TITLE:
Determinants of Technological Diffusion via FDI Enterprises in the Manufacturing Sector in Vietnam over 2005-2013
AUTHORS:
Thanh Ngo-Quang, Thong Le-Van, Phuc Doan-Ngoc
KEYWORDS:
Technological Diffusion, Technical Efficiency, FDI, Manufacturing Sector, Vietnam
JOURNAL NAME:
Open Access Library Journal,
Vol.2 No.10,
October
28,
2015
ABSTRACT: Much empirical research confirms that foreign enterprises are more
efficient than domestic ones in the context of developing countries. However,
while most studies support the hypothesis that foreign ownership participation
increases performance of firms in terms of productivity and efficiency, some
works find no differences, leading to a controversy on this issue. This study
was designed to investigate and examine technological diffusion via FDI
enterprises in manufacturing sector in Vietnam over the period 2005-2013. The
paper finds that in general, the investigation revealed that FDI firms have
more technical efficiency than domestic firms in most of manufacturing
sub-sectors in Vietnam over the period 2005-2013. Factors affecting
technological diffusion between all kinds of FDI and domestic manufacturing
enterprises in Vietnam within the framework of this investigation are named as
follows: 1) Firm’s past performance: Positive relationship between firms’ past
performance and technical efficiency score, 2) Size of a firm in terms of labour
and capital: Negative relationship between size of a firm in terms of labour
and capital and technical efficiency scores, 3) The firms’ financial
performance: Positive relationship between firms’ financial performance and
technical efficiency scores, 4) The firms’ level of self-financing: Negative
relationship between firms’ level of self-financing and technical efficiency
scores, 5) The labour market conditions: Positive relationship between the
labour market conditions and technical efficiency scores, 6) Years of
operation: A quadratic relationship between Years of operation and technical
efficiency scores, 7) FDI creates reverse effects in terms of firms’ financial
performance in terms of ROA, ROE on FDI firms’ technical efficiency, 8) FDI
creates reverse effects in terms of firms’ characteristics (equity to assets
ratio, capital, and labour) on FDI firms’ technical efficiency. Wholly
foreign-owned firms also create reverse effects in terms of equity to assets
ratio on firms’ technical efficiency. Moreover, wholly foreign-owned firms also
create reverse effects in terms of labour on firms’ technical efficiency. Paper
also suggests some recommendations to policy makers and administrators at
various levels in Vietnam.