Innovation and Productivity of SMEs in Vietnam - Firm level panel data evidence

Abstract

Innovation is considered an essential factor for motivating the productivity of nations and firms. Innovation and productivity are connected by multidimensional relationships and investigated in many countries. However, there is very limited research in this field for Viet Nam. This paper examines the relationship between innovation and productivity of Small and Medium Enterprises (SMEs) by using Viet Nam SMEs survey balanced panel data in 2007 and 2009. Cobb-Douglas production function and the fixed effect model are employed throughout the thesis. The author has found that the presence of innovation has positive effects on a manufacturing firm’s productivity. In addition, this study also looks at the impact of firm size, firm location and manufacturing sector on the relationship between innovation and SMEs’ productivity.