after the policy implementation.
The DID method involves estimating the following basic regression equation:
The model can be expressed as \(Y_{it} = \beta_0 + \beta_1 \cdot Treat_{it} + \beta_2 \cdot Post_{it} + \beta_3 (Treat_{it} \cdot Post_{it}) + \epsilon_{it}\), where \(Y_{it}\) represents the outcome variable for firm \(i\) at time \(t\) The variable \(Treat_{it}\) equals 1 if firm \(i\) is part of the treated group at time \(t\), and 0 otherwise The variable \(Post_{it}\) equals 1 if time \(t\) is after the policy implementation, and 0 if it is before Additionally, the term \(Treat_{it} \cdot Post_{it}\) serves as the interaction term, highlighting the combined effect of being in the treated group during the post-policy period.
𝛽 1 is the average difference in outcomes between the treatment and control groups in the pre-treatment period
𝛽 2 is the average change in outcomes over time for the control group
The 𝛽 3 coefficient serves as the difference-in-differences estimator, quantifying the impact of a policy on the outcome variable by measuring the differential changes over time between treatment and control groups A positive 𝛽 3 value signifies a beneficial effect of the policy on the outcome, whereas a negative value suggests an adverse impact.
𝜖 𝑖𝑡 is the error term, which represents all other factors that affect the outcome variable
The Difference-in-Differences (DID) method is an effective approach for evaluating policy impacts, but it has notable limitations One key limitation is the necessity for the comparison groups to be alike in all aspects except for the policy intervention; dissimilar groups may lead to outcome differences attributable to external factors rather than the intervention itself Additionally, the DID method relies on the timely implementation of the policy intervention to ensure accurate assessment.
The Difference-in-Differences (DID) method is a valuable tool for evaluating policy interventions, particularly when implemented gradually over time Although it can be challenging to isolate the effects of the policy from concurrent factors, the DID method, when applied correctly, offers a reliable estimate of a policy's impact.
The Difference-in-Differences (DID) method is an effective tool for evaluating the impact of supporting industry development policies on the electronics sector By comparing the performance of firms benefiting from these policies against those that do not, the DID method enables a clearer understanding of how such policies influence key outcomes like revenue and labor force size, while controlling for external factors affecting the industry.