ASSESSMENT AND MEASUREMENT OF INNOVATIVE PERFORMANCE AT THE REGIONAL LEVEL IN VIETNAM

NGUYEN HIEN THAN

Faculty of Environment and Resources, Nong Lam University Ho Chi Minh city, Vietnam, Email: nguyenhienthan@yahoo.com

Abstract In order to measure the innovation level in a region, the paper establishes the innovation index for the region based on multi-criteria analysis and an entropy weight method. The regional innovation index is measured from 42 indicators, clustered into 11 objects and relies on 2 dimensions as innovation input indicators1 and innovation output indicators2. Author illustrates the method with a case study in Binh Duong province. The result showed that Binh Duongs innovation index has increased continually from a score of 0.47 to 0.63 in the period 2007 2011.

deploying significantly improved measures of innovation (Kestenbaum, 2009). However, the global innovation index (GII) only focuses on economic aspects and a little on social aspects. Environmental innovation has not been mentioned in GII. Furthermore, it only focuses on measure innovative performance at the national level. It is very hard application to measure at sub-national level such as cities, provinces, federations, etc. The main problem we face is the lack of statistical data for complex indicators in this system. Thus, the main purpose of this paper is to establish a better understanding of the innovative performance for regions; considering the possible use of three aspects - economic, environmental, and societal. In this case, the author uses Binh Duong province (Viet Nam) for an illustrative case study. Binh Duong is a industrial province in Viet Nam. Binh Duong has had quickly economic growth with an average annual growth rate of 14% in gross domestic product (GDP) from 1997 to 2011. In 2011, the per capita annual income of Binh Duong was around 48.8 million VND (2,402 USD), which is two times more than the nations average value. II. MATHEMATICAL MODEL FOR COMPUTING THE INNOVATION INDEX 2.1. Selection of indicators The proper innovation indicators are selected covering different aspects of development including economy, society and environment. The criteria for selection of the innovation indicators includes usefulness, data availability, continuity, reliability, relevance (DiSano, 2001) and readily measurable data (UNESCO, 2005).

Keywords: innovation, innovation indicator, innovation index, composite index.

I. INTRODUCTION Innovation has become a policy priority in many countries supported by national strategies and large budgets (Meghnaddesai & Sakikofukuda-parr, 2002). Consequently, innovation is a central driver of economic growth, development, and better jobs. It has also always been an important element in the relative success of societies (Kestenbaum, 2009). Moreover, the innovative process is the key factor to developing the current industrial status. This innovation must always be evidently linked to sustainability (Lzaro & Dorronsoro, 2008). Nowadays, in order to evaluate the effectiveness of a governments interventions, various innovative measurement have been developed over the years to measure innovative performance at the national level such as innovation indicators, the innovation capacity index, the sum innovation index, and especial the global innovation index. First a time, composite innovation index was established as the strategic goal for the European Union in 2000; called the European innovation scoreboard (Hollanders, 2010). Now, the global innovation index has become well-known all over the world. According to NESTA, innovation index provides a basis for better policy making for innovation by developing and
1

Innovation input indicators represent elements required for developing innovative activities.
2

Innovation output indicators are used to control activities related to innovative results obtained (Lzaro & Dorronsoro, 2008).

FIGURE 1: INNOVATIVE EVALUATION MODEL

Selection

Innovation indicators Innovation Input

Indicators of positive innovation

Grouping Judging

Innovation output
Indicators of negative innovation

Y=

Weighting Normalizing Calculating Combining

Weight of indicators Normalize indicators of innovation Innovation Input Sub-index Innovation output Sub-index

According to the attribution of every indicator, we have different the construction function of normalization as the following Eq (1) and Eq (2). However, min and max values are the minimum and maximum indicator sample values. It differs in value as discussed above (sub-heading 2.3). To standardize the matrix, the result is:

Overall innovation index

R=

, R = (rij)m x n (i =1,2,,m; j = 1,2,

FIGURE 2: SCHEME FOR CALCULATION OF THE REGIONAL INNOVATION INDEX

,n). Where, rij is the standard value of the i-th evaluation indicator the j-th on evaluation object; rij [0,1]. Step 2: Define entropy: during the assessment where there are m evaluation indicators and n evaluation years, the definition of the entropy of the i-th indicator is: Hi = Where, fij = rij/ lnfij (3) , 0 Hi 1. Obviously, when fij = 0,

2.2. Determining maximum and minimum scores The maximum score is the highest relative score found for the whole time period. Similarly, the minimum score is the lowest relative score found for the whole time period (Research, 2009). In this study, the maximum score and the minimum scores are determined based on literature review, realistic research and the results of the global innovation index of INSEAD. Min value and max value are considered to limit the standard (benchmark) that the government needs to improve toward a high innovation performance. 2.3. Transforming data The main difficulty of aggregating indicators into the innovation index is the fact that indicators may be expressed in different units (Damjan Krajnc & Glavic, 2004). The positive indicator: r+ij = [xij min(xj)]/[max(xj) - min(xj)] (1) The negative indicator: r-ij = [max(xj) - xij]/[max(xj) - min(xj)] (2). 2.4. Weighting the indicators The weight determination is one of the important parts in the composite index, because it has a deep effect on the assessment results. The main steps of using the entropy coefficient method to determine the weights are as follows (Yang & Wu, 2011): Step 1: Standardization of the original data matrix Supposing there are m evaluation indicators and n evaluation objects, the original data matrix is as follows:

so fij lnfij = 0 (Liu & Cui, 2008). Step 3: Define entropy weight Then, the entropy weight can be defined as: wi = (1- Hi)/(m ), 0 wi 1, = 1. (4)

2.5. Calculating the sub-indices, sub-index and overall index Sub-indices can be calculated as shown in Eq: iS,jit = + , = 1, 0 (5)

Where, iS,jit is the innovation sub-indices for a group of indicators j in time (year) t. is the weight of indicator i for

the group of a object j. Sub-index can be calculated as shown in Eq. IS,jt= , = 1, 0. (6)

Where, IS,jt the innovation sub-index for a group of objects j in time (year) t. is the weight of objects j for the group of

innovation input or output indicators and reflects the importance of this object in the innovation assessment of the region.

The overall innovation index is the simple average of the input and output sub-index. IRII = (Iinput + Ioutput)/2. (7) III. RESULTS 3.1. Innovation indicators for the regional innovation index

Innovation indicators were abtained based on literature review, such as Global innovation index 2011 (Dutta, 2011), Innovation and Human development in Viet Nam (Humanities, 2001), Indicators for monitoring integration of environment and sustainable development in enterprise policy (Hertin & Berkhout, 2011). The innovation indicators selected following the criteria mentioned above by multiple analysis. The result of selection is shown in Table 1:
Min 1 1 1 1 1 0 0.8 7.5 0.5 0.5 0.03 10 0.2 0 1 1 0 0.05 1 1.32 554 0 0 20 2.74 15 11.3 9.01 0 5 23.3 42.6 0.1 10.3 0.00 2007 7.95 7.02 7.44 7.02 7.34 5.69 1.47 22.07 71.8 94.1 0.15 407 0.56 22.2 16.1 4 13.3 0.40 65.30 16.07 2673 62.20 0.175 40.1 4.2 46.5 114.15 110.8 56.80 13.6 90.6 60.3 0.22 15.03 14.89 2008 8.5 7.74 7.72 6.24 6.25 5.63 1.46 21.68 71.8 94.1 0.13 419 0.58 25.76 15.4 4 7.99 0.29 66.25 6.42 3355 62.23 0.58 46.23 4.7 47.5 123.68 125 54.50 15.3 93.6 60.3 0.20 17.60 10.32 2009 8.38 7.48 7.55 5.94 8.08 4.82 1.22 20.27 73 96.7 0.12 454 0.58 25.76 14.1 4 7.98 0.25 72.62 1.32 3752 62.50 1 58.63 4.9 48.28 144.46 160.9 39.53 16 94.6 60.3 0.17 14.67 15.06 2010 8.34 7.16 6.57 5.63 6.99 4.55 1.68 20.56 74 96.9 0.13 647 0.60 25.76 12.9 5 5.49 0.22 75.72 2.35 3085 62.80 1 58.99 7 50 192.7 201.8 7.79 16.5 98.1 60.3 0.21 33.11 14.00 2011 8.12 6.84 6.61 6.39 6.85 4.7 1.40 20.8 75.6 97.3 0.11 638 0.62 25.7 11.1 5 6.83 0.35 85.7 4.26 3263 63.2 1.175 75 5 58.01 226.2 215 5.50 20 99.7 94.9 0.22 34.1 14.6 Source a a a a a b c c b b c c c c c c c c a c c c a a a a c c c d c c d c c

TABLE 1: INNOVATION INDICATORS OF BINH DUONG PROVINCE FROM YEARS 2007 TO 2011 Subjects Indicator Entry costs index Land access and tenure security index Transparency index Legal institutions index Time costs of regulatory compliance Total tax rate/ profit Public education expenditure Pupil teacher ratio Gross enrolment ratio Adult literacy rate Gross expenditure on R&D Researchers headcount per million population Equally distributed income index Ratio of women in government at provincial people's council Child malnutrition Number of doctors per 10,000 population Infant mortality rate under 5 years Public health expenditure Infrastructure index Electricity output Electricity consumption Share of renewable energy use Percentage of total business costs spent on labor training Services provided by provincial agencies: general education Percentage of secondary graduates/total workforce Firm has used technology related services Imports of goods & services Exports of goods & services Foreign direct investment net inflows Ratio of firms registered environmental management systems Population access to safe water Population access to sanitation Environmental protection expenditure Total factor productivity Annual growth rate of GDP at constant prices % % %
%GDP

Unit

Max 10 10 10 10 10

Business environme nt

%
%GDP

Education &Training Research & developme nt Gender equality

% % % %

40 8.36 48 98 99 4.83 1000 1 40 34.5 10 40 5 100 200 5000 93.3 5 90 28 75 230 220 73 50 100 100 1.50 0.00 15.8

Health

Infrastruct ure

kWh/ cap kWh/ cap % % % % %

%GDP %GDP %GDP

Market Access

% % % %GDP %

Environme nt

Economic effects

Social effects Environme ntal effects

Implemented FDI Gender development index Human development index Gini coefficient Water quality index Air quality index Eco-efficiency

%GDP

79.6 1 1. 0.45 100 500 1.8

0 0.2 0.2 0 1 1 0

31.41 0.75 0.75 0.31 40.38 158.5 0.84

31.47 0.75 0.76 0.33 43.07 153.3 0.7

30.77 0.76 0.76 0.34 69.30 132.1 0.88

22.08 0.77 0.78 0.34 69.26 80.6 0.98

18 0.78 0.79 0.39 73.48 67.7 1.17

c c d d IER

Source: a - The Vietnam provincial competitiveness index (USAID & VNCI, 2012), b - General Statistical Office (http://www.gso.gov.vn), c - Binh Duong Statistical Office (Binh Duong Statistical Office, 2011), d - Binh Duong Department of Natural resources and Environment. 3.2. The weight of each indicator and sub-index by the entropy coefficient method

To determine the weights of the selected indicators, indicators of positive (+) and negative performance (-) in the perspective of innovation were determined at the judging stage. Then, the process of determining the weights by the entropy coefficient method was conducted. The evaluating weights for indicator system and objects are as follows:

TABLE 2: THE WEIGHTS OF THE INDICATORS AND THE OBJECTS IN EVALUATION MODEL

Issues

Objects Entry costs index

Indicator

Judging + + + + + + + + + + + + + + +

Weight 0.1 3 0.1 7 0.2 1 0.1 6 0.1 4 0.2 0 0.1 7 0.1 9 0.3 5 0.2 9 0.3 7 0.6 3 0.6 1 0.3 9 0.2 1 0.4 7 0.1 2 0.2 0 0.2 6

Land access and tenure security index Business environment Transparency index Legal institutions index Time costs of regulatory compliance Total tax rate Public education expenditure Education and Training Innovation out put Research & development Pupil teacher ratio Gross enrolment ratio Adult literacy rate Gross expenditure on R&D Researchers headcount per million population Equally distributed income index Gender equality Ratio of women in government at provincial people's council Child malnutrition Number of doctors per 10,000 population Health Infant mortality rate under 5 years Public health expenditure Infrastructure Infrastructure index

0.1 3

0.1 5

0.1 5 0.1 1

0.1 2

0.0 8

Electricity output Electricity consumption Share of renewable energy use Percentage of total business costs spent on labor training Services provided by provincial agencies: general education Percentage of secondary graduates/total workforce Market Access Firm has used technology related services Imports of goods & services Exports of goods & services Foreign direct investment net inflows Ratio of firms registered environmental management systems Population access to safe water Environment Population access to sanitation Environmental protection expenditure Total factor productivity Economic effects Annual growth rate of GDP at constant prices Implemented FDI Innovation Input Social effects Gender development index Human development index Gini coefficient Environmental effects Water quality index Air quality index Eco-efficiency

+ + + + + + + + + + + + + + + + + + + + +

0.3 0 0.1 5 0.2 9 0.0 9 0.1 2 0.1 6 0.2 0 0.1 6 0.1 3 0.1 5 0.1 4 0.1 2 0.6 4 0.1 0 0.5 6 0.1 9 0.2 5 0.4 0 0.3 6 0.2 4 0.3 3 0.4 1 0.2 6

0.0 8

0.1 8

0.3 6

0.2 6

0.3 9

criteria of the innovation level including: very low [0 0.25], low (0.25 0.45], moderate (0.45 0.55], high (0.55 0.75] and extremely high (0.75 1]. The results of RII are shown in Table 3: 3.3. Analysis of the results According to the evaluation model of the composite index, the comprehensive index of regional innovation is achieved. Reference geography, the author designs a 5 grade evaluation
TABLE 3: THE INNOVATION LEVEL RESULTS OF BINH DUONG PROVINCE FOR 2007 - 2011 Objects Business environment 2007 0.10 200 8 0.10 200 9 0.10 201 0 0.09 2011 0.09

Education and Training Research & development Gender equality Health Infrastructure Market access Environment Economic effects Social effects Environmental effects Input sub-index Output sub-index Regional innovation Index

0.10 0.04 0.06 0.04 0.04 0.03 0.06 0.13 0.15 0.21 0.47 0.49 0.48

0.10 0.04 0.06 0.05 0.04 0.04 0.06 0.10 0.15 0.20 0.48 0.45 0.47

0.10 0.04 0.06 0.05 0.04 0.04 0.06 0.13 0.15 0.25 0.49 0.54 0.51

0.10 0.06 0.06 0.05 0.04 0.04 0.06 0.26 0.16 0.28 0.52 0.69 0.61

0.10 0.06 0.06 0.06 0.04 0.04 0.13 0.27 0.15 0.30 0.60 0.72 0.66 FIGURE 5: INNOVATION OUTPUT SUB-INDICES IN 2007 & 2011

As can be seen from Fig 4 - 5, Binh Duongs innovation input sub-indices have fluctuated lightly between the period 2007 and 2011. In 2007 - 2011, environmental index has strongly changed from 0.06 to 0.13, an increase of 0.07, and rising as much as 123 %. Then, the research and development index is at the second rank with 0.04 in 2007 and steadily reaches 0.06 in 2011, an increase of 0.02, rising as much as 55%. Some objects have changed little such as education training and infrastructure. Besides, the business environment index is decreasing 5%. On the other hand, we show that Binh Duongs innovation output sub-indices have fluctuated strongly. Especially, economic effects has quickly change, an increase from 0.13 to 0.27, and rising as much as 107%.
FIGURE 3: BINH DUONGS INNOVATION INDEX FROM 2007 TO 2011

As can be seen from the Fig 3, Binh Duongs innovation index is registering a good state of development from 2007 to 2011, and its composite index of 0.47 in 2007 continually rises 0.63 in 2011, an increase of 0.16, rising as much as 33%, with an average annual growth of 8%. According to the discrimination criteria to the innovation degree, Binh Duong has high innovation performance in 2011.

The results of assessment show that Binh Duongs innovation performance is in a good state of development. Binh Duong has strongly improved in many fields, especially economic growth. Besides, Binh Duongs innovation index also shows that Binh Duong still has some weaknesses which need improvement in the future such as income equality, health, research and education.

IV. DISCUSSION AND CONCLUSIONS Regional innovation performance can be measured using the regional innovation index (RII) which provides a good overview of trends in innovation over a period of time. It also highlight the individual regions strengths and weaknesses. The RII helps to highlight opportunities for improvement and to respond to emerging issues and pressures in the innovation process both nation at and sub-nation at. An important feature of the regional innovation index is the possibility of comparing and ranking many regions in the nation that the case study in this paper does not have opportunity to introduce. Measuring innovation, identifying its main drivers, and fostering adequate policies is a multi-year journey.

FIGURE 4: INNOVATION INPUT SUB-INDICES IN 2007 AND 2011

The regional innovation index provides an integrated metric based on carefully selected and weighted variables. In

this way, determining weights by the entropy method is useful to evaluate a complex phenomenon on fields. The entropy weight method, an optimal method for comprehensive assessment and worth promoting, has simple formulas and is easy to use. The calculation processes use almost all the relative information and entropy weight is assigned to each index, which makes the assessment results reasonable and reliable. The possible disadvantage of the model could be a selection of indicators. In this case study, the indicators were selected considering the availability of reliable data. In Viet Nam, some indicators are necessary to the innovative evaluation model, but they are not available data in statistical yearbooks or other sources. In order to overcome this disadvantage, the author used indicators to be easily selects in agencies and public sources (such annual reports, statistical yearbooks, websites, etc) but they are still guaranteed to be exact and reasonable. Nomenclature IRII regional innovation index xij value of every indicator min(xj) indicator of positive performance with minimum value of Binh Duong province mix(xj) indicator of positive performance with maximum value of Binh Duong province r+ij indicator of positive performance r-ij indicator of negative performance iS,jit innovative objects index IS,jt innovative sub-index w weight of indicators or objects i innovation indicators j innovation objects t time in years REFERENCES