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The effect of competition on innovation and productivity in Vietnamese SMEs sector

By Phan Nguyen Trung Nhan (VNP 24)

Supervisor: Dr. Nguyen Trong Hoai

Abstract:

The reform programs of Vietnam have turned Vietnam from a completely closed economy to a market economy, which leads to strong and sustained growth as well as reduces the poverty rate in the country in the past two decades. Besides that, in the globalization context, the open economy also helps Vietnam attract more attention and interest from the international area. These changes have increased competition in the Vietnamese economy, especially for the SME sector since it is accounting for the majority in this country. Therefore, this paper examines the effect of competition on the determinant of growth, namely productivity and innovation, in this sector. By using the database of over 2,500 small and medium firms in Vietnam for the year 2013 – 2015, though they are less statistically significant, the evidence shows that competition has a positive effect on these two concepts in the Vietnamese SME sector. Furthermore, the intense competition also has an indirect effect which raises productivity via innovation.

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