Factors Influencing Innovation on SMEs in Lao PDR

This research article aims to analyze the factors influencing innovation on Small and Medium-sized Enterprises (SMEs) in the Lao People’s Democratic Republic (PDR) by using descriptive analysis and quantitative analysis. The objective is to investigate the comprehensive business entrepreneur operations on SMEs in the Lao PDR and explore the innovative learning of business entrepreneurs on SMEs in the Lao PDR. In order to fulfill the objective, the authors employ secondary data derived from the survey results conducted by the World Bank on Small and Medium-sized Enterprises during the period from May to November 2018, which encompassed data collection from each business entity operating in five provinces of the Lao PDR. The study’s findings revealed that in the Lao PDR, small and medium-sized enterprise (SME) entrepreneurs observed that 65.38% of business managers within SMEs were male. Furthermore, it was found that approximately 33.65% of these managers possessed over 20 years of experience in business management. Additionally, the study highlighted that a majority of these enterprises were located in Vientiane capital accounting for approximately 41.83% of the sample group. In terms of sector distribution, the majority of businesses belonged to the manufacturing sector comprising 39.42% of the sample group, followed by service business at 35.10% and retailing business at 25.48%. Interestingly, the study discovered that a significant proportion of SMEs, approximately 78.47% did not possess loan collateral. Moreover, a vast majority of these establishments, accounting for 88.94%, had not undergone an external audit of their business operations. When examining the executives, it was observed that around 78.85% of them had never received any training in business operations. Furthermore, only 25.96% of enterprises utilized websites, and among them, a staggering 69.71% did not engage in export activities. Disturbingly, the study found that 77.40% of enterprises faced difficulties in access to financing capital sources. Lastly, it was concerning to note that approximately 82.21% of organizations had never implemented innovation within their operations. In the study conducted on small and medium-sized enterprises (SMEs) in Lao PDR, the Logit Model was employed by the authors to investigate the factors influencing innovation. The analysis revealed a total of seven factors that positively impact innovation. These factors include manager experience (Exper), manufacturing sector (Manuf), access to financing capital (Afc), training (train), direct export (dex), business income (Ln(Inc)), and website (Site). The study also established a significant relationship between these factors and innovation at a confidence level of 90%, 95%, and 99%. On the other hand, there were five factors that were found to have no effect on SME innovation in Lao PDR. These factors are the gender of the manager (Gen), retailing business (Ret), service business (Serv), number of labor (Ln(Labor)), and indirect export (Inex). Thus, the study found there was no statistical relationship and was consistent with the hypotheses.