The innovation paradox: Institutional drivers and capability orchestration in Vietnamese enterprises
Type of the article: Research ArticleAbstractEnterprises serve as the primary innovation engine in transition economies yet face significant institutional challenges. The purpose of this study is to investigate the “innovation paradox” in enterprises within a transition economy by analyzing the shift from reliance on passive subsidies (government support) to capability orchestration (absorptive capacity and internal readiness) in determining innovation performance. Grounded in the functional national innovation system and resource-based view, this paper relies primarily on a cross-sectional survey. Data were collected from November 2025 to January 2026 through direct and digital questionnaires administered to C-level executives and R&D managers from 240 enterprises across Hanoi, Da Nang, and Ho Chi Minh City. These key informants were selected for their strategic vantage point, ensuring high relevance in capturing diverse innovation modes. Using partial least squares structural equation modeling (PLS-SEM), the model explains 58.6% of the variance in innovation performance. Empirical results reveal a substantive implementation gap: internal R&D readiness is the strongest direct predictor of innovation performance (β = 0.410), and intermediary linkages significantly enhance outcomes through the partial mediation of absorptive capacity. Conversely, while direct government support marginally aids short-term output, it does not show a significant association with long-term absorptive capacity (β = 0.032). Consequently, policymakers should complement financial incentives by supporting intermediary networks, while managers must cultivate internal learning routines to exploit external knowledge.AcknowledgmentThis is the result of the national-level science and technology project entitled “Comparative Study of Best Practices in the Development of National Innovation Systems in Selected Transition Economies of the European Union and Lessons for Vietnam”, project code KX.07.04/21–30, under the KX07 Program of the Ministry of Science and Technology.