The impact of information technology adoption and input resource competition on product innovation: evidence from Vietnamese firms

This study examines the impact of information technology (IT) adoption and competition for input resources (capital and labor) within the same industry at the 5-digit level on business product innovation. Using a large dataset of 659,105 businesses surveyed by the National Statistics Office of Vietnam, the study applies normalized logit models to address multicollinearity, a large number of variables and complex interaction effects. The results show that IT adoption (using the internet, software, and automation systems) is the most influential factor, significantly increasing the potential for product innovation. Simultaneously, competition for input resources has a dual impact: competition for capital promotes innovation by improving resource allocation. In contrast, competition for labor hinders innovation due to skill limitations and rising labor costs. Notably, IT applications play a regulatory role, helping businesses better leverage the benefits of capital competition and mitigate the adverse effects of labor competition, with the impact varying by workforce size. These results imply that policies should prioritize digital transformation, coupled with improved capital allocation and labor skills development, to enhance businesses’ capacity for innovation.