Relationships Between Innovation and Firm Performance in Vietnam’s Manufacturing and Services Industries

Innovation is widely considered a key driver for economic growth and firm's competitiveness. While not a new concept, innovation has become an essential element for obtaining competitiveness in the ever-changing environment and speeding up the economy's development. This study aims to investigate the connections between innovation and firm performance in Vietnam, considering four types of innovation—product, process, organizational, and marketing—across two main industries: manufacturing and services. The study employs a sample of 965 firms, comprising of 666 manufacturing firms and 299 services firms. Data was obtained through a survey conducted in Vietnam between November 2014 and April 2016, as part of the World Bank’s Enterprise Survey project. Estimation of a knowledge production function sheds light on the innovation behaviour of firms and its impacts on their performance, growth, and survival. The results will have implications for public policies supporting innovation and performance of manufacturing and service firms.