Factors affecting innovation capacity: Empirical evidence from small and medium enterprises in Vietnam

Type of the article: Research Article AbstractThis paper aims to assess the relative importance of various determinants impacting small and medium enterprises’ (SMEs) capacity for innovation. The study employed a quantitative approach with data obtained from 462 participants working across SMEs in 2023 in Ho Chi Minh City, Vietnam. The collected data were subsequently processed and analyzed using structural equation modeling (SEM) and exploratory factor analysis (EFA). The EFA results indicated the removal of two items due to their poor fit within the variables. Furthermore, the statistical adequacy of the data for factor analysis was confirmed by a Kaiser-Meyer-Olkin (KMO) coefficient of 0.892 and a significant Bartlett’s test (Chi-square = 8177.250, p-value < 0.001). The remaining variables yielded a convergent solution in the subsequent CFA analysis, with goodness-of-fit indices meeting acceptable thresholds. The SEM results revealed four key factors influencing the innovation capability of SMEs in Ho Chi Minh City: collaboration networks, organizational culture, entrepreneurial leadership, and internal human resources, with p-values for all these factors’ estimates of 0.000. The survey respondents indicated that collaborative networks exerted the most substantial influence on the innovation capability of SMEs (with an estimate of 0.282). Subsequently, factors such as organizational culture and entrepreneurial leadership demonstrated progressively lesser degrees of impact, with corresponding coefficients of 0.266 and 0.207, respectively. Recommendations for both enterprises and state policies are then proposed.