The role of government connectivity in fostering innovation activities at small and medium-sized enterprises in Vietnam

Abstract

This paper examines how government relationships influence the innovation activities of small and medium-sized enterprises (SMEs) focusing on the specific aspects of innovation impacted by these relationships. Additionally, it looks at the challenges, opportinities, and strategies that SMEs face in securing government contracts which are often vital for their growth. The research adopts a qualitative approach, collecting data through 121 questionaires and 34 semi-structured interviews with SME leaders and owners in Hanoi, Da Nang, and Ho Chi Minh City. The findings indicate that government ties significantly affect various innovation aspects, inlcuding businesss models, organizational structures, processes, product development, services, branding, and customer engagement. Government contracts provide SMEs with valuable opportinities for business expansion and growth offering bọth financial support and strategic advantages. The study concludes that SMEs with strong government relationships tend to innovate more broadly and effectivelt, leveraging these connections to enhance competitiveness. In terms of practical implications, the research highlights the importance of building and maintaining strong government relationships as the key strategy for SMEs aiming to improve their innovative capacity. It also provides valuable recommendations for policymakers, suggesting the development of supportive public procurement policies and programs to help SMEs thrive through innovation. The findings offer useful insights for businesses and local authorities working to create an environment that fosters SME innovation and growth.