Main Article Content
Innovation is a crucial factor that contributes to improved labor productivity and an enhanced competition capacity, thereby ensuring the development of the firm. However, small and medium enterprises (SMEs) encounter many difficulties when seeking innovation. For such firms, it is not clear whether globalization works to encourage firms to innovate via transferring knowledge and promoting market competition mechanism; or whether globalization works against such innovation due to a negative impact on the diversification of different dimensions in economic, social, and political life. The primary purpose of this research is to investigate how globalization affects innovation in Vietnamese SMEs. To be specific, using a Probit model with data from a Vietnamese SME Survey during the period 2005-2015, the research examines the micro and macro effects of globalization on the propensity of innovation in businesses. The main result shows that at a macro level, globalization is negatively correlated with innovation. When examining the effect of each dimension, we find that economic and political globalization facilitates innovation, while social globalization discourages innovation. At the micro-level, increasing competitive pressure and knowledge transfer due to globalization are positively correlated with the propensity to the innovation of SMEs.
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