The moderating roles of R&D on digital transformation and financial performance: evidence from Vietnam’s manufacturing enterprises

Purpose This study investigates how research and development (R&D) moderates the relationship between digital transformation and financial performance in manufacturing enterprises within a transition economy. Design/methodology/approach Data from 365 manufacturing firms in Vietnam were extracted from the Vietnamese Stock Exchange. These firms received government support, as the manufacturing sector is a priority for digital transformation by 2030. Hausman’s test confirmed the random effect model as suitable for estimating R&D’s moderating effects. Findings The findings revealed that high-performing manufacturing firms that invest in R&D experience enhanced digital transformation, leading to improved financial performance. Additionally, firms in the same industry show varying results from digital transformation based on their operational contexts. Notably, Vietnamese manufacturing enterprises have effectively initiated digital transformation, largely due to supportive government policies. This transformation has enabled firms to boost revenue, enhance production efficiency and reduce costs through improved labour productivity, helping them remain stable amidst uncertainties like COVID-19. Research limitations/implications The study highlights the importance of capital and tax incentives, investments in digital infrastructure and training programmes for digital transformation. These initiatives alleviate financial pressures and expedite the transformation process for Vietnamese manufacturers. The findings present valuable recommendations for foreign investors and serve as a reference for other countries facing similar transitions. Originality/value The article stands out for its in-depth examination of the digital transformation process in the R&D activities of manufacturing enterprises, which are considered vital for businesses. This study highlights the crucial role of the government in facilitating digital transformation for numerous small and medium-sized enterprises in emerging economies.