Impact of globalization on innovation of Vietnamese small and medium enterprises

Main Article Content

Nguyen Ngoc Thuy Vy
Do Thi Thanh Nhan
Thu-Quang Luu
Wing-Keung Wong

Abstract

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.

Downloads

Download data is not yet available.

Article Details

How to Cite
Nguyen Ngoc Thuy Vy, Do Thi Thanh Nhan, Thu-Quang Luu, & Wing-Keung Wong. (2022). Impact of globalization on innovation of Vietnamese small and medium enterprises. Asian Academy of Management Journal. Retrieved from https://ejournal.usm.my/aamj/article/view/593
Section
Early Views - June 2023

References

Aghion, P., & Howitt, P. (1992). A model of growth through creative destruction. Econometrica, 60(2), 323–251.

Aghion, P., & Howitt P. (1998). Endogenous growth theory. Cambridge, MA: MIT Press.

Aldaba R. M. (2011). Trade reforms, competition, and innovation in the Philippines. In C. H. Hahn, & D. Narjoko (Eds.), Globalization and innovation in East Asia. ERIA Research Project Report, 2010- 04, pp. 315–340. Jakarta: ERIA.

Archibugi, D., & Sirilli, G. (2001). The direct measurement of technological innovation in business. In Innovation and Enterprise Creation: Statistics and Indicators. European Commission.

Arrow, K. 1962, ‘Economic Welfare and the Allocation of Resources for Invention’, in R. Nelson (ed.) The Rate and Direction of Inventive Activity, Princeton University Press, 609-625.

Becheikh, N., Landry R. and Amara N. 2006, ‘Lessons from innovation empirical studies in the manufacturing sector: A systematic review of the literature from 1993-2003’, Technovation, 26: 644-664.

Beroc, M. A. 2015, ‘Does Gender Matter for the Innovativeness of SMEs?’, FREE Policy Brief Series. Bertschek, I. 1995, ‘Product and Process Innovation as a Response to Increasing Imports and Foreign Direct Investment’, The Journal of Industrial Economics, 43(4): 341-357.

Bloom, D. 2002, ‘Mastering Globalization: From Ideas to Action Higher Education Reform’, Unpublished paper.

Bordo M. D., Eichengreen B., Irwin A. D, Frankel J and Taylor M. A. 1999, ‘Is Globalization Today Really Different than Globalization a Hundred Years Ago’, NBER Working Paper No. W7195

Caselli, M. 2012, ‘Trying to measure globalization, experiences’, Critical Issues and Perspectives. Springer Briefs in Political Science.

Caselli, M. 2006, ‘On The Nature of Globalization and Its Measurement. Some Notes on The A.T. Kearney /Foreign Policy Magazine Globalization Index and The CSGR Globalisation Index’, UNU-CRIS Occasional Papers, no. O-2006/3.

Chen, V.Z., Li, J., Shapiro, D.M. and Zhang, X. 2014, ‘Ownership structure and innovation: an emerging market perspective’, Asia Pacific Journal of Management, Vol. 31 No. 1, pp. 1-24.

Choi, S.B., Lee, S.H. and Williams, C. 2011, ‘Ownership and Firm Innovation in A Transition Economy: Evidence from China’, Research Policy, Vol. 40 No. 3, pp. 441-452.

Choi, S.B., Park, B.I. and Hong, P. 2012, ‘Does ownership structure matter for firm technological innovation performance? The case of Korean firms’, Corporate Governance: An International Review, Vol. 20 No. 3, pp. 267-288.

CIEM 2016, ‘Characteristics of the Vietnamese Business Environment: Evidence from An SME Survey in 2015’, Hanoi.

Cicea C., Popa I., Marinescu C., Stefan S., 2019. ‘Determinants of SMEs' performance: evidence from European countries’, Economic research-ekonomska istrazivanja, vol. 32, issue 1, pp. 1602-1620.

Clark, W. C. 2000. ‘Governance in a Globalizing World’, Environmental Globalization, p. 86–108. Brookings Institution Press.

Coad, A., Segarra, A. and Teruel, M. 2016, ‘Innovation and Firm Growth: Does Firm Age Play a Role?’, Research Policy, Vol. 45 No. 2, pp. 387-400.

Danaeefard H. and Abbasi T. 2011, ‘Globalization and Global Innovations’, Chapters in The Systemic Dimension of Globalization, Ed. Piotr Pachura. IntechOpen.

Deschryvere, M. 2014, ‘R&D, firm growth and the role of innovation persistence: an analysis of Finnish SMEs and large firms’, Small Business Economics, Vol. 43 No. 4, pp. 767-785.

Dreher, A. 2006, ‘Does Globalization Affect Growth? Evidence from A New Index of Globalization’. Applied Economics, 38(10), 1091–1110.

Dreher, A., Gaston, N. and Martens, P. 2008, Measuring Globalisation - Gauging Its Consequences. New York: Springer

Dung Nguyen, Hoai Nguyen, Kien S. Nguyen 2018, ‘Ownership feature and firm performance via corporate innovation performance: Does it really matter for Vietnamese SMEs?’, Journal of Asian Business and Economic Studies, Vol. 25 Issue: 2, pp.239-250, https://doi.org/10.1108/.

El Elj M.and Abassi B. 2014, ‘The Determinants of Innovation: An Empirical Analysis in Egypt, Jordan, Syria and Turkey’, Canadian Journal of Development Studies/Revue Canadienne D'études Du Développement, 35:4, 560-578.

EMCDDA 2016, ‘EU Drug Markets Report. In-depth Analysis’, European Monitoring Centre for Drugs and Drug Addiction, Luxembourg: Publications Office of the European Union.

Figge, L. and Martens, P. 2014, Globalisation Continues: The Maastricht Globalisation Index Revisited and Updated, Globalizations, 7731(April), 1–19.

Gallhofer, S. and Haslam, J. 2006, ‘The accounting–globalisation interrelation: An overview with some reflections on the neglected dimension of emancipatory potentiality’, Critical Perspectives on Accounting, 17(7), 903-934.

Ghemawat, P. & Altman, S. A. 2016, ‘DHL global connectedness index 2016 - The State of Globalization in an Age of Ambiguity’.

Gorg, H. and Greenaway D. 2004, ‘Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?’, World Bank Research Observer, 19(2): 171-197.

Gorodnichenko, Y., Svejnar J, and Terrell K. 201, ‘Globalization and Innovation in Emerging Markets’, American Economic Journal: Macroeconomics, 2 (2): 194-226.

Grossman, G. and Helpman E. 1991, ‘Innovation and Growth in the Global Economy’, MIT Press.

Gygli S., Haelg F., Potrafke P and Sturm J.-E., 2019, ‘The KOF Globalisation Index - Revisited’, Review of International Organizations, DOI: 10.1007/s11558-019-09344-2

Hahn, C. H. and D. Narjoko (2011), ‘Globalization and Innovation in East Asia’, in Hahn, C. H. and D. Narjoko (eds.), Globalization and Innovation in East Asia. ERIA Research Project Report 2010-04, pp.1-19. Jakarta: ERIA.

Hopper, T. and Lassou, P. J. C. and Soobaroyen, T. 2017, ‘Globalisation, Accounting and Developing Countries’, Critical Perspectives on Accounting, Vol. 43, No. 1, 2017.

Howitt, P. 2000, ‘Endogenous Growth and Cross-Country Income Differences’. American Economic Review, 90 (September 2000): 829-46.

Kluver, R. and Fu, W. 2004, ‘The cultural globalization index’, Foreign Policy.

Kuncoro A. 2012, ‘Globalization and Innovation in Indonesia: Evidence from Micro-Data on Medium and Large Manufacturing Establishments’, Working Papers DP-2012-09, Economic Research Institute for ASEAN and East Asia (ERIA).

Lesakova L., 2018. ‘The Critical View on Innovation Activity in SME's Sector in Slovakia’, in “Modeling innovation sustainability and technologies: economic and policy perspectives” (Book series Springer Proceedings in Business and Economics), pp.137-147.

Liñán, F., Paul, J., & Fayolle, A. (2020). SMEs and entrepreneurship in the era of globalization: advances and theoretical approaches. Small Business Economics, 55(3), 695-703.

Lockwood, B. and Redoano, M. 2005, ‘The CSGR globalisation index: An introductory guide’, Technical Report, 155 (04), CSGR working paper.

Love H. J. and Roper S. 2015, ‘SME innovation, exporting and growth: A review of existing evidence’, International Small Business Journal: Researching Entrepreneurship, Volume: 33 issue: 1, page(s): 28-48.

Melitz, M. J. 2003, ‘The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity’, Econometrica, 71(6): 1695-1725.

Mendy, J., Rahman, M., & Bal, P. M. (2020). Using the “best-fit” approach to investigate the effects of political economic and social barriers on SMEs' internationalization in an emerging country context: Implications and future directions. Thunderbird international business review, 62(2), 199- 211.

Michie, J. 1998, ‘Introduction: The Internationalisation of the Innovation Process’, International Journal ofthe Economics of Business 5(3): 261–277.

Nguyen, N. A., P. M. Nguyen, D. N. Nguyen and D. C. Nguyen 2011, ‘Trade Liberalization and Innovation Linkages Micro-evidence from Vietnam SME Surveys’, in Hahn, C. H. and D. Narjoko (eds.), Globalization and Innovation in East Asia. ERIA Research Project Report 2010-04, pp.315-340. Jakarta: ERIA.

Norris, P. 2000, ‘Governance in a Globalizing World, Global Governance and Cosmopolitan Citizens’, p. 155–177. Brookings Institution Press.

Norek T., Arenhardt D.L., 2015. ‘Comparative Analysis of Innovative Activity Determinants in Selected SME's in Brazil and Poland. Results of Empirical Researches’, Equilibrium-quarterly journal of economics and economic policy, vol. 10, issue 2, pp. 157-181

Nye, J. S. & Keohane, R. O. 2000, ‘Governance in a Globalizing World, Introduction’, p.144. Brookings Institution Press.

OECD 2010, ‘SMEs, Entrepreneurship and Innovation’, Organisation for Economic Co-operation and Development.

OECD 2005, ‘The Measurement of Scientific and Technological Activities. Proposed Guidelines for Collecting and Interpreting Innovation Data’, Organisation for Economic Co-operation and Development.

Ošenieks, J. and Babauska, S., 2014, The relevance of innovation management as prerequisite for durable existence of small and medium enterprises. Procedia-Social and Behavioral Sciences, 110 (1), 82- 92.

Perraton J., 2011, ‘The Scope and Implications of Globalisation’, Chapters in: The Handbook of Globalisation, Second Edition, Chapter 3, Edward Elgar Publishing.

Peters B., Riley R., Siedschlag I., Vahter P. and McQuinn J. 2018, ‘Internationalisation, innovation and productivity in services: evidence from Germany, Ireland and the United Kingdom’, Review of World Economics (Weltwirtschaftliches Archiv), Springer; Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 585-615, August.

Potrafke, N. 2015, ‘The evidence on globalisation’, The World Economy, 38(3), 509–552.

Randolph, J., 2001, ‘G-index: Globalisation Measured’, World Markets Research Center (presently HIS Global Insight).

Rodil, Ó., Vence, X. and del Carmen Sánchez, M. 2015, ‘The relationship between innovation and export behaviour: the case of Galician firms’, Technological Forecasting and Social Change, Vol. 113, pp. 248-265.

Romer, P.M. 1986, ‘Increasing Returns and Long-Run Growth’, Journal of Political Economy, 94, 1002-1037.

Romer, P. M. 1990, ‘Endogenous Technological Change’, Journal of Political Economy 98(5): S71-S102. Saleem, H., Li, Y., Ali, Z., Mehreen, A., & Mansoor, M. S. (2020). An empirical investigation on how big data analytics influence China SMEs performance: do product and process innovation matter?. Asia Pacific Business Review, 26(5), 537-562.

Sander F. and Janovsky J. 2016, ‘Globalization as A Risk Factor for Creativity and Innovativeness’, Ekonomski Vjesnik/Econviews – Review of Contemporary Entrepreneurship, Business, and Economic Issues, Vol 29, No 1.

Santoro, G., Ferraris, A., & Winteler, D. J. (2019). Open innovation practices and related internal dynamics: case studies of Italian ICT SMEs. EuroMed Journal of Business, 14(1), 47-61.

Santoro, G., Mazzoleni, A., Quaglia, R., & Solima, L. (2019). Does age matter? The impact of SMEs age on the relationship between knowledge sourcing strategy and internationalization. Journal of Business Research, 128 (1), 779-787.

Scholte, J. A. 2008, ‘Defining globalisation’, The World Economy, 13(11), 1471–1502. Schumpeter, J. A. 1943, ‘Capitalism, Socialism, and Democracy’, New York: Harper.

Scuotto, V., Santoro, G., Bresciani, S., & Del Giudice, M. (2017). Shifting intra?and inter?organizational innovation processes towards digital business: an empirical analysis of SMEs. Creativity and Innovation Management, 26(3), 247-255.

Sutton, J. 2007, ‘Quality, Trade and the Moving Window: The Globalization Process’, manuscript.

Supriyono B., Trisnawati, 2015. ‘Innovative Public Leadership (Case Study on Innovative Food Policy for SME's in Sidoarjo Regency)’, 2nd global conference on business and social sciences (gcbss- 2015) on multidisciplinary perspectives on management and society, vol. 211, pp. 1057-1063.

Vujakovic, P. 2010, ‘How to measure globalisation? A new globalisation index (NGI)’, Atlantic Economic Journal, 38(2), 237–237.

Wolf, M. 2003, ‘Is Globalisation in Danger?’, The World Economy, Vol. 26, pp. 393-411, April 2003.

Wagner, J. 2007, ‘Exports and Productivity: A Survey of the Evidence from Firm-level Data’, World Economy, 30 (1): 60-8.