Unveiling the Nexus: Foreign Ownership, Innovation Dynamics, and Firm Performance through a Resource-Based Lens in Vietnam

Abstract

This study investigates the complex relationships between firm resources, innovation, foreign ownership, and firm performance in the context of Vietnam's emerging market. Using a comprehensive dataset of 17,430 firm-year observations from 1,245 manufacturing firms across Vietnam for the period 2010 to 2023, we employ system GMM estimation to address potential endogeneity concerns. Our findings reveal non-linear effects of firm resources and foreign ownership on performance, measured by both ROA and Tobin's Q. Specifically, we observe inverted U-shape relationships for human capital and foreign ownership, diminishing returns for physical capital, and a positive squared term for R&D intensity. Moreover, we find that foreign ownership positively moderates the effects of firm resources on performance. These results are robust to alternative measures and subgroup analyses. Our study contributes to the literature by providing a nuanced understanding of firm performance drivers in Vietnam's unique institutional context, extending the applicability of resource-based and knowledge-based views to this emerging market. The findings offer valuable insights for managers and policymakers in Vietnam, highlighting the importance of balanced resource allocation, strategic innovation investments, and the potential benefits of foreign ownership in enhancing firm performance.