sustainability

Article
How Small- and Medium-Sized Enterprise Innovation
Affects Credit Accessibility: The Case of Vietnam
Phuong Anh Nguyen 1,2, * , Thuy Anh Tram Uong 1,2 and Quang Dung Nguyen 1,2
1 School of Business, International University, Ho Chi Minh City 700000, Vietnam;
anhtram96@gmail.com (T.A.T.U.); nqdung1112@gmail.com (Q.D.N.)
2 Vietnam National University, Ho Chi Minh City, Vietnam
* Correspondence: npanh@hcmiu.edu.vn; Tel.: +84-283-7244-270; Fax: +84-283-7244-271




Received: 8 September 2020; Accepted: 11 November 2020; Published: 17 November 2020


Abstract: Nowadays, small- and medium-sized enterprises play crucial roles in both developed
and developing countries. They create new employment, fulfill the market gap, contribute to Gross
Domestic Product and boost the whole economy. However, small- and medium-sized enterprises face
more financial constraints than large enterprises, which prevent them from growing and expanding
their activities. This paper aims to investigate how the innovation of small- and medium-sized
enterprises impacts on credit accessibility in Vietnam from 2005 to 2015, through five aspects of
innovation: new products, new technology, improved existing products, research and development
investment, and machine innovation. The data set consists of more than 4500 observations of small-
and medium-sized enterprises in Vietnam. This data set is taken from a survey conducted within
the framework of cooperation among UNU-WIDER, the University of Copenhagen and Vietnamese
government agencies. Using panel regression model, we found out that three out of five innovation
factors significantly impact on credit accessibility. More specifically, research and development
investment and new product have negative impact on credit accessibility; whereas new technology
has positive impact on credit accessibility. These findings are useful for firm managers, banks and
policy makers to help small- and medium-sized enterprises overcome financial constraints through
innovation aspects.

Keywords: small- and medium-sized enterprise; innovation; credit accessibility; financial

inclusion; Vietnam

JEL Classification: D20; M10; O30

1. Introduction
Nowadays, small- and medium-sized enterprises (SMEs) are placed among the key components
of the economy in both developed and developing countries. They are internationally known as the
driving force based on their enormous contributions to Gross Domestic Product (GDP) and generating
new employment. They are generally presumed as the leader of environmental sustainability, economic
prosperity and innovation, particularly for the economy of developing countries such as Vietnam [1].
Compared with other type of businesses, SMEs have their own outstanding features about business
activities. SMEs are flexible in adapting the ever-changing market, easy establishment, low expenses,
quick returns, etc. These advantages create the beneficial foundation for SMEs’ operations that are
undertaken in various industries. Besides, they can adapt easily to the market change, they also exploit
and leverage local labor force.
SMEs play an important role in expanding economy, creating careers, contributing to diversify
the products, supporting economic development, and transferring the business structures. Thanks to

Sustainability 2020, 12, 9559; doi:10.3390/su12229559 www.mdpi.com/journal/sustainability

 SMEs play an important role in expanding economy, creating careers, contributing to diversify
the products, supporting economic development, and transferring the business structures. Thanks to
the power of low investment capital and abundant labor force, over the past decades, SMEs’ growth
Sustainability 2020, 12, x FOR PEER REVIEW 2 of 17
has quickly accelerated and become the dominant part among businesses [2]. SMEs supply the
Sustainability 2020, 12, 9559 2 of 17
market with SMEs manyplay products
an important in role
all fields, createeconomy,
in expanding more product
creating alternatives, meet to
careers, contributing alldiversify
the needs of
consumers, therebysupporting
the products, elevate the economy.
economic In addition,
development, and this type ofthe
transferring business,
businessnoticeably, can contribute
structures. Thanks to
a great the power
deal toofthe
the power of
lowlow investment
government capital and abundant labor force, over the past decades,
tax. and abundant labor force, over the past decades, SMEs’ growth
investment capital SMEs’ growth
has has quickly
quickly accelerated
accelerated
In Vietnam, the Annual Business and and become
become the dominant
theReport
dominant
2016 part part
among
released among businesses
businesses
by the [2].Chamber
[2]. SMEs
Vietnam SMEs
supplysupply the
theCommerce
of market
market with many products in all fields, create more product alternatives, meet all the needs of
andwith many products
Industry claimed inthat all fields,
Vietnam create more product
experienced a alternatives,
remarkablemeet all the
growth inneeds of consumers,
the number of new
consumers,
thereby elevate thereby
the elevate
economy. the
In economy.
addition, In
thisaddition,
type of this type
business, of business,
noticeably, noticeably,
can can
contribute contribute
a great deal
enterprises registered and in the reduction of unemployment rate during the period 2007–2016 (see
a great deal to the government tax.
Figure 1). In Vietnam, tax.
to the government
the Annual Business Report 2016 released by the Vietnam Chamber of Commerce
In Vietnam, the Annual Business Report 2016 released by the Vietnam Chamber of Commerce and
and Industry claimed that Vietnam experienced a remarkable growth in the number of new
Industry claimed that Vietnam experienced a remarkable growth in the number of new enterprises
enterprises registered and in the reduction of unemployment rate during the period 2007–2016 (see
The number
registered and in the reduction
Figure 1). of newly
of unemployment rateestablished SMEs
during the period 2007–2016 (see Figure 1).

120,000 110,100
The number of newly established SMEs
100,000 94,754
120,000 110,100
83,600
77,500 76,900 74,845 94,754
80,000
100,000 69,800
83,600
77,500 76,900 74,845
60,00080,000 69,800

60,000
40,000
40,000
20,000
20,000
0
0 2010 2011 2012 2013 2014 2015 2016
2010 2011 2012 2013 2014 2015 2016

Figure 1. The number of newly established small- and medium-sized enterprises (SMEs). Source: The
Figure
Figure 1. 1.
TheThenumber
number of
of newly
newlyestablished
establishedsmall-
small-and medium-sized
and enterprises
medium-sized (SMEs).
enterprises Source:Source:
(SMEs). The
Vietnam Association of SMEs.
TheVietnam
VietnamAssociation
Associationof of
SMEs.
SMEs.

According
According to to
According General
to
General Statistics
GeneralStatistics Office
Statistics ofofVietnam,
Officeof
Office Vietnam,
Vietnam,inin in 2020
2020
2020 SMEs
SMEs
SMEs represent
represent
represent moremore
more than
than 97
than 97 percent
97 percent
percent of
of totalofenterprises
total in
enterprisesVietnam
in Vietnam(see Figure
(see Figure 2).
2).In
In accordance
accordance with
with these
these statistics,
statistics,
total enterprises in Vietnam (see Figure 2). In accordance with these statistics, SMEs are recorded SMEs SMEs
are are recorded
recorded in
in the inaspect
the aspect of solving manysocial
social challenges,
challenges, consisting of ofemployment, and promoting
the aspect of of solving
solving manymany
social challenges, consisting consisting
of employment, employment,
and promoting and promoting
urbanization.
urbanization.
urbanization. Vietnamese SMEs’ contribution is positive to the economy. As reported by the Ministry
VietnameseVietnamese SMEs’ contribution
SMEs’ contribution is positive toisthe positive
economy. to the
As economy.
reported by Asthereported
Ministry byofthe Ministry
Finance
of Finance in December 2019, over 40 percent of Vietnam’s GDP and 30 percent of total budget
of Finance
in December in December
2019, over2019, over of
40 percent 40Vietnam’s
percent of Vietnam’s
GDP GDP and
and 30 percent 30 percent
of total of totalwere
budget revenue budget
revenue were contributed by SMEs. Thanks to SMEs, 60 percent of Vietnam’s workforce was
revenue were by
contributed
employed. contributed
SMEs. Thanks
The amount of bytax
toSMEs.
SMEs, Thanks
60 percent
and other fees which toofSMEs,
Vietnam’s 60 workforce
SMEs have percent
contributedof
wasVietnam’s
employed. workforce
to government
The amountwas
budget
of tax
employed. and
Theother fees
amount which
of taxSMEs
and have
other contributed
fees which
has increased 18.4 times after ten years from 2006 to 2016. to government
SMEs have budget
contributed has increased
to 18.4 times
government budget
after ten years from 2006 to 2016.
has increased 18.4 times after ten years from 2006 to 2016.

Proportion of SMEs in 2018

Proportion4%of3%SMEs in 2018
4% 3%
31%
62%
31%
62%
Micro Small Medium Large

Figure 2. Proportion of SMEs in Vietnam in 2018. Source: General Statistics Office in Vietnam (2018).
Micro Small Medium Large

Figure 2. Proportion
Figure of of
2. Proportion SMEs ininVietnam
SMEs Vietnamin
in2018.
2018. Source: GeneralStatistics
Source: General StatisticsOffice
Officein in Vietnam
Vietnam (2018).
(2018).
Sustainability 2020, 12, 9559 3 of 17

Recently, the issue of finance accessibility of SMEs has become the topic drawing much interest
from managers, investors, banks, and policy makers. SMEs can borrow money from different sources
such as banks, capital fund organizations, issue stock, relatives, etc. Among capital sources, bank credit
is seen as the least risky one and it offers the tremendous amount of capital.
Nonetheless, small- and medium-sized businesses are more financially pressured than large
businesses because of the collateral shortage, lack of management skills of owners, lack of network,
information asymmetries, etc., which is difficult for banks to evaluate. According to the statistics of the
Vietnam Chamber of Commerce and Industry, SMEs’ ability to access credit through the commercial
banks system is still limited, up to 70 percent of SMEs currently do not have access to bank credit.
In which, more than 30 percent of SMEs cannot access bank capital and another 30 percent said that it is
very difficult to access this source of capital. Those 70 percent of SMEs must continue using their own
capital or borrowing from other sources with very high costs and risks. The ratio of outstanding loans
to SMEs accounts for an average of 22–25 percent of total outstanding loans for the entire economy in
the period 2012–2017 [3].
The SME sector in Vietnam has difficulty in accessing formal loans for the following reasons.
From the SMEs side, the level of information transparency of SMEs has not met the expectations of
investors in the financial market and credit institutions. The development level of SMEs is still low due to
the size and capital constraints, outdated technology, poor governance, low productivity. Additionally,
SMEs often lack collateral, do not have the habit of buying hedging insurance, lack understanding of
mechanisms, policies, products—services and packages of financial institutions, guarantee programs
and government support. From the credit institutions’ side, credit institutions do not have specific
products and services suitable for SME customers. The existing products are not diversified, not flexible,
and require complicated and cumbersome credit procedures. The diversity and scale of capital of
institutional investors in Vietnam is low in terms of quantity, type, and scale of working capital.
Other types of financial intermediary institutions develop slowly and mainly focus on large listed
enterprises. These affect the ability of SMEs to diversify capital mobilization channels [3].
If SMEs face barriers when asking for the loan, would that be easier for innovative SMEs?
Does SMEs’ innovation impact on their ability to access to credit? These questions have arisen
recently. Innovation is known as the provision of new merchandises or processes, new service, modern
technologies, creative thoughts or idea, research and development activity with more efficient version to
organize business [4]. Innovative small firms—those introducing new products, processes, or business
models—are important to create new markets, achieve rapid growth, and help the economy recover.
Innovative SMEs have been entitled as the motivation of boosting the economy and equal growth.
In addition, it has a great influence on expanding SMEs’ competitive position. Therefore, investing in
innovative activities is urgent in improving and renovating product quality, services, and cost savings,
which are the core conditions for boosting competency. As innovative small firms can lack the internal
resources to successfully commercialize innovations, external finance plays a particularly important
role [5]. The survey of Hay and Kamshad [6] shows that investment into innovation is the most
common plan for expansion. Successful innovation investment plans will have a multiplier effect by
mobilizing autonomous resources from businesses and simulating the creation of new companies and
industries [7].
On the other hand, despite the noticeable performance of innovative SMEs, there are many
constraints that prevent firms from innovating. Large firms with more capital funds allow them
to make improvement to a variety of innovative projects that would eventually generate income to
continuously work on the next ones. In case of SMEs, they normally focus on developing a single
innovative project due to the lack of availability such as capitals, management skills, etc. Furthermore,
the capital of SMEs is limited, so the investments in upgrading, renewing equipment or process are
not made frequently that result in being stagnant. Credit accessibility of innovative SMEs is lower,
since innovation is viewed as a risk nature relating to the likelihood of unsuccessful future products,
the uncertainty of expected future returns and the high sunk cost storage. Overall, there is a trade-off
Sustainability 2020, 12, 9559 4 of 17

between project risk and return that the bank must have to carefully consider before making the
decision whether to allow SMEs to take out the loan.
In the light of the foregone, this paper investigates the impact of SMEs’ innovation on their credit
accessibility in Vietnam. The proxy for credit accessibility is the formal loan, which is the amount
originally borrowed from banks and formal credit institutions and represents the most important
current formal loan. The investigated research questions are: (i) whether each of the five innovation
factors has positive impact on formal loan, (ii) whether fully innovative firms have any advantages
getting the formal loan compared to the non-innovative firms. This study will fill the gap of the
research on Vietnamese SMEs and provide recommendations for the government, managers, and banks
to help increase SMEs credit accessibility.

2. Literature Review

2.1. SMEs Concepts

There are different ways to define and categorize SMEs across countries. Being considered as
SMEs, they are required to meet these criteria such as the number of employees, the fixed assets,
management skills, applied technology production capacity, economic growth, total sale turnover and
the unique issues experienced by SMEs [8], which makes it difficult to capture the shape of SMEs in
specific countries [9].
In general, the most popular standard to categorize the global definition of SMEs leans on the
total labor force. Nonetheless, based on the distinction in population areas in the world or even in
different states or provinces within the same countries, the number of employees for each type of SMEs
will be divided accordingly [10].
According to the stipulation of Decree No. 56/2009/ND-CP of Vietnam in August 2009, the definition
of SMEs was published. SMEs stand for micro-, small- and medium-sized enterprises, which are
defined as founded enterprises and registered business under Enterprise Law. Micro-, small- and
medium-sized businesses are identified based on the strength of total capital and labor scale across
different industries (see Table 1).

Table 1. SME categories in Vietnam.

Micro Enterprise Small Enterprise Medium Enterprise

Number of Laborers Total Capital Number of Laborers Total Capital Number of Laborers
Agriculture, Forestry ≤100 bill
≤10 ≤20 bill VND 11–200 201–300
and Fishery VND
Industry and ≤100 bill
≤10 ≤20 bill VND 11–200 201–300
Construction VND
Trade and Service ≤10 ≤10 bill VND 11–50 ≤50 bill VND 51–100
Source: Vietnamese Government’s Decree No. 56/2009/ND-CP.

In the newly established Law on Facilitating SME sector (No. 04/2017/QH14), an enterprise is
considered a SME if it meets either of the following criteria: (i) total capital should not exceed VND
100 billion; or (ii) total turnover of the preceding year should not exceed VND 300 billion. In addition,
micro-, small-, and medium-sized enterprises are identified differently in the fields of agriculture;
forestry and fishery; industry and construction; trade and services [9]. Specific criteria of each enterprise
category are stipulated in Decree No. 39/2018/NÐ-CP of Vietnam in March 2018.
In this research, we consider enterprises as SMEs based on the capital scale criteria in accordance
with the Decree No. 56/2009/ND-CP.

2.2. Access to Finance and the Demand of SMEs’ Credit

Nonetheless, enterprises need a huge amount of capital for their different purposes, and in case of
SMEs, the demand of capital becomes higher. Based on Vietnam Survey, more than 60 percent of SMEs
apply for loans [11] (see Figure 3).
 Sustainability 2020, 12, x FOR PEER REVIEW 5 of 17

2.2. Access to Finance and the Demand of SMEs’ Credit

Nonetheless, enterprises need a huge amount of capital for their different purposes, and in case
Sustainability
of SMEs, 2020,
the12,demand
9559 of capital becomes higher. Based on Vietnam Survey, more than 60 percent of5 of 17
SMEs apply for loans [11] (see Figure 3).

The demand of capital

The purpose of external capital

The capital sources

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Banks Other sources

Business expansion Current plans
compensate for short-term loan Firms have capital demand
no have

Figure
Figure 3. The
3. The demandofofcapital,
demand capital, the
the purpose,
purpose,and
andcapital sources
capital [11].[11].
sources

Any Any obstacles

obstacles preventing
preventing SMEsfrom
SMEs frombreaking
breaking out outwould
wouldseriously
seriously become
become a threat toward
a threat the the
toward
economic development. According to [12] the areas that SMEs most identified as barriers or high
economic development. According to [12] the areas that SMEs most identified as barriers or high
barriers to growth are financial constraints (60 percent), government regulations and procedures (44
barriers to growth are financial constraints (60 percent), government regulations and procedures
percent), market access (38 percent), marketing (37 percent), and human capital (33 percent). Facing
(44 percent), market constraints
external financial access (38ispercent),
considered marketing
as the main(37 percent),
barrier of the and
stablehuman
growthcapital
of SMEs.(33 percent).
Thanh
Facinget al. [13] stated that the barriers of SMEs when approaching external finance are the shortage ofSMEs.
external financial constraints is considered as the main barrier of the stable growth of
Thanh et al. [13]
collateral, stated that
insufficient the barriers
experience of SMEsbusinesses
in operating when approaching
of owners, external
not taking finance
part inare the shortage
production
of collateral,
networks; insufficient
which led to experience
the reasons in why
operating
SMEs businesses
find it hard of to owners, not taking
get the credit part in
accessibility fromproduction
the
financial organizations. SMEs are seen riskier to pay back the loan to
networks; which led to the reasons why SMEs find it hard to get the credit accessibility from thethe lender than larger ones.
Access to finance
financial organizations. SMEs is known
are seen asriskier
the capability
to pay back to get
thethe loanfinancial service,than
to the lender such as credit
larger ones.
accessibility, deposit, payments, etc., which are provided by banks, stock markets,
Access to finance is known as the capability to get the financial service, such as credit accessibility, private equity,
financial institutions. Access to credits allows SMEs to utilize productive assets to enhance
deposit, payments, etc., which are provided by banks, stock markets, private equity, financial institutions.
productivity and economy of scale [14]. It provides national economics with the key to boost their
Access to credits allows SMEs to utilize productive assets to enhance productivity and economy of
growth as well as the existence, the creation, and the development of firms, and especially for small
scale and
[14].innovative
It provides national[5,15].
enterprises economics with the
As mentioned key to
above, SMEsboosthave their growth
shortage as well
of capital oras the existence,
cumulative
the creation,
capital isand the development
limited, basically, they needof firms,
creditand
for especially for small enhance
their daily operation, and innovative enterprises
productivity, invest in[5,15].
As mentioned
the asset, adapt technology, etc. Evidence from [16] showed that financial barriers restraint firms from they
above, SMEs have shortage of capital or cumulative capital is limited, basically,
need developing
credit for their dailyare
and SMEs operation,
among theenhance productivity,
most constrained invest in the asset, adapt technology, etc.
category.
Evidence There
from [16]are two common
showed thatfinancial
financialsources
barriersthat firms can
restraint access.
firms from Firstly, internaland
developing finance
SMEs includes
are among
cash constrained
the most in hand and retained
category. earnings. The second one is external finance, including equity finance and
debt finance.
There are two The survey infinancial
common Muhoza by Harelimana
sources [17] recorded
that firms can access. that 38.8 percent
Firstly, of SMEs
internal used both
finance includes
external and internal sources of finance. Around 25.5 percent ran the business with external money,
cash in hand and retained earnings. The second one is external finance, including equity finance and
while the rest of them used within internal ones. Similar findings also agreed that the companies
debt finance. The survey in Muhoza by Harelimana [17] recorded that 38.8 percent of SMEs used both
using external finance to upgrade relatively faster in their business at different growth stages [10].
external
Theseand internallead
evidences sources
to the of finance.
point Around
that external 25.5 is
finance percent
extremely ranvital
the business
in small- and with external money,
medium-sized
whileenterprises’
the rest ofoperation.
them used within internal ones. Similar findings also agreed that the companies
using external finance
In Vietnam, to upgrade
equity financingrelatively
has not beenfaster in theirforbusiness
available SMEs since at different growth are
those companies stages
not [10].
Thesecapable
evidences lead tothe
of meeting the point that
standard externalstock.
of releasing finance is extremely
Therefore, financevital in small-
in debt form has and medium-sized
been chosen.
The most
enterprises’ common external money source that SMEs rely on is the bank lending source. Since the
operation.
In Vietnam,isequity
bank credit less risky and the
financing hassupply of capital
not been source
available forisSMEs
more since
abundant
those than other credit
companies are not
capable of meeting the standard of releasing stock. Therefore, finance in debt form has been chosen.
The most common external money source that SMEs rely on is the bank lending source. Since the bank
credit is less risky and the supply of capital source is more abundant than other credit institutions
and immediate partners. Nonetheless, under 60 percent of total SMEs get credit from the banks,
while the rest have access to the unofficial capital channel. Furthermore, among the enterprises that
borrowed capital from formal debt form, only one third of businesses are approved with loans of
50 percent or more, one fifth of businesses are only allowed to borrow at 25 percent compared to
capital requirements [9]. These numbers display that the demand of capital of SMEs is quite high and
Sustainability 2020, 12, 9559 6 of 17

SMEs have not been able to get enough capital as expected yet. The reasons that become financial
constraints of SMEs involved in the requirement of guarantee assets, the requirement of financial
report, the requirement of management skills, etc.
In conclusion, bank loans apply for both SMEs and large firms; however, it is believed that SMEs
is confronted with more disadvantages. Besides, a large number of previous empirical papers support
that credit constraints intend to harm the development of SMEs [18].

2.3. Innovative SMEs

Innovation is introduced to play an essential role to meet the new requirement or existing market
needs. It takes place through the provision of new products or processes, new service, advanced
technologies, modern idea, creative thoughts, research and development (R&D) with more powerful
versions to organize the business [4].
Nowadays, innovation has been considered a driving force behind firm dynamics [19]. Innovation
and technology pose a tremendous opportunity for Vietnam’s SMEs to increase global market access,
succeed past the startup phase, aim for and achieve high growth, and better engage with international
and environmental standards. Innovative firms are more likely to have better firm performance on the
basis of higher profits and revenues [12]. Innovative firms are also more likely to export, according to
Nguyen et al. in 2008 [20].
Investing in innovation becomes urgent in upgrading product quality, services, and cost savings,
which are the core conditions for boosting competency. Innovative SMEs have been entitled as the
motivation of boosting the economy and equal growth. Additionally, it has a great impact on expanding
SMEs’ competitive position.
However, despite the noticeable performance of SMEs, there are a lot of barriers that prevent firms
from innovation, such as high costs, the high uncertainty of success, weak authorization, etc. Among
them, lack of external finance becomes a main obstacle that SMEs have to confront in their innovative
operations. For SMEs, the capital is limited, so the investments to upgrade, renew equipment or process
are made infrequently that results in obsolete technology. The study of Le et al. in 2019 examined
the relation between SMEs’ capacity to access external capital and innovation in Vietnam and found
that SMEs with a high debt ratio tend to be more innovative [21]. The research of Tran and Vu in 2018
indicated the positive relation between government support and SMEs’ innovation [22].
Empirical evidences show that the innovative SMEs’ demand for borrowing external loan is
higher [15]. However, innovative firms are not given enough credit as they want, which can be seen
most directly in corporate investment in R&D [15]. Lee et al. showed that innovative SMEs which
introduce new products or process have a higher demand for finance compared to other businesses;
however, they have to face difficulties to receive the loan [23].
Several researches found proofs of the basic problems in financial provision for the innovative
project of SMEs. The first reason of innovative SMEs’ restricted credit accessibility is the uncertain
success of the innovative activity [19]. Banks always make wise decisions whenever lending loans
to innovative SMEs. Since it is not sure that R&D activities will completely succeed and innovation
projects are considered as high specific sunk cost, which might fail to guarantee money back to the
banks [24]. This also leads to the reason why bank investment in innovative firms is rated as high
risk, especially in SMEs [25]. Unlike large firms, SMEs might not be able to diversify their innovative
projects in order to cover the unexpected failure.
From the view of lenders, information asymmetries and agency problems are also the main
impediments behind credit provision, which hesitate financial intermediaries from investment in SMEs.
As highlighted by the report of Petersen and Rajan [26], the SMEs cannot meet enough necessary
requirements, which include the skills, the documentaries, the potential investments for external
suppliers. One of the surveys of Hernández-Cánovas and Martínez-Solano [27] reported that SMEs
have ability to obtain the loan, but at the same time suffer from the higher cost of debt than large sized
firms because asymmetric information is deducted when the enterprises are larger. It would be more
Sustainability 2020, 12, 9559 7 of 17

challenging for innovative SMEs as expected. The last disadvantage of innovative investment is that
completed innovative products might not be widely used [28].

2.4. Factors Affecting Credit Accessibility

As highlighted in previous studies, SMEs’ characteristics have a great impact on evaluating the
credit accessibility from banks. The characteristics are classified as firm size, firm age, firm ownership,
total asset, ROE, ROA, etc.
Several surveys stated that firm age is a signal to know the loan repayment ability. Thanks to the
experience through many years of operation, maturity firms are high examined in access to finance
than younger firms, since young businesses are often caught difficult in credit accessibility due to
informational disparities. The survey of Abdullah and Manan [29] found that the financial assistance
service gives equal chance to both young and mature businesses to borrow money for supporting
their daily operation; therefore, it proves there is no significant influence of firm age in external
finance accessibility.
Moreover, ownership types are theoretically considered as a positive factor to access to finance.
With regard to ownership types, state-owned enterprises are admitted to face less financial constraints
from banks or financial institutions, thanks to the government connection [30], while as noted by
Drakos and Giannakopoulos [31], non-state-owned enterprises are struggling with many problems
which come from collateral requirement, related documentaries, lack of relationship with banks.
Another study of Mina et al. [28] was conducted in US, they found that both product innovation
and process innovation have positive relation with credit accessibility; while in the survey of Freel [25],
innovation movements reach the negative success from loan application.
In Vietnam, according to Thanh et al. [13], Nguyen et al. [32], the factors preventing Vietnam SMEs
from accessing to finance are lack of governance experience, pledgeable assets, a close relationship
with commercial banks, and they leave the gap for innovation factor.
Therefore, this paper fulfills this gap by shedding light on the impact of SME innovation on credit
accessibility in Vietnam.

3. Methodology

3.1. Data
This research employs the Vietnam SME database tracking over 2500 enterprises from ten
provinces over time. The survey is collected biennially, and is a collaborative effort of UNU-WIDER,
the Development Economics Research Group (DERG) at the University of Copenhagen, the Central
Institute for Economic Management (CIEM), and the Institute of Labor Science and Social Affairs (ILSSA)
in Vietnam [30,31]. According to UNU-WIDER, the survey instrument is composed of three modules:
(i) a main enterprise questionnaire for owners or managers; (ii) an employee questionnaire administered
to a random subset of employees in a quarter of randomly selected enterprises; and (iii) an economic
accounts module. Firm characteristics, performance, history, employment, business environment, etc.,
are obtained from the enterprise-level survey [33,34].
At present the data set is available for the years 2005, 2007, 2009, 2011, 2013 and 2015 in ten
cities and provinces consisting of Ha Noi, Ho Chi Minh, Hai Phong, Long An, Phu Tho, Quang Nam,
Nghe An, Khanh Hoa, Lam Dong, Ha Tay. To be more specific, there are over 4500 observations
which stand for more than 2500 SMEs. The SMEs are defined under Vietnamese Law as previously
mentioned in Section 2 and these SMEs successfully applied for the formal loan. The enterprises have
one of the following ten ownership types which are household, private, partnership, collective, limited
liability company, joint-stock company with state capital, joint-stock company without state capital,
joint venture with foreign capital, central state enterprise, and local state enterprise. The total number
of SMEs operated each year is summarized in Table 2. Noticeably, the data set takes the unbalanced
panel form, and the existing SMEs in the database vary every year.
Sustainability 2020, 12, 9559 8 of 17

Table 2. The number of SMEs each year in the sample.

Year Total Number of SMEs

2005 1039
2007 935
2009 979
2011 704
2013 612
2015 1006
Source: Authors’ calculation.

3.2. Research Model

We use the panel regression model to investigate the impact of firm’s innovation on access to
external finance. The linear regression equation is given as follows:

Access to credit it = α + β Firm Innovation it + γ Firm Characteristics it + η it

where Access to credit is the dependent variable. Here, we use the most important current formal loan of
SME i at time t, which is the amount originally borrowed from banks and formal credit institutions, as the
proxy for access to the formal financial system. The dependent variable indicates the level of external
finance accessibility of every single SME i in year t. Besides, α, β, γ are constant, and η is the error term.
Firm Innovation includes the independent variables. The measurement of innovation consists of
five types of innovation: new product, improved product, new technology, machine innovation and
R&D investment.
Besides dependent and independent variables, this paper also considers control variables,
Firm characteristics, for a range of business characteristics. Total asset, firm ownership, firm age and
main business operation location are taken into account.

3.3. Variables

3.3.1. Dependent Variables

In this paper, Access to credit is measured based on the most important current formal loan,
the amount of money originally borrowed, measured in million VND.

3.3.2. Independent Variables

The independent variables consist of activities related to innovation within company as follows.
New product: is a dummy variable taking the value 1 when SME has produced a new product
since the previous survey, and 0 otherwise.
Improved Product: is a dummy variable taking the value 1 when SME has made any major
improvements of existing products or changed specification since the previous survey, and 0 otherwise.
New Technology: is a dummy variable taking the value 1 when SME has introduced new
production processes or new technology since the previous survey, and 0 otherwise.
Machine Innovation: is the amount of money (measured in million VND) that the firm has
invested in machinery or equipment since the previous survey, divided by total asset (also measured
in million VND).
R&D investment: is the amount of money (measured in million VND) that the firm has invested
in research and development activities since the previous survey, divided by total asset (also measured
in million VND).
Sustainability 2020, 12, 9559 9 of 17

3.3.3. Control Variables

The first control variables are chosen as follows.
Firm Age: is the number of years the enterprise has run business.
Total Asset: is the total asset of the firm, measured in million VND.
Besides, in the data set there are enterprises among the ten ownership types and coming from ten
provinces. The preliminary regression results suggest we consider the significant factors which are
the following.
Ownership Type 5: is also a dummy variable, equal to 1 for a limited liability company, equal to
0 otherwise.
Ownership Type 7: is also a dummy variable, equal to 1 for a joint-stock company without state
capital, equal to 0 otherwise.
Province 2: is a dummy variable, equal to 1 if the main area of business and production activity is
in Ho Chi Minh City.
Province 3: is a dummy variable, equal to 1 if the main area of business and production activity is
in Hai Phong City.
Province 6: is a dummy variable, equal to 1 if the main area of business and production activity is
in Phu Tho province.

4. Results and Discussion

We use STATA software to run panel regression model. The Pooled OLS (Pooled Ordinary
Least Squares), FEM (Fixed Effect Model), REM (Random Effect Model) are compared to find the
most suitable model. Then, robust standard errors will be used to deal with heteroscedasticity and
autocorrelation problems if applicable.

4.1. Descriptive Statistics

The variables’ descriptive statistics are given in Table 3, with the total number of observations
over the period of six years equal to 5275. According to this table, the average formal loan amount is
VND 765.32 million. In terms of location, 18.19 percent of total firms mainly operate business in Ho
Chi Minh City, 7.88 percent in Hai Phong City, 12 percent in Phu Tho province. Regarding ownership
types, 26.86 percent of total firms are limited liability companies, 5.45 percent are joint-stock companies
without state capital. The average firm age is 12.86 years, while average total asset is VND 4844.21
million. Concerning innovation factors, about 16.36 percent of total firms have implemented a new
product, 43.41 percent improved product, 20.79 percent introduced new process or new technology,
average machine innovation investment to total asset is 55.58, research and development investment
to total asset on average is 25.91.

Table 3. Descriptive Statistics.

Variable Obs. Mean Std. Dev. Min Max

Formal Loan 5275 765.3216 4125.537 0.05 172,316.6
Province 2 5275 0.1819905 0.3858733 0 1
Province 3 5275 0.0788626 0.2695497 0 1
Province 6 5275 0.1279621 0.3340793 0 1
Ownership Type 5 5275 0.2686256 0.4432867 0 1
Ownership Type 7 5275 0.0545972 0.2272138 0 1
Total Asset 5275 4844.218 23358.57 2.35 1,045,000
Firm Age 5275 12.86408 9.009828 2 72
New Product 5275 0.1636019 0.369949 0 1
Improved Product 5275 0.4341232 0.4956882 0 1
New Technology 5275 0.2079621 0.405888 0 1
Machine Innovation 4567 55.58546 125.3854 0 1683.111
R&D investment 4564 25.912 132.7345 0 2953.121
Source: Authors’ calculation.
Sustainability 2020, 12, 9559 10 of 17

In Table 4, the Pearson correlation coefficients are given, varying in the range from −0.1807 to
0.3598 among independent variables, which support no evidence of multicollinearity. Variance Inflation
Factors (VIFs) are also reported in Table 5 to double-check no multicollinearity problem. All the VIF
values are smaller than 5, which support no evidence of multicollinearity (see also Appendices C and D).

Table 4. Pearson correlation coefficients.

Formal Province Province Province Ownership Ownership Total

Loan 2 3 6 Type 5 Type 7 Asset
Formal Loan 1.0000
Province 2 0.1426 1.0000
Province 3 0.0121 −0.1380 1.0000
Province 6 −0.0251 −0.1807 −0.1121 1.0000
Ownership 5 0.1476 0.1997 −0.0028 −0.1233 1.0000
Ownership 7 0.0561 −0.0312 0.0783 −0.0121 −0.1456 1.0000
Total Asset 0.5120 0.0789 0.0291 −0.0368 0.1526 0.0422 1.0000
Firm Age −0.0371 −0.1378 0.0236 −0.0069 −0.2053 −0.0458 −0.0157
New Product −0.0054 0.0172 0.0132 −0.0145 0.0095 0.0020 0.0177
Improved Product 0.0672 0.0637 0.0275 −0.0229 0.0965 0.0134 0.0876
New Tech 0.1255 0.0828 0.0026 −0.0802 0.1384 0.0352 0.1441
Machine Innovation 0.0256 0.0278 −0.0143 0.0024 0.0491 0.0184 0.0081
R&D invest. −0.0336 0.0300 −0.0329 −0.0079 0.0534 0.0504 −0.0465
Firm New Improved New Machine R&D
Age Product Product Technology Innovation Investment
Firm Age 1.0000
New Product −0.0300 1.0000
Improved Product −0.1143 0.2082 1.0000
New Technology −0.0929 0.2406 0.3598 1.0000
Machine Innovation −0.1165 0.0997 0.0899 0.2261 1.0000
R&D investment 0.0290 −0.0751 −0.0703 −0.653 −0.0431 1.0000
Source: Authors’ calculation.

Table 5. The values of Variance Inflation Factor (VIF).

Variable VIF 1/VIF

New Technology 1.28 0.784121
Improved Product 1.18 0.846303
Ownership Type 5 1.16 0.863572
Province 2 1.10 0.910489
Firm Age 1.08 0.925286
New Product 1.07 0.930725
Province 6 1.07 0.932857
Total Asset 1.07 0.935077
Machine Innovation 1.07 0.935961
Ownership Type 7 1.05 0.950892
Province 3 1.05 0.952301
R&D investment 1.03 0.975570
Mean VIF 1.10
Source: Authors’ calculation.

4.2. Empirical Results

This research implements the panel regression model for 4564 observations in six years after
excluding the observations missing at least one variable in the model. The panel regression model
examines the effect of innovative activities including new products, improved products, R&D
investment, modern machine and equipment, advanced technologies on credit accessibility. Besides,
some firm’s characteristic components are also included.
Sustainability 2020, 12, 9559 11 of 17

First, to compare between Fixed Effect Model and Random Effect Model (REM), Hausman Test is
applied. The REM is preferred since p-value is 0.662 greater than 0.05 (see Appendix A).
To compare between Pooled OLS and REM, Breusch and Pagan Lagrange multiplier test is
conducted. Pooled OLS is preferred since p-value is 1.00 greater than 0.05 (see Appendix B).
Consequently, Pooled OLS is the appropriate model. Robust standard error (Rogers, 1993) is used
to deal with heteroscedasticity and autocorrelation (see Appendix E).
Thus, using the results from Table 6, the linear regression equation is obtained as follows:

Access to credit it =
− 169.17 + 1083.22 Province 2 + 204.12 Province 3 + 314.19 Province 6
+ 399.45 Ownership Type 5 + 0.099 Total Asset
− 321.78 New Product + 429.09 New Technology − 0.51 R&D investment + η it

Table 6. The regression results with Robust standard error.

Variables Access to Credit

−321.78 ***
New Product
(119.38)
7.39
Improved Product
(182.36)
429.09 **
New Technology
(169.08)
0.31
Machine Innovation
(0.28)
−0.51 ***
R&D investment
(0.15)
1.22
Firm Age
(3.84)
0.099 ***
Total Asset
(0.027)
Ownership Type 5 399.45 ***
(Limited Liability company) (138.99)
Ownership Type 7 541.59
(Joint-Stock Company without state capital) (334.06)
Province 2 1083.22 ***
(Ho Chi Minh City) (265.55)
Province 3 204.12 *
(Hai Phong City) (123.61)
Province 6 314.19 **
(Phu Tho province) (127.67)
Standard errors in parentheses: * p < 0.10, ** p < 0.05, *** p < 0.01. Source: Authors’ calculation.

According to this equation, on average, Province 2 (Ho Chi Minh City) has the highest impact
on formal loan, justifying the fact that Ho Chi Minh City offers a dynamic business environment as
the economic capital of Vietnam. Thus, if SME has main business operation in Ho Chi Minh City
then formal loan rise is VND 1083.22 million. New technology has the second important impact level,
thus if SME has introduced new technology then the formal loan rise is VND 429.09 million. Next if
the firm is a limited liability company then the formal loan rise is VND 399.4 million, suggesting these
companies are more in credit demand and better meet the bank requirements. Hai Phong city, Phu Tho
province, Total Asset also have positive relationship with formal loan.
Sustainability 2020, 12, 9559 12 of 17

On the other hand, new product and R&D investment have negative relationship with formal
loan. If SME has produced a new product, then formal loan fall if VND 321.78 million. If the ratio of
R&D investment to total asset increases 1 unit then formal loan decreases by VND 0.51 million.
To summarize, if the firm is only one-factor innovative then formal loan increases with new
technology, decreases with new product and R&D investment. Next, if the firm is partly innovative
by having introduced new technology and new product but not investing in R&D then formal loan
increases by VND 107.31 million. For a fully innovative firm, formal loan increases when the ratio of
R&D investment to total asset is less than or equal to 210.41 units, which means the firm is innovative
but limiting their investment in R&D activities.

4.3. Discussion
First, the results show that new product and R&D investment have the negative relation with
credit accessibility at 1% significance level. This result is consistent with [25]. The introduction of
novel products over the preceding two years is significantly negatively associated with the formal
loan amount. This implies firms may get more formal loan for the first plan of new product than the
next ones.
Besides, new technology has positive impact on credit accessibility at 5% significance level.
This result is similar to some other previous papers such as [28], when determining impact of
innovation on credit accessibility. The results show that if SMEs introduced new production processes
or new technology, they would receive more credit ability from the financial intermediaries. As we
know, production process and technology play an important role in directly influencing the productivity
of enterprises. Innovative production processes and new technologies are needed to make enough
inventories for customer satisfaction. Additionally, innovative technology will prevent the business
from wasting fuel production as well as being stagnant.
Finally, according to the regression results, the product improvement and machine innovation
have no significant impact on credit accessibility. This may infer that banks and credit institutions pay
no attention to the firm plan of product improvement and machine innovation.
In terms of control variables, the findings show that firm ownership (limited liability company)
has positive relation with formal loan. This may imply these firms successfully obtain higher bank
credit. Among provinces, Ho Chi Minh City, Hai Phong, Phu Tho positively impact credit accessibility,
supporting the higher level of dynamism of these cities and provinces. Total Asset has positive relation
with credit accessibility, which is consistent with the result in [28]. Firm Age, however, has no relation
with credit accessibility for SMEs, supported by Malesky and Taussig [35].

5. Conclusions
There is no doubt about the crucial role of external fund accessibility for SMEs. Using the data
set from a survey of SMEs conducted in Vietnam in six years 2005, 2007, 2009, 2011, 2013, 2015 of ten
cities and provinces, including Ha Noi, Ho Chi Minh, Hai Phong, Long An, Phu Tho, Quang Nam,
Nghe An, Khanh Hoa, Lam Dong, and Ha Tay, this research explores how innovative factors such as
new product, improved product, new technology, machine innovation, and R&D investment impact
on SMEs’ credit accessibility.
The research found out that three out of five factors relating to innovation affect credit accessibility.
They include new products, R&D investment and new technology. Specifically, new product and
R&D investment have significantly negative effects, while new technology has a significantly positive
effect on credit accessibility. These results are consistent with [25,28]. SMEs with higher total asset,
firms located in Ho Chi Minh City, Hai Phong City, Phu Tho province, and limited liability companies
also obtain more formal loan on average.
These results provide us with recommendations for SMEs, the government and financial
institutions in the long-term. In general SMEs need to increase formal loan to expand their business
operation, finance their current plans and pay short-term debts (see Figure 3). To overcome the
Sustainability 2020, 12, 9559 13 of 17

current problem of credit accessibility for SMEs, it would be more effective to focus on implementing a
comprehensive plan of several measures as follows.
First, if SMEs’ strategy is to go partly innovative then they should focus on new technology or
production process to increase formal loan. If SMEs decide to go fully innovative then they should
have implemented new product and introduced new technology solutions to reduce costs and improve
efficiency, meanwhile limiting their investment in R&D.
Second, the government needs to set up specialized organizations to support SMEs from various
aspects. These specialized organizations advise SMEs to overcome difficulties in technology, human
resources, market, product quality, etc., in the direction of encouraging SMEs to develop. Incentive
and supportive policies should be implemented consistently, flexibly, effectively and throughout
the development of the SME system. New technology or new production process should be of a
particular interest. Investing in R&D should be taken into account but at a reasonable investment
proportion. This result is consistent with [36] as implemented by the Australian government in 2020
with significant additional support for non-R&D innovation over the next 5–10 years, in addition to
more traditional R&D.
Third, the implementation of government credit support should be implemented selectively and
focused. Firms located in Ho Chi Minh City, Hai Phong City, Phu Tho province, and limited liability
companies are more dynamic in terms of formal loan amount obtained, should be encouraged. [36]
also suggests that some key growth sectors should be prioritized. Supporting SMEs to access credit
should be a component of the overall SME support system, along with other support programs such as
capacity building, training, tax incentives, finance and business environment improvement programs
to increase efficiency.
Fourth, there should be a platform for sharing information of stakeholders, including tax
authorities, business registration, bank credit information, etc., helping banks and SMEs to share and
transparent information, better serving SME credit rating and rating. Thus SMEs would overcome poor
information transparency to build trust with not only credit institutions but also financial investors,
securities investment funds and other financial intermediaries, helping SMEs step by step diversify
capital sources for their development process.
Fifth, the government should continue to further promote the role of capital mobilization of the
stock market in providing medium- and long-term capital for SMEs. In particular, it is necessary
to accelerate the process of developing the corporate bond market. Currently, there are very few
enterprises exploiting this capital source and therefore the room for development of the corporate
bond market is huge. On the other hand, it is necessary to facilitate the development of new types
of financial intermediary institutions such as investment banks, venture capital funds, and SME
investment funds. The development of the above types of financial intermediary institutions will
facilitate direct connection of new business ideas of startups with investors in the financial market,
thereby solving the problem of capital for SMEs.
Finally, for the financial institutions, it is necessary to proactively upgrade the system; invest in
building a digital financial platform to improve the accessibility and provision of financial services
to SMEs; enhance the search and access to cheap capital sources from preferential programs of
domestic and foreign organizations to finance specific business fields of SMEs that are approved by
the government; design specific loan products which are suitable for SME customers according to
each industry group to flexibly respond to customer requirements; improve and simplify the lending
process. Moving towards applying big data technology in banking operations will better help the bank
grasp information about its business operations, product usage trends as well as evaluate reputation in
customer credit relationship [3].
To conclude, Industry 4.0 brings up many opportunities for innovative SMEs participating in
global value chain. Managers, banks and policy makers should pay more attention to innovative
technology activities of SMEs to help them boost their business development and contribute to
 This research has been using panel regression model to investigate the impact of innovation
factors on credit accessibility using SMEs database from UNU-WIDER. Other research papers have
been using logistic regression model, Tobit regression method, etc., to study various aspects of
financial inclusion and credit accessibility. Future research could be undertaken with a more
Sustainability 2020, 12, 9559 14 of 17
comprehensive database using these approaches. More detailed analysis may also be obtained with
Sustainability 2020, 12, x FOR PEER REVIEW 14 of 17
sub-categories of SMEs across industries to provide recommendations for key growth sectors.
economic
This growth.
research This
has research shed
been using lightregression
panel on some ideas of to
model theinvestigate
strategic plans that help
the impact of innovative
innovation
Author Contributions:
SMEs
Conceptualization, P.A.N.; Data curation, T.A.T.U. and Q.D.N.; Funding acquisition,
factorsovercome
on creditthe finance barriers
accessibility using and
SMEsaccess morefrom
database capital fund.
UNU-WIDER. Other research papers have
P.A.N.; Methodology, P.A.N.;been
Project administration, P.A.N.; Software, P.A.N.impact
and T.A.T.U.; Supervision,
beenThis research
using logistichas using
regression panelTobit
model, regression model
regression to investigate
method, etc., to the of innovation
study various aspects of
P.A.N.; Validation,
factors P.A.N.
on inclusion and T.A.T.U.;
credit accessibility using Visualization,
SMEs database Q.D.N.;
from Writing—original
UNU-WIDER. draft, T.A.T.U. and Q.D.N.;
financial and credit accessibility. Future research could beOther researchwith
undertaken papers a have
more
Writing—review
been using&logistic
comprehensiveediting, P.A.N.
regression
database and
model,
using Q.D.N.
theseTobit All authors
regression
approaches. have
method,
More read and agreed
etc., analysis
detailed to study mayto
various the published
aspects
also be version of the
of financial
obtained with
manuscript.
inclusion and credit
sub-categories of SMEsaccessibility. Future research
across industries to providecould be undertakenfor
recommendations with
keya growth
more comprehensive
sectors.
database using these approaches. More detailed analysis may also be obtained with sub-categories of
Funding:Author
This research is funded
Contributions: by VietnamP.A.N.;
Conceptualization, NationalDataFoundation for Science
curation, T.A.T.U. andFunding
and Q.D.N.; Technology Development
acquisition,
SMEs across industries to provide recommendations for key growth sectors.
P.A.N.; Methodology, P.A.N.; Project
(NAFOSTED) under grant number 502.01-2016.21. administration, P.A.N.; Software, P.A.N. and T.A.T.U.; Supervision,
P.A.N.;Contributions:
Author Validation, P.A.N. and T.A.T.U.; Visualization,
Conceptualization, Q.D.N.;T.A.T.U.
P.A.N.; Data curation, Writing—original
and Q.D.N.; draft,
FundingT.A.T.U. and Q.D.N.;
acquisition, P.A.N.;
ConflictsMethodology,
of Interest:P.A.N.;
Writing—review The authors
& editing, declare
P.A.N. no conflict
and Q.D.N.
Project administration, P.A.N.; of interest.
All Software,
authors have read
P.A.N. and
and agreedSupervision,
T.A.T.U.; to the published version
P.A.N.; of the
Validation,
P.A.N. and T.A.T.U.; Visualization, Q.D.N.; Writing—original draft, T.A.T.U. and Q.D.N.; Writing—review &
manuscript.
editing, P.A.N. and Q.D.N. All authors have read and agreed to the published version of the manuscript.
Appendix A. Hausman
Funding: Test
This research Comparing
is funded by VietnamFixed Effect
National Model
Foundation forand Random
Science EffectDevelopment
and Technology Model
Funding:
(NAFOSTED)This under
research is funded
grant numberby Vietnam National Foundation for Science and Technology Development
502.01-2016.21.
(NAFOSTED) under grant number 502.01-2016.21.
. hausman fixed random
Conflictsof
Conflicts ofInterest:
Interest:The
Theauthors
authorsdeclare
declareno
noconflict
conflictof
ofinterest.
interest.
Note: the rank of the differenced variance matrix (8) does not equal the number of coefficients being tested (10); be sure this is
what you expect, or there may be problems computing the test. Examine the output of your estimators for anything
Appendix
Appendix
unexpected andA.possibly
A. Hausman
Hausman Testscaling
Test
consider Comparing
Comparing FixedEffect
Fixed
your variablesEffect Model
Model
so that andRandom
and Random
the coefficients Effect
are Effect
on Model
Model
a similar scale.

Coefficients
. hausman fixed random
(b) (B) (b-B) sqrt(diag(V_b-V_B))
Note: the fixed random varianceDifference
rank of the differenced S.E.the number of coefficients being tested (10); be sure this is
matrix (8) does not equal
what you expect, or there may be problems computing the test. Examine the output of your estimators for anything
p2 unexpected and possibly
-1118.422 1083.226consider scaling your variables5493.515
-2201.649 so that the coefficients are on a similar scale.
o5 134.9806 399.4583 -264.4778 261.8821
Coefficients
o7 90.34423 (b) 541.5944(B) -451.2502
(b-B)
419.0061
sqrt(diag(V_b-V_B))
ta .1028248 fixed .0999344random .0028905
Difference .0043796
S.E.
age -4.088345 1.220464 -5.308809 14.05563
new_prod p2
-503.0888 -1118.422 1083.226
-321.7897 -2201.649
-181.2991 5493.515
182.3049
improved_p~d o5
-122.4525 134.9806 399.4583
7.395506 -264.4778
-129.848 261.8821
159.729
o7 90.34423 541.5944 -451.2502 419.0061
new_tech 243.7028
ta
429.0965
.1028248 .0999344
-185.3937
.0028905
184.3228
.0043796
machine2 .2682859
age .3115019
-4.088345 1.220464 -.043216
-5.308809 .6243606
14.05563
rd2 -.3360067
new_prod -.5161401
-503.0888 -321.7897 .1801334
-181.2991 .4572399
182.3049
improved_p~d -122.4525 7.395506 -129.848 159.729
new_tech 243.7028 429.0965
b = consistent -185.3937
under Ho and Ha; 184.3228
obtained from xtreg
machine2 .2682859 .3115019 -.043216 .6243606
B = inconsistent
rd2
under Ha,
-.3360067
efficient under
-.5161401
Ho;
.1801334
obtained from xtreg
.4572399

Test: Ho: difference in coefficients notunder

b = consistent systematic
Ho and Ha; obtained from xtreg
B = inconsistent under Ha, efficient under Ho; obtained from xtreg
chi2(8) = (b-B)'[(V_b-V_B)^(-1)](b-B)
Test: Ho: difference in coefficients not systematic
= 5.87
Prob>chi2 chi2(8)
= =0.6620
(b-B)'[(V_b-V_B)^(-1)](b-B)
= 5.87
Prob>chi2 = 0.6620

Appendix B. Breusch-Pagan Lagrange Multiplier Test Comparing Pooled OLS and Random Effect
AppendixB.B. Breusch-Pagan
Breusch-Pagan Lagrange
Lagrange Multiplier
Multiplier Test
TestComparing
ComparingPooled
Pooled OLS
OLS and
and Random
Random Effect
Model Appendix
Effect Model
Model
. xttest0
. xttest0

Breusch and and

Breusch Pagan Lagrangian
Pagan Lagrangian multiplier test
multiplier test forfor random
random effects
effects

loan[id,t]
loan[id,t] = Xb+ +u[id]
= Xb u[id] +
+ e[id,t]
e[id,t]
Estimated results:
Estimated results: Var sd = sqrt(Var)
Var sd = sqrt(Var)
loan 1.67e+07 4085.68
loan e 1.51e+07
1.67e+07 3882.355
4085.68
u 0 0
e 1.51e+07 3882.355
Test: Var(u)u = 0 0 0
chibar2(01) = 0.00
Test: Var(u) = 0 Prob > chibar2 = 1.0000
chibar2(01) = 0.00
Prob > chibar2 = 1.0000
Sustainability 2020, 12, 9559 15 of 17
Sustainability
Sustainability 2020,
2020, 12,12, x FOR
x FOR PEER
PEER REVIEW
REVIEW 15 15
of of
17 17

Appendix
Appendix
Appendix C.
C.C.VIFVIF
VIF

Sustainability 2020, 12, x FOR PEER

. .REVIEW
vif
vif 15 of 17

Appendix C. VIF Variable

Variable VIF
VIF 1/VIF
1/VIF

new_tech
new_tech
. vif
1.28
1.28 0.784121
0.784121
improved_p~d
improved_p~d 1.18
1.18 0.846303
0.846303
o5o5
Variable 1.16
1.16
VIF 0.863572
0.863572
1/VIF
p2p2 1.10
1.10 0.910489
0.910489
age
age
new_tech 1.08
1.08
1.28 0.925286
0.925286
0.784121
improved_p~d
new_prod
new_prod 1.18
1.07
1.07 0.846303
0.930725
0.930725
p6o5
p6 1.16
1.07
1.07 0.863572
0.932857
0.932857
tap2
ta 1.10
1.07
1.07 0.910489
0.935077
0.935077
age 1.08 0.925286
machine2
machine2 1.07
1.07 0.935961
0.935961
new_prod 1.07 0.930725
o7
o7p6 1.05
1.05
1.07
0.950892
0.950892
0.932857
p3
p3ta 1.05
1.05
1.07 0.952301
0.952301
0.935077
rd2
rd2
machine2 1.03
1.03
1.07 0.975570
0.975570
0.935961
o7 1.05 0.950892
Mean
Mean VIF
VIF
p3 1.10
1.10
1.05 0.952301
rd2 1.03 0.975570

Appendix
Appendix
Appendix D. D. Correlation
D.Correlation
Correlation Coefficients
Coefficients
Coefficients among
among
Mean VIF
among Variables
Variables
1.10
Variables
Appendix D. Correlation
. pwcorr
. pwcorr loan
Coefficients
loan
p2 p2
p3 p3
p6 p6
o5 o5
among
o7 o7
ta ta
ageage
Variables
new_prod
new_prod improved_prod
improved_prod new_tech
new_tech machine2
machine2 rd2rd2

loan
loan p2 p2 p3 p3 p6 p6 o5 o5 o7 o7 ta ta
. pwcorr loan p2 p3 p6 o5 o7 ta age new_prod improved_prod new_tech machine2 rd2
loan
loan 1.0000
1.0000
p2 p2 loan 1.0000
0.1426
0.1426 p2
1.0000 p3 p6 o5 o7 ta
p3 p3 0.0121-0.1380
0.0121 -0.1380 1.0000
1.0000
p6loan
p6 1.0000-0.1807
-0.0251
-0.0251 -0.1807-0.1121
-0.1121 1.0000
1.0000
p2 0.1426 1.0000
o5 o5 0.1476 0.1997
0.1476 0.1997-0.0028
-0.0028-0.1233
-0.1233 1.0000
1.0000
p3 0.0121 -0.1380 1.0000
o7 o7
p6
0.0561-0.0312
0.0561 -0.0312 0.0783
0.0783-0.0121
-0.0251 -0.1807 -0.1121
-0.0121-0.1456
1.0000
-0.1456 1.0000
1.0000
ta ta
o5 0.5120
0.5120
0.1476 0.0789
0.0789 0.0291
0.0291 -0.0368
-0.0368
0.1997 -0.0028 -0.1233 0.1526 0.0422
0.1526
1.0000 0.0422 1.0000
1.0000
ageage
o7 -0.0371
-0.0371 -0.1378 0.0236
0.0561-0.1378
-0.0312 0.0236-0.0069
0.0783 -0.0069
-0.0121 -0.2053
-0.2053
-0.1456 -0.0458-0.0157
-0.0458
1.0000 -0.0157
new_prod
new_prod ta -0.0054
-0.0054
0.5120 0.0172
0.0172
0.0789 0.0132
0.0132 -0.0145
-0.0145
0.0291 -0.0368 0.0095
0.0095
0.1526 0.0020
0.0020
0.0422 1.00000.0177
0.0177
improved_p~d
improved_p~d age 0.0672 0.0637
0.0672
-0.0371 0.0637 0.0275
-0.1378 0.0275-0.0229
0.0236 -0.0229
-0.0069 0.0965
0.0965
-0.2053 0.0134
0.0134
-0.0458 0.0876
0.0876
-0.0157
new_prod
new_tech
new_tech -0.0054
0.1255 0.0172
0.1255 0.0828 0.0132
0.0828 0.0026 -0.0145
-0.08020.0095
0.0026-0.0802 0.0020
0.1384
0.1384 0.0177
0.0352
0.0352 0.1441
0.1441
improved_p~d
machine2
machine2 0.0672 0.0278
0.0256
0.0256 0.0637 0.0275
-0.0143-0.0229
0.0278-0.0143 0.00240.0965
0.0024 0.0134
0.0491
0.0491 0.0876
0.0184
0.0184 0.0081
0.0081
new_tech
rd2rd2 0.1255 0.0300
-0.0336
-0.0336 0.0828 0.0026
0.0300-0.0329 -0.0802
-0.00790.1384
-0.0329-0.0079 0.0352
0.0534
0.0534 0.1441
0.0504
0.0504 -0.0465
-0.0465
machine2 0.0256 0.0278 -0.0143 0.0024 0.0491 0.0184 0.0081
rd2 -0.0336 0.0300 -0.0329 -0.0079 0.0534 0.0504 -0.0465
ageage new_prod
new_prod improv~d
improv~d new_tech
new_tech machine2
machine2 rd2rd2
age new_prod improv~d new_tech machine2 rd2
ageage 1.0000
1.0000
new_prod
new_prod age -0.0300
-0.0300 1.0000
1.0000 1.0000
improved_p~d
improved_p~d
new_prod -0.1143
-0.1143 0.2082 1.0000
-0.0300 0.2082
1.0000 1.0000
improved_p~d
new_tech
new_tech -0.1143 0.2406
-0.0929
-0.0929 0.2082 1.0000
0.2406 0.3598
0.3598 1.0000
1.0000
new_tech
machine2
machine2 -0.0929 0.0997
-0.1165
-0.1165 0.2406 0.3598
0.0997 0.0899 1.0000
0.0899 0.2261
0.2261 1.0000
1.0000
machine2
rd2rd2 -0.1165 0.0997 -0.0703
0.0290-0.0751
0.0290 -0.0751 0.0899 0.2261
-0.0703-0.0653 1.0000
-0.0653-0.0431
-0.0431 1.0000
1.0000
rd2 0.0290 -0.0751 -0.0703 -0.0653 -0.0431 1.0000

Appendix
Appendix
Appendix
Appendix E.
E.E.TheThe
The
E. Results
Results
The Results
Results with
with
withwith Robust
Robust
Robust
Robust Standard
Standard
Standard
Standard Error
Error
Error
Error
. xtreg
. xtreg
. xtreg loan loan
loan
p2 p2p2p3
p3 p3p6
p6 p6 o5
o5 o5 o7
o7 o7 ageage
ta ta age new_prod
new_prod
new_prod improved_prod new_tech
improved_prod
improved_prod machine2
new_tech
new_tech rd2,
machine2
machine2 vce(cluster
rd2,
rd2, id) id)id)
vce(cluster
vce(cluster

Random-effects
Random-effects
Random-effects GLS
GLSGLS regression
regression
regression Number of
Number
Number obs
obsobs = = = 4,564
of of 4,564
4,564
Group variable: id Number of groups =
Group
Group variable:
variable: id id Number
Number of of groups= = 2,467
groups 2,467
2,467
R-sq: Obs per group:
R-sq: within = 0.1678
R-sq: ObsObs
perper group:
group:
min = 1
within
within = =0.1678
= 0.1678
between 0.3429 minmin
avg == = 1.9 1 1
between
between = =0.3429
= 0.3429
overall 0.2603 avgavg
max == = 61.91.9
overall
overall = 0.2603
= 0.2603 maxmax
= = 6 6
Wald chi2(12) = 206.05
corr(u_i, X) = 0 (assumed) Prob >
Wald
Wald chi2
chi2(12) = = = 0.0000
chi2(12) 206.05
206.05
corr(u_i,
corr(u_i, X) X) = 0= (assumed)
0 (assumed) Prob
Prob > chi2
> chi2 = = 0.0000
0.0000
(Std. Err. adjusted for 2,467 clusters in id)
(Std.
(Std. Err.
Err. adjusted
adjusted forfor 2,467
2,467 clusters
clusters in in
id)id)
Robust
loan Coef. Std. Err. z P>|z| [95% Conf. Interval]
Robust
Robust
loanp2
loan Coef. Std.
Coef.
1083.226 Std. Err.
Err.
265.559 z z P>|z|
4.08 P>|z|
0.000 [95%
[95% Conf.
Conf.
562.7402 Interval]
Interval]
1603.712
p3 204.1239 123.6136 1.65 0.099 -38.15438 446.4022
314.192 265.559
p2 p2p6 1083.226
1083.226 127.6716
265.559 2.46
4.08
4.08 0.014
0.000
0.000 63.96032
562.7402564.4237
562.7402 1603.712
1603.712
p3 p3o5 399.4583
204.1239 138.9987
204.1239 123.6136
123.6136 2.87
1.65
1.65 0.004
0.099
0.099 127.0258
-38.15438671.8908
-38.15438 446.4022
446.4022
p6 p6o7 541.5944
314.192 334.0655
314.192 127.6716
127.6716 1.62
2.46
2.46 0.105
0.014
0.014 -113.1619 1196.351
63.96032 564.4237
63.96032 564.4237
o5 o5ta 399.4583
.0999344
399.4583 .0274886
138.9987
138.9987 3.64
2.87
2.87 0.000
0.004
0.004 .0460577
127.0258.1538111
127.0258 671.8908
671.8908
age 1.220464 3.847667 0.32 0.751 -6.320825 8.761752
o7 o7 541.5944 334.0655
541.5944 334.0655 1.62
1.62 0.105
0.105 -113.1619 1196.351
-113.1619 1196.351
new_prod -321.7897 119.3893 -2.70 0.007 -555.7884 -87.791
ta ta
improved_prod .0999344
.0999344
7.395506 .0274886
.0274886
182.3677 3.64
3.64
0.04 0.000
0.000
0.968 .0460577364.8296
.0460577
-350.0386 .1538111
.1538111
ageage
new_tech 1.220464
1.220464 3.847667
429.0965 3.847667
169.0831 0.32
0.32
2.54 0.751
0.751
0.011 -6.320825760.4932
-6.320825
97.69969 8.761752
8.761752
new_prod
new_prod -321.7897
machine2-321.7897 119.3893
.3115019 119.3893
.2850781 -2.70
-2.70
1.09 0.007
0.007
0.275 -555.7884.8702446
-555.7884
-.2472408 -87.791
-87.791
improved_prod
improved_prod 7.395506
rd2 7.395506 182.3677
-.5161401 182.3677
.1585075 0.04
0.04
-3.26 0.968
0.968
0.001 -350.0386
-350.0386
-.8268091 364.8296
364.8296
-.2054711
new_tech_cons 429.0965
new_tech -169.1732 169.0831
429.0965 92.11566
169.0831 -1.84
2.54
2.54 0.066
0.011
0.011 -349.7166
97.69969 11.3702
97.69969 760.4932
760.4932
machine2
machine2 .3115019 .2850781
.3115019 .2850781 1.09 0.275
1.09 0.275 -.2472408
-.2472408 .8702446
.8702446
sigma_u
rd2 -.51614010 .1585075
rd2 -.5161401 .1585075 -3.26
-3.26 0.001
0.001 -.8268091
-.8268091 -.2054711
-.2054711
sigma_e 3882.3549
_cons -169.1732
-169.1732 92.11566
92.11566 -1.84
-1.84 0.066
0.066 -349.7166
-349.7166 11.3702
_cons 11.3702
rho 0 (fraction of variance due to u_i)
sigma_u
sigma_u 0 0
sigma_e 3882.3549
sigma_e 3882.3549
rhorho 0 0 (fraction
(fraction
of of variance
variance duedue
to to u_i)
u_i)
Sustainability 2020, 12, 9559 16 of 17

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