National innovation and r&d fund allocation in Vietnamese listed firms: The role of foreign ownership and the 2017 technology transfer Law

Abstract

In the context of technological advancement, fostering national innovation enhancement is important to achieve sustainable development and economic growth. Vietnam aspires to become an innovation-driven nation by developing technology products reflecting its identity and capabilities. To this end, Vietnam has enacted crucial policies intending to expedite digital transformation and drive economic growth. Noteworthy the 2017 Law on Technology Transfer encourages firms to invest in technology, strengthen collaborations with domestic and international partners, and adapt business strategies. However, the extent of responsiveness and adoption varies depending on each firm's internal capacity and ability to leverage these opportunities. Hence, this research aims to ascertain the impact of national innovation (GII) on the behavior of Research and Development allocation in Vietnamese listed firms with the role of foreign ownership and the Law on Technology Transfer 2017 (Law No. 07/2017/QH14), effective from July 1, 2018. The authors developed a secondary dataset comprising GII and R&D funding data from 1,557 listed firms (HoSE, HNX, UPCoM) spanning the period 2010 to 2023 from FiinPro-X and World Intellectual Property Organization, which are repetitive sources. The research data was processed by the detrending method to minimize interference from fluctuations between macroeconomic variables. Thereafter, we employ many regression models such as the Pooled OLS, High-Dimensional Fixed Effects models to control the variation factors of each firm and time. The results prove that national innovation (GII) positively influences firms' R&D funding allocation behavior, highlighting the impact of national policies on firm-level decisions. Specifically, the Law 2017 on Technology Transfer exerts significant macroeconomic effects whilst fostering microeconomic engagement by encouraging long-term innovation activities. Additionally, firms have benefited from enhanced policy support and regulatory frameworks following the law's implementation, driving greater investment in innovative and creative endeavors