State Ownership and Firm Innovation? Evidence from an Emerging Market

Thao T.U. Dang () and Vinh X. Vo
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Thao T.U. Dang: University of Lincoln, Lincolnshire, United Kingdom and International University, Vietnam National University of Ho Chi Minh City, Vietnam
Vinh X. Vo: University of Economics Ho Chi Minh City, Vietnam

Journal of Economic Development, 2023, vol. 48, issue 4, 117-140

Abstract: The Vietnamese government has long recognized the essential importance of innovation in fostering sustainable competitive advantage and economic growth. While transitional countries have experienced limited research on SOEs and firm innovation, our research makes an initial effort to examine the impact of state ownership on innovation in Vietnam's emerging market using extensive panel data of firms listed on the Ho Chi Minh Stock Exchange from 2007 to 2016. The study integrates the institutional view, which regards that SOEs’ political and financial favoritism would connect firms to overcome constraints; and agency theory, which holds that SOEs would be less efficient in leveraging these critical resources in pursuing innovative projects. Our study demonstrates that innovation practices occur less often with the increased government involvement in a corporate structure. Our findings are attributable to the inherent problems of state-owned firms and suggest implications for managers and policymakers regarding the benefits and costs of state ownership in fostering innovation in the context of the socialist-oriented market economy of Vietnam.

Keywords: State Ownership; Innovation Investment; Emerging Market; Vietnam (search for similar items in EconPapers)
JEL-codes: H70 O31 (search for similar items in EconPapers)
Date: 2023
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