Foreign Direct Investment and Innovation Activities of Vietnamese Small and Medium Enterprises

The research investigates the impact of foreign direct investment (FDI) on the innovation activities of small and medium enterprises (SMEs) in Vietnam. The data in this research are extracted from the survey of SMEs in 2011, 2013, and 2015. Using the Bayesian Logit regression method via simulation of the Markov Chain Monte Carlo—MCMC), the research demonstrates that FDI flows tend to overwhelm the innovation activities of SMEs. This result implies that SMEs should focus on investment, technology, and the quality of FDI flows. In addition, the study confirms the internal factors of the enterprise, including the education level of the manager, the number of years of operation of the enterprise, the enterprise located in the industrial park or export processing zone, enterprises with export activities, enterprises with official websites and provincial-specific factor measured through the provincial competitiveness index positively affect the innovation activities of SMEs.