Innovation Policies

Innovation refers to the use of new ideas in a firm’s products, operations, or broader activities that result in greater benefits—whether through increased value added for the firm itself or improvements for consumers and other businesses. Innovation in developing countries such as Vietnam differs significantly from that in developed countries, necessitating distinct policy frameworks. While innovation in developed countries primarily focuses on increasing R&D output, innovation in developing countries emphasizes value-added production and the development of technological capabilities, including technology adoption, adaptation, diffusion, and upgrading. Vietnam has developed a broad innovation framework with multiple institutions supporting technology and entrepreneurship. Despite this growing ecosystem, Vietnam continues to lag in research spending, university-industry collaboration, and commercialization. To address these gaps, policy should prioritize intangible assets such as knowledge, design, and intellectual property over traditional physical incentives. Strengthening technology extension services, enabling the use of intangible assets as collateral, and enhancing STEM education aligned with industry needs would help broaden innovation diffusion and improve productivity. At the same time, Vietnam must reinforce coordination between research institutions, businesses, and the private sector through joint research, technology transfer offices, and commercialization support. Supporting SMEs with quality control, design, marketing, and export facilitation will further expand their participation in innovation networks.