The Meaning Of Innovation

Malaysia is pretty poor at doing R&D. Spending relative to GDP is by any standards low; so are the number of researchers relative to the population. Patent applications, in absolute terms, in relative terms, and in the ratio of local to foreign applications, are in a word: pathetic. The government has all kinds of programs to get R&D and innovation going, the latest of which is MaGIC. Much of these ideas revolve around the invention and commercialisation of new products.

While this is certainly one way to get innovation off the ground, it’s not the only – or even the best – way of increasing productivity, incomes, and local value added. Getting to and sustaining high levels of development involves much more than that. I think we really need to put as much emphasis on process innovation and managerial innovation as well.

The Effectiveness Of Innovation Policies

One more from today’s mail from the NBER (abstract):

Aggregate Implications of Innovation Policy
Andrew Atkeson, Ariel T. Burstein

We present a tractable model of innovating firms and the aggregate economy that we use to assess the link between the responses of firms to changes in innovation policy and the impact of those policy changes on aggregate output and welfare. We argue that the key theoretical determinant of the relative long-run aggregate impact of alternative policies is their impact on the expected profitability of entering firms. We show that, to a first-order approximation, a wide range of policy changes have a long-run aggregate impact in direct proportion to the fiscal expenditures on those policies, and that to evaluate the aggregate impact of such policy changes, there is no need to calculate changes in firms' decisions in response to these policy changes.

Innovation and R&D: Hurdles Galore

Just how bad is the situation with respect to R&D in Malaysia? Even considering our demographic profile, it’s really, really poor. The latest report available on actual expenditure paints a gloomy picture (click on the pic for the larger version; source: MASTIC):

Not pretty is it? All’s not quite lost however, as a lot of the foundation for a growth spurt in innovation and R&D intensity is already in place:

1. The legal framework is in place, from laws governing patents and trademarks to intellectual property rights, though enforcement is still a bit of an adventure.
2. Malaysia acceded to the international Patent Cooperation Treaty in 2006, which greatly speeds up the granting of international patents.
3. A little more than half of total R&D spending is done by industries rather than government.
4. Universities have mostly gotten their act together and are starting to really push for industrial collaboration to commercialise patents, and to offer research consultancy services.
5. We have a numbers of science parks operational such as Technology Park Malaysia, Kulim High-Tech, and Cyberjaya with more on the way. These developments can create the potential (I won’t say actual realisation) for cooperative R&D between academia and industry, as well as serve as an incubator for start-ups and joint ventures.
6. Various tax incentives and the IRPA grants provide financial motivation for both public and private sector R&D.

There has been in fact some progress since 2006 in fostering innovation (patents applied for and granted; source:MYIPO):

Nevertheless, just looking at the chart, there’s still a long way to go before we catch up with our regional peers or even domestic based foreign R&D. Some of the issues I see (my opinions, not necessarily the facts):

1. Issue number 1 is that Malaysian companies just aren’t interested in spending on R&D, with most of the private sector contribution coming from MNCs and other foreign owned firms – that has to change. Local companies that do engage in R&D collaboration with universities run into a culture clash mainly because business and academic incentives for R&D aren’t aligned.
2. Issue number 2 is universities aren’t always doing research that can be commercially applied, and aren’t terribly good at communicating their discoveries when they do. As a result, existing patents aren’t picked up on by the private sector and bought or licensed to be commercialised.
3. Issue number 3 is that IP laws aren’t fully grasped yet, which results in disputes and delays in getting products to market.
4. Issue number 4 is that outside of the science parks, we have a problem getting R&D going in SMEs as they lack the scale and resources to conduct R&D on their own, even if it’s just market research.
5. Issue number 5 is quite simply capacity and capability. We just don’t have enough people doing research or the facilities to support them.
6. Issue number 6 is that tax incentives and government research grants are too narrowly based. While there’s a good argument for prioritising limited resources, when you talk about a new economic model based on innovation and creativity, putting your money on just hard sciences isn’t exactly going to get you far.

Technical Notes:

1. Report excerpt from Mosti Pocket Book 2008 (warning: pdf link), Malaysia Science and Technology Information Centre (MASTIC)
2. Patent statistics from the Intellectual Property Corporation of Malaysia

Random Musings

There were a couple of articles in the papers today that I thought were worth commenting on but didn't deserve their own post. So I’m rounding out my impressions of both in one.

First up, the results of a survey conducted by the National Population and Family Development Board shows that Malaysians are marrying later and having fewer babies:

More getting married later or not at all

”A recent survey by the National Population and Family Development Board on trends between 2000 and 2007 indicated that the average marriage age of marrying Malaysians would increase to 33 years by 2015 or they may choose not to get married at all.

Universiti Malaya’s Associate Professor Tey Nai Peng said the average age at first marriage for men and women had increased from 25.5 and 22.0 years respectively in 1970 to 28.6 and 25.1 years in 2000.

Also, the number of those who had never been married between the ages of 25 and 29 years had more than doubled for women from 13% to 29%, and rose from 32% to 54% among men, he added.“

This all of a piece with the demographic transition that Malaysia is undergoing (detail in this post). It will only become a problem if fertility drops below the replacement level, and we are a long way (as in, at least a couple of generations) from even having to think about that issue. The only concern here is really the potential breakdown in the family institution, for which I'm not competent to comment on.

Second, our Higher Education Minister thinks giving budding professors more pay and less work equals Nobel prizes:

Pay rise will help lecturers focus on R&D

"The pay rise for lecturers at public universities without them having to hold administrative posts will reduce politicking. Higher Education Minister Datuk Seri Mohamed Khaled Nordin said this meant that they would not have to fight for posts in the varsities, but could instead focus on their fields of study through research and development.

'It will help create more Nobel laureates, because the professors will not be bogged down with administrative work,' he said yesterday."

If I'm not mistaken (feel free to correct me), most Nobel prize winners won on the basis of work they developed before gaining their professorship. In which case, giving more time to professors for research won't necessarily create more and better research output. And how many Nobel Prize winners does Malaysia have anyway? None?

I've also been doing a bit of research (for completely unrelated reasons) into the question of Malaysian academia's contribution to innovation, and strengthening linkages between universities and industry. The global research literature on these issues is enormous, but numerous studies indicate incentive and cultural problems in fostering innovation through collaboration and commercialisation of university research output.

The basic issue is that the primary purpose of universities is teaching and research – they are judged on quality of graduates and on publication of research. On the other side, what industry is interested in is new ideas and solutions they can turn into products and services, with maybe a sideline in overcoming industry problems and obstacles. Success is judged by the top-line (sales) and the bottom-line (profits).

In a nutshell, the R&D problem we have is that universities are interested in the ‘R’ while industry are interested in the ‘D’. Put in another way, universities are good at starting things but poor at finishing, while industry is the other way around. Failure to bridge that fundamental culture gap is one big reason why university-industry collaboration has failed to produce big results in Malaysia.