Determinants of product innovation activity: the case of Vietnamese SME firms

Abstract

This study examine two manors of product innovation including improving existing product and making new product with the scope of Vietnamese SME's firms. The aim of this study is to figure out what determinants have significant impact on each type of product innovation and whether correlation between these two manors exists. Determinants are categorized into internal and external factors. The first group includes age, experience of entrepreneur, firm size, training cost, and R&D cost. The second group includes competition level, outsourcing cost, external consultant, networking, knowledge of market/marketing cost, and export orientation. Bivariate-probit model is used for attaining research's purposes above. The model is applied on 1418 SME's firms which are separated into five sections: textile & shoes, food manufacturing and processing, mechanics and electricity, wood processing and all other sections. Five factors are figured out to have significant influence on product innovation activity of firms including firm size, age of entrepreneur, export, competition level and network. Marginal effect calculated from bivariate-probit regression are helpful evidence for firms to adjust significant determinant to improve their innovation performance.