Technology, capital, and talent remain key constraints for businesses

Based on data from the 2025 Provincial Competitiveness Index (PCI) survey recently released by the Vietnam Chamber of Commerce and Industry (VCCI), responses from 3,546 private enterprises across 34 provinces and cities show that innovation and digital transformation efforts remain limited within the business community. Currently, only 37.9% of enterprises use at least one digital technology at a “low” level or above. While 29.6% of firms have implemented at least one process improvement, only 8.8% have introduced a new product or service. Notably, just 3.9% of enterprises allocate 3% or more of their revenue to science and technology, innovation, and digital transformation activities, or engage in science and technology partnerships with external organizations. Human resources in these areas also remain limited, with only 6.2% of businesses reporting that they have designated specialized personnel.

There is also a clear gap between businesses of different sizes. Compared with microenterprises, large enterprises with more than 200 employees are more than three times as likely to introduce product innovations (28.1% versus 8.7%), seven times as likely to engage in science and technology collaboration (20.9% versus 2.8%), and 3.5 times as likely to access public financial support (16.5% versus 4.5%). All of these differences are highly statistically significant (p < 0.001), reflecting the stronger resource base of larger enterprises.

The PCI 2025 survey assessed the adoption of five core digital technology groups: cloud computing, IoT, Big Data, AI, and websites/e-commerce. Among these, websites and e-commerce platforms are the most widely used. By contrast, advanced technologies such as AI and Big Data remain in the early stages of adoption, with most enterprises reporting that they do not use them. This suggests that key technologies of the Fourth Industrial Revolution have yet to gain broad traction across Vietnam’s private business sector.

Regarding science and technology application and innovation spending over the past two years, the survey examined the 10 most common activities and asked enterprises about their participation. The results show that only 16.7% of businesses engaged in at least one of these activities. The most common was the purchase of advanced machinery, equipment, and software (11.8%), followed by investment in advanced machinery, equipment, and software (11.3%). By contrast, activities that require closer connections with external partners, such as outsourcing or purchasing R&D services from other organizations and acquiring external knowledge, recorded much lower participation rates of 5.8% and 4.2%, respectively. This suggests that Vietnamese private enterprises still rely largely on their own resources for innovation, while collaboration, partnerships, and knowledge sharing remain limited.

When asked about barriers to innovation across different business segments and capital sizes, enterprises identified a lack of internal capital as the biggest challenge, with 55.6% rating it as important or very important. This was followed by high costs (52.1%) and concerns about markets being dominated by large enterprises (49.5%). Workforce-related constraints (49.1%) and limited access to technology information (36.1%) were also cited as significant obstacles to innovation.

However, the nature of these barriers changes as businesses grow. For microenterprises with capital below VND3 billion (US$120,000), access to finance is the biggest challenge, cited by 54.3% of respondents. As capital increases, the importance of this barrier gradually declines, falling to 41.7% among enterprises with capital of VND20 billion to VND200 billion (US$800,000 to US$8 million) and to just 30.7% among those with more than VND200 billion (US$8 million) in capital. In contrast, knowledge and workforce-related challenges remain persistent, with 42% to 47% of enterprises reporting these barriers, and only easing significantly among the largest firms. This suggests that once businesses move beyond capital constraints, the main bottlenecks become shortages of skilled workers and access to technology information. These findings provide a basis for designing support policies tailored to different stages of business development.

In addition to tangible resources, the PCI 2025 survey also examined innovation management culture within enterprises. Overall, most businesses agreed or strongly agreed that their leadership encourages new ideas (89%) and views failure as an opportunity to learn (88.6%). However, turning these attitudes into concrete action remains a significant challenge.

Support policies should be tailored to enterprise size

To make innovation and digital transformation stronger drivers of growth, the Vietnam Private Economy Report prepared by VCCI recommends that support policies at the national level be tailored to enterprise size. Micro and small enterprises with capital below VND10 billion (US$400,000) should be given priority access to financial tools such as preferential credit and micro-innovation support funds. Medium-sized enterprises with capital of VND10 billion to VND200 billion (US$400,000 to US$8 million) need programs that strengthen digital skills and improve access to technology information. For large enterprises with capital exceeding VND200 billion (US$8 million), policies should focus on building a more collaborative R&D ecosystem while strengthening intellectual property protection.

The report also recommends prioritizing changes in leadership mindset before investing in technology transformation. An open management culture makes businesses more likely to assign dedicated innovation staff. As a result, innovation management training programs should be developed for leaders of small and medium-sized enterprises, focusing on risk acceptance, creating processes that support new ideas, and sharing lessons from successful innovation models.

Particular attention should also be given to strengthening connections within the innovation ecosystem. The low rate of science and technology collaboration among enterprises suggests that links between businesses and research institutions remain weak. Cooperation among government agencies, enterprises, research institutes, and universities should be encouraged through co-funded R&D programs, technology vouchers, and a national platform that connects technology supply with demand.

In addition, the reach and effectiveness of public financial support should be expanded. Although access remains limited, enterprises that receive this support report stronger innovation results and higher spending on innovation activities, demonstrating the role of government funding as seed capital. Procedures should therefore be simplified, selection criteria improved, and access broadened so that support reaches more deserving enterprises.

At the local level, efforts should focus on improving the quality of technology consulting and training services. Building on existing support programs, including consulting services, environmental training, and tax incentives, local authorities can expand and redirect these initiatives toward digital transformation consulting and training, with a focus on practical tools and affordable solutions for small businesses.

Regional cooperation in innovation and digital transformation should also be strengthened. Localities can work together to establish regional innovation mentor networks, with major economic centers serving as hubs for infrastructure and expertise. At the same time, “lead enterprise” models should be developed to encourage more advanced companies to share their experience and support microenterprises through the early stages of transformation.