Relations between Innovation and Firm Performance of Manufacturing Firms in Southeast Asian Emerging Markets: Empirical Evidence from Indonesia, Malaysia, and Vietnam

Kyunga Na,Young-Hee Kang

doi:10.3390/joitmc5040098

Abstract

This study aims to investigate the effects of product and process innovations on manufacturing firm performance in Southeast Asian emerging markets. To this end, using a cross-national sample of 2324 manufacturing firms from the World Bank Enterprise Survey (WBES) dataset of 2015, we test the effects of product and process innovations on the sales growth of manufacturing firms in Vietnam, Malaysia, and Indonesia. This study finds that product innovation is positively related to sales growth while new operating technologies are negatively associated with sales growth. For high-tech firms, product innovation is positively related to sales growth. The findings imply that in Southeast Asian emerging markets, governments and manufacturing firms can enhance performance by investing in product innovation.

Highlights

Innovation has been regarded as an essential element for a nation’s economic growth, as well as a firm’s competitiveness [1]
The main results suggested that product innovation such as the introduction of new products can increase the firm performance, while the firm performance may suffer after adopting new or significantly improved methods
The positive effects of product innovation on firm performance only appeared in the high-tech industry, while the negative impacts of process innovation were more prominent in the medium- and the low-tech industries

Summary

Introduction

Innovation has been regarded as an essential element for a nation’s economic growth, as well as a firm’s competitiveness [1]. Innovation has become extremely relevant for firm sustainability in the current global markets, where knowledge based competition is becoming more apparent. Research on firm innovation in emerging markets has placed weight on determinants of firm innovation such as R&D activities [2,3,4,5] and top managers’ characteristics [6,7]. These research streams have left the innovation activities in emerging markets relatively unknown. There is a lack of literature on firms’ innovation activities in the Asian emerging markets. Except for China and India [11,12,13], there is a lack of literature on the effectiveness of firms’ innovation activities in the Asian emerging markets

Objectives

Results

Discussion

Conclusion