Technological Catch-Up through Globalization? Imported Capital Goods, Firm Productivity, and Technical Efficiency in Vietnamese SMEs

Firms gain from globalization not only through exporting but also through access to foreign capital goods that embody superior technology, quality and variety. This paper examines whether imports of capital goods act as an effective channel of technology diffusion and whether firm-level technological capability shapes the gains from importing, using panel data from Vietnam SME Survey for 2011, 2013 and 2015. The paper applies stochastic frontier analysis to distinguish frontier shifts from changes in technical efficiency. The results show that a higher share of imported machinery is associated with an outward shift of the production frontier. This association is driven more by between-firm differences than within-firm changes, suggesting that imported capital goods matter more through embodied technology and cross-firm heterogeneity than through short-run learning. By contrast, the effects of technological capability and its interaction with import share are more mixed. Overall, the findings point to imported capital goods as an important channel of productivity upgrading for Vietnamese SMEs.