The effect of social capital on innovation of SMEs in Vietnam

Abstract

The contribution of SMEs in the economic growth is undeniable but difficult to measure, especially in Vietnam. SMEs take a large percentage in the total number enterprises in Vietnam, thereby offering remarkable employment opportunities. Moreover, they also play essential role in enhancing the stabilization and dynamic of the economy. One of the most important element in improving the activities of the SMEs is innovation, which has long been mentioned as a consequential component for creating and keeping up the competition and development of cooperation in SMEs. SMEs’ innovation activities are currently influenced by many components, but the SMEs usually faces the problem of lack of resources and capital. In this context, social capital is used as a significant resources in most of SMEs activities in general and innovation process in particular. The relationship between social capital and innovation has been examined by many authors in many countries. However, there has been very little research about this issue in Vietnam. This paper aims to ascertain the consequentiality effect of social capital on the innovation by utilizing the multinomial logit model while measuring innovation of Vietnamese SMEs. According to the theories and empirical researches of many authors in all around the world, we expect the positive relations between the social networks of enterprises and the innovation activities. Besides, we have also expected to figure out more related factors that effected on innovations activities, thus we might be able to recommend the policy makers ways to enhance the economics. About the methodology, this paper use the multinomial logit model to test its hypothesis. We measuring innovation of Vietnamese SMEs by “new products”, “improvement of existing products” “export”. The positive relations between the social networks of enterprises and the innovation activities which is evidenced by previous literature again presented in this study. In addition, we also find some factors which affect innovation, since the policy makers will be able to motivate the economy development by implementing the innovation support's policies.