Moderator effect of industrial park on knowledge spillover from sectoral innovation to firm performance in Vietnam

New economic geography in a wide range of industrial theories explains why certain activities agglomerate in a certain region through the benefits of innovation activities. However, positive external economies of innovation have been less investigated in empirical studies. This study investigates the knowledge spillover effects of sectoral innovation on firm performance through the mediating effects of industrial parks in the manufacturing industry in Vietnam. Using the Vietnam Enterprises Survey (VES) data from 2011 to 2014 with 7,236 enterprises in combination with other data from the General Statistics Office (GSO), this study applied panel data regression with mixed-effects models and presented novel findings on knowledge spillover from sectoral innovation to firm performance in Vietnam. Sectoral innovation may require two years to have a positive effect on a firm’s value added, which supports lags in innovation on the productivity nexus, as suggested by Griliches. Interestingly, this positive spillover effect may be greater for enterprises located in industrial parks. This finding approves the approach of innovation economy that economic activities based on new knowledge are likely to be grouped into geographical regions. This may imply policies that enhance the effectiveness of innovation through the development of industrial parks.This study provides new insights into the relationship between sectoral innovation and firm performance in the manufacturing industry in Vietnam, emphasizing the role of knowledge spillover and industrial parks. By employing panel data regression with mixed-effects models, the research finds that sectoral innovation positively impacts firm performance, albeit with a two-year lag. Moreover, industrial parks play a crucial mediating role in amplifying the benefits of sectoral innovation. The findings offer significant policy implications for Vietnam, suggesting that fostering innovation and developing industrial parks can lead to enhanced economic performance through increased knowledge spillover. This study contributes to the broader literature on economic geography and innovation by showing how sectoral innovation can influence firm-level outcomes in emerging economies.