Innovation and firm performance: Is R&D worth it? An empirical case of Vietnam enterprises

Abstract

This study aims to analyze the impact of R&D and product innovation on firm performance in Vietnam using a sample of 397 firms. The resource-based view is used as the underlying theory the research model. The statistics show that the Vietnamese firms on average extract 5.82% of total revenue to spend on R&D activities. In addition, there are approximately 32% of the Vietnamese firms in the sample has improved or upgraded products as well as developed new services during the last 3 years. This result has implied that the investment in R&D and the activities on product innovation in Vietnam have been at a relatively modest level. Besides, the regression results showed that product innovation positively affects Vietnamese firms' performance in terms of profitable accounting measures. This result implies that launching new products or improving existing products could be the "fuel" for the growth engine of firms and thus could improve the performance for the Vietnamese firms. Also, R&D was found to have a positive impact on firm performance in the Vietnam context. Hence, it could be said that investing in R&D is necessary to improve firm performance in an emerging market like Vietnam. R&D could be a means to help firms create competitive advantages and increase their profits. Moreover, R&D could also be the premise of innovation activities for firms. These results indicated that the resource-based view theory is empirically supported in the Vietnamese context. As a result, this study's evidence calls for the consideration of R&D investment and product innovation to improve the firm performance in this market. Furthermore, the statistical evidence in this study shows that export intensity has positively influenced on firm performance in the Vietnamese market.