Năng lực cạnh tranh và công nghệ ở cấp độ doanh nghiệp tại Việt Nam - Kết quả điều tra năm 2013

constant term not reported. Robust standard errors in parentheses, *** p<0.01, ** p<0.05. 88 5. Forward Linkages: Technology Transfer from Suppliers Forward linkages refer to technology spillovers that occur between domestic customers of intermediate inputs and foreign firms (either local FDI firms or international suppliers of these inputs). In contrast to backward linkages this type of spillover refers to benefits to the down- stream sector. As backward and forward linkages together represent vertical spillovers, the same avenues through which backward linkages occur also apply to forward linkages, such as direct technology transfer between customers and suppliers and incentives for sharing production pro- cesses and technologies with other parts of the supply chain. In this case a relevant example is access to high quality inputs to a domestic firm’s production process. Limited empirical research has focused on the role of forward linkages, with emphasis concentrated on horizontal or back- ward spillovers. However, distinguishing between types of vertical spillovers, Dritfield et al (2002) found a positive effect for spillovers from forward linkages. Figure 5.1(a) documents where domestic firms source their intermediate inputs. 12% of firms buy from both domestic and foreign suppliers, 83% only from domestic suppliers and 5% pur- chase their intermediate inputs from foreign suppliers only. Figure 5.1(b) documents the source of raw materials for domestic firms. A similar pattern is observed, with 16% buying from foreign and domestic suppliers, 78.5% domestic only and 5.5% from only from foreign suppliers. Firms across all size categories rely on domestic inputs.3The localized nature of domes- tic firms operations is again noted, with the majority of inputs originating from the same, or a closely located province to where the firm operates. This suggests that where forward linkages are observed, they are more likely to be generated by domestic firms, or foreign firms based in Vietnam, than through contacts with international suppliers. Looking specifically at international suppliers, we see that the average share of inputs from overseas is positively related to firm size. Figure 5.1 (a): Source of Intermediate Inputs 3. The columns are the average share of inputs from each source reported by size category, so need not sum to 100% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% Same Prov. Neigh. Prov. Other Prov. International N=7,141Mi cro (1 -99 ) Sm all (1 0-4 9) Me diu m (50 -29 9) La rge (3 00 +) 89 Figure 5.2 (b): Source of Raw Material Inputs To examine the interactions between domestic and international firms, Figure 5.3 shows the country reported by firms as the most important source of inputs, for both raw materials and intermediate goods. China is listed as the most important source country accounting for approxi- mately 26% of the total sample (1,260). Given China’s designation as a cheap source of inputs this is not surprising. However, we also observe firms importing from high cost countries such as the US and Japan. It appears that firms follow one of two pathways, either importation of high quality intermediate inputs that can be transformed into a final product with relatively cheap labor or the traditional importing of cheap inputs for processing and export to high value added markets. This is most likely decided upon based on the final good to be produced by the firm. Figure 5.3: Most Important Country for Imported Inputs N = 6,933 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Mi cro (1 -99 ) Sm all (1 0-4 9) Me diu m (50 -29 9) La rge (3 00 +) Same Prov. Neigh. Prov. Other Prov. International 26.4% 17.1% 12.6% 12.2% 5.4% 3.4% 3.4% 3.3% 2.3% 2.0% 11.8% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% N=1,260 Ch ina Ta iw an So uth K ore a Jap an Th ail an d Sin ga po re US A Ma lay sia Ho ng ko ng Ind ia Ot he r 90 Contract duration may be correlated with the presence of forward linkages. In this instance it indicates the strength of the relationship between Vietnamese customers and their suppliers, both domestic and international. One would expect that a stronger relationship with a long-term contract would provide more opportunity for unintentional spillovers or allow customers to de- velop bargaining power over/mutual agreement with their suppliers which could lead to contrac- tual/intentional spillovers. Figure 5.4 shows that larger firms and those firms with total or part foreign ownership receive longer contracts, on average. Again, it is possible that these firms have more advanced technologies and processes or are perceived to be more trustworthy/reliable due to their connec- tions with foreign companies. Additionally, larger firms may be exploiting economies of scale due to their size, making their inputs more competitive. However, it is important to note that the average contract duration is less than one year, regardless of firm type or size. This is in line with the domestic supplier contracts detailed in Section 4. The overall picture of the supply chain relationships we can glean from the TCS data is one of relatively short-term production arrange- ments. This therefore makes technology transfer less likely. The characteristics of those firms who import their intermediate inputs is examined through regression analysis. It is possible that importers may create positive externalities for both other importers and other related firms, in a similar way that exporters are supposed to generate posi- tive spillovers. Table 5.1 presents the results. The results are similar to those for exporters. Larger firms are significantly more likely to import intermediate inputs, even though they only minority of firms in the sample. Negative coefficients are observed on all legal structures. As these are interpreted relative to a base category of a FDI firm, it appears that, where forward linkages ex- ist, these would accrue to foreign firms, rather than domestic. However, this does not consider long-run ramifications whereby the positive benefits of these spillovers may then lead to positive benefits for domestic firms via horizontal spillovers. Figure 5.4: Average Contract Duration with Suppliers (Months) 0 1 2 3 4 5 6 7 8 9 Domestic International N(Dom.)=7,648 N(Int'l)=2,112 Joi nt Ve ntu re (SO E+ for eig n) Mi cro (1 -9) Sm all (1 0-4 9) Me diu m (50 -29 9) La rge (3 00 +) Co lle cti ve Pri va te Pri va te lim ite d Joi nt sto ck , st ate Fo rei gn (1 00 %) Joi nt ve ntu re (no n-s tat e & ... To tal 91 An insight into the characteristics of firms likely to experience positive spillovers from forward linkages is in itself of limited usefulness. To discern whether they represent a viable means to improve and promote technology transfer among firms, the prevalence of these linkag- es among firms must be examined. It is also important to distinguish between positive spillovers resulting from domestic and international firms, to their domestic customers. These factors have important implications for industrial policy, as already discussed in previous sections. Figure 5.5 below looks at the proportion of firms in our sample who stated that they received a technology transfer from a supplier. Of the 2,112 firms with international suppliers that re- sponded, over 14% reported some kind of positive spillover through a forward linkage; the figure decreases to under 9%for firms buying inputs from domestic suppliers (7,648 observations). In contrast to backward linkages, it appears that forward linkages are more likely to arise through contact with international firms. Of those firms that do experience some kind of technology transfer from suppliers, Figure 5.6 shows that the majority of these transfers are formally agreed in contracts. No major distinction exists between the type of agreement and whether it is made with a domestic or international supplier. Table 5.1: Importers of Intermediate Inputs, Regression Analysis Dependent variable: Total constraints (1) (2) (3) coef se coef se coef se Micro (1-9) -0.05*** (0.02) -0.05*** (0.03) -0.05*** (0.03) Medium (50-299) 0.10*** (0.01) 0.09*** (0.01) 0.09*** (0.02) Large (300+) 0.19*** (0.02) 0.18*** (0.02) 0.17*** (0.02) Joint, with State -0.09*** (0.01) -0.08*** (0.01) -0.06*** (0.01) Private -0.16*** (0.01) -0.16*** (0.01) -0.13*** (0.01) Private Limited -0.20*** (0.01) -0.19*** (0.02) -0.16*** (0.02) Joint Stock, no State -0.14*** (0.01) -0.13*** (0.01) -0.11*** (0.01) Joint Venture (SOE and Foreign) -0.01 (0.03) -0.00 (0.03) -0.02 (0.03) Joint Venture (Non-state and Foreign) -0.03 (0.02) -0.03 (0.02) -0.01 (0.02) Observations 7,293 7,235 7,234 Region Effect N Y Y Sector Effect N N Y Pseudo R-squared 0.22 0.22 0.25 - cients on constant term not reported. Robust standard errors in parentheses, *** p<0.01, ** p<0.05. 92 Figure 5.5: Technology Transfer from Suppliers Figure 5.6: Intentionality of Tech. Transfer from Suppliers A very small minority of 1% in the domestic case and 3.3% in the international case re- sponded that the transfer was unintentional and was not mutually agreed in a contract (samples were 684 firms for firms reporting links to domestic suppliers and 305 for firms with links to international suppliers). Finally, international and domestic forward linkages are analyzed in a regression framework in Table 5.2 below.Larger firms are much more likely to report transfers of technology from suppliers. Interpreting the results for legal structure where the base category is wholly foreign- owned firms, it appears that domestic firms such as joint stock no state and private limited are more likely to receive technology transfer from domestic firms (Column 1). However, as illus- trated in Column 2, all types of firms are less likely to report transfers of technology from inter- national suppliers relative to the base category of FDI companies.Domestic firms again appear to be restricted in accruing technology transfer from international firms. With larger productivity gains from international firms generally posited in the literature, how to improve linkages be- tween foreign and domestic firms should be investigated by policymakers. 8.9% 14.4% 91.1% 85.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Domestic International Yes No N(Dom.)=7,648 N(Int'l)=2,112 71% 28% 1% 69.8% 26.9% 3.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% Contracted Intentional Unintentional Domestic International N(Dom.)=684 N(Int'l)=305 93 Table 5.2: Technology Transfer from Suppliers, Regression Analysis Dependent variable: Technology Transfers from Suppliers (1) (2) (3) Dom. se Int’l se Both se Micro (1-9) -0.04*** (0.01) -0.02 (0.01) -0.04*** (0.01) Medium (50-299) 0.03*** (0.01) 0.05*** (0.01) 0.05*** (0.01) Large (300+) 0.07*** (0.02) 0.11*** (0.02) 0.11*** (0.02) State Limited 0.06 (0.13) 0.01 (0.11) Joint, with State 0.05* (0.02) -0.00 (0.01) 0.03 (0.02) Collective -0.02 (0.02) -0.05*** (0.01) -0.05*** (0.02) Private -0.01 (0.01) -0.02** (0.01) -0.03 (0.01) Private Limited 0.02* (0.01) -0.02*** (0.01) -0.00 (0.01) Joint Stock, no State 0.03* (0.01) -0.02** (0.01) 0.01 (0.01) Joint Venture (SOE and Foreign) 0.09* (0.05) 0.02 (0.03) 0.06 (0.04) Joint Venture (Non- state and Foreign) 0.01 (0.03) -0.03*** (0.01) -0.03 (0.03) Observations 7,457 7,387 7,457 Region Effect Y Y Y Sector Effect Y Y Y Pseudo R-squared 0.039 0.078 0.044 Marginal effects from Probit model, standard errors to right of coefficients clustered at firm level. Base: Small, FDI, Region 7 (HCMC), Food Processing (ISIC 15). Sector effects are at 2-digit level. Coefficients on constant term not reported. Robust standard errors in parenthe- ses, *** p<0.01, ** p<0.05, *p<0.1. Section 4 highlighted the limited existence of backward linkages in the Vietnamese case and results from in-depth studies based on previous rounds of the TCS suggest that productivity spillovers through these linkages are limited at best. In contrast, as shown in this section, forward linkages appear to provide much greater opportunities for domestic firms to benefit from relationships with foreign firmsthrough spillovers from foreign and international suppliers of intermediate inputs to domestic firms. Indeed, when the analysis is limited to domestic firms only, Newman et al (2014) find strong evidence for positive productivity spillovers from upstream FDI firms supplying inputs to downstream domestic firms. Although these spillovers may be less for domestic firms than foreign firms as suggested by the results presented in Table 5.2, they are still a potentially important source of productivity growth for domestic firms. In fact, part of these spillovers can be explained by reported technology transfers from input suppliers to domestic customers. Given these findings future policy efforts in relation to FDI should focus on attracting investment into upstream sectors that supply inputs to downstream Vietnamese firms. This appears to be the route through which productivity gains are most likely to be realized. 94 References Driffield, Nigel, Max Munday and Annette Roberts (2002), “Foreign Direct Investment, Transac- tions Linkages, and the Performance of the Domestic Sector.” International Journal of the Economics of Business, Vol. 9 (2002): 335-351 Newman, C., Rand, J., Tarp, F. and Nguyen Thi Tue Anh (2014) ‘‘Exporting and productivity: the role of ownership and innovation in the case of Vietnam’ UNU-WIDER, Working Paper Number 2014/70 95 6. Alternative Paths to Innovation: Research, Adaptation, and Modification Thus far, we have focused primarily on the technology transfer arising fromspillovers. How- ever, this represents just one potential pathway through which firms can improve their techno- logical capabilities. Firms can invest in new and innovative R&D, an approach based on original research into, and development of, technologies not yet available in the market. Alternatively, firms can undertake a type of diffusion-based innovation, where the focus is on adaptation of existing technologies, using knowledge and techniques already developed, but new to the firm it- self. R&D is highly regarded as a major indicator of innovation and technological sophistication, however evidence on the effectiveness of R&D in a developing or emerging economy is mixed. Innovative R&D projects are prone to failure, highly expensive and also very intensive in terms of their physical and human capital requirements. Given that emerging economies tend to be located at a distance from the technological frontier, it is possible that firms will see productivity improvements merely from investment in existing technology that improves their current opera- tions. Indeed, Basant&Fikkert (1996) find that investments in existing technologies provide a better return for firms that innovative research, in the context of Indian firms. Approximately 514 (6.4%) of the 8,010 firms in our sample invested in some form of R&D in 2012. Figure 6.1 shows the type of research undertaken by firms. 53% of this research ex- penditure was focused on developing technology that is new to the market the firm operates in, rather than ‘frontier research’ which represents only 4% of research expenditure (from a sample of 504 firms). The remaining 43% was used to research development into technologies that are new to the enterprise. Figure 6.1: Originality of Research Output Evidence from the TCS therefore suggests that most of the expenditure on research is fo- cused on developing technology that may already be available on a global or even national level. If this is the case, then a firm’s current R&D expenditure may be more productively applied to in- vestment in obtaining this existing technology and adapting it for use within the firm. Adaptation also reduces issues around the high failure rates and costliness of innovative R&D as detailed above. Over the short term, policymakers may find the payoffs to an industrial policy focused on adopting existing technology higher than one emphasising original research. This view is 53.2% 42.9% 4.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% New to market New to ent. New to world N=504 96 reinforced by Chuang & Lin (1999) who examine R&D, FDI and spillovers for Taiwanese firms. They posit that a preferred environment for R&D is one where firms have already advanced their technical capabilities via technology transfer (from FDI/Spillovers). Figure 6.2 shows how this expenditure is financed. The cost of undertaking new research is funded primarily from firms own equity (86%) with limited state assistance for research into new technologies (3%). Figure 6.2: Financing Research A potential solution to the expensive of R&D for firms is to develop linkages with other similar firms, intuitions or research centres who would be interesting in assisting with research into a particular area/sector. We are unable to accurately observe the extent to which these link- ages exist through the TCS due to a limited number of respondents acknowledging the presence of an external research partner. Overall, although R&D is regarded as essential for continued innovation and technological advancement, the presence of positive spillovers and adaptation of existing technologies should provide sufficient productivity gains for an emerging economy like Vietnam and as such these mechanisms should be prioritised over original R&D investment in the short run. Nonetheless, examining the determinants of undertaking research activity is still important in order to inform appropriate industrial policy for Vietnam with regard to R&D investment. The regression frame- work in Table 6.1below shows the results of this analysis. Controlling for sector and region effects (Column 3), we observe that larger firms are sig- nificantly more likely to undertake R&D. However medium sized firms are also more likely to undertake R&D compared to micro/small. Firm size seems to matter. Regarding firm legal structure, although some of the coefficients are not well determined it appears that joint stock both with and without state and private limited companies are more likely to invest in research compared to the FDI base category. 86.4% 10.2% 3.0% 0.4% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Equity Credit State funds Venture capital N=500 97 Table 6.1: Research and Development, Regression Analysis Dependent variable is 1 if firms does adaptation, research or both, 0 otherwise (1) (2) (3) Adapt. se R&D se Both se Micro (1-9) -0.02 (0.01) -0.02 (0.01) -0.02 (0.01) Medium (50-299) 0.04*** (0.01) 0.05*** (0.01) 0.05*** (0.01) Large (300+) 0.08*** (0.01) 0.09*** (0.01) 0.11*** (0.02) Joint, with State 0.16*** (0.03) 0.14*** (0.03) 0.13*** (0.03) Collective 0.01 (0.02) -0.01 (0.02) 0.00 (0.02) Private -0.00 (0.01) -0.01 (0.01) 0.00 (0.01) Private Limited 0.03*** (0.01) 0.02*** (0.01) 0.03*** (0.01) Joint Stock, no State 0.08*** (0.01) 0.06*** (0.01) 0.06*** (0.01) Joint Venture (SOE and Foreign) 0.07 (0.04) 0.06 (0.04) 0.05 (0.03) Joint Venture (Non- state and Foreign) 0.04 (0.03) 0.04 (0.03) 0.04 (0.03) Observations 7,459 7,459 7,457 Region Effect N Y Y Sector Effect N N Y Pseudo R-squared 0.066 0.071 0.11 Note: Marginal effects from Probit model, standard errors to right of coefficients clustered at firm level. Base: Micro, FDI, Region 7 (HCMC), Food Processing (ISIC 15). Robust stan- dard errors in parentheses. *** p<0.01, ** p<0.05. 6.1 Adaptation and Modification As already stated, adaptation of existing technologies for emerging economies may have larger returns for firms, compared to costly investment in innovative R&D (Basant&Fikkert, 1996). This is a related idea to the purchase of embodied technology, seen earlier as an important source of technology transfer, however it is distinguished by the intentional seeking out of new and more efficient technologies by firms for adaptation rather than transfers from commercial interactions. This also distinguishes this type of technology adaptation from technology transfer as a result of vertical linkages. The type of technology gained from these interactions depends on the technology present in customer/supplier organisations and so is limited in its scope to improve firm production and processes. The 2013 round of the TCS produced dataon research and adaptation for 8,010 firms. As we see in Figure 6.3, the vast majority of these companies did not engage in either technology adaptation or R&D activity with only 8% of firms undertaking one, or both forms of investment in innovation. 98 Figure 6.3: Share of Firms Doing Adaptation, Research This suggests that policymakers should focus on encouraging firms to invest in adaptation of technology that already exists. With over 90% of firms in the sample currently without an adaptation strategy and with benefits to firms of more advanced technologies documented in the literature, it is possible that this would lead to large productivity gains. This type of policy is also likely to be more feasible for firms to implement and may therefore yield a higher success rate. This finding again shows the unique insights on innovation gained from the TCS. Looking specifically at firm level allows policymakers to see the type of tailored policy that may improve firm performance in Vietnam, rather than implementing policies based on traditional measures of encouraging innovation, such as R&D, that may then fail. We use a regression framework to evaluate the role that firm characteristics play in the deci- sion to invest in research or adaptation, with results shown in results in Table 6.2. Both adapta- tion and research are more likely amongst larger firms. Regarding firm structure, although some coefficients are poorly defined, it appears that joint stock with state companies are more likely to conduct adaptation and R&D whereas private limited and joint stock no state are more likely to engage in R&D only. Table 6.2: Determinants of Research and Adaptation, Regression Analysis Dependent variable is 1 if firms does adaptation, research or both, 0 otherwise (1) (2) (3) Adapt. se R&D se Both se Micro (1-9) -0.01** (0.01) -0.01 (0.01) -0.01** (0.00) Medium (50-299) 0.02*** (0.01) 0.04*** (0.01) 0.02*** (0.00) Large (300+) 0.04*** (0.01) 0.08*** (0.01) 0.04*** (0.01) Joint, with State 0.05*** (0.01) 0.10*** (0.03) 0.05*** (0.02) Collective 0.01 (0.01) -0.01 (0.02) 0.01 (0.02) Private 0 (0.01) 0 (0.01) 0 (0.01) Private Limited 0.01 (0.01) 0.02*** (0.01) 0.01 (0.00) Joint Stock, no State 0.01 (0.01) 0.05*** (0.01) 0.01 (0.01) 3% 1% 90% 5% Adapt. but no R&D N=8,010 Adapt. and R&D No adapt. or R&D No adapt. but R&D 99 Joint Venture (SOE and Foreign) 0.02 (0.02) 0.03 (0.03) 0.02 (0.02) Joint Venture (Non- state and Foreign) 0 (0.01) 0.05 (0.03) 0 (0.01) Observations 6,927 7,107 6,927 Region Effect Y Y Y Sector Effect Y Y Y Pseudo R-squared 0.11 0.1 0.11 Note: Marginal effects from Probit model, standard errors to right of coefficients clustered at firm level. Base: Micro, FDI, Region 7 (HCMC), Food Processing (ISIC 15). Robust stan- dard errors in parentheses. *** p<0.01, ** p<0.05. 6.2 Constraints to Adapting Technology Given the benefits to firms from more advanced technologies, the regression analysis and sample averages presented in section 6.1 are surprising, with relatively few firms investing in adaptation, and those that do primarily larger firms. It is possible that constraints are hampering the ability of firms to invest in this area. If this is the case then an understanding of these con- straints and how to improve them is of interest to policymakers, particularly if adaptation is to be considered as a relatively low-cost way for companies to invest in improved technology. To support this, the TCS investigates why firms want to invest in adaptation and the constraints that prevent them from doing so. The survey questionnaire asks responding firms to summarise their experience of past ad- aptations, failed adaptations, and desired or anticipated adaptations the firm plans to make in the future. Figure 6.4 shows respondent’s main motivation for adaptation. Improving quality stands out as the most important reason. Firms appear to desire improvements in quality and productiv- ity. This may be due in part to increasing levels of competitiveness in the economy necessitating product improvements, or indicative of firms trying to move into, and compete in, higher value- added markets. This suggests that firms are aware of the potential productivity gains from invest- ments in technology and reinforces the importance of examining the constraints to implementing these improvements. Figure 6.4: Reasons for Adaptation 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Failed Desired Ca pa cit y r est ric tio n Lo w pro du cti vit y Qu ali ty im pro ve me nts Ex pa nd pr od uc t v ari ety Ou tda ted te ch no log y Le ga l re qu ire me nts Ot he r Past 100 Figure 6.5 shows the share of respondents that listed each constraint as the “most severe.” The sample is dominated by financial constraints. Firms are unable to invest in technology ad- aptation due to credit constraints or lack of sufficient capital with the firm. Access to finance is a common constraint for firms in emerging economies. Indeed, an evaluation by the World Bank (2013) of the SME sector stated that financial constraints are frequently observed in de- veloping countries and according to both theoretical and empirical evidence, the burden of these constraints tends to fall disproportionately on small and medium sized firms. They posit that promoting reforms in this area can be considered favourable to SME development. Indeed, this is an area where domestic industrial policy could assist, for example by developing schemes to expand access to loans for firms with plausible strategies for adaptation of technology into their organisation. Figure 6.5: Reasons for Technology Adaptation Rather than Purchase The need for improved access to finance is underlined by survey data on how firms financed or plan on financing adaptation. Figure 6.6 summarises the share of respondents reporting vari- ous funding mechanisms as beingthe most important. Figure 6.6: Financing of Adaptation 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% Does not exits Did not know about it Too expensive No access Past Failed Desired N (past) = 3.19 N (Fail) = 35 N (Des.) = 377 1% 75% 21% 0%0% 83% 14% 3%0% 55% 42% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% State funds Equity Credit Venture Capital Past Failed Desired N (Past) = 319 N (Fail) = 35 N (Des.) = 377 101 This again highlights credit restrictions on firm decisions to adapt technology, with a signifi- cant gap between desired financing from credit and actual financing from credit. The sample is dominated by firms who rely on equity to finance adaptation, meaning that firms’ ability to invest is limited by their available internal capital such as retained earnings. Firms may then be invest- ing in technology adaptation that is not sufficient for them to realise real gains from production improvements. This suggests that firms would make use of credit schemes that are transparent, widely available, and preferential (compared to standard borrowing rates) and is an important consideration for industrial policy in this area. As the conclusions from this section echo those in the 2012 TCS report, it appears that current policy is failing resolve these concerns. References Basant, Rakesh, and Brian Fikkert. “The effects of R&D, foreign technology purchase, and domestic and international spillovers on productivity in Indian firms.” The Review of Economics and Statistics (1996): 187-199. Chuang, Yih Chyi, and Chi Mei Lin. “Foreign direct investment, R&D and spillover effi- ciency: Evidence from Taiwan’s manufacturing firms.” The Journal of Development Studies 35.4 (1999): 117-137. World Bank. “ Evaluation of the World Bank Group’s targeted support for small and medium enterprises.” Independent Evaluation Group (IEG) approach paper (2013). Washington DC 102 7. Corporate Social Responsibility (CSR) The concept of Corporate Social Responsibility (CSR) and adoption of a comprehensive CSR policy is seen as increasingly important in business environments, both in developing and developed economies. Firms are increasingly called upon to operate in a way that is socially responsible. However, despite the focus on CSR, an actual definition of what it entails remains elusive. Indeed, it appears that the issue is not lack of a definition, but an abundance of defini- tions, each differing in their expectations for CSR(Dahlsrud, 2006). Alongside these differing views on what CSR is, are competing views as to its relevance, with disagreement in the litera- ture about whether it improves orburdens firm performance. Indeed, Jensen (2002) argues that CSR needlessly raises firm costs and that this then disadvantages the firm relative to competitors who are not engaging in CSR. Proponents of CSR highlight the economic benefits from implementing a superior CSR strategy. Cheng et al (2014) investigate the effect of CSR on firm financial constraints and con- clude that firms with better CSR performance have significantly lower capital constraints. They attribute this to two factors. First, lower agency costs as a result of improved engagement with stakeholders and second, through reduced informational asymmetries resulting from increased transparency in the organisation. McWilliams & Siegel (2001), highlight positive effects result- ing from improved image and reputation and the follow on effect this has on firm competitive- ness and performance. It is possible that firms with an active and vocal CSR strategy are per- ceived to be taking responsibility for their actions and advocating a positive impact through their activities with various stakeholders, for example community, employees and customers. This could potentially improve firm performance by attracting and retaining both skilled staff to the organisation and also clients who respond to the firm’s progressive reputation. The 2013 survey follows a similar format to previous years of the TCS, again to allow an examination of CSR in firms over time.The survey explores the extent to which firms in Vietnam change their socially responsible behaviour and incorporate CSR into their corporate strategy. Three dimensions of CSR are examined: The extent to which the firm (i) complies voluntarily with labour and environmental standards (ii) has a well-developed CSR strategy at the manage- ment level that goes beyond compliance with existing regulations and (iii) engages in beyond compliance community based activities not directly linked to firm operations. This information is used to generate a CSR index to examine the degree of CSR activities undertaken by firms. How the CSR indicators and CSR index relate to firm characteristics is then examined. 7.1 Measuring Corporate Social Responsibility (CSR) The indicators detailed above encapsulate the key markers of CSR, as found commonly across the literature. CSR strategies can be evaluated based on those firms that fulfil only the required legal aspects of CSR, and those that go beyond mandatory policies. Two bodies have established views of CSR on based around each of these evaluations. The UN Global Compact initiative provided a set of ten principles to ensure responsible supply chain management, for ex- ample, basic labour rights and an anti-corruption principle. The CSR Compass then put forward a view of CSR as the voluntary initiatives of companies to integrate social and environmental considerations into their business activities and their interactions with stakeholders. Both of these views are represented in the examination of CSR presented in this chapter. 103 The three components of CSR highlighted above are measured through a number of specific indicators. The number of indicators for each component is shown below. Table 7.1 lists each of these in detail. • Labour related responsibilities (3 indicators): Compliance indicators • Management related responsibilities (4 indicators): Beyond compliance indicators • Society related responsibilities (8 indicators): Beyond compliance indicators Labour-related responsibilities encapsulate the mandatory legal responsibilities of the firm. Examples are the provision of official contracts, access to trade unions and paying health in- surance. In general, this measure examines firm compliance with existing labour regulations. Management-related responsibilitieslook at whether CSR represents a central tenet of a firm’s business strategy. Finally, society related responsibilities addresses whether firms actively en- gage with and embrace CSR in the form of local community initiatives, above and beyond that required legally and through activities often not related to the company’s commercial purpose. Table 7.1 documents the proportion of firms engaged in CSR related activities on the basis of these indicators. It is apparent that CSR in Vietnam currently resembles that of cooperation with compliance related CSR activities. However, it is positive to note that this co-operation, especially with regard to labour regulations, is very high (over 95% of firms have written labour contracts for all employees). Compared to the 2012 TCS little change in observed, highlighting a lack of advancement to CSR activities that are ‘beyond compliance’. It appears that firms in Vietnam are applying a minimal CSR strategy to their organisations. Table 7.1: Corporate Social Responsibility (CSR) Indicators 2013 Labour All permanent employees have a written labour contract? 95% Enterprise has a local/plant level trade union? 49% Enterprise pays contribution to social insurance for employees? 72% Enterprise pays contribution to health insurance for employees? 72% Management Has committee/board overseeing CSR practices? 46% Has written down CSR policy? 74% Member of groups or has agreements that promote CSR stan- dards? 3% Has been awarded CSR type certifications or awards? 9% Community 1. Environmental Protection 24% 2. Education 8% 3. Infrastructure Development 7% 4. Health Care services 5% 5. Youth Development 3% 6. Poverty Alleviation 19% 7. Local Heritage 3% 8. Sporting events 5% Note: N=8,007 104 Disaggregating by sub-group of the CSR index and starting with labour related CSR in- dicators; we observe that most permanent workers have written labour contracts, independent of firm size and form of ownership (see Table 7.2 and Table 7.3). Furthermore, a large share of Vietnamese firms provides social and health insurance, which is indicative of the existence of labour contracts in accordance with current laws. However, looking at firm size and legal structure it is evident that larger firms and those owned by the state or foreign interests are more likelyto provide these benefits, than smaller, private firms. Regarding the availability of a trade union, nearly 90% of state owned firms are unionised, this is also the case with large firms. This is in line with developed countries where larger and in particular public sector organisations are generally heavily unionised. It is worth noting an improvement in the proportion of micro firms who have access to a trade union, this doubled from 5% in 2012 to 10% in 2013. Table 7.2: Corporate Social Responsibility (CSR) Indicators, by firm size Micro Small Medium Large Management Has a committee/board overseeing CSR practices? 31% 36% 53% 70% Has a written down CSR policy? 62% 69% 78% 88% Member of standards groups or agreements that pro- mote CSR standards? 1% 1% 3% 9% Has been awarded CSR type certifications or awards? 4% 6% 11% 19% Labour All permanent employees have a written labour con- tract? 94% 95% 96% 96% Enterprise has a local/plant level trade union? 10% 26% 67% 90% Enterprise pays contribution to social insurance for employees? 33% 57% 87% 97% Enterprise pays contribution to health insurance for employees? 34% 58% 87% 97% Community 1. Environmental Protection 18% 24% 25% 28% 2. Education 3% 7% 9% 13% 3. Infrastructure Development 4% 7% 8% 7% 4. Health Care services 2% 3% 5% 9% 5. Youth Development 2% 2% 4% 5% 6. Poverty Alleviation 16% 20% 20% 18% 7. Local Heritage 3% 3% 3% 3% 8. Sporting events 3% 3% 6% 9% The second sub-group of the aggregate CSR index is related to management. There is a clear increase across all firm sizes and structures in the number of firms reporting to have a committee or board in place to examine CSR. This could be indicative of an increasing awareness among firms of CSR and an increase in the number of firms who have, or who are intending to develop, a CSR strategy. However it is important to note that this year’s sample size is much larger than in 2012 and thus this change could explain the increases observed in the tables. As illustrated in Table 7.1, almost 46% of firms (compared to 33% in 2012) have a committee in place to de- termine CSR policies and 74% confirm that they have written down CSR policies (72% in 2012). 105 However, official certification in core CSR policies has been undertaken by relatively few firms. We observe highest percentages of certification in state owned and large firms (approxi- mately 20%) and no clear increase in certification levels is observed relative to the 2012 TCS. This could represent an area that policy could improve upon, in order to formalise the CSR stan- dards of firms in line with certificationprovided byinternational bodies such as the UN Global Contact Initiative described above. Firms can participate in and financially support their local communities through various activities. This refers to the ‘beyond compliance’ CSR approach discussed earlier. Tables 7.1-7.3 show the range of community-based activities enterprises engage in. Table 7.3: Corporate Social Responsibility (CSR) Indicators, by ownership category Private State Foreign Management Has a committee/board overseeing CSR practices? 43% 69% 60% Has a written down CSR policy? 73% 88% 82% Member of standards groups or agreements that promote CSR standards? 3% 9% 5% Has been awarded CSR type certifications or awards? 8% 21% 15% Labour All permanent employees have a written labour contract? 96% 98% 96% Enterprise has a local/plant level trade union? 40% 95% 81% Enterprise pays contribution to social insurance for employ- ees? 65% 98% 98% Enterprise pays contribution to health insurance for employ- ees? 65% 98% 99% Community 1. Environmental Protection 26% 33% 16% 2. Education 9% 21% 6% 3. Infrastructure Development 8% 12% 3% 4. Health Care services 5% 16% 4% 5. Youth Development 4% 10% 2% 6. Poverty Alleviation 22% 32% 8% 7. Local Heritage 4% 6% 1% 8. Sporting events 5% 14% 4% Note: N(Private)= 5640, N(State)= 320, N(Foreign)=1680 While it is positive to see that the two most common forms of community activities relate to the environmental protection and poverty alleviations (two important issues in Vietnam), less than one third of firms engage in this kind of CSR, regardless of firm size or structure. Again this reinforces the view of CSR in Vietnam as being primarily in place to comply with existing regulations. The two most common forms of community-based activities relate to environmen- tal protection and poverty alleviation. 106 7.2 What are the characteristics of CSR adopting firms? This section analyses correlations between CSR adoption and selected firm specific char- acteristics, controlling for those factors identified in the literature as important determinants of CSR for firms. These include a firm size variable (log full-time employment) and a binary indica- tor variable for Research and Development (with a value of one if R&D takes place in-house and zero otherwise) in addition to indicators for whether firms produce intermediate or final goods. Ownership characteristics, location and sector dummies are also included. The dependent vari- able in this analysis is the CSR index, this is an aggregate index ranging from 0-16 derived from the answers documented in Table 7.1. The results are shown in Table 7.4 below and are disag- gregated by sub-index. Table 7.4: CSR determinants by sub-sector (1) (2) (3) (4) CSR (all) CSR (Manag.) CSR (Labour) CSR (Soci- ety) VARIABLES coef se coef se coef se coef se Firm size(log) 0.7*** (0.0) 0.2*** (0.0) 0.4*** (0.0) 0.1*** (0.0) R&D 1.4*** (0.1) 0.5*** (0.0) 0.3*** (0.0) 0.6*** (0.1) Firm produces final goods 0.2*** (0.1) 0.0 (0.0) 0.1** (0.0) 0.1 (0.0) state 0.9*** (0.1) 0.2*** (0.1) 0.3*** (0.0) 0.4*** (0.1) foreign 0.1** (0.1) 0.2*** (0.0) 0.4*** (0.0) -0.4*** (0.0) Observations 7,464 7,464 7,466 7,466 R-squared 0.3 0.2 0.5 0.1 Province Effect Y Y Y Y Sector Effect Y Y Y Y Note: Dependent variable: CSR Index (0-16) or sub-indices, Base: province 1, Sector 15, Robust stan- dard errors in parenthesis. **p<0.01, *** p<0.05 7.3 Future research Corporate social responsibility in Vietnam currently takes the form of compliance with legally mandated governance within the firm. There is limited evidence of CSR that extends out past the firm into relations with external stakeholders. However, given that where this type of CSR exists its focus is on environmental protection and poverty alleviation, improvements in CSR may have a positive impact on these issues in local communities. The implications for firm performance are unclear. As the literature states that benefits to CSR generally arise where superior strategies are implemented, CSR may currently represent a cost on Vietnamese firms. Under increasing com- petitiveness this area may then be neglected. Policies to encourage CSR could focus on improving firm’s perceptions of CSR and facilitating its extensions to that of ‘beyond-compliance. Comparing to the 2012 TCS survey improvements in CSR are minimal and seem to be limited to an increasing percentage of firms exploring CSR as an addition to their business strategies. However, if this indi- cates increasing awareness and willingness to consider CSR then this in itself is a positive change. 107 References Cheng, Beiting, IoannisIoannou, and George Serafeim. “Corporate social responsibility and access to finance.” Strategic Management Journal 35.1 (2014): 1-23. CSR Compass: “About CSR” Dahlsrud, Alexander. “How corporate social responsibility is defined: an analysis of 37 definitions.” Corporate social responsibility and environmental management 15.1 (2008): 1-13. Jensen, M. C.” Value maximization, stakeholder theory, and the corporate objective func- tion.” Business Ethics Quarterly, 12(2) (2002): 235-256. McWilliams, A. and Siegel, M. (2001). “Corporate Social Responsibility: A Theory of the Firm Perspective”, Academy of Management Review, 26(1), 117-127. United Nations Global Compact: “The Ten Principles” abouttheGc/TheTenprinciples/index.html 108 8. Conclusion This report documents the findings from the 2013 Technology and Competitiveness Survey. As evidenced throughout the report, detailed information was provided on levels of competitive- ness, technology transfer, innovation and corporate social responsibility currently evident in Vietnam. A large sample of approximately eight thousand firms and comprehensive information available at firm level provided an in-depth snapshot of many aspects of firms operating environ- ment. These attributes make the TCS an invaluable and unique tool for both researchers and poli- cymakers. It is one of the only survey instruments in Vietnam available to analyze topics such as the development of technological capabilities within firms, the role of foreign investment in the dissemination of technological advantages to domestic firms and more broadly, the social con- text of the business environment. With this round of the survey, an additional year of data is also available for use in longitudinal empirical research investigating changes within firms over time. The importance of innovation and technological development for an economies continued growth should not be understated. This type of productivity-enhancing growth is increasingly vital for Vietnam, given that the large gains realized after the DoiMoi reform are not sustainable. The focus of policymakers needs to shift towards the development of sustainable real growth, in order to foster growth in employment, in real wages and ultimately in living standards, particu- larly for Vietnams urban and rural poor. It is apparent from the survey that firms are aware of the benefits of investment in technol- ogy and are already doing what they can to improve product quality. However, the presence of constraints is potentially preventing them from investing to the extent that real gains can be realized. Throughout the report it was noted that the 2013 analysis is broadly similar to the 2012 TCS. This highlights that the operating environment and firms circumstances are largely stagnat- ing. It is of pivotal importance that policies are enacted to assist firms in moving forward. In par- ticular, focus on loosening the constraints detailed in the analysis should be decisively addressed. As it stands current industrial policy does not appear to be sufficient in dealing with these issues. Evidence on the benefits to foreign direct investment and indeed relationships with inter- national clients and supplier, is also provided in the report. The benefits to the interactions of domestic and foreign firms is anticipated to be technology transfers, occurring as a result of spillovers. This can be either from horizontal spillovers, resulting interactions between firms operating in the same sector, backward linkages, resulting from relationships between foreign firms and domestic suppliers or finally, from forward linkages, where foreign firms supply inter- mediate inputs to domestic clients. The TCS shows only small numbers of firms report spillovers and that these spillovers are reported to occur between in interactions between domestic firms as well as interactions of domestic firms with foreign firms. While the presence of spillovers between domestic firms is positive, no indication is given of the quality of the transfers, which would impact on the return that firms would gain as a result. It is likely that spillovers originating from foreign firms are a higher quality than those from domestic firms and this is an important consideration for policymakers to weigh the costs of attracting FDI to the benefits that domestic firms get, versus the benefits that arise from purely domestic interactions. 109 An additional avenue for technology improvements is adaptation of new technologies. It appears that for firms in Vietnam investment in R&D is primarily in developing technologies that are already in existence elsewhere. Given the high potential failure associated with R&D in addition to the high costs, it would likely be more beneficial to firms to adopt and modify exist- ing technology rather than investing in R&D. Adapting technologies is also likely to be more beneficial to firms that transfers as a result of spillovers, as they can seek out technology specific to their firm rather than receiving transfers that are limited by the technological advancement of the contributing firm and indeed may not even arise in the first place. Given the productivity gains observed from improved technology, policies to stimulate this type of investments should be given serious consideration and should include reference to loosening the constraints faced by firms. Finally, as Vietnam’s economy becomes more competitive there may be increased pressure on firms to reduce their commitments to CSR in pursuit of increased profit margins. Corporate social responsibility in Vietnam currently seems to take the form of fulfilling obligations within the firm and in line with those legally required from companies. It appears that benefits to CSR are only realized in firms that adopt a wider reaching and more superior CSR strategy that ex- tends to the external community and stakeholders. As such we would not expect to observe par- ticular gains to Vietnamese firms from their current CSR policies. Policies that support ‘beyond compliance’ CSR strategies in firms could potentially assist in improving this. 110 In 500 cuốn, khổ 20,5 cm x 29,5 cm. ĐKXB 32-2014/CXB/198-210/TC: 195/QĐ-NXBTC ngày 27/10/2014 Tại Dịch vụ cung ứng tổng hợp Minh Tâm In xong và nộp lưu chiểu tháng 10 năm 2014 111