The Role of The Formalization Process on The Product Innovation Results of Small and Medium-sized Private Enterprises in Vietnam

Abstract

This study assesses the role of formalized business in the innovation activities of small and medium-sized enterprises (SMEs) in the private sector in Vietnam. Panel data regression analysis is employed in this study. Research data were extracted from three surveys of small and medium private enterprises conducted by the United Nations University (UNU) in 2011, 2013 and 2015. The dataset contains information about enterprises in all major manufacturing sectors, on innovation activity, firm formalization status, and enterprises’ characteristics. Research results show that improving the status of the firm from informal to formal has a significant boost to the overall innovation performance, as well as each type of innovation of small and medium enterprises in Vietnam. This is the first study in Vietnam that examines the impact of formalization on product innovation outcomes of small and medium-sized private enterprises, taking into account the characteristics of enterprises such as size, age, technology level, and other specific features.