Empirical Economics

, Volume 51, Issue 3, pp 1235–1259 | Cite as

Efficiency, innovation and competition: evidence from Vietnam, China and India

  • Thanh Pham Thien NguyenEmail author
  • Son Hong Nghiem
  • Eduardo Roca
  • Parmendra Sharma


Given a number of common features in both the economy and banking markets across Vietnam, China and India, this study investigates the comparative levels of efficiency, innovation and competition and then examines the effect of competition on innovation of banks in the three countries over the period 1995–2011. Applying for the first time a recently developed stochastic meta-frontier framework to the banking sector, this study finds that Indian banks are the most cost-efficient, followed by Chinese banks and Vietnamese banks. Indian banks are also more innovative in reducing the operating costs compared to Chinese and Vietnamese banks. Using the Lerner index, the banking markets of India and Vietnam are found to be more competitive than that of China. The relationship between competition and cost-reducing innovation follows an inverse U-shape curve, which is consistent with the literature. This study also finds that the optimal Lerner index to achieve the greatest innovation in reducing operating costs is 55 %. Based on the results of the Lerner index, this study recommends that to improve cost-reducing innovation, policy makers should promote bank competition in all the three countries, but to a greater extent in China than in Vietnam and India.


Vietnam China India Competition Efficiency Innovation Meta-frontier SFA 

JEL Classification

G21 L11 D24 O30 N20 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  • Thanh Pham Thien Nguyen
    • 1
    • 3
    Email author
  • Son Hong Nghiem
    • 2
  • Eduardo Roca
    • 3
  • Parmendra Sharma
    • 3
  1. 1.Banking FacultyUniversity of Economics Ho Chi Minh CityHo Chi Minh CityVietnam
  2. 2.Institute of Health and Biomedical Innovation (IHBI)Queensland University of TechnologyKelvin GroveAustralia
  3. 3.Department of Accounting, Finance and EconomicsGriffith UniversityNathanAustralia

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