Nguồn tri thức nhân tố ảnh hưởng tới đổi mới sáng tạo ở cấp độ doanh nghiệp tại việt nam một nghiên cứu thực nghiệm

Numerous empirical studies suggest that innovation enhances firm performance because the product of innovation increases firm competitiveness and the process of innovation transforms a f

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY VIETNAM

HANOI – 2020

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY VIETNAM

Scientific instructors:

1 Prof Dr TRẦN THỌ ĐẠT

HANOI – 2020

DECLARATION

I have read and understood the violations of academic honesty, and I commit

by my personal honor that this research is my own and does not violate the requirement of honesty in academic

Dissertation author

Phùng Minh Thu Thủy

I would like to express my sincere appreciation and thanks to Professor Tran Tho Dat, for his regular provision of invaluable pieces of advice, guidance, correction, and encouragement to me throughout this research I could not finish this PhD course without his supports and encouragements

I also like to extend my heartfelt thanks of gratitude to Professor Joris Knoben and Professor Patrick Vermeulen from Radboud university in The Netherlands, who guided me from my first step to set up this research and spent a countless amount of time to support me This dissertation could not have been successfully accomplished without their contributions

Finally, I would like to dedicate this success to my beloved husband and lovely daughter, who all the time stay beside me I would not be able to achieve this success without their continuous supports and great deal of understanding

ABBREVIATIONS AND ACRONYMS

Eurostat : European Statistical System

R&D : Research and Development

The ES : The Enterprise Survey

The ICS : The Innovation Capabilities Survey

TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENT ii

ABBREVIATIONS AND ACRONYMS iii

LIST OF TABLES vi

LIST OF FIGURES vii

TABLE OF CONTENTS iv

CHAPTER 1: INTRODUCTION 1

1.1 Background 1

1.2 Problem Statement 4

1.3 Study Objective 7

1.4 Study process 7

1.5 Scope of Study 8

1.6 Contribution of Study 11

1.7 Limitation of Study 11

1.8 Organization of the Dissertation 12

CHAPTER 2: LITERATURE REVIEW 13

2.1 Research on Innovation in the world 13

2.1.1 Ground theory research 13

2.1.2 Determinant of innovation research 17

2.1.3 Product innovation research 27

2.2 Research on Innovation in Vietnam 30

CHAPTER 3: THEORY FRAMEWORK 39

3.1 Definition of Innovation 39

3.2 Types of Innovation 41

3.3 Determinants of Innovation 44

3.3.1 Following Resources Based view theory 44

3.3.2 Following Knowledge based view theory 46

3.3.3 Conclusion 47

3.4 Knowledge sources 48

3.4.1 Internal Knowledge Sources 49

3.4.2 Collaborative Knowledge Sources 49

3.4.3 Regional Knowledge Sources 50

3.5 Hypotheses 50

3.5.1 Internal knowledge sources 50

3.5.2 Collaborative knowledge sources 52

3.5.3 Regional knowledge sources 54

3.6 Research model 55

CHAPTER 4: METHODOLOGY AND DATA COLLECTION 60

4.1 Research context 60

4.2 Methodology approach 69

4.2.1 Logistic regression 69

4.2.2 Innovation research used logit regression 70

4.3 Data collection 71

4.4 Variables 75

CHAPTER 5: RESEARCH RESULTS 81

5.1 General description of the ES and ICS sample 81

5.1.1 Distribution of firms by sector and region 81

5.1.2 Descriptive statistics 84

5.1.3 Innovation 85

5.2 Descriptive statistics of the sample merged from ES and ICS 92

5.3 Knowledge Sources and Product Innovation 93

CHAPTER 6: CONCLUSION AND RECOMMENDATION 101

6.1 Conclusion 101

6.2 Recommendation 105

6.2.1 Policy recommendation 105

6.2.2 Recommendation for firms 109

6.3 Limitations of the research 112

LIST OF RESEARCH BY THE AUTHOR

REFERENCES

APPENDIX

LIST OF TABLES

Table 2.1: List of innovation models 15

Table 2.2: List of main innovation research categorized by theory 27

Table 3.1: Firms resources 45

Table 4.1: Key Policy Documents related to innovation in Vietnam 64

Table 4.2: Variable measurement 78

Table 5.1: Distribution of firms by region 81

Table 5.2: Distribution of firms by sector and region 83

Table 5.3: Distribution of firms by size and region 84

Table 5.4: Descriptive statistics 85

Table 5.5: Product Innovation 86

Table 5.6: Product Innovation orientation 87

Table 5.7: Objectives of product innovation 88

Table 5.8: Innovation activities 89

Table 5.9: Sources of information for innovation 90

Table 5.10: Barriers to innovation 91

Table 5.11: Descriptive statistics and correlations 93

Table 5.12: Logistic Regression Result of the baseline model 94

Table 5.13: Logistic Regression Results of each individual knowledge source models 95

Table 5.14: Logistic Regression Results of the all independent variables simultaneously model 97

Table 5.15: Robustness tests 99

LIST OF FIGURES

Figure 2.1 Research model in Nguyen Van Thang et al study 34

Figure 3.1: Research model with all the variables 59

Figure 4.1 Distribution of the realized sample by region 74

Figure 5.1: Product innovation and using knowledge sources from the supply chain 100

CHAPTER 1: INTRODUCTION

1.1 Background

There is no doubt about the advantages that innovation can bring to a nation OECD (2007) reported strong evidence for a positive relationship between innovation and national competitiveness Innovation plays an essential role in economic growth and is an indispensable factor to contribute to creating more jobs More broadly, both past theory and practice suggest that countries will follow different development trajectories, depending on their ability to identify and capture technological progress Applying new technology translates technological and scientific advances into more productive economic activity As such, it is not surprising that many OECD member countries have adopted national strategies to boost innovation and enhance their economic performance though increased productivity and growth

The vital role of innovation is not only affirmed in OECD countries but also developing countries OECD (2012) There is a plethora of reasons why innovation is important for developing and emerging countries (OECD, 2012) For example, innovation in agriculture plays an important role in reducing poverty and promoting economic growth Other advantages that innovation can bring to those countries are creating more jobs, improving welfare, access to business opportunities, reaching the world technological frontier in many industries, and especially having the way to avoid “middle income traps”

The Asian development bank (ADB) (2014) states that countries fall into the middle-income trap if they are unable to move from a low-cost to a high-value economy, making it difficult for them to compete with both low-income and high-income countries The ADB (2014) also stresses the vital role of innovation to avoid the middle-income trap as it raises productivity and promotes structural change The ADB (2014) mentions Vietnam is a lower-middle-income country, which needs to increase the productivity of capital, land and other resources to avoid falling into the middle-income trap as well Eric Sidgwick, Country Director of ADB in Vietnam,

said it was too early to say whether Vietnam was trapped in the middle-income trap, but the country needed policies to create higher incomes and increase labor productivity

Recently, some emerging economies have become significant actors in the global innovation system Given the importance of innovation for economic growth,

it is of utmost importance to understand the determinants of successful innovation In order to gain that understanding innovation needs to be studied at the level at which

it is generated, namely the firm level

At firm level, the ability to innovate leads to the wealth generation capacity Innovations reduce production cost and improve quality of firms’ goods and services Numerous empirical studies suggest that innovation enhances firm performance because the product of innovation increases firm competitiveness and the process of innovation transforms a firm’s internal capabilities making it more adaptive to change (Neely & Hii, 1998) De Jong and Brouwer (1999) confirmed the same idea in their empirical research with small and medium enterprises (SMEs) Those SMEs work in

an environment of changing consumer preferences, increasing competition and changing technological requirements, in order to achieve business goals such as profit and growth, having a continuous flow of successful innovations is crucial for them They build their competitiveness position by offering high quality products and services that match their customers’ demand, so they need a permanent flow of innovations

As mentioned above, there are plentiful studies on innovations However, only a limited number of studies are conducted in developing countries especially in the case of Vietnam Vietnam has been known as a poor country that suffered many wars along its history In 1975, Vietnam became independent, but the economy was

in an atrocious condition The first five - year plan mission was to build a technical infrastructure and form a new economy that could improve people’s lives However, the economy was not improved significantly and after two five – year plans it fell into

crisis From 1975 to 1985, Vietnam had low economic growth with an annual increase

of 4.6% and domestic production did not meet demand (Nguyen Quang Ngoc, 2006)

In 1986, the Vietnamese Government started “Doi Moi” period to change the situation After more than 20 years of economic reform, changing from a centrally planned economy into the market economy, Vietnam has undergone significant economic growth and become a lower ‘middle-income’ country in 2010 Vietnam has been one of the fastest growing countries in the past 20 years, but in terms of "development quality", it has not been achieved like other countries such

as Korea, India or China According to Nguyen Xuan Thanh from Fulbright University in Vietnam, the country can develop more only thanks to technology enterprises although this journey may last for decades more Notwithstanding, the Government of Vietnam has set a target, namely, to become a middle-income industrialized country by 2020 To achieve this ambitious goal, there is a need for a more effective application of science, technology and innovation in the economy in order to drive productivity growth and diversification in production (Nguyen Anh, Nguyen Mai, & Doan Hung, 2013) or in the other words, this is the time the country should pay attention to innovation

In lieu of the lack of research regarding innovation in developing countries,

In Vietnam, there is a specific dearth of firm-level innovation studies (Nguyen Ngoc Anh, Nguyen Dinh Chuc & Nguyen Duc Nhat, 2011; Nguyen Ngoc Anh, Pham Quang Ngoc, Nguyen Dinh Chuc & Nguyen Duc Nhat, 2008; Nguyen Thi Phuong Linh, Nguyen Ke Nghia, Do Thi Dong, & Nguyen Thi Tuyet Mai, 2019) Moreover, firms are the dominant economic actors that drive innovation, and particularly the commercialization of innovations, it is necessary to have a study on innovation at the firm level In addition, with innovation firms can develop and create more value for the nation such as creating jobs, improving welfare, access to business opportunities, reaching the world technological frontier which could bring social benefits for a country Hence, there is a call for more innovation studies in Vietnam than ever before

Previous studies have shown that some firms are more capable of developing innovations than others This research attempts to understand the reason behind that and aims to fill in the gap in research in firm level innovation generally and contributes to literature regarding the significance of firm’s innovation determinants

by deeply investigating the relationship between innovation and one of the key determinants – knowledge sources for innovation at firm level By doing so, the author expects to provide empirical evidence for policy makers in Vietnam to foster innovation at macro level

1.2 Problem Statement

Innovation has received much attention over the last decades as it is considered as a source for economic development Most studies conducted in this area focus on developed countries even though for (firms on) developing countries innovation also is of crucial importance in order to grow and become internationally competitive However, the difference in stages of development can be a barrier when applying the outcomes of studies in developed countries and in developing countries

Moreover, most of these studies, also those done in Vietnam, are about understanding innovation process at the macro level and provided limited or out of date empirical evidence for policy makers They predominantly focus on national innovation systems and government innovation policies Researches on innovation in Vietnam begins from early 2000s, though, most of the examinations is about innovation in agriculture field (Chairatana & Sinh, 2003; Martin, Castella, Anh, Eguienta, & Hieu, 2004; Spielman & Kelemework, 2009; Van Linh, 2001) Recently, innovation studies are getting more attention in macro level and other fields as well (Nguyen Ngoc Anh et al., 2011; Nguyen Ngoc Thang et al., 2013; Phan Thi Thuc Anh, 2014 However, there is still very little evidence about what drives firm level innovation in countries like Vietnam Therefore, this research includes firm level variables in order to analyze the relative importance of different resources that affect firm level innovation and access the capabilities of a firm to utilize these resources

Moreover, it is necessary to understand determinants of innovation in Vietnam to provide empirical inputs for evidence-based policy makers Innovation is important

as firms with innovation normally develop very fast and hence create lots of job opportunity which we could consider as one of the social benefits for a country

The case of Vietnam is especially salient to analyze as it has changed from a central planning regime where the central government decided output targets and prices, domestic and international trade with bureaucratic controls to a more market-based economy since 1986 Thirty years after the enactment of Vietnam’s “Doi Moi” (renovation) policy in 1986, the country has increased economic liberalization and achieved structural reforms needed to modernize the economy and to produce more competitive, export-driven industries State-owned enterprises now account for roughly 40% of GDP Vietnam has enjoyed rapid economic growth, which has been among the fastest in the world, with a mean of 6.4 percent a year since 2000 Remarkably, it has been transformed from one of the poorest to a lower middle-income country (Cao Sinh Viet et al.,2016)

With a population of almost 93 million people (GSO, 2018), Vietnam is a densely populated developing country with 34.6% of the population living in urban areas Even though its poverty has declined significantly, the country is working to create jobs to meet the challenge of a labor force that is growing every year by more than one million people As mention above, Vietnam is now dealing to escape the Middle-income trap which is the stage where an economy has overwhelmed the low-income threshold (below US $ 1,025/person) to grow into a middle-income country (US $ 1,025 - US $ 12,475/person), but stuck At this level of income, it

is impossible to continue to rise up to become a high-income country (over 12,475 USD/person) This trapping has factors such as: no longer has the advantage of cheap labor costs as low-income countries; There is also no advantage in terms of infrastructure, high level human resources and modern technology - technology like high-income countries Vietnam has moved out of the low-income countries group since 2008 (based on GDP per capita in that year reaching USD

1,145/person) However, it is believed that Vietnam is still face to the risk of middle -income trap and the highly recommend solution is to rely on innovation and technology firms (Ngo Thang Loi, 2019)

Although Vietnam does have firms and industries actively engaged in innovation, the overall innovation system is weak Vietnam ranks eleventh out of twelve East Asian countries in terms of human resource capacity (3.79 out of 10) reported by OECD & The World Bank (2014) Firms in transition economies exhibit

a number of striking differences with firms in developed countries, such as a lack of complete discretion to acquire and allocate resources and little knowledge and experience to compete in a competitive, market-based economy (Peng, 2000) Performing this research with empirical data in Vietnam, the author can evaluate factors that affect innovation in Vietnam and compare with advanced economies This is in line with the Ministry of Science and Technology (MOST) of Vietnam as

in recent year, they has identified firms as the center of innovation which could creative innovation, in which, attributing importance to technological innovation to increase productivity and competitiveness of enterprises and nation

In addition, Quintane et al.(2011) has stated that innovation is knowledge based outcome In their research, they emphasized the vital role of knowledge as well

as the source where the knowledge come from Furthermore, our Party has determined since early 90’s Vietnam need to associate industrialization and modernization with the development of the knowledge-based economy, in which the whole country should "promote industrialization and modernization with the development of the knowledge-based economy and environmental protection." (Document of the 11th National Congress of the Communist Party of Vietnam) The party emphasized that technological development and knowledge related to that are really a fundamental driver of the process of rapid and sustainable development Hence, study related to knowledge sources for innovation in Vietnam is really in critical need

To sum up, there are four main reasons that the author would like to conduct this research They are: (1) innovation related-knowledges are public goods and firms could benefit from diffusion these knowledge; (2) Majority of firms in Vietnam are small and medium size, i.e they lack of resources for conducting innovation; (3) Social benefits could be improved if evidence-based industrial policies create better changes and assessing resources for firms which are pursuing innovation activities; (4) Good evidence-based policies grounds on understanding the determinants of innovation

1.3 Study Objective

The main objectives of this dissertation are:

• To review the literature on innovation and the determinants of innovation especially knowledge sources for innovation at firm level

• To analyze the current situation of innovation of manufacturing firms in Vietnam

• To identify the knowledge sources that manufacturing firms in Vietnam use for innovating and test the relationship between those knowledge sources and innovation outcome

• To propose several solutions for manufacturing firms as well as policy makers in order to foster innovation in Vietnam based on empirical evidence

1.4 Study process

This study was conducted with 6 steps as following:

Step 1: Literature review: Review all related studies and summarize the result of those studies

Step 2: Theory framework structuring

+ Identify research questions

+ Identify all the variables

+ Identify possible hypotheses

Step 3: Designing questionnaire to interview firm managers on innovation

at firm level

Step 4: Selecting database available to use secondary data

This study use data from The World bank survey for innovation in Vietnam Step 5: Data analyzing using Excel and Stata

This step conducted to test the hypotheses and analyze the impact of

independent variables on dependent variable

Step 6: Dissertation composing

Use the results from step 5 to compose this dissertation

1.5 Scope of Study

This study focuses on innovation in manufacturing firms in Vietnam Manufacturing firms are considered as a basic economic unit, the cell of the national economy At this level, product creation activities take place - providing these types of products - for social needs The role of those firms in a market economy is undeniable Manufacturing firms is usually seen as any firms use components, parts or raw materials to produce a finished product It is defined by Kenton (2018) that firms which create or assemble finished goods for sale on a large scale Those firms can utilize a quantity of methods, including human and engine labor, and biological and chemical progressions, to make raw materials into finished products by using tools

It is said that production or production of material wealth is a major activity of human economic activities It is defined as the process of making a product for use, or for trade The concept of manufacturing firms is those that use resources and production materials in combination with the application of science and technology to produce commodity products to meet market demand (Nguyen

Le Thanh Tuyen, 2013)

The reason why the author focus on manufacturing firms is because Vietnam has increasingly turned into a manufacturing hotspot in Asia mostly with electronics, thanks to its comparatively large and low-cost labor force, constant political atmosphere, geographical advantages, attractive tax regime, and open trade policies from the government Data in 2017 shows that manufacturing production increased 14.4% while the first two quarters of 2018 observed Vietnam’s ongoing manufacturing successful at 12.9% (BBGV, 2018) They also mentioned that Vietnam is having important advantages to encourage its industrial development including steady and substantial foreign direct investment stream and a youthful healthy and low-cost labor force Multinational organizations attempt to find their way out of the reliance on China - the manufacturer of the world, hence countries in ASEAN are a good opportunity as they carry certain parallels On the other hand, Vietnam is a country that does offer many competitive advantages contrast with other countries in ASEAN

One of the leading advantages is that Vietnam offer low minimum wages (BBGV, 2018) reported that the widest minimum wage gap in 2018 between Vietnam and Thailand is roughly $50 per month Correspondingly, manufacturing industries in Vietnam have been perceiving a remarkable growth Moreover, Vietnamese policy makers understand the role of global integration, hence, they are welcoming international businesses, and attempting to give those firms the same opportunities as the local firms If they have evidence from firm level, they could issue more appropriate policies in the future Hence, this study aimed to provide policy makers in Vietnam data support related to this field

When mention determinants of innovation at manufacturing firms, literature shows studies on either or both exogenous and endogenous factors (Avermaete et al.,2004; De Jong & Vermeulen, 2006) However, the scope of this study is to focus

on the impacts of knowledge sources for innovation, namely internal knowledge sources, external knowledge sources, and regional knowledge sources The reason is

because innovation is a based activity It is explained by the based view theory as the firm is assumed as an institution for integrating knowledge and knowledge performs vital role in production This is also supported by the concept “knowledge-based economy” This found back to the early 1960s of the last century, pioneered by Fritz Machlup and Peter Drucker Over the past five decades, there has been much research to identify and explain the mechanism of this economy In the past few years knowledge economy has been chosen as the development strategy of many countries, both developed and developing countries including Vietnam In the knowledge economy, the main principles, ways and factors that govern economic activities are human knowledge Other names such

knowledge-as knowledge-bknowledge-ased economy or knowledge-driven economy give us a more intuitive understanding with emphasis on fundamental role and influence of knowledge in economics (Godin, 2006)

The author would like to use product innovation as an indicator for innovation outcome as it is the highly familiar and commonly been used in manufacturing sector (OECD, 2018; OECD/Eurostat, 2005) Product innovation includes methods, techniques and processes to implement incremental improvements

to existing products and services including making evolutionary changes to products that use existing technologies and organizational capabilities Moreover, Cooper and Kleinschmidt (1987) declared that product innovation is especially needed for firms

to compete with their counterparts in the same fields Dougherty (1992) stated that the exercise of product innovation is envisioned of as the establishment and development of knowledge which connects market and technological opportunities

In addition, product innovation is considered as a key determinant of firms’ sustainable development in many recent studies (Danneels, 2002; Laursen, Masciarelli, & Prencipe, 2012)

These indicators are selected as dependent variables to indicate the impacts during 2013-2016 This study focuses on firm-level data in Vietnam in

order to deliver critical evidence that complement macro data The survey conducted by the World Bank in 2015-2016 dealing with 996 firms in Vietnam Later, the author took 300 manufacturing firms to interview for the following innovation survey There are some missing variables when merging the data and the study finalized with consists of 294 firms Correspondents of the surveys located in four Vietnamese regions, which are the Red River Delta, North Central area and Central coastal, South East and the Mekong River Delta

1.6 Contribution of Study

This research analyses the impact of different knowledge sources of product innovation in Vietnam using firm-level data Hence, it can help to answer the question that whether all kinds of knowledge sources have significant relationship with innovation or only specific one Firms in Vietnam could base on that and decide who and where they should take knowledge from if they intend to

do innovation

Secondly, this study could also be a good evidence for policy makers to understand the determinants of innovation especially the impact of knowledge sources for innovation Innovation related knowledges are public foods and firms could benefit from the diffusion these knowledges

Moreover, while most firms in Vietnam are small and medium size, they could lack of resources for conducting innovation To understand what could hinder innovation at firm level means we could provide grounds for new industrial policies and create social benefits for firms which pursuing innovation activities

Moreover, because some of the independent variables refer to the same period as the dependent variable, causality may not be inferred The observed firms are private firms and mostly are SMEs Consequently, this study might only see part

of the total range of firms In addition, given the cross-sectional nature of the data there is little the research can do in terms of endogeneity

Finally, the sample size after merging the ES and the ICS become too small

to test with a subset (e.g., by size, by age, by location, etc.) for a better understanding

of innovation in Vietnam However, this could shed the door for further research as pursuing innovation is the only way to boost the economy and preventing it from falling into the middle-income trap

1.8 Organization of the Dissertation

This dissertation is divided into six chapters, which will be further subdivided into sections, and they are organized in the following manner

The introductory part briefly presented problem statement, objective, scope of study, limitation of study and dissertation organization, respectively as shown in Chapter 1

Chapter 2 will review both theoretical and empirical literature on innovation and determinants of innovation at firm level In the theoretical section, it firstly categorizes innovation and types of innovation, then there is

a summary on determinants of innovation especially knowledge sources for innovation

The following part of this dissertation will first provide an overview of the theoretical framework and hypotheses in Chapter 3, methodology and data collection

in Chapter 4 Next in Chapter 5, the analysis will be reported together with the results summary Lastly, the author provides a discussion on the results and conclusion in Chapter 6

CHAPTER 2: LITERATURE REVIEW

This chapter provides an overview of numerous of studies on innovation in Vietnam and the world The author would like to review the research in order to find the gap in literature related to innovation field

2.1 Research on Innovation in the world

2.1.1 Ground theory research

The groundwork of modern term “innovation” starts from 1930s, Joseph Schumpeter – a famous economist mentioned that innovation should be distinguished invention, innovation means “development” and “new combinations” (Schumpeter, 1934b) He announced the idea of so-called “new combinations” which refer to “the introduction of a new product or a new quality of a product, a new method of production, a new market, a new source of supply of raw materials or half-manufactured goods” (p.66) Schumpeter set the foundation for most of the work on innovation in the world, he emphasized the vital role of changing to the new and better positions or methods but base on the resources that firms have such as knowledge, human resources, capital and other Even though Schumpeter mentioned innovation as new combinations in almost of all of his writings, he also identified innovation “as the setting up of a new production function” (p.679) Most definitions

of innovation given by Schumpeter related to new combinations or production functions are considered rather wide and vague It is said that it reflected his 'struggle'

to know the complications of technological development (Hagedoorn, 1996) Consequently, it is no surprise that Schumpeter' s effort to define innovation has been criticized by numerous authors However, the role of his study in innovation research history is very critical and has set a basic ground for various research works later

Until 1980s, Peter Drucker stated in his book that innovation is a key tool for entrepreneurs to advance over their competitors (Drucker, 1985) Drucker opinion is

in line with Schumpeter’s as he also agreed that innovation should not be misunderstood with only invention, innovation means accepted to changes and open

new opportunities which could be established from products, services, processes or technologies Peter Drucker’s opinion of entrepreneurship as a method that has a knowledge ground and that pursues to empower organizations to transform while remaining faithful to their missions Hence, innovation at the end is the specific tool

of entrepreneurs Moreover, innovation is the specific mission of the firm All together they utilize change as an opportunity to do something different and create better performance for firms

In early 2000, innovation studies are getting much attention as innovation is

of key importance for an organization’s survival (Eveleens, 2010) He said innovation

is needed by the firms that want to compete for market share or profit or public organizations that need to improve their services However, innovation is not easy all the time Eveleens listed few reasons such as innovation efforts over time could gave

us a host of failed innovation projects or even enormous corporations that once were the forerunners and creators of whole markets have unsuccessful to be competitive when changes happened He explained that an organization which is so engaged with their normal track - what they are good in they might become trapped in those frequency Firms are not be able to adapt when the outside environment changes Underlining the extensive range of background, Eveleens (2010) listed twelve different models that he thinks could represents innovation studies in the past 40 years Then, it is verified whether the model had an empirical foundation, if it was based on prior theoretical research, or both Correspondingly, the main type and sector of the innovation is established The models are observed in Management books and scientific journals beyond the help of scientific search engines in combination with searching further in references

The type of innovation varies considerably among the models Most of the innovation process models are largely based on radical products and processes in the private sector However, in modern economies in which services are getting more important, other types of innovations (incremental and/or services) are considered as well

Table 2.1: List of innovation models

type

Organization type

Organization size

Industrial manufacturing product innovation

Private

Fairly large with an own R&D department and a distinctive senior management Van de Ven

and Poole

(1990)

Large empirical study

Product, process, services

Private and public

Large and small

Mulgan and

Albury

(2003)

Prior research + some

case studies

on theory, verified in practice

Product, technology

Tidd (2006)

Empirical and theoretical research

Product, process, services

Private and public

Large and small

Andrews et

al (2007)

Experience and empirical research

Product, process, services

of the authors

Product, process, services

multinationals

Jacobs and

Snijders

(2008)

Theoretical and empirical research

Product, services

Private and public

Both large and small organizations

Source: Eveleens (2010)

2.1.2 Determinant of innovation research

There is evidence in literature proved that innovation might be affected by both internal and external factors Avermaete et al (2004) observed the determining factors of product and process innovation in small food manufacturing which are commonly viewed as working in a matured and not so hi-tech zone In this area, R&D activities are restricted, and patenting is exceptional The authors used in-depth survey among 177 EU firms Firms are divided into four groups which are non-innovators, traditionals, followers and leaders They used multiple logistic regression

to classify the drivers of product and process innovation in the firms At the end, the outcomes emphasize the crucial role of the skills of the workforce, the company's investment in know-how and the utilization of external sources of knowledge However, there is no proof of a significant correlation between the types of the entrepreneur and the innovation performance of the firm

Hussen and Çokgezen (2019) also do research related to what factors could affect innovation at firm The paper tries to find the answer for the following: “(i) Do firm’s internal factors such as size, age, ownership, R&D spending, and exporting significantly predict the propensity of firms to engage in innovative activities in Ethiopia? (ii) Do firm’s external factors, namely, access to finance and competition, significantly predict the propensity of firms to engage in innovative activities in Ethiopia?” They used the data conducted in Ethiopian firms and logistic regression model to analyze the data collected The results revealed that inner factors such as firm size, employee education level, technology adoption capability of administrators, on-job training, and R&D outflows have a significant positive effect

on both types of innovations, whereas private and foreign ownership found to be significant for only process innovation Assessments also indicated that gain access

to finance has a positive significant impact on product innovation The impact of the competition level is negative significant only on process innovation The key finding

is that ignoring their statistical significance, all explanatory variables affect both process and product innovation in the identical direction, perhaps because of the positive correlation between the two type of innovation

Another study from Korea related to determinants of innovation from Choi and Lim (2017) empirically discovers the connection between innovation performance and the internal and background aspects leading technological innovation in manufacturing small and medium-sized enterprises (SMEs) in metropolitan areas of Korea This study used structural equation modeling (SEM) and based on firm-level data from the Korean Innovation Survey performed by the Science and Technology Policy Institute in 2012 The results of the study showed that innovation capacity in SMEs was optimistically linked to scientific innovation accomplishment The research mentioned SMEs’ skills and technology acquisition

as contextual factors which are also positively influences firm innovation performance The paper found that SMEs’ innovation capacity is a fractional mediator between skills and technology acquisition and technological innovation performance in SMEs Furthermore, the findings demonstrate that the relationship between public policies, government and SMEs’ innovation performing is facilitated

by SMEs’ inner capacity of innovation Hence, it is means that all four factors namely

“skills and technology acquisition and government and public policies” are critical contextual reasons can improve innovation performance at firms This paper offers guidelines for policy makers that they need to compose policies which could support directly and indirectly boost innovation and then could foster economic growth and development regional or world while

Research on innovation could also be categorized in term of sources for innovation, especially innovation idea Some researchers believed that

innovation could only generated by the firms themselves or they follow resources-based view (RBV) Barney (1991) stated that there are three categories

of firm resources including: physical capital resources, human capital resources and organizational capital resources In his study, emphasized that resources must have certain conditions in order to enable firms to sustain their competitive advantages namely: rareness, value, imperfect imitability and non-substitutability Barney argued that sustained competitive advantage derives from those resources These resources and capabilities can be regarded as packages of tangible and intangible assets, involving firms’ management skills, firms’ organizational processes and routines, and the information and knowledge that firms control To sum up, firm's internal processes generate a resource package which can become the means of creating and maintaining a competitive advantage

Literature shows several studies in innovation related to resources-based view theory

First, the RBV of the firm offered the logic for hypothesizing that firms will have different longitudinal patterns of manufacturing innovation adoption in plants (Bates & Flynn, 1995) Bates and Flynn (1995) also hypothesized that early innovators were to have higher levels of competitive performance and their research results provided support for the hypotheses This study provided support for the presence of a strategy of building resources through manufacturing innovations over

an extensive period The innovations were adopted in an "S" curve pattern, the common pattern for innovation diffusion TQM, JIT and supplier reduction involve principally of information technology and alterations in the process layout Employee engagement and manufacturing strategy are administrative innovations for the reason that they deliver the way that managers and operators deal with manufacturing decision making The "S" form of innovation adoption reveals there is a "first mover" advantage to any innovation which improves performance in general while the length

of that advantage varies by innovation and the scope of the advantage may not be

recognized This paper suggests that any innovation should be implemented as quickly as possible, given the firm's capacity to innovate

Tarafdar and Gordon (2007) found that information system firms competencies affect process innovation in an organization This could be clarified by RBV theory as Tarafdar and Gordon (2007) identified six different competencies to test their affection on facilitating innovation in those firms This paper has two objectives The first objective is to establish the value of the competency perspective

of the RBV for analyzing how technologies and associated managerial resources and mechanisms (IS) can affect the success of process innovation Next, it aims to understand how certain IS competencies control an organization’s ability to create, build and implement process innovation The author based on longitudinal and exploratory case data from two process innovations at an American healthcare organization.This study has found the evidence between inner firm resources and innovation

Terziovski (2010) used RBV to explain why manufacturing SMEs could create competitive advantage by utilizing the creative idea from their employees for developing differentiated manufactured goods in niche marketplaces According to Terziovski (2010), innovation strategy and formal structure can be considered as key drivers in manufacturing SMES and SMEs in manufacturing sectors tend to advance their accomplishment when they progressively imitate bigger firms but still keep in track to their strategy and their formal structure.This study revised the literature relating to innovation in manufacturing firms in order

to identify appropriate constructs to formula the basis for the development of a theoretical model, and applied the resource-based view of the firm to give explanation on the manner in which manufacturing SMEs mature competitive advantage in comparison with large firms Terziovski (2010) argued that manufacturing SMEs progress competitive advantage through their employees’ creative potential to develop differentiated products for niche markets while large

manufacturing firms on the other hand grow competitive advantage based on cost efficiencies expanded through formalized structures and systems The results demonstrate that there is a positive relationship between innovation strategy and formal structure and significant predictors of the performance of SMEs in the manufacturing sector Therefore, formalization is indeed important for manufacturing SMEs in order to improve their performance.Formal systems and procedures are important as well due to the fact that they have a tendency to add clarity to employees’ roles, control to employee commitment, and finally lead to effectiveness of organizations

Bakar and Ahmad (2010) try to answer the matter about which resources

of a firm pays most to performance of product innovation The authors adopted the RBV and considered both tangible and intangible assets in firms Bakar and Ahmad (2010) intentioned on the resources of the firm as factors for achievement

in product innovation Therefore, the evaluation of the product innovation could

be recognized by using pointers in the performance of product innovation Bakar and Ahmad (2010) named six different strategic resources including “physical reputational, organizational, financial, human intellectual and technological” The findings supported the RBV point of view that firms should concentrates on immaterial resources as the foremost drivers for their better performance which include product innovation as one the performance indicators Meanwhile, intangible resources like reputation of a product are hard to obtain and cultivate or imitate by competitors Product reputation which blends with innovative activities could bring excellent product innovation performance because reputation deceits in client's way of thinking (Bakar & Ahmad,2010)

These above researchers believe that innovation should come from inside the firms and the firms should strengthen their innovation ability by trusting on their own resources

However, there are also other line of the literature believed in based view (KBV) when they study innovation It is typically true in the knowledge economy The term "knowledge economy" was first introduced in 1990

knowledge-in a United Nations report The first person to raise the concept of knowledge economy was Mr Daniel Bell and later many authors mentioned this issue In the OECD's "Knowledge-based knowledge economy" report, "Knowledge economy

is an economy built on the basis of production, distribution and use of knowledge and information." APEC (2000) and Godin (2006) mentioned the following characteristics of a Knowledge economy:

- In the knowledge economy, economic growth is primarily in depth, the subject is knowledge laborers, trained, well equipped with modern knowledge, understanding advanced science and technology

- Key economic sectors are material production and service industries based

on knowledge and high technology These economic sectors generate high-value, high-knowledge products, accounting for a large proportion of GDP In particular, the service sector is the economic development and generates the greatest income in GDP; in particular, knowledge services such as scientific - technical research, design, consulting, finance, post and telecommunications develop rapidly

- Social investment is mostly allocated to science - technology (especially high technology) and education and training Knowledge of human society and science and technology develops at a high level and perform a very high position in socio-economic development

- Knowledge-based economy uses fewer and fewer tangible resources, in contrast, more and more intangible resources such as knowledge, information, etc., but these intangible resources are not being lost when used Moreover, many people, many businesses can utilize them at the same time

Various studies have identified that current knowledge is a pre-requisite for the innovation process to happen, construction path-dependency a critical question

(Cohen & Levinthal, 1990) Cohen and Levinthal (1990) mentioned that absorptive capacity is likened to a firm’s innovative capability and this is seen as a role of preceding knowledge Small amount of knowledge can make innovative capability to

be “locked-out” if the knowledge level is so remote behind that it could be impractical

to gather the necessary path- dependent knowledge Knowledge available is also associated to creativity: “The prior possession of relevant knowledge and skill is what gives rise to creativity, permitting the sorts of associations and linkages that may have never been considered before” (Cohen & Levinthal, 1990)

Nonaka and Takeuchi (1995) mentioned in their study of various Japanese firms that knowledge creation is the key to help those firms become world leaders in the automotive and electronics industries They mentioned that Japanese firms are not extremely efficient, entrepreneurial, or progressive, however, they have improved their position in international market gradually and certainly How can those firms become successful? Nonaka and Takeuchi (1995) states that the success of Japanese companies is because of their manufacturing competence, access to cheap capital, good relationship with customers, suppliers or any other parties in the supply chain, lifetime employment, seniority systems, human resources management, etc However, their champion comes from their skills and expertise at “Organizational knowledge creation” which means the firm capability to create new knowledge, utilize that knowledge to their products, services and the whole systems The authors are the first to tie the victory of Japanese firms to their ability to make new knowledge and practice it to harvest successful products and technologies They emphasized that Japanese firms are especially upright at creating innovation endlessly, incrementally and spirally based on their knowledge

Grant (1996b) states in his research that “given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm

is conceptualized as an institution for integrating knowledge” Production encompasses the revolution of inputs into outputs hence fundamental of knowledge-based theory of the firm is to give prominence to knowledge as it is a critical input in

production and primary source of value (Grant, 1996b) On other words, Grant (1996b) said “all human productivity is knowledge dependent, and machines are simply embodiments of knowledge” The primary contribution of Grant’s paper is in exploring the harmonization mechanisms through which companies combine the professional knowledge of their partners When compare to earlier study, knowledge is considered

as residing within the individual person Moreover, the principal role of the institute is applying knowledge rather than creating knowledge The paper brings implications for the basis of organizational capability, the philosophies of organization design, and the determining factors of both horizontal and vertical boundaries of the organization In general, Grant used the knowledge‐based approach in his study, and it casts off new light upon existing organizational innovations and developments and has also bring implications for management practice

Nonaka and Peltokorpi (2006) used case analysis in their study Prius as a knowledge-based view of radical innovation Instead of viewing innovation only as

a ‘final’ state, they labeled innovation as a creative process The knowledge-creating theory labels the process through the SECI and ba, in which rational human actors combine tacit and explicit knowledge in conflict way The case and processes are collective by unclear and inspiring knowledge visions, which middle managers perform through strong social contact Their human connections allow them to connect various ba as a large and regular knowledge generating system Whereas external networks empower firms to notice market potentials, early stages of radical innovation proved that appropriate knowledge domains occur, showed most efficiently within firms

Another study conducted in Asian Pacific emphasized that the appearance of knowledge-intensive world has altered the nature of business competition Knowledge management turns out to be an vital managerial task and framing a sound innovation strategy is an essential part of strategic management (Lu, Tsang, & Peng, 2008) In the study they mentioned that the society is transforming from industry-based to knowledge-concentrated and the transformation is driven by two influences:

the development of a global economy and the persistent technological change Particularly, the quickening development of information technology for example the creation of the Internet has united all parties of the micro economic namely companies, customers, suppliers, and other stakeholders in a complicated web of relations As the result, these developments started a shift in the nature of competition Firms are required to build up capabilities founded upon specialized knowledge Such capabilities guarantee persistent innovations to accomplish a soaring rate of productivity and to deliver better products and services to consumers than their rivals Therefore, a foremost challenge facing firms and their managements currently is to create, control, and maintain knowledge to improve the chance for company persistence and development In addition, Lu et al (2008) mentioned about the Asia Pacific region in their study and emphasized the role of the institutional environment

in the region It is believed to have a multi-faceted character overdue knowledge management as well as innovation strategy of firms Institutions execute directions in various activities namely legitimacy, source of knowledge, and also motivations and resources to innovate The study is believed that has important possible to advance knowledge management and innovation strategy in Asia Pacific firms

Quintane, De Castro, Casselman, Reiche, and Nylund (2011) found a strong difference in the method which innovation could be perceived in literature of the traditional innovation which theorizes innovation without obviously seeing the fundamental knowledge, in comparison with the literature of the knowledge management “where knowledge is the core of innovation process” Managers should

be aware of and make a clear link between knowledge and innovation and then understand the trade-offs between penetrating and relocating knowledge Managers should also keep a clear mind in proceeding through the innovation process which aims to reestablish an innovation which might already out there in other firms For overall success of the firm, managers should improve “ability to measure and understand the key factors in the innovation process” because innovation is a strong driver of firm competitiveness (Quintane et al., 2011)

De Castro, López‐Sáez, and Delgado‐Verde (2011) highlight the importance

of knowledge management and organizational learning in relationship with innovation

of a firm It also offers an integrative framework to comprehend this complicated business phenomenon.The paper indicates a general assessment on “A Knowledge‐Based View of Firm Innovation” communicating and combining ten theoretical and empirical contributions related to this subject This study has organized in three main topics both theoretically and empirically The first topic implies the importance of external knowledge, networking, and relationships of a firms as key drivers for them

to have technological innovation This part offers an “open or relational innovation framework” The next topic demonstrates several papers on the growing importance of Knowledge‐Intensive Business Services in a Knowledge Economy and Society The authors mentioned general review integrates papers about organizational context, and its role on knowledge management and firm innovation at the third topic This paper has offered new significant developments for the academic society in the increasing body of knowledge management and firm innovation

Isaksson, Simeth, and Seifert (2016) mentioned that external knowledge is commonly deemed as a vital force for innovative performance Regarding any particular sources, companies could benefit from the innovative activities of their competitors, universities or research institutions, and other partners in their supply Likewise, survey evidence also recommends that downstream partners are an essential information source for firm innovation Hence, in this paper the authors analyze knowledge spillovers in supply chain networks In particular, they investigate how innovation from supplier is influenced by innovation from buyer The paper used financial accounting data together with supply chain relationship data and patent data

of U.S companies in high tech industries The econometric analysis result indicates that innovation from buyer has a positive and significant effect on innovation from supplier In addition, they found that the duration of the buyer-supplier relationship positively moderates this effect, however, the technological distance between the two firms does not have a meaningful effect on spillovers

Table 2.2: List of main innovation research categorized by theory

Follow resources-based view

(RBV)

Knowledge-based view (KBV)

(1995); Tarafdar and Gordon (2007); Terziovski (2010); Bakar and Ahmad (2010)

Cohen & Levinthal (1990);Grant (1996b); Nonaka and Takeuchi (1995); Nonaka and Peltokorpi (2006); Lu

et al (2008); Quintane

et al (2011)

Source: Collected by the author

2.1.3 Product innovation research

Studies on product innovation seems to be the most popular in literature as it started very early and various of them available on academic sources (Bakar & Ahmad, 2010; Barasa, Knoben, Vermeulen, Kimuyu, & Kinyanjui, 2017; Chakrabarti, 1974; Cooper & Kleinschmidt, 1986)

Cooper and Kleinschmidt (1987) mentioned that product innovation is very necessary for firms in order to compete with their rivals in the same fields One of the success factors in product innovation is that the company should be aware of the role

of buyers as a high quality product is a product that could provide unique benefits to the user and that could work out a customer difficulty or performs a distinctive task Product innovation simply means the company could bring new benefit for clients and support their needs in time However, new product success is considered a multidimensional concept The study identified three independent and underlying dimensions of new product success which are financial performance, opportunity window, and market impact In addition, the research found a strong connection between outcomes of the project and the nature of the product, synergy, project

definition and market environment Product advantage is a dominant factor in success both financially and in term of marketing

Dougherty (1992) also in line with literature on the critical role of product innovation However, he stated that the growth of commercially possible new products involves the chances in technology and marketplace are associated with the product's design effectively Innovators have unrelenting troubles with such connecting, nonetheless his study investigates these challenges by directing on the collective interpretative schemes individuals use to explain of product innovation in large firms The research found “two interpretive schemes which reserved the development of technology-market knowledge which are departmental thought worlds and organizational product routines” The research illustrates in some intensity distinctions among the thought worlds which hold innovators from synthesizing their expertise It also describes how organizational routines aggravate challenges with learning, and how fruitful innovators overwhelm both interpretive barriers However, the paper’s key suggestion “is that to improve innovation in large firms it is needed to deal openly with the interpretive barriers expressed here” In addition, the study brings suggestions for practice and research in the field of innovation study

Danneels (2002) based on organizational learning theory and conceptualized

as exploitation and exploration These organizational learning theories are used to achieve a dynamic and path‐dependent view of product innovation and firm development, and to disclose the distinctive nature and challenges of various categories of product innovation At first, the study examined how product innovation provides to the regeneration of the firm via “its dynamic and reciprocal relation with the firm's competences” Danneels (2002) used field research in five high‐tech companies which have differences in age, size, and level of diversification and later

on combined with existing theory to analyze and develop the findings of the research The author knew that new products are generated by combining competences relating

to technologies and clients Hence, a typology is developed that classifies new

product developments based on whether a new product can get on existing experiences, or whether the product involves competences which the firm does not have yet

In their study, De Castro, Delgado-Verde, Navas-López, and Cruz-González (2013) emphasize the essential of innovation especially product innovation They said that developing effective technological innovations is crucial for creating and maintaining a firm's competitive advantage They analyzed the internal complication that distinguishes technological innovation at firm level The firm innovation capability varies tightly on firm intellectual and/or organizational knowledge resources and their ability to utilize these properties This research reaches beyond the direct relationships between product innovation and humanoid and technological knowledge resources The introduced a moderating role of innovation culture on these interactions The research conducted a questionnaire to survey with nearly 300 Spanish manufacturing firms in high and medium-high technological fields Then developed multiple regression models The authors analyzed the relationship between human capital and product innovation established by firms The outcomes disclose the presence of the moderating role of innovation culture in a knowledge-based product innovation model

Clausen, Korneliussen, and Madsen (2013) insist that firms need to develop new product innovations in order to remain competitive in today's business markets The purpose of this research is to observe main differences among firms

in the way they innovate and investigate how different innovation modes affect firms’ abilities to develop new product innovations The authors used the research question which are “How do firms attempt to develop new product innovations and to what extent and how do “the way firms innovate” influence their abilities

to actually develop product innovation?” They state that this research question is rather broad but needed to develop into testable hypotheses on the basis of a new taxonomy of innovation modes

We could see that most of the recent studies on product innovation are trying to find the relationship between product innovation and firm performance There are some researches had shown the connection between product innovation and knowledge sources (Cooper and Kleinschmidt, 1987; Dougherty, 1992), however, research on product innovation and knowledge sources are very limited, especially the one with evidence based

2.2 Research on Innovation in Vietnam

Studies on innovation in Vietnam starts from early 2000s, however, most of the studies is about innovation in agriculture field (Chairatana & Sinh, 2003; Martin, Castella, Anh, Eguienta, & Hieu, 2004; Spielman & Kelemework, 2009; Van Linh, 2001) The reason behinds it might be because Vietnam had just opened its economy and agriculture still played the main role

Recent years, innovation is getting much attention in macro level and other fields as well

Nguyen Ngoc Anh et al (2011) wrote that Vietnam has long been chasing its far-reaching trade liberalization program which has directed to poverty reduction and fast economic growth The study mentioned that Vietnam has set the fundamentals of a market economy and actively contributed in the globalization process by opening up the economy to international streams of capital and trade in products and services after more than 20 years reforming Under the emergence of the market-based economy with proper institutions, steady macroeconomic environment and the backing of the government for business development tolerate Vietnam in various area

First, it has revealed the potential of the agriculture sector as Vietnam now has become the world's third largest rice exporter Second, it has encouraged the growth of a luminous domestic private sector Third, it brings together a significant amount of foreign investment Finally, the country could achieve its comparative advantages and earn more advantages from international trade Vietnam is now

known as one of the most prosperous developing countries in terms of poverty alleviation and economic progress Moreover, innovation has considered an imperative factor for generating and preserving the competitiveness of nations and firms since long time Firms in Vietnam have to face with increasing international competition; hence, innovation has grown to be a central focus of firms’ long-term strategies It could help firm compete in global markets and face the challenges and opportunities of change in markets and technologies Therefore, in their paper, Nguyen Ngoc Anh et al (2011) also examines the impacts of trade liberalization on innovation activities by SMEs which play major role for Vietnam’s future economic development This research used the recently released Vietnam Small and Medium Enterprise Survey and found that innovation is strongly influenced by trade liberalization In the paper, the author pinpointed two ways for the trade liberalization – innovation linkages which are FDI and trade The research results showed the impacts of trade liberalization on innovation are essential and significant however, it also depends on the channels and proxies used

Another study observed how market demand influence green product innovation, and firm performance in the background of Vietnamese motorcycle industryindustry (Lin, Tan, & Geng, 2013) Lin et al (2013) tried to answer two main questions related to the relationship between market demand, firm performance and

a firm’s green product innovation The authors used a total of 208 valid questionnaires from four biggest foreign motorcycle firms in Vietnam The results concluded that market demand is positively significant correlated to both green product innovation and firm performance, whereas green product innovation performance is positively correlated to firm performance as well Furthermore, Lin et al (2013 also classified three different types of green product innovation and deliberates their effects on market demand and firm performance

Nguyen Ngoc Thang et al (2013) established a paper to development the understanding and exercise of knowledge-based management in Vietnam by studying two Vietnamese agricultural companies The study delivered illustrative examples of