[Research Contribution] Strategies to Foster Innovation in Local Socio-Economic Development: An Assessment Based on the Pillars of the Provincial Innovation Index (PII)

5 August, 2025

Keywords: Innovation; local income; socio-economic development.

In the context of Viet Nam accelerating its pursuit of the Sustainable Development Goals, innovation is not merely a strategic choice but a fundamental driving force for socio-economic transformation at the local level. In alignment with the spirit of Resolution No. 57/NQ-TW (2024) of the Politburo on breakthroughs in science, technology, innovation, and national digital transformation, the research team from the University of Economics Ho Chi Minh City (UEH) utilised a comprehensive dataset from 63 provinces and cities (prior to the administrative merger) to highlight two key aspects: (i) the uneven development of innovation pillars across territorial regions; and (ii) the impact of innovation on income and inequality at the local level.

Research Context

Viet Nam is undergoing profound transformation to adapt to emerging trends of the Fourth Industrial Revolution, aiming to achieve sustainable development by 2030 and to become a high-income nation by 2045. Against this backdrop, on 22 December 2024, the Politburo issued Resolution No. 57/NQ-TW on breakthroughs in science, technology, innovation, and national digital transformation. This resolution provides a comprehensive strategic orientation, recognising innovation as one of the foremost pillars for fostering rapid and sustainable growth while enhancing national competitiveness.

Resolution 57 underscores several core directives:

Establish innovation, science and technology, and digital transformation as the principal engines of socio-economic development and the modernisation of national governance;
Ensure comprehensive leadership by the Party and active participation from all segments of society, particularly enterprises, entrepreneurs, and citizens;
Prioritise the development of institutions, infrastructure, data, strategic technologies, and human resources—with institutions being a prerequisite that must advance ahead of other factors;
Progressively achieve technological self-reliance, particularly in key technologies, while allocating substantial resources for their development;
Ensure cybersecurity, data safety, and national sovereignty in cyberspace as a continuous requirement throughout the entire process of digital transformation and innovation.

Accordingly, Resolution 57 sets specific objectives for 2030, including: strengthening intrinsic scientific and technological capacity; increasing the contribution of total factor productivity (TFP) to economic growth; expanding investment in research and development (R&D); building modern digital infrastructure; and perfecting digital-based state governance models. These foundations are critical to realising the 2045 vision of Viet Nam as a developed nation, with innovation serving as a core driver.

The guiding principles in Resolution 57 closely align with the global innovation framework proposed by Dutta & Lanvin (2012), which has been localised through Viet Nam’s Provincial Innovation Index (PII). This framework conceptualises innovation as a process comprising five input factors—institution; human capital and R&D; infrastructure (technological and ecological); market sophistication; and business sophistication—and two output factors: knowledge, technology and creative products, and the socio-economic impacts of innovation.

Against this backdrop, the UEH research focuses on two primary objectives:

Assess the strengths and weaknesses of each PII component at the local level to identify regional innovation characteristics;
Analyse the impact of innovation on local residents’ incomes—considering average income, wage and salary income, income from agriculture–forestry–fishery, and income from non-agricultural sectors—while also examining correlations between the PII and the income levels of the richest and poorest groups, as well as the gap between them.

Research Findings

Each economic region demonstrates distinct strengths across different PII pillars
The Red River Delta and Central Coastal regions excel in innovation input pillars: institutions, human capital and R&D, infrastructure, market sophistication, and business sophistication.

Conversely, the Southeast and Mekong Delta regions demonstrate strengths in two output pillars:
(1) Knowledge, creativity, and technology products; and
(2) Impact.

In particular, the Mekong Delta shows strong performance in knowledge, creativity, and technology products, benefiting from favourable agricultural conditions. These percentile rankings can inform local innovation strategies based on the inherent strengths of each region or locality.

Average per capita income is positively influenced by infrastructure, market sophistication, business sophistication, knowledge–creativity–technology products, and innovation impacts.
Wage and salary income is positively influenced by infrastructure, market sophistication, business sophistication, and innovation impacts, while institutional factors show a statistically significant negative effect on this income group.
Innovation plays a greater role in driving incomes from industrial and service sectors than from agriculture–forestry–fishery.
Only innovation impacts positively influence agricultural incomes, whereas human capital, R&D, market sophistication, and business sophistication tend to hinder income growth in this sector. This reflects the ongoing trend of young workers leaving rural areas for urban centres or industrial zones. In agriculturally strong regions such as the Mekong Delta, this finding serves as an early warning for designing sustainable innovation-driven socio-economic strategies.
Clear positive effects of innovation are observed for non-agricultural incomes, particularly through business sophistication, knowledge–creativity–technology products, and their associated economic and social impacts.
Innovation exerts a positive influence on both the highest- and lowest-income groups.
High-income groups are affected by infrastructure, market sophistication, and innovation impacts, while low-income groups are influenced by business sophistication, knowledge–creativity–technology products, and innovation impacts. Socially, these effects contribute to reducing income inequality.

Policy Implications

Based on the above analysis, the research team proposes the following policy recommendations:

Leverage strengths and address weaknesses in line with regional characteristics
Research results indicate that lowland and coastal provinces enjoy notable advantages in PII pillars such as infrastructure, market sophistication, business capacity, knowledge–technology products, and the social impacts of innovation. In contrast, mountainous provinces face significant challenges, particularly in institutional quality, human capital, and R&D. Addressing these disparities aligns with the strategic measures set forth in Resolution 57, including:

Enhancing investment and improving infrastructure for science, technology, innovation, and digital transformation;
Promoting innovation within enterprises;
Strengthening the application of science and technology in political institutions;
Expanding international cooperation in science, technology, innovation, and digital transformation.

Although institutional and human capital–R&D pillars currently show no clear effect on residents’ incomes, they remain essential inputs for the innovation process. Improving these factors in 2026–2030 will lay the groundwork for:
(i) Refining institutions, removing developmental bottlenecks, and transforming them into national competitive advantages; and
(ii) Developing and utilising high-quality human resources to meet the demands of innovation and digital transformation.

Enhance the role of innovation in local socio-economic development
Empirical evidence shows that PII pillars positively affect per capita income, particularly wages and non-agricultural incomes. However, innovation has not yet demonstrated a significant impact on agricultural incomes, despite the sector’s importance in certain regions. Climate change, salinity intrusion, and labour shifts away from agriculture are diminishing this sector’s advantages. Strengthening inter-regional and cross-sectoral linkages that integrate innovation with existing strengths is crucial for sustainable agricultural development.
Improve institutional quality
Creating an enabling environment for innovation requires:

Enhancing science and technology policies aligned with socio-economic goals;
Establishing transparent legal systems to ensure security, order, and business support;
Reducing market entry costs, enhancing competitiveness, and fostering proactive local governance.

Strengthen human capital and R&D activities
Developing local human resources and research ecosystems entails:

Enhancing skills at the general education level;
Increasing secondary school participation in science competitions;
Expanding public spending on education and training;
Building full-time R&D teams;
Increasing public expenditure on science and technology;
Expanding the number and capacity of local science–technology organisations.

Develop integrated innovation infrastructure
This includes:

Digital and ICT infrastructure: technical facilities and e-government systems;
Industrial and ecological infrastructure: connectivity, fully equipped industrial zones, and environmental governance.

Advance market sophistication
Key priorities include:

Finance and investment: private credit, microfinance, production–business capital, fixed assets, and long-term investment;
Science–technology service market size: number and quality of enterprises providing science–technology services.

Promote innovative enterprises
Focus areas:

Enterprise human resources: increasing the proportion of trained workers and training expenditure;
Innovation linkages: strengthening enterprise–science organisation cooperation, improving project quality in industrial zones;
Knowledge absorption capacity: increasing FDI, number of innovative enterprises, and ISO-certified businesses.

Stimulate knowledge, creativity, and technology products
Emphasis on:

Knowledge creation: number of patents, utility solutions, and registered plant varieties;
Intangible assets: trademarks, industrial designs, geographical indications;
Knowledge diffusion: number of newly registered enterprises, particularly science–technology firms and innovative start-ups.

This article is a product of the National-Level Research Project: “Improving Policy Frameworks to Enhance Innovation Capacity in Vietnamese Enterprises in the Context of Digital Transformation.”
Authors: Assoc. Prof. Dr. Phan Thi Bich Nguyet; Assoc. Prof. Dr. Nguyen Thi Hong Nham; Dr. Le Van – University of Economics Ho Chi Minh City (UEH).

Part of UEH’s “Research Contribution For All” series, disseminating applied research and knowledge for the community. Stay tuned for the next edition of UEH Research Insights.