The impact of R&D expenditure on firm performance in emerging markets: evidence from the Vietnamese listed companies

ABSTRACT The impact of research and development (R&D) investment on firm performance is interesting, but it is not easy to conduct this topic in emerging markets due to the data unavailability. We investigate this topic in the context of Vietnam, a fast-growing developing country with impressive progress in economic and social development by employing a unique panel data set of 343 listed companies during the period 2010–2018. We estimate the panel data with two different techniques, including the fixed effect model and the two-stage least squares (2SLS) model. We find that investment in R&D has positive impacts on revenues, profits, return on assets (ROA) and return on equity (ROE). In addition, regression results suggest that firms with high R&D outperform those with low R&D in terms of profit, revenue and ROA. To the best of our knowledge, this is the first paper examining the impacts of R&D on firm performance in Vietnam. We propose that Vietnamese firms should invest more on R&D activities, such as the production of fundamental research and applied research to have better performance and enhance their competitiveness in the future.