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Does planned innovation promote financial access? Evidence from Vietnamese SMEs

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Abstract

The study examines the feedback effect of innovation outcomes on access to finance, as an extension to the existing literature which suggests financial access drives firms to innovate. The study applies the theory of planned behaviors integrated with the signaling theory to evaluate financial access of Vietnamese firms in connection to their innovation with a particular focus on planned innovation activities—innovation activities that started out with an entrepreneurial intention to innovate. Applying the multilevel mixed-effects logistic (MELOGIT) regression for panel and the two-stage probit model within the conditional mixed process (CMP) to the data on Vietnamese small and medium firms, for the period 2005–2015, the study shows that firms with innovation outcomes appear to have better access to finance. More interestingly, the effect is stronger for planned innovation. These findings assert the signaling role of planned innovation to potential lenders on a comprehensive resource commitment guiding the innovation activity to success. The study offers interdisciplinary arguments from both financial risk perspective and theory of planned behavior integrated with the signaling view.

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Notes

  1. Small value of labor cost relatively to revenue results in small percentage which is rounded down to zero. This explains the minimum value of zero for labor cost.

  2. The exogenous variables predict innovative activity include R&D over assets, proportion of machine over asset, and percentage top management by woman whilst these variables have little relation to the outcome variable.

  3. Our robustness tests confirm that overall bank access is also positive toward innovation and planned innovation across innovation types. Results are to be provided upon request.

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Funding

This research is funded by the Vietnam National Foundation for Science and Technology Development (NAFOSTED) [502.01- 2016.21].

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Authors and Affiliations

  1. The Business School, RMIT University Vietnam, Ho Chi Minh City, Vietnam

    Thi Thu Tra Pham & Thai Vu Hong Nguyen

  2. Birmingham Business School, University of Birmingham, Birmingham City, United Kingdom

    Son Kien Nguyen

  3. CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences, Prague, Czech Republic

    Hieu Thi Hoang Nguyen

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  1. Thi Thu Tra Pham
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Appendix

Appendix

See Tables 5, 6, 7 and 8.

Table 5 Industry composition according to Vietnamese Standard Industrial Classification (VSIC) 1 digit
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Table 6 Descriptive statistics for firms with financial access to different bank types
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Table 7 The multilevel mixed-effects logistic regression for access to foreign-owned banks and social policy banks
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Table 8 The recursive systems for censored Probit model for access to foreign-owned banks and social policy banks
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Pham, T.T.T., Nguyen, T.V.H., Nguyen, S.K. et al. Does planned innovation promote financial access? Evidence from Vietnamese SMEs. Eurasian Bus Rev 13, 281–307 (2023). https://doi.org/10.1007/s40821-023-00238-3

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