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The Role of External Network, Government Support, and Absorptive Capacity on the Innovative Activities of SMEs in Vietnam

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Abstract

This paper analyzes the determinants of innovative probability of SMEs using the Vietnamese manufacturing SME survey dataset. The study emphasizes external network, government support, and the absorptive capability in performing innovative activities. The logistic regression model is used in this study. The result shows that network quality does not affect innovation activities of SMEs. Network range and network size are important structures for SMEs in the process of conducting innovation activities. Government technical support is more important than government financial support. Government technical supports contribute to innovation in all three aspects of innovation including product innovation, product improvement, and process innovation. Absorptive capacity affects innovation in which capacity comes not only from R&D expenditure but also from investment in machinery and equipment and the level and legal knowledge capacity of the business owner. Intangible asset expenditure and skilled employees do not affect the innovative process of SMEs. The study also gives some practical recommendations for both the government and enterprises.

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Notes

  1. Resolution No. 20/2012/NQ-TW dated November 1, 2012, of the Resolution of the 6th Plenum of the Party Central Committee, Course XI, on scientific and technological development in service of industrialization and modernization in socialist-oriented market economic conditions and international integration.

    Law No. 04/2017/QH14 dated June 12, 2017, on supporting SMEs.

  2. Schumpeter (1930) cited in Goswami & Mathew (2005).

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  1. School of Economics, UEH University, Ho Chi Minh City, Vietnam

    Ngo Hoang Thao Trang

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Highlights

- Network quality does not affect the innovation process of businesses in all three aspects (product innovation, product innovation, and process innovation). This shows that Vietnamese SMEs have not really used external network channels effectively for innovation activities.

- Network range and network size are important for the product improvement process. Vietnamese SMEs are effectively using these two network structures.

- Financial support only affects product innovation while technical support affects all three types of innovation.

- Absorptive capacity applied for innovation comes not only from R&D but also from investment in machinery and equipment, the qualifications of the business owner, and their level of legal knowledge.

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Trang, N.H.T. The Role of External Network, Government Support, and Absorptive Capacity on the Innovative Activities of SMEs in Vietnam. J Knowl Econ (2024). https://doi.org/10.1007/s13132-024-01913-0

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