Total factor productivity and the learning mechanism by exporting: case study for SMEs in Vietnam

Abstract

By using two-step system GMM method, the study tests the learning mechanism by exporting hypothesis of small and medium-sized enterprises (SMEs) in Vietnam from 2005 to 2013. The results show that export has a positive impact on total factor productivity at firm level. Moreover, the study finds reasons for an appearance of learning mechanism by exporting: (i) exporting firms receive technological transfers from developed countries; and (ii) exporting firms have enough capabilities to absorb knowledge generated by exporting. The findings suggest that SMEs in Vietnam should invest in R&D as well as machinery and equipment, and actively explore and access to developed countries. Moreover, the government should support formal credits, internet services, and business environment for SMEs to improve the capacity to absorb foreign knowledge through exporting.