DECLARATION. i
ACKNOWLEDGEMENT. ii
ABBREVIATIONS AND ACRONYMS. iii
LIST OF TABLES . vi
LIST OF FIGURES . vii
TABLE OF CONTENTS. iv
CHAPTER 1: INTRODUCTION. 1
1.1. Background . 1
1.2. Problem Statement . 4
1.3. Study Objective . 7
1.4. Study process . 7
1.5. Scope of Study . 8
1.6. Contribution of Study . 11
1.7. Limitation of Study . 11
1.8. Organization of the Dissertation . 12
CHAPTER 2: LITERATURE REVIEW. 13
2.1. Research on Innovation in the world . 13
2.1.1. Ground theory research . 13
2.1.2. Determinant of innovation research . 17
2.1.3. Product innovation research . 27
2.2. Research on Innovation in Vietnam . 30
CHAPTER 3: THEORY FRAMEWORK. 39
3.1. Definition of Innovation . 39
3.2. Types of Innovation . 41
3.3. Determinants of Innovation. 44
3.3.1. Following Resources Based view theory . 44
3.3.2. Following Knowledge based view theory . 46
3.3.3. Conclusion . 47
3.4. Knowledge sources . 48
3.4.1. Internal Knowledge Sources . 49
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n, will benefit a firm’s innovative
performance. However, the degree to which knowledge from inside or outside the
supply chain affects innovation might be different. It has been demonstrated that
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joining alliance networks can enhance firm learning and innovation (Ahuja, 2000;
Soh, 2003; Walker, Kogut, & Shan, 1997). Pittaway, Robertson, Munir, Denyer, and
Neely (2004) emphasize that network relationships with suppliers, customers and
intermediaries are vital factors affecting firms’ innovation performance and
productivity, as different partners control different sources of knowledge and
information, which will influence firms differently. Furthermore, firms that do not
collaborate nor exchange knowledge, limit their knowledge base in long term. Several
lines of evidence suggest that collaborative knowledge sources are critical not only
to create in-house innovations, but also for learning about innovative work practices
that other organizations have done or adopted (Biemans, 1991; Erickson & Jacoby,
2003). Empirical findings from South African firms showed that these firms used
different external sources, including (1) business organizations: buyers, suppliers,
competitors, consultants and sectoral institutes; (2) technological knowledge sources:
public research labs, universities, innovation centers; and (3) codified knowledge
sources: patents, electronic databases (Oerlemans & Knoben, 2010) .
Using knowledge from competitors and suppliers seems to increase the
number of innovations within a firm, while others sources such as universities and
institutes have less effects on the innovative potential of firms (Oerlemans & Knoben,
2010; Doloreux and Lord-Tarte (2013) (Oerlemans & Knoben, 2010; . However,
Laursen and Salter (2006) also provided evidence for an inverted U-shape
relationship between the number of collaborative knowledge and innovative
performance. In addition, they also found a curvilinear effect related to how deep
firm’s use collaborative knowledge. They concluded that when firms adopt too many
collaborative knowledge sources or if firms use more than three sources of
collaborative knowledge deeply in their innovative activities, the declining returns
are likely to begin. Evidence from several recent studies found an inverted U-shape
as well (Bayona-Saez et al., 2017; Chiang & Hung, 2010; Garriga, Von Krogh, &
Spaeth, 2013). However, given our specific research context in a lower middle-
income country with a still underdeveloped technological environment, the amount
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of collaborative knowledge sources is probably more restricted compared to more
advanced countries. This means that the author does not expect that firms are
confronted with external information overload. Yet, given the negative effect of over-
search on innovation in developed countries, the study tentatively explores the
existence of this relationship in Vietnam in a separate analysis (in line with Bayona-
Saez et al. (2017); Hung and Chou (2013); Laursen and Salter (2006)) ). The author
formulates the following hypotheses:
Hypothesis 2a: The stronger a firm’s collaborative knowledge gained from
inside the supply chain, the higher the likelihood that that firm produces product
innovation.
Hypothesis 2b: The stronger a firms’ collaborative knowledge gained from
outside the supply chain, the higher the likelihood that that firm produces a product
innovation.
3.5.3. Regional knowledge sources
Access to resources that are not internal to the firm can also stem from simply
being located in a region where many other firms are located, a so-called
agglomeration. Within that region, firms could take advantage of available
specialized labour, specialized inputs, technological spill-overs, and demand market
thickening thickening (McCann & Folta, 2008). A large body of research shows that
tacit knowledge can be implanted in geographic regions, enabling firms within these
regions to draw from this knowledge (Boschma, 2005; Sorenson & Baum, 2003;
Tsuji & Miyahara, 2010). Additionally, social scientists have long recognized the
importance of geography for innovation (Doloreux & Lord-Tarte, 2013; Frenken, van
Oort, Verburg, & Boschma, 2005; Funk, 2013; Laursen et al., 2012). Being in
scientific communities and recruiting skilled employees provide knowledge that help
firms innovate and generate competitive advantage. McCann and Folta (2008) state
that if firms are located in clusters, there is a pooled market for workers with
specialized skills, which benefits both workers and firms.
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Moreover, when firms require specialized inputs such as tools, suppliers,
manufacturing facilities or services, being in the same region with other firms in the
same or similar fields would help them to reduce transaction costs. Schumpeter
(1934) mentioned that proximity is helpful as it enables access to diverse knowledge
that firms can recombine in novel ways to make discoveries. Furthermore, the benefit
of being in the same region with other firms can help a firm to stay informed of
technological knowledge, which help them to be more innovative (Funk, 2013).
Proximity is considered an important condition for knowledge sharing, transfer and
technology acquisition (Gertler, 1995). Firms’ innovation processes can change
remarkably across regions (Doloreux & Lord-Tarte, 2013). Being close to firms from
the same or similar industry could bring firms benefits in terms of labor market
pooling and transport cost savings. At the same time, being with firms from outside
its industry could provide firms with knowledge spillovers (Beaudry &
Schiffauerova, 2009). For those reasons, the author supposes that when firms are
located in a region with more firms or a region with high levels of R&D activities, it
is more likely for them to innovate.
Hypothesis 3a: The stronger the knowledge base of the region a firm is
located in the higher the likelihood that that firm produces a product innovation
Hypothesis 3b: The higher the population of the region a firm is located in
the higher the likelihood that that firm produces a product innovation
3.6. Research model
Innovation has been studied as an indicator for firm performance in numerous
studies (Artz et al., 2010; Calantone, Cavusgil, & Zhao, 2002; Darroch, 2005; Hitt et
al., 1997; Kasseeah, 2013). It is broadly viewed as one of the most important springs
of sustainable competitive advantage in an progressively changing milieu, because it
leads to firm’s improvements, creates continuous advances that benefits firms to
survive, lets firms to develop more speedily, be more efficient, and finally be more
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profitable than their competitors who do not innovate. Hence, a firm’s capacity to
generate innovations has consistently been considered a source of sustained
competitive advantage (Barney, 1991). Additionally, innovation often originates
from the exchange and recombination of knowledge. Therefore, firms need to acquire
new knowledge from numerous sources to continuously generate innovations and
maintain their competitive edge (Porter, 1990).
Moreover, the increasing of knowledge-based economies has directed to the
growth of the ‘knowledge-based view’ theory. This theory suggests that knowledge
is the core source of firms’ competitive advantage and therefore the ability to generate
knowledge is one of the most significant abilities of firms (Grant, 1996a) . Under this
hypothesis, firms could be considered as knowledge creating hub (Nonaka &
Takeuchi, 1995).
Firm-level resources allow firms to distinguish themselves from their
competitors and develop a competitive advantage. According to the resource-based
view (RBV) of the firm, this is only possible, however, when resources are valuable,
rare, inimitable and non-substitutable (Barney, 1991). Even though knowledge is
crucial for all type of firms, the exact type of knowledge that is most useful might
differ between larger and smaller firms. Large companies engaged in
internationalization pay particular attention to internal knowledge as a source of
innovation (Scaringella, 2016). SMEs on the other hand are resource-constraint so
they need to draw on knowledge networks that tie a broad set of partners, customers
and suppliers together to take advantage of innovation resources. As such, these firms
could benefit from an ‘open innovation’ approach.
According to to ChesbroughChesbrough (2003, p. XXIV) “open innovation
is a paradigm that assumes that firms can and should use external ideas as well as
internal ideas, and internal and external paths to market, as firms look to advance
their technology.”. Hence, open innovation refers to the capability of firms to connect
with other actors and develop connections in order to make use of external sources
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and ideas (Chesbrough, 2003; Sakkab, 2002). Firms that are solely focused on
internal knowledge sources, miss opportunities and potentially suffer from lock-in of
existing ways of doing business (Uzzi, 1997). Several recent studies suggest that a
growing number of firms pursue an open innovation strategy, which means involving
both inbound activities (focusing on external knowledge sources and collaboration
with external stakeholders) and outbound activities (generating knowledge through
R&D for own uses and commercializing innovations) (Greco et al., 2015; Schroll &
Mild, 2012; West & Bogers, 2014) . In a related stream of literature, Boschma (2005)
and Asheim and Isaksen (1997) and argue that firms can learn and gain external
knowledge by being located in a region with other firms. Hence, knowledge might
flow from various sources, which can be internal, collaborative and regional sources.
Internal knowledge sources could be generated by firms through in-house
R&D activities, employee training or managers’ experience (Chen & Huang, 2009;
Frenz & Ietto-Gillies, 2009; Martínez-Ros & Orfila-Sintes, 2012). Collaborative
knowledge sources could come from collaborative activities between firms and their
counterparts from inside the supply chain, such as competitors, suppliers and
customers, or from outside the supply chain, such as universities and research
institutes (Lin, Hung, Wu, & Lin, 2002). Regional knowledge sources come to firms
from the information available in the region where firms are located, because
knowledge may spill over across firms, especially when the distance between them
is small (Boschma, 2005; Knoben & Oerlemans, 2006). Boschma (2005) states that
short distances could bring people together, favor information contacts and facilitate
the exchange of tacit knowledge. Hence, within the same region, firms could have
access to specialized labor sources and gain knowledge from their expertise.
Furthermore, more recent attention has focused on the effect of internal firm
dynamics, inter firm linkages and regions on innovation (Doloreux & Lord-Tarte,
2013; Giuliani, 2006; Wang & Lin, 2012). Similarly, this study therefore aims to
simultaneously test the relationship between three different sources of knowledge
(internal, collaborative and regional) with innovation.
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In this study, the author focuses on product innovation, which is defined as “a
good or service that is new or significantly improved. This includes significant
improvements in technical specifications, components and materials, software in the
product, user friendliness or other functional characteristics” (OECD/Eurostat, 2005, p.
48). Illustrations of product innovation might contain new product's inventions; technical
condition and quality enhancements made to a product; or the attachment of new
components in that product, materials or desirable functions into a current product.
It is now well established from a variety of studies that the ability of firms to
introduce product innovation is considered a key determinant of organizational
performance and sustainable development (Danneels, 2002; Laursen, Masciarelli, &
Prencipe, 2012).
59
Figure 3.1: Research model with all the variables
Source: The author composed and designed
Innovation outcome
- Product innovation
Regional Knowledge Sources
- Knowledge benefit from the position
of the firm even when firms do not
enter in any collaboration
Collaborative Knowledge Sources
- Knowledge from inside the supply
chain (from customers, competitors,
suppliers)
- Knowledge from outside the supply
chain (Universities, Research institutes)
Internal Knowledge sources
- Internal R& D
- Managerial Experience
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CHAPTER 4: METHODOLOGY AND DATA COLLECTION
4.1. Research context
Although Vietnam has grown astonishingly in the past three decades, the
transition to a flourishing and modern economy has only just begun. Vietnam has per
capita income still accounting for only a little part of the global average, the country
is attempting to maintain its fast-growing path and follow the direction of other
successful East Asian economies to join the ranks of high-middle income countries
for the past half-decade. Even though Vietnam has every potential to achieve this
goal, victory is not by itself. The population is aging rapidly, which moderate labor
productivity. Moreover, slow investment growth is weighing on Vietnam's medium-
term growth potential. How to cope with the resistance of domestic structures?
According to the political report of the 10th Central Committee of the Party at the
11th National Congress of the Party, Vietnam needs to steer the external environment
changing, where global trade structures are shifting, breakthrough technology, rapid
innovation, and Climate change is shaping opportunities and creating new risks for
the country.
Whether Vietnam can continue to maintain previous growth or not, this is
extremely important. Although growth is not the goal that the government are aiming
for, growth is a necessary condition for the wider development. It is the basis needed
for creating jobs, alleviating poverty and mobilizing resources to invest in health,
education and other social goals. Vietnam have some advantages that we should not
forget which are a geographic location, an open economy, a young and largely labor
force in rural areas, and a high level of domestic savings. Therefore, the country has
conditions for high and sustainable growth. Nonetheless, in order to take advantage
of these fundamentals, the government needs to regularly focus on policy and
institutional reforms targeted at creating increased productivity, effective investment
in human capital and physical capital, sustainable and efficient use of natural
resources.
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Recently, the big trends are global transforming forces, shaping the future
world by profound influence on businesses, society, economy, culture and human
life. Hence, Vietnam should be able to identify success, analyze and has action to face
those major trends to build a long-term dynamic development strategy that
contributes to successful economic development due to the fact that Vietnam is likely
to be the country most affected by major global trends.
Vietnam is one of the most open countries in the world, with trade to GDP
ratio reaching nearly 200% and FDI inflow accounting for about 7% of GDP in 2018
(GSO, 2019). Regarding geopolitical position and trade structure, Vietnam may be
more vulnerable to climate change and US-China trade tensions. Therefore, The
Central Theoretical Council (2019) suggest four major global trends that Vietnam
needs to consider in the next two decades which are population movement, disruptive
technology, the rise of China and climate change.
We could see the vital role of innovation especially breakthrough technology
which could be defined as emerging technologies that cause a change in costs or
access to products or services, or quickly change the way we collect information,
produce or interact operative (Lientz & Rea, 2016) . Vietnam are currently in the
midst of the 4th industrial revolution, characterized by rapid technological diffusion,
multi-technology convergence, and emergence of global platforms. Breakthrough
technology is often based on technology and digital products, but they can go beyond
the connection and potential of the internet. This includes modern production
methods such as robotics, artificial intelligence, and the internet of things. They also
include advances in nanotechnology and biotechnology - and new production lines
such as batteries, drones, solar panels, self-driving cars, and exotic materials (Lientz
& Rea, 2016).
The vast opportunities will be associated with innovation and technological
breakthroughs that contribute to expanding access to global markets, creating new
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goods and services, transforming production processes, changing business models,
and make a significant impact on development.
The economic and social transformation that innovation and especially
breakthrough technology could bring is that they could accelerate development of a
country. If a country cannot compete in the future global economy, they will be left
behind. Hence, to take advantage of the potential of new business models, ways of
providing services, and shifting the source of competitiveness, Vietnam need to have
a multi-sector and multi-pronged approach to increase opportunities especially foster
innovation and technology for the country.
Assessing innovation policy in Vietnam
In the 2017-2018 Global Competitiveness Report carried out by the World
Economic Forum (WEF), Vietnam's institution was awarded 3.8 out of 7 points,
ranked 79th out of 137 economies, behind Laos (62/137) and Thailand (78/137).
Additionally, the 2016 World Bank's Easy Business Index also showed difficulties in
the business process in Vietnam such as starting a business (ranking 119/189),
protecting investors (ranking 122/189), and tax (ranked 168/189). These obstacles
have made business activities in general and innovation activities of firms in
particular difficult. Phung Xuan Nha and Le Quan (2013) in research on innovation
of Vietnamese enterprises also pointed out the main obstacles that many businesses
often encounter when conducting innovation, in which the unstable state policy, high
risk of innovation and lack of legal protection accounted for 80 percent and 70 percent
respectively. US Embassy (2018) reported that despite various efforts made the
government, intellectual property in Vietnam is yet to be effectively safeguarded. In
2017, the piracy software rate for the IT industry remained at 74 percent – a
concerning record in comparison with other manufacturing destinations in the world.
These are major barriers to the development of science and technology, technological
innovation in Vietnam.
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In recent years, the Ministry of Science and Technology (MOST) has
identified firms as the center of innovation (creative innovation), in which, attaching
importance to technological innovation to increase productivity and competitiveness
of enterprises and nation. Policies and laws on science and technology have focused
on promoting businesses to renovate technology and production processes. The
national technology innovation program by 2020 has more than 50 technology
innovation projects in diverse fields, in the form of a leading enterprise, cooperating
with research institutes, universities or receiving transfer technology from abroad for
technological innovation.
In addition, the 3 parties linkage policy (Chính sách ba nhà) about the
collaboration between universities, the government and firms announced at the 16th
Conference of Science and Technology in 2019 emphasizes that innovation could
only boosted and bring fruitful results when 3 parties work in harmony. For the State,
they have investment programs on R&D (research and development), infrastructure
investment, laboratories and most importantly, development of science and
technology policies. As for entrepreneurs, they have financial resources,
knowledgeable market, venture capitalists. With universities, they have human
resources, advanced training programs, etc. Each party has its own strengths and
needs a model of cooperation and cooperation to create high-value commercialized
products. Vietnam could build up an environment to foster innovation by enforcing
this policy as there are many other foreign countries do it very well. There are
numerous policies in Vietnam related to innovation listed in Table 3.1
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Table 4.1: Key Policy Documents related to innovation in Vietnam
Parliament and Party promulgated documents
Innovation and growth-related contents Notes
Law on Science and Technology
(2000, amended 2013)
Encouraging innovative activities, technical
improvements, production rationalizing and
innovation (Article 47)
Technology Transfer Act (2006)
National technological innovation program
(Article 38)
National technological innovation fund
(Article 39)
Tax policies to promote technology transfer
activities and other encouragements (Article
44, 45)
High Technology Act (2008)
The goal of technological innovation and the
measures to promote high technology
application (item a, Clause 2, Article 9,
Article 10, Article 11, Article 12)
Intellectual Property Law (2006)
General conditions for protected industrial
designs are new, innovative, capable of
industrial application (Article 63)
Central Resolution 6 in the
development of science and
technology
The specific objectives of science and
technology in 2020 (Paragraph b, Section 2)
Government / ministry promulgated documents
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Decision 1342/QD-TTg (5/8/2011)
on the establishment of National
Technological Innovation Fund
Introduction of the national technology
innovation fund and operational support
funding for organizations, individuals and
businesses doing research, transfer,
innovation and technological perfection
(Article 2)
Decision 677/QD-TTg (10/5/2011)
approving the national
technological innovation program
until 2020.
Missions until 2015 and 2020 on
technological innovation (Part I)
Decree 122/2003/ND-CP on
established national scientific and
technology development fund
Financial support methods from the fund for
scientific missions and extraordinary new
technologies (paragraph b of Article 13)
Decree 119/1999/ND-CP of the
Government on incentives for firms
to invest in science and technology
Encouraging technological innovation,
manufacturing new products (Article 1,
Paragraph 3 of Article 4)
Decision 2075/QD-TTg
(11/08/2013): To approve the
program of science and technology
market development until 2020
Regulations on science and technology
market (Section 1, Part I)
Decision 418/QD-TTg (2012)
approved the development strategy
of science and technology in the
period of 2011-2020
Development of science and technology
market associated with enforcement of
intellectual property law to promote the
commercialization of applicable research
results and technology development,
encourages scientific creativity and
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technology. (Section 1 & Section 4, Part I)
Decision 1244/QD-TTg (2011) on
the approval of the direction, goals
and tasks of science and technology
in the period of 2011-2015
The target number of registered patent
protection increased 1.5 times compared with
the period 2006-2010. (Section 1, Part II)
Decree No. 56/2009/ND-CP on
support for the development of
small and medium enterprises
Innovating, technological capacity building,
increasing number of technical qualifications
(Article 9)
Decision 2441/QD-TTg (2010) on
the approval of the national product
development program until 2020
National product development based on new
technology and high technology (Section 1,
Article I)
Decree 115/2005/ND-CP, amended
by Decree 96 provides for
autonomy, self-organization and
accountability of public science and
technology organisations
Strengthening accountability and enhancing
positivity, proactivity, dynamic, creativity for
science and technology organisations and
their heads (Paragraph 1, Article 2)
Decision 68/2005/QD-TTg on the
approval of supporting the
development of the intellectual
property program for firms
Supporting firms in creating and developing
intellectual property for innovative
achievements of science – technology.
Encouraging creative work in firms;
delevering intellectual property information
to research activities, science – technology
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