Technology Transfer to Vietnam for Process Innovation through Engineer Exchanges under China plus One Strategy, Firm-level Evidence

Increasing wages in coastal areas and the risk of Yuan appreciation in China will encourage firms in China to adopt China plus One strategy. More firms establish plants in Vietnam to take advantage of supporting industries in China and hedge China risk. Hanoi and its surrounding region will be one of the main destinations for FDIs into manufacturing sectors. Although Vietnam can provide cheap labor forces, firms in Vietnam do not have sufficient technological and managerial capabilities to participate in international production networks. International technology transfer is needed for Vietnam to achieve international business standards. This paper presents firm-level evidence on process innovation through technology transfer to firms in Hanoi. We emphasize engineer exchanges as a channel of technology transfer. A case study of Japanese firm invested from China to establish a plant in Hanoi is also introduced to complement the empirical result.