IDEAS home Printed from https://ideas.repec.org/a/taf/reroxx/v32y2019i1p3417-3436.html
   My bibliography  Save this article

The lasting effects of innovation on firm profitability: panel evidence from a transitional economy

Author

Listed:
  • Anh Ngoc Mai
  • Huong Van Vu
  • Bien Xuan Bui
  • Tuyen Quang Tran

Abstract

This study is the first to study the lasting effects of innovation on firm profitability in Vietnam. Using a unique panel dataset for the period 2005–2015, our results show that innovators achieve higher profit in comparison with non-innovating firms. The positive effects of innovation on firm profitability are observed not only in the short term but also in the longer term. The benefits of innovation for firm profitability can be seen in higher export probability, better productivity, better access to formal credit, and the ability to secure government support, but only after innovation.

Suggested Citation

  • Anh Ngoc Mai & Huong Van Vu & Bien Xuan Bui & Tuyen Quang Tran, 2019. "The lasting effects of innovation on firm profitability: panel evidence from a transitional economy," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 3417-3436, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:3417-3436
    DOI: 10.1080/1331677X.2019.1660199
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1331677X.2019.1660199
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1331677X.2019.1660199?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Love, James H. & Roper, Stephen & Du, Jun, 2009. "Innovation, ownership and profitability," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 424-434, May.
    2. Tran Quang Tuyen & Vu Van Huong & Doan Thanh Tinh & Tran Duc Hiep, 2016. "Corruption, provincial institutions and manufacturing firm productivity.New evidence from a transitional economy," Estudios de Economia, University of Chile, Department of Economics, vol. 43(2 Year 20), pages 199-215, December.
    3. Howell, Anthony, 2018. "Innovation and Firm Performance in the People’s Republic of China: A Structural Approach with Spillovers," ADBI Working Papers 805, Asian Development Bank Institute.
    4. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises," IZA Discussion Papers 3962, Institute of Labor Economics (IZA).
    5. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
    6. Julio Raffo & Stephane Lhuillery & Luis Miotti, 2008. "Northern and southern innovativity: a comparison across European and Latin American countries," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(2), pages 219-239.
    7. Paul Geroski & Steve Machin & John Van Reenen, 1993. "The Profitability of Innovating Firms," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 198-211, Summer.
    8. Re‐Jin Guo & Baruch Lev & Charles Shi, 2006. "Explaining the Short‐ and Long‐Term IPO Anomalies in the US by R&D," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3‐4), pages 550-579, April.
    9. James Bessen, 2002. "Technology Adoption Costs and Productivity Growth: The Transition to Information Technology," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 443-469, April.
    10. Keunjae Lee & Sang-Mok Kang, 2007. "Innovation Types and Productivity Growth: Evidence from Korean Manufacturing Firms," Global Economic Review, Taylor & Francis Journals, vol. 36(4), pages 343-359.
    11. Bruno Crepon & Emmanuel Duguet & Jacques Mairesse, 1998. "Research, Innovation And Productivity: An Econometric Analysis At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 7(2), pages 115-158.
    12. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
    13. Areti Gkypali & Apostolos Rafailidis & Kostas Tsekouras, 2015. "Innovation and export performance: do young and mature innovative firms differ?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 397-415, December.
    14. Nguyen, Ngoc Anh & Pham, Quang Ngoc & Nguyen, Dinh Chuc & Nguyen, Duc Nhat, 2007. "Innovation and Export of Vietnam’s SME Sector," MPRA Paper 3256, University Library of Munich, Germany.
    15. Rachel Griffith & Elena Huergo & Jacques Mairesse & Bettina Peters, 2006. "Innovation and Productivity Across Four European Countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(4), pages 483-498, Winter.
    16. Danny Leung, 2004. "The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data," International Productivity Monitor, Centre for the Study of Living Standards, vol. 9, pages 52-61, Fall.
    17. Hee‐Jae Cho & Vladimir Pucik, 2005. "Relationship between innovativeness, quality, growth, profitability, and market value," Strategic Management Journal, Wiley Blackwell, vol. 26(6), pages 555-575, June.
    18. Pierre Mohnen & Bronwyn Hall, 2013. "Innovation and Productivity: An Update," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 47-65, June.
    19. Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
    20. Anh Ngoc Nguyen & Ngoc Quang Pham & Chuc Dinh Nguyen & Nhat Duc Nguyen, 2008. "Innovation and exports in Vietnam's SME sector," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(2), pages 262-280.
    21. Huong Vu & Tuyen Quang Tran & Tuan Nguyen & Steven Lim, 2018. "Corruption, Types of Corruption and Firm Financial Performance: New Evidence from a Transitional Economy," Journal of Business Ethics, Springer, vol. 148(4), pages 847-858, April.
    22. Ada Leiponen, 2000. "Competencies, Innovation And Profitability Of Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(1), pages 1-24.
    23. Albert G. Z. Hu & Gary H. Jefferson & Qian Jinchang, 2005. "R&D and Technology Transfer: Firm-Level Evidence from Chinese Industry," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 780-786, November.
    24. Ana M. Fernandes & Caroline Paunov, 2015. "The Risks of Innovation: Are Innovating Firms Less Likely to Die?," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 638-653, July.
    25. Bisbe, Josep & Otley, David, 2004. "The effects of the interactive use of management control systems on product innovation," Accounting, Organizations and Society, Elsevier, vol. 29(8), pages 709-737, November.
    26. Jose Miguel Benavente, 2006. "The role of research and innovation in promoting productivity in chile," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 301-315.
    27. Crepon, B. & Duguet, E. & Mairesse, J., 1998. "Research Investment, Innovation and Productivity: An Econometric Analysis at the Firm Level," Papiers d'Economie Mathématique et Applications 98.15, Université Panthéon-Sorbonne (Paris 1).
    28. Hans Loof & Almas Heshmati, 2006. "On the relationship between innovation and performance: A sensitivity analysis," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(4-5), pages 317-344.
    29. Rasa Subačienė & Lehte Alver & Inta Brūna & Mirjana Hladika & Daša Mokošová & Jan Molín, 2018. "Evaluation of accounting regulation evolution in selected countries," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(1), pages 139-175, September.
    30. Frank Crowley & Philip McCann, 2018. "Firm innovation and productivity in Europe: evidence from innovation-driven and transition-driven economies," Applied Economics, Taylor & Francis Journals, vol. 50(11), pages 1203-1221, March.
    31. Sue Birley & Paul Westhead, 1990. "Growth and performance contrasts between ‘types’ of small firms," Strategic Management Journal, Wiley Blackwell, vol. 11(7), pages 535-557, November.
    32. Johan Hombert & Adrien Matray, 2018. "Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?," Journal of Finance, American Finance Association, vol. 73(5), pages 2003-2039, October.
    33. Judita Narkunienė & Aurelija Ulbinaitė, 2018. "Comparative analysis of company performance evaluation methods," Post-Print hal-02121048, HAL.
    34. Herriott, Scott R & Levinthal, Daniel & March, James G, 1985. "Learning from Experience in Organizations," American Economic Review, American Economic Association, vol. 75(2), pages 298-302, May.
    35. Fisman, Raymond & Svensson, Jakob, 2007. "Are corruption and taxation really harmful to growth? Firm level evidence," Journal of Development Economics, Elsevier, vol. 83(1), pages 63-75, May.
    36. Yannis Hatzikian, 2015. "Exploring the Link between Innovation and Firm Performance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 749-768, December.
    37. Andrea Bellucci & Ilario Favaretto & Germana Giombini, 2014. "Does Innovation Affect Credit Access? New Empirical Evidence from Italian Small Business Lending," IAW Discussion Papers 104, Institut für Angewandte Wirtschaftsforschung (IAW).
    38. Rasa Subačienė & Lehte Alver & Inta Brūna & Mirjana Hladika & Daša Mokošová & Jan Molín, 2018. "Evaluation of accounting regulation evolution in selected countries," Post-Print hal-02121121, HAL.
    39. Donna Marie DeCarolis & David L. Deeds, 1999. "The impact of stocks and flows of organizational knowledge on firm performance: an empirical investigation of the biotechnology industry," Strategic Management Journal, Wiley Blackwell, vol. 20(10), pages 953-968, October.
    40. Patrick A.M. Vermeulen & Jeroen P.J. De Jong & K.C. O'shaughnessy, 2005. "Identifying key determinants for new product introductions and firm performance in small service firms," The Service Industries Journal, Taylor & Francis Journals, vol. 25(5), pages 625-640, July.
    41. GUAN, Jian Cheng & YAM, Richard C.M. & Tang, Esther P.Y. & Lau, Antonio K.W., 2009. "Innovation strategy and performance during economic transition: Evidences in Beijing, China," Research Policy, Elsevier, vol. 38(5), pages 802-812, June.
    42. Morris, Diego M., 2018. "Innovation and productivity among heterogeneous firms," Research Policy, Elsevier, vol. 47(10), pages 1918-1932.
    43. Elena Cefis & Matteo Ciccarelli, 2005. "Profit differentials and innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(1-2), pages 43-61.
    44. Amadou Boly, 2018. "On the Short- and Medium-Term Effects of Formalisation: Panel Evidence from Vietnam," Journal of Development Studies, Taylor & Francis Journals, vol. 54(4), pages 641-656, April.
    45. Marco Stampini & Benjamin Davis, 2009. "Does nonagricultural labor relax farmers’ credit constraints? Evidence from longitudinal data for Vietnam," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 177-188, March.
    46. Re-Jin Guo & Baruch Lev & Charles Shi, 2006. "Explaining the Short- and Long-Term IPO Anomalies in the US by R&D," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(3-4), pages 550-579.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ran Ma & Xiaodan Kong & Mianqing Wang & Xiangde Kong, 2023. "The Impact of Utility Model Patent Quality on Export Performance in China: A Moderated Mediation Effect Model," Sustainability, MDPI, vol. 15(10), pages 1-18, May.
    2. Zhao, Yueyang & Mao, Jinzhou, 2023. "Mixed blessing: Mixed ownership reform and innovation behaviour of Chinese state-owned enterprises," Finance Research Letters, Elsevier, vol. 56(C).
    3. Bojan Morić Milovanović & Mirjana Grčić Fabić & Vjekoslav Bratić, 2023. "Strategic Approach to Configurational Analysis of Entrepreneurial Orientation, Strategic Networking, and SME Performance within Emerging Markets of Selected Southeast European Countries," Administrative Sciences, MDPI, vol. 13(2), pages 1-19, February.
    4. Do Vu Phuong Anh & Mai Thanh Lan & Bui Quang Tuyen & Ta Huy Hung, 2024. "Does leadership personality affect business risks? New evidence from Vietnamese small and medium-sized enterprises," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-27, May.
    5. Cuong, Ly Kim & Hau, Hoang Tran, 2021. "Does innovation promote access to informal loans? Evidence from a transitional economy," Finance Research Letters, Elsevier, vol. 40(C).
    6. Daniel Amente KENEA, 2020. "The Role Of Innovation Strategy In Improving Organizational Performance And Productivity: Focus On Heineken Beverage Industry, Ethiopia," Annals of the University of Craiova for Journalism, Communication and Management, Department of Communication, Journalism and Education Sciences, University of Craiova, vol. 6(1), pages 31-56, December.
    7. Khleef A. Alkhawaldeh, 2021. "The Impact of Innovation on Profitability of Jordanian Services Companies," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(1), pages 1-92, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Morris, Diego M., 2018. "Innovation and productivity among heterogeneous firms," Research Policy, Elsevier, vol. 47(10), pages 1918-1932.
    2. Fedyunina, Anna & Radosevic, Slavo, 2022. "The relationship between R&D, innovation and productivity in emerging economies: CDM model and alternatives," Economic Systems, Elsevier, vol. 46(3).
    3. Wadho, Waqar & Chaudhry, Azam, 2022. "Innovation strategies and productivity growth in developing countries: Firm-level evidence from Pakistani manufacturers," Journal of Asian Economics, Elsevier, vol. 81(C).
    4. Edeh, Jude N. & Acedo, Francisco J., 2021. "External supports, innovation efforts and productivity: Estimation of a CDM model for small firms in developing countries," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    5. Adel Ben Khalifa, 2023. "Impact of research and development (R&D) and information, and communication technology (ICT) on innovation and productivity evidence from Tunisian manufacturing firms," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 341-361, April.
    6. Crespi, Gustavo & Zuniga, Pluvia, 2012. "Innovation and Productivity: Evidence from Six Latin American Countries," World Development, Elsevier, vol. 40(2), pages 273-290.
    7. Busom, Isabel & Vélez-Ospina, Jorge Andrés, 2017. "Innovation, Public Support, and Productivity in Colombia. A Cross-industry Comparison," World Development, Elsevier, vol. 99(C), pages 75-94.
    8. Wadho, Waqar & Chaudhry, Azam, 2020. "Innovation Strategies and Productivity Growth in Developing Countries: Evidence from Pakistan," GLO Discussion Paper Series 466, Global Labor Organization (GLO).
    9. Max Nathan & Anna Rosso, 2017. "Innovative events," Development Working Papers 429, Centro Studi Luca d'Agliano, University of Milano, revised 08 Apr 2019.
    10. Pierre Mohnen & Bronwyn Hall, 2013. "Innovation and Productivity: An Update," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 3(1), pages 47-65, June.
    11. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2010. "Innovation and Economic Development," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 833-872, Elsevier.
    12. Hoang, Ngoc & Nahm, Daehoon & Dobbie, Michael, 2021. "Innovation, gender, and labour productivity: Small and medium enterprises in Vietnam," World Development, Elsevier, vol. 146(C).
    13. Esther Goya & Esther Vayá & Jordi Suriñach, 2012. "“Do intra- and inter-industry spillovers matter? CDM model estimates for Spain”," AQR Working Papers 201207, University of Barcelona, Regional Quantitative Analysis Group, revised Sep 2012.
    14. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1129-1155, Elsevier.
    15. Huang C. & Wu Y. & Mohnen P. & Zhao Y., 2013. "Government support, innovation and productivity in the Haidian (Beijing) District," MERIT Working Papers 2013-058, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Howell, Anthony, 2018. "Innovation and Firm Performance in the People’s Republic of China: A Structural Approach with Spillovers," ADBI Working Papers 805, Asian Development Bank Institute.
    17. Ugur, Mehmet & Vivarelli, Marco, 2020. "The role of innovation in industrial dynamics and productivity growth: a survey of the literature," MERIT Working Papers 2020-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    18. Beneito, Pilar & Rochina-Barrachina, María Engracia & Sanchis, Amparo, 2014. "Learning through experience in Research & Development: An empirical analysis with Spanish firms," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 290-305.
    19. Mehmet Ugur & Marco Vivarelli, 2021. "Innovation, firm survival and productivity: the state of the art," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 30(5), pages 433-467, July.
    20. Son Thi Kim Le, 2019. "Innovation efforts in developing countries: The case of Vietnamese small and medium-sized enterprises," WIDER Working Paper Series wp-2019-7, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:3417-3436. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rero .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.