ADBIWorkingPaperSeries TECHNOLOGY,INNOVATION,ANDFIRMCOMPETITIVENESS: FIRMLEVELANALYSISINCAMBODIA VuthaHing,ShandreThangavelu,andRathaKong No.1353 January2023 AsianDevelopmentBankInstitute VuthaHingisaPhDcandidateattheInstituteforInternationalTrade,UniversityofAdelaide.ShandreThangaveluisaprofessorattheJeffreyCheahInstituteforSoutheastAsia,SunwayUniversityandaprofessorattheInstituteforInternationalTrade,UniversityofAdelaide.RathaKongisaPhDstudentattheInstituteforInternationalTrade,UniversityofAdelaide. TheviewsexpressedinthispaperaretheviewsoftheauthoranddonotnecessarilyreflecttheviewsorpoliciesofADBI,ADB,itsBoardofDirectors,orthegovernmentstheyrepresent.ADBIdoesnotguaranteetheaccuracyofthedataincludedinthispaperandacceptsnoresponsibilityforanyconsequencesoftheiruse.TerminologyusedmaynotnecessarilybeconsistentwithADBofficialterms. Discussionpapersaresubjecttoformalrevisionandcorrectionbeforetheyarefinalizedandconsideredpublished. TheWorkingPaperseriesisacontinuationoftheformerlynamedDiscussionPaperseries;thenumberingofthepaperscontinuedwithoutinterruptionorchange.ADBI’sworkingpapersreflectinitialideasonatopicandarepostedonlinefordiscussion.Someworkingpapersmaydevelopintootherformsofpublication. TheAsianDevelopmentBankrefersto“China”asthePeople’sRepublicofChinaandto“Vietnam”asVietNam. Suggestedcitation: Hing,V.,S.Thangavelu,andR.Kong.2023.Technology,Innovation,andFirmCompetitiveness:FirmLevelAnalysisinCambodia.ADBIWorkingPaper1353.Tokyo:AsianDevelopmentBankInstitute.Available:https://doi.org/10.56506/BIWS9085 Pleasecontacttheauthorsforinformationaboutthispaper.Email:shandre.thangavelu@adelaide.edu.au AsianDevelopmentBankInstituteKasumigasekiBuilding,8thFloor3-2-5Kasumigaseki,Chiyoda-ku Tokyo100-6008,Japan Tel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.orgE-mail:info@adbi.org ©2023AsianDevelopmentBankInstitute Abstract Thepaperexaminestheinnovationandcompetitivenessoffirms,especiallywithregardtothechannelsoftechnologytransferandthenatureofinnovationactivitiesthatinfluencefirmperformanceintheCambodianeconomy.Despitethegrowingimportanceofinnovation,therehasbeennoempiricalanalysisofthefactorsaffectingtechnologicalandinnovativedevelopmentandtheimpactthatthesefactorshaveonfirms’productivityinCambodia.WeusetheWorldBankEnterpriseSurvey(WBES)forCambodianenterprisesforourempiricalimplementation.Theresultsoftheresearchindicatethatoverseaslinkagesthatincludebothupstreamanddownstreamactivitiescouldaffectproductivitygrowthatbothfirmandindustrylevels.WealsofindthattechnologyandinnovationhaveapositiveimpactontheproductivityoffirmsinCambodia. Keywords:technology,innovation,productivity,humancapital,exportandimport JELClassification:D240 Contents 1.INTRODUCTION1 2.LITERATUREREVIEW3 3.OVERVIEWOFSCIENCE,TECHNOLOGY,ANDINNOVATION(STI) INCAMBODIA5 3.1NationalSTIPolicy5 3.2InnovationandTechnologyattheFirmLevel6 4.EMPIRICALSTRATEGYANDDATASOURCE7 4.1EmpiricalStrategy7 4.2DataSources9 4.3EstimationMethod10 5.EMPIRICALRESULTSANDDISCUSSION10 5.1BaselineResults10 5.2DifferentiatingtheImpactofTechnologyandInnovation13 5.3AlternativeMeasureofProductivity14 5.4AddressingEndogeneityProblems15 6.CONCLUSION17 REFERENCES19 1.INTRODUCTION TheNationalInnovationSystem(NIS)iscriticalforthedevelopmentofkeyinnovationstrategiesandeconomicfundamentalsforsustainableandinclusivegrowth.TheNISbuildsacoherentandintegratedframeworktocreatesustainableandinclusivegrowth.TheNISframeworkiscriticalintermsofidentifyingthelinkagesbetweenbusinessesandpublicpolicies,developingkeyfundamentalsofcompetitivenessofdomesticfirms,identifyingthelinkagesbetweendomesticfirmsandmultinationalfirms,developingthevitalhumancapitaltofullyparticipateintheinnovativeandeconomicactivitiesinanopeneconomicsystem,creatingtangibleandintangibleknowledgecapitalinthedomesticeconomy,andcreatingforward-lookingpoliciesandinstitutionstosupportthecreativeandknowledge-basedeconomicdevelopmentintheeconomy(AsianDevelopmentBank2014).TheNISframeworkisalsoimportanttomanagetheunevenimpactofeconomicdevelopmentfromeconomicliberalization,anditwillhaveadirectimpactontheinclusivedevelopmentofdomesticfirms,themanagementofruralandurbansectorinequalities,andwilldirectlyaddressthedigitaldivideandinequalitiesinthedomesticeconomy.TheNISframeworkrecognizestheimportanceofgovernmentpoliciestocoordinateandmanagethekeyinnovationframeworkinthedomesticeconomy. Itisclearthattechnologyandinnovationarekeyfordomesticindustriestobecompetitiveandtocreatesustainabledevelopmentinthedomesticeconomyinthelongrun.Theirsignificanceandimpactonlong-termeconomicdevelopmentandeconomicgrowthiswidelyrecognizedintheliterature(i.e.,GrossmanandHelpman1991;Romer1994).Technologicalprogresscanalsohavepositivespilloversindevelopingcountriestoboosttechnologicalcapacityandenhanceproductivity,whichserveascrucialvehiclestocatchuptodevelopedcountries(Coe,Helpman,andHoffmaister1997;Fagerberg,Srholec,andKnell2007;GrossmanandHelpman1991).ThegrowthpatterninEastAsiaprovidesstrongevidenceofthecrucialimpactoftechnologyandinnovationonthecompetitivenes