Role of R and D operations to improve competitiveness for Viet Nam small and medium sized enterprises

973 ROLE OF R & D OPERATIONS TO IMPROVE COMPETITIVENESS FOR VIETNAM SMALL AND MEDIUM SIZED ENTERPRISES Dr. Nguyen Thi Thuy Quynh, Dr. Nguyen Thi Bich Lien Email: liennguyen1908@gmail.com; ntquynh83@gmail.com Faculty of Economics - Vinh University Summary Over the years, the Vietnam small and medium-sized enterprises was formed, flourished and has confirmed its important role in the economy. However, the competitiveness of Vietnam small and medium-sized enterprises is still very limited. Therefore, in the coming time, Vietnam should have utility solutions to help to improve competitiveness for these enterprises, which need special attention about the role of active research and development (R & D). Question International economic integration is an objective tendency of every economy. For Vietnam, a country currently in innovation and development process, international integration is just the opportunity to expand the market, is both a major challenge for Vietnam product quality and cost. The pressure of integration, enterprises need a comprehensive plan including technological innovation, personnal training, upgrading information systems and management, product quality assurance. So to see the important role of R & D operation and finding appropriate solutions to the small and medium-sized enterprises to enhance competitiveness based on R & D to meet the practical requirements. 1. Characteristics of R & D activity in Vietnam small and medium-sized enterprises in Vietnam According to reports about technological innovation in the industrial enterprises in Vietnam (Institute for Economic Management Central, 2012), the enterprises‘ survey indicated that they usually conduct one or several active R & D depending on financial availability and business situation of their production as follows: * Research to improve existing manufacturing processes: The improvement of production processes include: improvements in technology, improvements in machinery, production methods, alternative materials, ... here are the research activity now conduct most. These can be explained by the investment in research activities to improve existing manufacturing processes which are less expensive than investing in new machinery and equipment, technological lines, while still having closed pole in improving product quality, enhancing productivity, and improving products or new products. * Products improved research and new products design: Type of activity rates are higher now when conducting studies followed by product innovation and design. Product enhancements conduct regularly and new products offering is an objective requirement for businesses, especially goods consumer, garments manufacturing, cosmetics, paint and 974 shoes businesses, etc to diversify products to meet customers‘ demand for the change of the external factors such as weather, environment, fashion and tastes, etc. These are the reasons which businesses often conduct regular activities. * To research and apply new production processes: With some enterprises, adoption research of new manufacturing process are usually done with the property that the business expansion would be rather than technological innovation. These means that new investment in the technology chain in business, to enhance the output of existing products or develop new products can be the same as category with the current product and can also be a completely different items. At the adoption of new production processes can be completely replace the equipment, machinery and technological factor, because these require businesses to have invested enormously. * Research and development: Research and implement the activities at the Vietnam small and medium-sized enterprises to conduct production technological innovation. These reflect the research and deployment capacity of the enterprise to be limited. In theory, research and deployment operations of businesses including practicement research are to renew the product manufacturing process; in the other hand, researchers create technologies for the production or upgrade technology and import products to suit the specific conditions. However, the reality current of businesses are be conducted research and implement the most application purposes, operational technology which would be rather than technological innovation. * Results of a survey in the framework of Vietnam other potential of science and technology assessment scheme in 2014 are as well as similar assessments. Those were shown when requesting enterprises list research operations and innovation implementation from 2004 to 2014 include: research and development, new products design, product availability improvement, new technological processes application and technology improvement as follows: Table 1: Percentage of R & D activities and technological innovations implemented by enterprises Operation The percentage of implementing enterprises (%) Current product improvements 98 Current technological process improvements 85 New products design 45 Design / application of new technological processes 30 R&D 8,5 Source: Synthesis Report "Look at the factors affecting R & D activities of the company", NISTPASS, 2014 2. The role of R & D activities in enterprises R & D closely connected with the creation of products and new production technologies have a direct effect on the country‘s growth rate and the enterprises 975 sustainable development. The investment for R & D is from the government, business and external financing. In developed countries, the average investment rate for R & D from the state budget compared to areas outside the state is about 1: 4, also in Vietnam, this rate is estimated at about 5: 1, which means that Vietnam R & D operation is still mainly by the state investment. Table 2: Funding for R & D performed in some countries Unit: % Government Industry Others America 9,1 68,9 22,1 Canada 28,7 61,2 10,1 Swiss 3,5 74,1 22,4 Germany 31,3 36,7 26,7 Russia 24,5 69,9 5,6 Hungary 31,3 36,7 26,7 Japan 9,3 75 15,8 Korea 12,6 76,1 11,3 China 11,9 68,6 19,5 Source: Synthesis Report "Look at the factors affecting R & D activities of the company", NISTPASS, 2014 In every business, R & D is an integral part, they can be held in the form of hardware as technical department, technology department and be held in the form of "soft" R & D as with projects and research programs in business collaboration with research institutes, universities and technical, etc. Whatever be held in any way, the number of engineers working in R & D of each business now always the most elite technicians. They are not only people with high technical expertise, basic training but they were also capable of very good business and marketing when compared to research staff in research institutes and universities. - In terms of investment structure, the allocation of the business under the technical department is staff home where most elite granted more funding than any other parts. This funding is growing over years belongs to business activity. - R & D activities in the enterprise has four basic roles: + Strengthening of technology for the enterprise + Raising the status of the enterprise + Strengthening the export activities for enterprises + Growing and developing enterprises In many businesses due to this particular size of business, R & D has no specialized department in charge which is often integrated into one of the business parts such as production department, sales department,etc. However, the interest in this activity has always been laid out in the business strategic development. 976 3. The content and orientation R & D activities to improve competitiveness for small and medium-sized enterprises in the context of integration For the process of production technological innovation, business needs can arise perform R & D to search for innovative ideas or seek solutions to solve the problems that arise when implementing innovation. Businesses can conduct R & D or make your outsourcing. Enterprises also can order agencies such as research institutes or universities to perform R & D belongs to the business needs . Currently, many different assessments show that R & D activity in Vietnam small and medium-sized enterprises is very weak. Assessment of the results of the investigation VCCI in 2013 is that nearly half of the businesses currently have no R & D to export promotion. In addition, businesses in general and small and medium-sized enterprises in particular are passive, refuses to link or go to R & D organizations. Regional links between R & D institutions with manufacturers, and businesses in Vietnam today is very low. The link between areas is weak due to many reasons, but in which there is the most reason is no growth of the consultancy support services and technology market. While the form of businesses counseling, supporting services thrive in developing countries, the Vietnam services today is not yet fully aware of the importance. The national legislation, statistical systems do not insist on this form. The important thing is that our country lacking of the consulting services to help enterprises to conduct technological innovation, promote the formation and development of scientific and technology market and improve the businesses competitiveness . Technical services related to the regular production activities of the enterprise (maintenance services, maintenance and minor repairs of machinery and equipment) usually conduct. For SOEs, their technical staff are trained regularly, even all over the non- state enterprises. Moreover, the state-owned enterprises usually have a contract signed with an R & D organization to perform complex technical consultancy. The private enterprise applies only way to invite technical staff in large companies, through individual agreements in technical issues. The role of other forms of support services in Vietnam has been overlooked as one of the factors that make it difficult for technological innovation in the small and medium- sized enterprises. On assessing the effects of the factors limiting product innovation activities, technological processes of enterprises, is shown by the results of the investigation about techonological capacity in some industries. In the table, a scale was agreed as follows: 1: does not matter; 2: very little significance; 3: mean; 4: very significant; 5: the nature of the decision. The scores in the table is the average score on the results of businesses surveys in each sector in 2007. 977 Table 3: To assess the impact of the factors limiting product innovation activities, technological processes of enterprises Affecting factors Affecting level Electronics, information, telecommunications Seafood processing Coffee processing Contruction Agricultural engineering A. Factors belongs to the business Lack of professional qualified human resources 2,7 3,5 2,3 2,4 2,5 Lack of information technology 2,7 3,6 3,3 2,4 3,5 Lack of outside technical support services 2,3 3,1 3,1 2,6 3,5 Lack of opportunities for cooperation with the outside scientific and technological organizations 2,6 3,1 3,5 2,5 3,2 Difficult to monitor the cost of innovation 1,8 1,8 1,9 2,1 2,2 Conservative and fear innovation thinking of business 2,1 1,6 1,9 1,8 1,2 B. Other factors Risk 1,9 2,0 2,3 2,5 2,3 978 Affecting factors Affecting level Electronics, information, telecommunications Seafood processing Coffee processing Contruction Agricultural engineering aversion, and waste of renovation money Lack of appropriate funding 3,1 3,7 4,1 3,5 4,9 The payback period for renewal is too long 3,0 3,1 3,1 3,1 3,7 Lack of the opportunity to interact with new technology 2,2 3,3 3,4 2,6 3,4 Fear of innovation is easy to imitate 2,4 - - 1,8 2,3 Legal environment is not favorable 3,2 2,9 3,6 2,6 2,6 Tax regime does not encourage innovation 4,0 3,4 4,0 2,7 3,4 exchange goods enjoying psychology of the customer 3,1 1,1 - 2,4 3,1 Source : Report of the survey results about the level and technological capabilities in some economic and technical sectors of Vietnam ( NISTPASS.2014) 979 It can be seen clearly in the context of international economic integration today, the Vietnam small and medium-sized enterprises is still difficult in many aspects, especially in technology, project management, human resources, investment capital technological innovation, information technology, marketing and support services. From the study of international experience shows that even if held under what form of R & D in every business whose main task is working to create new products, the product is competitive to meet market demand and implement the business development strategy. However, it is precisely because of the imposition of duties is quite narrow that many R & D enterprises, particularly in the case of businesses with medium-sized and small have failed to fulfill the functions required of a R & D enterprises as such, leading to restrict, confine within the framework of traditional products, waste resources and other business resources. Worldwide, R & D functions in the enterprise is not only limited to the launch of new products. A professional R & D department in an enterprise often extended and one or more of the following activities: * Product R & D: this is R & D functions purely in terms of the product to give birth to the new product design, materials, properties and uses. For example, studies about fish sauce made from salmon, the seasoning made from seaweed or herbal tea bottle,etc. Enterprises to implement the R & D typically focuses more on product formulation, the section, texture, color, flavor, style. In addition, R & D products also include research to improve and enhance the products available quality. Packaging R & D: in addition to R & D of new products, for some enterprises, especially enterprises in the field of manufacturing and trading, R & D also has the function of research and application of a new type of packaging material. Such a business in the industry launched the bottled green tea products, is filling at high temperature, required to have a plastic bottle made of heat-resistant material without being deformed, non-toxic. R & D department of the enterprise researches to produce a material suitable for the most appropriate cost for this new product. The study of packaging products plays a huge role in the success of the consumer products. Actually, sometimes just changing the packaging material, while keeping component materials, quality and quantity of products inside, the consumption of the product would have increased several times. Packaging for products instant noodles in Vietnam today is an example in this case. When switching from paper packaging to plastic packaging, the products of the enterprise instant noodles Vietnam's capital budget position, was able to fairly compete with foreign products, though the quality inside have not changed much. * Technology R & D: research activities, seeking production technology, optimization process to get their product quality and cost optimization is one of the important functions of R & D. For example, natural fermentation technology differs by acid hydrolysis technology in the production of soy sauce. * Process R & D: The nature of this function is to study, identify the production, processing, assembly, operation, coordination. Its performance give high practical effect to 980 the enterprise. Typically for this activity is to improve the research and development of production processes (for products), processes serving (for services), operating procedures (for machinery). This activity can be considered R & D "software" of the product, other than the "hardware" is material, formulation, packaging. In fact, the work of R & D "software" is often overlooked or ignored, while efficiently bringing even higher than the "hardware". In particular, for the type of service, research and development processes meant to serve a very important, if not the decision in the success or failure of this kind of service. In addition, to implement its mandate, R & D in the business can not help but focus on a process of scientific truth. It's reasonable for R & D, are usually placed for a name that so obviously "R & D process." This process defines the sequence of steps in R & D, described the collaboration between the R & D with other business parts such as marketing, production, quality control, finance from the receipt of the request, research, analyzes from pilot production to mass production. Thus, R & D activities in the business not only the limits of pure and rigid on target launched new products or services. With this understanding, the function of R & D department will be expanded, the expansion of the scope of R & D for business take advantage of resources and cost savings. References 1. The Government (2009), Decree No. 56/2009 / ND-CP dated 30/6/2009 of the Government on development assistance to small and medium-sized enterprises 2. Vu Cao Dam, "Innovating financial mechanisms and policies for R & D activities", document presented at the seminar "Innovation management mechanism R & D activities", NISTPASS, 2003 3. Nguyen Huu Long, Necessary to understand the functions of R & D, the Saigon Economic Times, 6/2009 4. GSO, "The situation of enterprises through the survey results in 2010, 2011, 2012, Publisher of Statistics, 2013 5. Hoang Van Tuyen, Synthesis Report "Look at the factors affecting R & D activities of the company", NISTPASS, 2014