Knowledge spillover, sectoral innovation and firm total factor productivity: The case of manufacturing industries in Vietnam

Abstract

This study developed the framework of knowledge spillovers at sector level and investigated these spillover effects of research and development (R&D), foreign direct investment (FDI) and trade activities on sectoral innovation by Spatial Regression Models. Besides, the study examined the spillover effects of sectoral innovation and provincial human resources on firms’ TFP with 7,236 enterprises in 38 sectors of Vietnamese manufacturing industries, located in 62 provinces by CrossClassified Models. By Spatial Regression Models with 38 manufacturing sectors in correspondence to Input/Output table from 2010 to 2014, the intra-industry rather than inter-industry spillover effects was found to be significant; that approved the hypothesis of Marshall rather than Jacob’s externalities. In particular, only R&D and export activities were found to have significantly positive effects on innovation activities at the sector level. In contrast, FDI and import activities seem to have a negative impact on innovation activities. In cross-classified models, firms’ characteristics in comparison with characteristics of sectors and provinces may have the highest explanation on the heterogeneity in firms’ TFP. The firm size, capital intensive and export orientation were found to have stably significantly positive effects on firms’ TFP. The sectoral innovation might turn to have positive impacts on the productivity of firms in that sector after one year. Besides, the externalities of human resources in provinces on firms’ productivity were found to be positive.