Distance to the Frontier and Innovation: The Role of Local Business Environment

  • Pham Thi Huyen Trang Foreign Trade University
  • Vu Hoang Nam Foreign Trade University


This study uses panel data from biennially surveys of small and medium-sized enterprises during the period of 2005-2015 in the transition economy of Vietnam, and data on the quality of local business environment (measured by the provincial competitiveness index). This study uncovers that the effects of distance to the frontier (measured by the ratio of productivity of an enterprise to that of the industry leader) on innovation are negatively moderated by improved local business environment. Such an important role of the local business environment indicates that laggard enterprises, which form the majority in transition economies, are favourably supported to achieve innovation when quality of the local business environment is improved.


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Author Biographies

Pham Thi Huyen Trang, Foreign Trade University

School of Economics and International Business

Vu Hoang Nam, Foreign Trade University

Faculty of International Economics

How to Cite
TRANG, Pham Thi Huyen; NAM, Vu Hoang. Distance to the Frontier and Innovation: The Role of Local Business Environment. Malaysian Journal of Economic Studies, [S.l.], v. 57, n. 1, p. 21-37, june 2020. ISSN 1511-4554. Available at: <https://mjes.um.edu.my/article/view/24360>. Date accessed: 28 jan. 2021. doi: https://doi.org/10.22452/MJES.vol57no1.2.