Innovation: National competitiveness improvement strategy and innovation startup ecosystem building strategy of Ho Chi Minh City

1. Definition

Innovation

According to the Organization for Economic Cooperation and Development (OECD), innovation is the application of a new or significantly improved product (goods or services) or process, a new marketing method or organizational structure method in business practice, organizational structure or foreign relations. Hence, there are 4 forms of innovation namely product, process, marketing method or organizational structure method.

According to the Law No. 29/2013/QH13 on Science and Technology, amended and supplemented by Law No. 28/2018/QH14, innovation is the creation, application of achievements, technical solutions, technologies, management solutions to improve the efficiency of socio – economic development, improve productivity, quality, added value of products and goods.

Innovation driven start-up

According to Decree 94/2020/ND-CP on the regulation of mechanisms and preferential policies for the National Innovation Center, creative startups are enterprises established in accordance with the law to implement ideas on the basis of exploitation of intellectual property, technology, new business models and capable of rapid growth.

Definition of creative startups in Decree 94/2020/ND-CP on the regulation of preferential mechanisms and policies for the National Innovation Center.

Innovation ecosystem

According to Granstranda and Holgersson, the innovation ecosystem is a population consisting of actors (government, organizations, businesses, individuals), activities (cooperation, research and development, innovation), assets/vehicles (knowledge/technology, capital/human resources, products/services, platforms), mechanisms, policies and interactions between actors leading to the formation of innovative results from one or more actors in the population. The innovation ecosystem can have levels of scale ranging from Group level, industry/sector level to regional or national level.

Startup innovation ecosystem

According to Metcalfe, Ramlogan and the Joint Research Centre (JRC), a scientific and knowledge institution of the European Commission, the innovation startup ecosystem is a system with a regional or national level structure, in which innovative startups, small-and-medium-sized enterprises, corporations, higher education institutions and state institutions interact with each other on a integrated platform of technology, society, law and commerce to create knowledge and develop new technologies and new business opportunities. This interaction is aimed at developing and protecting new technologies, investing and forming new projects and enterprises in accordance with the law. Thus, the innovation startup ecosystem is only fundamentally different from the innovation ecosystem in that it focuses on supporting and facilitating business development for the core component of the innovation startup enterprise.

GII – Global Innovation Index

According to the World Intellectual Property Organization (WIPO), the Global Innovation Index is a ranking index of the performance of innovation ecosystems of economies on a global scale each year. year. This index includes 80 sub-indices, arranged in 02 groups. The input sub-index group represents the 5 elements of the national economy, serving as the foundation and premise for innovation activities, including: Institutions, Human capital and research, Infrastructure, Market sophistication, Business sophistication. The group of output sub-indices represents the results of the innovation process, consisting of two basic indicators: Knowledge and Technology outputs, Creative outputs.

GCI 4.0 - Global Competitiveness Index 4.0

According to the Report on Competitiveness Index of the Ministry of Planning and Investment, the Global Competitiveness Index 4.0 is an index that evaluates the determinants of a country’s productivity levels – the most important motivation for improving long-term living standards. The index is based on a set of factors influencing productivity in the context of the Industrial Revolution 4.0, measured by 98 indicators for 12 pillars of productivity, divided into 04 groups: business environment, human resources, market and innovation ecosystem. The index has been officially published by the World Economic Forum in related reports since 2018.

2. Overview of the national competitiveness improvement strategy and the strategy of building the innovation startup ecosystem of Ho Chi Minh City

According to Porter (1990), national competitiveness has 04 levels based on the foundation of:

Available production resources;
Investment capital;
Innovation capacity;
Social prosperity.

At the first level, businesses use only available resources and low-skilled basic human resources to produce simple products that are designed from highly qualified countries. At the second level, national competitiveness is based on the ability to attract investment capital (mainly from abroad) to effectively produce standard products and services. After that, national competitiveness advances to the third level, which is based on the innovation capacity when the enterprise is able to create new technologies, methods and produce or provide new products and services that are globally competitive. At the fourth level of competitiveness, enterprises no longer promote innovation but focus on maintaining social prosperity created from the previous level.

Economic zones are defined by countries (or regions of lower geographical size such as regions and cities) as strategies for developing growth rates and improving the competitiveness of the economy. According to the United Nations Industrial Development Organization12 the economic zone has 05 types:

Industrial park;
Special economic zone, including export processing zone or free trade zone;
Eco-industrial park;
High-tech park;
Creative urban area.

Table 1 introduces the relation between the first 03 levels of national competitiveness according to the main economic zone type according to the United Nations Industrial Development Organization and the World Economic Forum. Internally considering the level of national competitiveness, they are distinguished by different threshold frames of values of indicators: gross domestic product per capita (GDP per capita) and 03 weighted percentages (total 100%) reflect:

The level of exploitation of available production resources (according to reviews from: public-private organizations, infrastructure, microeconomic environment, health and secondary education),
Operational efficiency (in undergraduate training, markets: commodities, human resources, finance, technological readiness)
Innovation capacity (according to the level of business perfection and research and development activities, innovation) of each country.

Thus, the World Economic Forum has redefined the second level of national competitiveness according to operational efficiency instead of investment capital proposed by Porter.

Competitiveness level:	Level 1: based on available production resources	Transition from level 1 to level 2	Level 2: based on efficiency factors	Transition from level 2 to level 3	Level 3: based on innovation factors
Per capita GDP threshold (US$)	<2000	2000-2999	3000-8999	9000-17000	>17000
The level of exploitation of available production resources	60%	40-60%	40%	20-40%	20%
The level of effective exploitation of investment capital (and the efficiency of operations)	35%	35-50%	50%	50%	50%
Innovation capacity	5%	5 – 10%	10%	10 – 30%	30%
Main types of economic zones:	Industrial park	Special economic zone	Eco-industrial park	High-tech park	Creative urban area

Table 1. The relationship between the levels of national competitiveness and the types of key economic zones

For Vietnam, national competitiveness for the period 2017-2018 is classified at the transition level from level 1 to level 2 according to the Global Competitiveness Report for this period of the World Economic Forum. By 2019,Vietnam’s competitiveness level remains unchanged as the gross domestic product per capita this year is also just 2,551.1 US$ (less than 2,999 US$ according to Table 1). Considering the Global Competitiveness Index 4.0, Vietnam’s ranking (compared to the total number of countries surveyed) through 2017, 2018 and 2019 was 71/135, 77/140 and 67/141 respectively. This shows that to improve the level of competitiveness and the Global Competitiveness Index 4.0, the development of high-tech parks and the formation of creative urban areas with an emphasis on innovation activities are key factors.

Recognizing the importance of economic development associated with improving national competitiveness, the government has issued Resolution No. 02/NQ-CP on the tasks and solutions that mainly improve the business environment, improve national competitiveness in 2022 on January 10, 2022. The aim of this resolution is to vigorously improve the business environment, improve Vietnam’s position on the international rankings of business environment and competitiveness in order to adapt to the development trend of the Fourth Industrial Revolution and increase the resilience of the economy in the context of the COVID-19 epidemic. Accordingly, some specific objectives related to national innovation by 2025 are set as follows: Global Competitiveness Index 4.0 strives to be among the top 50 countries; Global Innovation Index strives to be among the top 40 countries (this index of Vietnam in 2021 reached 44/132 countries participating in the ranking)…

Resolution No. 02/NQ-CP also sets out the key tasks and solutions related to innovation: “developing the innovation ecosystem, supporting and encouraging innovation startups”; this task has also been focused on for the period 2016-2020 in the framework of the project “Supporting the national innovation startup ecosystem until 2025” according to Decision No. 844/QD-TTg approved by the government on May 18, 2016… on February 2, 2021, the government also approved Decision No. 188/QD-TTg on amending and supplementing some articles of Decision No. 844/QD-TTg to build an “open and flexible” startup ecosystem in the period of 2021-2026; by 2030, the national innovation startup ecosystem will be ranked in the top 15 emerging innovation startup ecosystems in the Asia-Pacific region.

As a key economic – industrial center of the country, in the spirit of implementing Project 844 of the government, on August 15, 2016, Ho Chi Minh City also issued Decision No. 4181/QD-PPC accompanied by a program to support small and medium-sized enterprises in the City to innovate, improve competitiveness and international integration in the period of 2016-2020, which includes the content to form the creative startup ecosystem for the City… On March 1, 2021, the city also issued Decision No. 672/QD-PPC approving the project “Supporting the development of the Innovation Startup Ecosystem in Ho Chi Minh City in the period of 2021-2025”. The project has the following main objectives:

Supporting the development of the city’s innovation startup ecosystem developing on a regional level, gradually becoming a solid foundation to support innovation startup activities, improving productivity quality, competitiveness of enterprises, developing the city’s flagship product, contributing to increasing the contribution of the TFP Total Factor Productivity index to the City’s Gross Regional Domestic Product (GRDP) by 2025 to 45-50%;
Creating a favorable environment to promote, support the formation and development of enterprises with rapid growth based on exploitation of intellectual property, technology, new business models;
Completing the legal system to support innovation startup activities.

Regarding the innovative urban development strategy to build the hardware structure for the innovation startup ecosystem of the city, Ho Chi Minh City has issued a plan to implement the project “Formation and development of creative and highly interactive urban eras in the East of the City in the period of 2020-2035” in 2020-2025 according to Decision No. 318/QD-PPC dated January 24, 2022. The purpose of this plan is to build and develop the Eastern region of the city (Thu Duc City) into a highly innovative, interactive metropolis and a region that leads the city and city economies in knowledge-based economic activities such as training, research and high-tech production. The plan includes 06 working groups, including:

Urban development planning,
Management of development towards smart, creative urban areas,
Investment in infrastructure construction,
State administration,
Human resource development,
Construction of an economic and investment policy system.

In the sixth working group, there are 02 policy groups developing and attracting economic sector activities in 02 key areas:

High-Tech Park: develop research, design, testing, trial production, and production of high-tech innovative products
The City National University Area: develop learning and training services, international cooperation, creative space, research and development, startup incubator; attract international academies to cooperate in training, establish branches, and establish schools in the Eastern creative urban area.

Under the plan to implement the project “Formation and development of creative and highly interactive urban eras in the East of the City in the period of 2020-2035” of the city, the City National University Area can be considered an innovation center, a creative nucleus in the Eastern creative urban area, combined with the High-tech park to contribute to increasing the City’s innovation capacity, thereby improve the level of national competitiveness (according to Table 1) and related indicators.

References

1. Definition of Innovation by the Organization for Economic Co-operation and Development (OECD) in 2005
2. Definition of innovation in Law on Science and Technology No. 29/2013/QH13 dated June 18, 2013, amended and supplemented by Law No. 28/2018/QH14 dated June 15, 2018
3. Definition of innovation startups in Decree 94/2020/ND-CP on the regulation of preferential mechanisms and policies for the National Innovation Center
4. Granstranda, O., Holgersson, M. (2020), Innovation ecosystems: A conceptual review and a new definition, Technovation 90-91, Elsevier Ltd.
5. Metcalfe, S. & Ramlogan, P. (2008). Innovation Systems and the Competitive Process in Developing Economies. The Quarterly Review of Economics and Finance, 48(2), 433-446.
6. Basso, A., Baltar, E., & Andonova, E. (2018). Startup Innovation Ecosystems in Southern Europe. European Commission, Brussels, JRC113872.
7. World Intellectual Property Organization (WIPO). https://www.globalinnovationindex.org/about-gii.
8. Report on understanding the competitiveness index (2019). Ministry of Planning and Investment.
9. Porter, M. E. (1990). The Competitive Advantage of Nations. Harvard Business Review, 68(2), 73-93.
10. Global Competitiveness Report 2017-2018 of the World Economic Forum.
11. Global Competitiveness Report 2017-2018 of the World Economic Forum.
12. Global Competitiveness Report 2019 of the World Economic Forum.
13. The 2018 and 2019 Global Competitiveness Report of the World Economic Forum (2020 and 2021, due to the impact of the COVID-19 epidemic, many international organizations do not publish the annual ranking report, including the World Economic Forum’s 4.0 Global Competitiveness Report).
14. Resolution No. 02/NQ-CP on main tasks and solutions to improve the business environment and enhance national competitiveness in 2022.
15. Decision No. 844/QD-TTg of the Government approving the project “Supporting the national innovation startup ecosystem until 2025”.
16. Decision No. 188/QD-TTg of the Government on amending and supplementing a number of articles of Decision No. 844/QD-TTg.
17. In 2020, Vietnam’s innovation startup ecosystem was ranked 59/100 global innovation startup ecosystems and in the group of 20-25 emerging innovation startup ecosystems in Asia-Pacific according to Startup Blink (center for research and ranking of global startup ecosystems).
18. Decision No. 4181/QD-UBND of Ho Chi Minh City People’s Committee promulgating a program to support small and medium-sized enterprises in the City to innovate, improve competitiveness and international integration in the period of 2016-2020.
19. Decision No. 672/QD-UBND of Ho Chi Minh City People’s Committee on approving the project “Supporting the development of Ho Chi Minh City’s innovation startup ecosystem in the period 2021-2025”
20. TFP’s contribution to Ho Chi Minh City’s GRDP in 2020 reached 42%, an increase of 10% compared to 2015 (source: Ho Chi Minh City Statistics Department)
21. Decision 318/QD-UBND of Ho Chi Minh City People’s Committee promulgating a plan to implement the project “Formation and development of a creative, highly interactive urban area in the East of the City in the period of 2020-2035” in 2020- 2025 January 24, 2022.

Associate Professor, Dr. Mai Thanh Phong, Associate Professor, Dr. Le Van Thang Dr. Pham Tan Thi, Associate Professor, Dr. Pham Dinh Anh Khoi.
University of Technology, VNUHCM

Science and Technology