139 The impacts of technological innovation and institutional quality on the productivity of Vietnamese manufacturing firms

Abstract

This research aims to assess the pivotal role of total factor productivity (TFP) in shaping the performance of manufacturing enterprises in Vietnam. It systematically examines the influence of technological innovation and the quality of economic institutions on the TFP of these firms. Employing robust methodologies such as control function (CF) and feasible generalized least squares regression (FGLS) models, a comprehensive panel dataset of Vietnamese manufacturing companies is meticulously scrutinized. The data, meticulously sourced from the General Statistics Office of Vietnam and the Vietnam Chamber of Commerce and Industry, spans the five-year period from 2015 to 2019. The findings of this study elucidate several key insights. First, it reveals that the manufacturing landscape in Vietnam is predominantly characterized by labor-intensive operations, with an apparent trend toward increasing returns to scale. Furthermore, the study underscores that TFP's contribution to manufacturing output remains relatively modest, averaging at 1.933 over the period from 2015 to 2019. Additionally, it identifies a concerning decline in the average TFP score, along with a widening gap between firms, which tends to exacerbate during the study period. Finally, the research establishes a positive correlation between investments in production technology and the quality of economic governance within provincial governments in Vietnam, both of which significantly bolster the TFP of manufacturing firms.