Corporate innovation efficiency in Southeast Asian countries
- University of Economics and Law, VNUHCM, Viet Nam
- University of Economics and Law, Vietnam National University - Ho Chi Minh City
Abstract
This study aims to examine how innovative activities influence corporate innovation efficiency in selected Southeast Asian countries, including Vietnam, Laos, Cambodia, Malaysia, Indonesia, and Thailand. The data were collected from the World Bank, and Tobit regression was used. The research results show that product or service innovation activity and process innovation activity have a positive impact on the innovation efficiency of firms. Moreover, the research finds a difference in the effect of innovative activities on corporate innovation efficiency in country-income groups. The paper is of great significance in the current period because countries in Southeast Asia are encouraging businesses to increase innovation to improve their integration and competitiveness.
Introduction
Innovation activities play an important role in the development of enterprises1. The importance of innovation activity to negative changes in the business environment and the function of innovation is to increase competitiveness toward the goal of increasing the efficiency of the business 2. Most studies of the literature on innovation focus on the impact of innovative activities on firm performance3, 4, 5, 6. However, there are limited studies exploring corporate innovation efficiency7, 8, 9.
Innovation activities affect corporate innovation efficiency in the following ways. First, businesses want to survive when the market is increasingly competitive, so innovative activities of products and services will have a positive impact on the efficiency of enterprises. He & Wong (2004)8 demonstrated the positive impact of product innovation on corporate innovation performance. Fosfuri & Tribó (2008)7 also said that the innovation activities of products and services have a positive impact on the innovation efficiency of enterprises. Second, marketing innovation helps increase the ability to reach potential customers and expand markets, contributing to improving business efficiency. Johne & Davies (2000)10 argued that marketing innovation is the key driver of business decisions to increase revenue and improve operational efficiency. Gunday et al. (2011)4 stated that marketing innovation has an impact on the competitiveness of enterprises. Chen (2006)11 showed that marketing innovation is proven to have a positive impact on firm performance. Third, enterprises improve their production or distribution processes, and they will help businesses improve their competitiveness, thereby improving their operational efficiency. Peters (2008)12 asserted that not all process innovation activities are cost-effective, but they will provide businesses with a way to market their products at competitive prices, contributing to increasing business efficiency. Savitz et al. (2000)13 found that process innovation has a positive impact on the development and increase of business value. Schmidt & Rammer (2007)14 argued that process innovation has a positive impact on corporate performance. Finally, organizational innovative activity helps enterprises increase their governance capacity, which has the effect of increasing the efficiency of the business. Organizational innovation will help businesses have more solutions to develop markets and increase business performance (Samuelides, 2001)15. Camisón & Villar-López (2014)16 found that organizational innovation activities increase the competitive advantage of enterprises.
The motivations for choosing Southeast Asia are as follows. Southeastern Asia is one of the most dynamic regions in the world and is in a period of intense innovation to enter the international market. Moreover, the innovation efficiency of domestic enterprises in low-middle-income countries is still very low, mainly depending on foreign enterprises. In contrast, countries belonging to the group of middle-high-income countries have very high innovation efficiency of domestic firms (OECD, 2013)17. Hence, an important question that naturally arises is whether the impact of innovation activity on corporate innovation efficiency varies by income across country groups.
In this paper, we examine how innovative activities influence corporate innovation efficiency. To conduct our study, we use data on 889 firms in 06 countries, including Vietnam, Laos, Cambodia, Thailand, Indonesia, and Malaysia, that implemented innovative activities collected by the World Bank. We find that product or service innovative activity and process innovative activity have a positive impact on corporate innovation efficiency. On the other hand, the study confirms that there are differences in the impact of innovative activities on corporate innovation efficiency by country income group. The results are robust for the Tobit regression method with robustness selection.
Our study contributes to the literature on corporate innovation efficiency. First, the research provides a new approach to determine whether there are differences in the impact of innovation activity on corporate innovation efficiency by income group across countries. Previous studies have focused on assessing the impact of innovative activities on corporate innovation efficiency at the national level 7, 8, 9. Second, the study is of great significance in the current period because countries in Southeast Asia are encouraging businesses to increase innovation to improve their integration and competitiveness.
Section 1 is the introduction, and the study is structured into 3 parts: (i) Section 2 presents the data and empirical design, (ii) Section 3 presents the main empirical analyses, and (iii) Section 4 presents the conclusions.
Data and empirical design
Sample selection
The data of the study are extracted from the World Bank survey of businesses in Southeast Asia by the World Bank, including Vietnam (2015), Cambodia (2016), Indonesia (2015), Laos (2016), Malaysia (2015), and Thailand (2016). Out of a total of 5,243 enterprises surveyed, we use data from 899 firms that engaged in innovation activities18.
Empirical design
Following Minh (2020)9, we consider the following model:
where i indexes the firm; α is the intercept coefficient; β and ℷ are the regression coefficients of the independent variables; and µ is the standard error. is the dependent variable that measures corporate innovation efficiency. Following previous research 9, 19, 8, we measure innovation performance to equal the percentage of sales due to new products or services on total revenue.
The independent variables of interest are product or service innovation activity (), marketing innovation activity (), process innovation activity (, and organizational innovation activity (OrgaInno), following Minh (2020)9. These variables take the value of one if the firm has implemented innovative activities and 0 otherwise. To control variations in a firm’s characteristics, we include the ratio of export revenue to total revenue (), the natural logarithm of the total number of employees (), and the number of years from the year of establishment to the present of the enterprise (), following Minh (2020)9.
For cross-sectional data, there are many analytical methods used, but for data of dependent variables with values from 0 to 1, the Tobit regression analysis method is the most suitable20. To limit the assumptions of the Tobit regression model, we use the robustness estimation method to find the optimal estimators by ignoring the limitations.
Summary statistics
Variable |
Observations |
Mean |
Median |
Minimum |
Maximum |
InnoPerf |
899 |
0.296 |
0.303 |
0 |
1 |
ProdInno |
899 |
0.508 |
0.500 |
0 |
1 |
MarInno |
899 |
0.502 |
0.500 |
0 |
1 |
ProInno |
899 |
0.553 |
0.497 |
0 |
1 |
OrgaInno |
899 |
0.586 |
0.492 |
0 |
1 |
Export |
899 |
14.468 |
28.735 |
0 |
100 |
Size |
899 |
218,832 |
702,093 |
2 |
9,000 |
Age |
899 |
18.14 |
10.777 |
1 |
93 |
Correlation Coefficients Matrix
According to the results of
Correlation Matrix
Variable |
InnoPerf |
ProdInno |
MarInno |
ProInno |
OrgaInno |
Export |
Size |
Age |
InnoPerf |
1.000 | |||||||
ProdInno |
0.323*** |
1.000 | ||||||
MarInno |
0.081** |
0.045 |
1.000 | |||||
ProInno |
0.105*** |
0.048 |
0.199*** |
1.000 | ||||
OrgaInno |
0.063* |
-0.026 |
0.325*** |
0.413*** |
1.000 | |||
Export |
0.042 |
0.021 |
0.055* |
0.089*** |
0.082** |
1.000 | ||
Size |
0.179*** |
0.262*** |
0.088*** |
0.144*** |
0.066** |
0.274*** |
1.000 | |
Age |
-0.026 |
0.074** |
0.100*** |
0.121*** |
0.093*** |
0.111*** |
0.358*** |
1.000 |
Main empirical analyses
The analysis results in
The
In contrast, the study shows that the coefficients for and are not significant at the 10% level, implying that we do not find a relationship between corporate innovative efficiency and marketing innovation activity and organizational innovation activity. The results of this study are in contrast to the results of Johne & Davies (2000)10, Gunday et al. (2011)4, and Minh (2020)9. They are explained by the characteristics of enterprises in Southeast Asian countries where SMEs are located in these countries, organizational innovation and marketing innovation are often carried out by SMEs because they do not have to cost many initial investment costs in line with enterprise resources (Ramirez et al., 2018)23. However, organizational innovation and marketing innovation are considered to be less effective than product and service innovation and process innovation. These results do not show a clear impact of these two types of innovation on the innovation performance of firms.
Tobit regression
Variable |
InnoPerf | ||||
ProdInno |
0.178*** (8.93) |
- |
- |
- |
0.178*** (8.92) |
MarInno |
- |
0.044** (2.24) |
- |
- |
0.026 (1.39) |
ProInno |
- |
- |
0.054*** (2.69) |
- |
0.038* (1.90) |
OrgaInno |
- |
- |
- |
0,036* (1.86) |
0,019 (0.96) |
Export |
0.0001 (0.29) |
-0.00008 (-0.21) |
-0.0001 (-0.28) |
-0.0001 (-0.25) |
0,0003 (0.1) |
Size |
0.023*** (3.98) |
0.037*** (6.28) |
0.036*** (6.06) |
0.038*** (6.41) |
0.022*** (3.67) |
Age |
-0.002*** (-2.76) |
-0.003*** (-3.12) |
-0.003*** (-3.08) |
-0.003*** (-3.05) |
-0.003*** (-3.10) |
Constant |
0.186*** (8.50) |
0.223*** (9.71) |
0.219*** (9.76) |
0.222*** (9.67) |
0.151*** (6.22) |
Obs. |
899 |
899 |
899 |
899 |
899 |
Log likelihood |
-143.682 |
-180.706 |
-179.562 |
-181.566 |
-138.335 |
The analysis results in
Comparison of the impact of innovative activities on corporate innovation efficiency by country income group
Variable |
InnoPerf | |
Upper Middle-income |
Low Middle-income | |
ProdInno |
0.067** (2.19) |
0.228*** (8.88) |
MarInno |
-0.039 (-1.00) |
0.073*** (3.12) |
ProInno |
-0.028 (-0.72) |
0.076*** (3.27) |
OrgaInno |
0.0809* (1.75) |
0.076*** (3.27) |
Export |
0.0006 (0.93) |
0.0001 (0.04) |
Size |
-0.013 (-1.13) |
0.037*** (3.47) |
Age |
-0.002* (-1.79) |
-0.002** (-2.00) |
Constant |
0.426*** (9.03) |
0.018 (0.47) |
Observations |
305 |
594 |
Log likelihood |
-12.960 |
-94.895 |
Conclusion
The paper examines how innovative activities influence corporate innovation efficiency in Southeast Asia. We use data on 889 firms in 06 countries, including Vietnam, Laos, Cambodia, Thailand, Indonesia, and Malaysia, that implemented innovation activities collected by World Bank surveys. The results show that product or service innovation activity and process innovation activity have a positive impact on corporate innovation efficiency in Southeast Asia. Moreover, there are differences in the impact of innovative activities on corporate innovation efficiency between low-middle-income and high-middle-income countries.
The study results imply that to enhance innovation efficiency, businesses in Southeast Asia should consider investing in product or service innovation because it brings many innovation effects. However, product or service innovative activity requires many costs, so businesses can consider investing in innovation in stages to reduce capital pressure. Governments should consider policies to support businesses in innovative activities to enhance competitiveness and improve business efficiency in the context of increasing international integration.
Competing Interests
The authors declare that they have no competing interests.
Authors' Contributions
All authors significantly contributed to this work, and approved the final version for publication.
Acknowledgments
None.