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Dynamics of innovation and internationalization among Vietnamese SMEs

Trinh Long

MPRA Paper from University Library of Munich, Germany

Abstract: Innovation and internationalization have been considered as the major sources of growth for a long time. Various theoretical models suggest a bi-directional causality relationship between these two decisions. However, so far there is limited empirical evidence on whether there is a dynamic interdependence of innovation and internationalization decisions among SME firms in developing countries. Using a dynamic bivariate probit model and adopting a broader definition of internationalization, this paper analyzes the dynamic interdependence of internationalization and innovation decisions at the firm level in a developing country, by using a rich panel data set of SMEs collected biannually from 2005 to 2013 in Vietnam. Our empirical results show a high persistence in process, product innovations and internationalization decisions. Furthermore, we find that, for non-micro firms (i.e. firms with at least six fulltime permanent workers), past internationalization has a positive effect on process innovation but past process innovation do not has a significant effect on internationalization decision of these firms. For this group of firms, we also find signs of cross-dependence between process innovation and internationalization decision. Our empirical results, however, does not show dynamic interdependence between internationalization and product innovation. For micro firms, we do not find any evidence relating to interdependence of internationalization and both types of innovation.

Keywords: internationalization; process innovation; product innovation; persistence of innovation; dynamic random effect bivariate probit; SME; Vietnam (search for similar items in EconPapers)
JEL-codes: F14 L20 O31 (search for similar items in EconPapers)
Date: 2015-12, Revised 2015-11-26
New Economics Papers: this item is included in nep-bec, nep-cse, nep-dcm, nep-ent, nep-ino, nep-sbm, nep-sea, nep-tid and nep-tra
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