Impact of competition on product innovation: evidence from Vietnamese manufacturing enterprises

This study explores the impact of competition on innovation in Vietnam, using a probit model with a binary dependent variable to measure product innovation outcomes. The competition variable is calculated using the adjusted Herfindahl-Hirschman Index. The study uses data from the 2021 enterprise survey, which includes 200,059 manufacturing firms. The model estimation results and the calculation of the marginal effect of competition provide several key findings: first, there is an inverted U-shaped relationship between competition and innovation; second, an optimal competition threshold is identified, where the marginal effect of competition on innovation is maximized. However, the competition level in the sample exceeds this optimal level, leading to a diminishing marginal effect of competition on innovation; third, a competition threshold is identified, beyond which competition no longer stimulates innovation. These findings offer valuable insights for policymakers and business leaders to develop effective competition regulation strategies, fostering an environment that supports innovation.