Innovation and firms' outcomes: The case of Vietnam

Abstract

The thesis explores the relationship between Research and Development (R&D) fund allocation and firms’ outcomes (including financial performance and investment decisions, particularly in tangible and intangible assets) of Vietnamese listed firms from the 2006-2022 period, taking into consideration the effect of firms’ locations on the nearest innovation hub/ high technology centers. The findings indicate that when the distance between firms and these innovation centers increases, the effect of R&D on firm performance diminishes. Additionally, the findings reveal a counterintuitive relationship between intangible assets: as firms are located farther from high-tech centers, the positive impact of R&D on their investment in intangible assets becomes stronger. This suggests that geographically isolated firms must rely more on internal R&D to compensate for the lack of external knowledge spillovers. Furthermore, the findings show that when the High Technology Law took effect in 2009, it also influenced firms’ investment decisions, with its effects moderated by firms’ R&D activities and their proximity to innovation centers. At the industry level, the results suggest that distance from high technology centers also moderates the relationship between firms’ R&D allocation and investment choices. Finally, a similar effect is proposed by foreign ownership of firms. This thesis's key contribution is the role of location in determining both firm- and broader economic-level outcomes. These results confirm that geographic distance imposes more constraints, offering policymakers and firm managers valuable insights to help them allocate resources effectively toward productivity and innovation.