Commercialization of Research and Development Programs in Malaysia - Assignment Example

Commercialization of Research and Development (R&D) Programs in Malaysia Introduction This paper aims to recommend specific methods on how to improve the commercialization of research and development (R&D) in Malaysia. Specifically, it intends to come up with a full-blown marketing proposal for the Malaysian Innovation Agency that is aligned with the primary goal of empowering research agencies, private companies and other non-profit institutions. In the end, it hopes to present inspiring ideas that could be incorporated into the yearly programs of the Malaysian Innovation Agency. In this regard, this paper shall be divided into three main parts. The first part will delve into the nature of research and development (R&D) and its connection to economic development. To do this, attention must be placed on some key issues: (1) the possible sources of R&D; (2) the private and public returns of R&D; and (3) the main sources of R&D and how it is ought to be commercialized. The second part, on the other hand, will zero in the discussion on the current status of R&D in Malaysia. In this light, this part will take a closer look at the pivotal role of R&D in the enhancement of business operations of private companies, and in the development of timely and strategic economic plans of the Malaysian government. To make the analysis more relevant, cases shall also be revisited in order to highlight the key insights and gather as much learning as possible. The last part will outline the recommended marketing programs for the Malaysian Innovation Agency in order to create more R&D initiatives in the country. As such, it will begin with an attempt to revamp the agency’s main vision and goals. After this, it will exhaust all possible sources in order to give a jumpstart to the recommended programs (from a financial and logistical points of view). Then, it will discuss, in great detail, the business- and marketing-related plans for the agency. I. Nature of Research and Development (R&D) A. Research and its Essence Research is and will always be equated to development. By traditional definition, research focuses on the discovery and/or enhancement of a specific body of knowledge through a structured methodology. In this light, the success of research can be viewed in two interrelated perspectives: firstly, the continual improvement of the research process, and secondly, the economic and socio-political impact of the research results. As for the first perspective, an effective research utilizes specific procedures and instruments that are in line with the objectives of the study. Thus, research success, from this point of view, means coming up with a time- and cost-efficient methodology that is able to address issues succinctly. The second perspective, on the other hand, puts premium on the product of research and how it helps improve the lives of society. Therefore, the discovery of new knowledge, as in the case of medical breakthroughs and technological innovations, becomes the primary impetus behind doing research. It must be pointed out, however, that there are a lot of factors that influence results or products of research. For situations that shall be expounded much deeper later on, it is safe to surmise that research necessitates ample funding, either from the government or from private companies and institutions, in order to provide an environment that is conducive for analyzing and synthesizing essential ideas. Thus, there is always a need to properly train the researcher, procure high caliber research instruments, and put up well-designed data systems. While research initiatives may not always result in the discovery of new knowledge, it could enhance or improve certain bodies of knowledge. From a commercial point of view, this means generating better operating procedures that could help maximize the business outputs of a certain company. From political point of view, this entails launching more job opportunities and strengthening the connection among key industries in a certain country. In both of these perspectives, it is apparent that it is vital to consider the benefits of research given the costs of doing one. Either private or public, the results of research will always be weighed against the investments needed to mount such activity. And this is the primary reason why the government and private companies must critically assimilate the benefits to be reaped from doing research before starting one. In the end, research as a cognitive activity is and will always be part of human nature. The desire for truth (from a philosophical and a sociological standpoint) will always guide the researcher in coming up with the objectives of his study and the ways through which he will conduct one. However, given the availability of resources today (as provided by the Internet), part of the researcher’s main task now is to ensure that all his initiatives could (emphasis on the small possibility of not being able to attain one) lead to tangible results that could help in the betterment of society. Therefore, research as a social undertaking could never be divorced from the concept of authentic human development. At this point, it is now crucial to ask, in what ways does research contribute in the attainment of authentic human development? For this, we shall now focus on the specific relation of R&D to economic and socio-political development. B. R&D and its Connection to Economic and Socio-Political Development A lot of academicians, economists, and social scientists have stated the relation between conducting R&D projects and the attainment of sustainable growth. Obviously, R&D results could increase the economic efficiency of a certain country. In order to reinforce this statement, we shall further divide this part into three subsections: first, the key attributes of research results; second, the main industries or social institutions that benefit from R&D programs; and lastly, the main issues that assimilate the effectiveness of R&D. 1. Exogenous and Endogenous Characteristics of R&D The most fundamental output of R&D is knowledge, which as we have discussed earlier, can either be innovative or reinforcing. It can be stated, however, that there have been two schools of thought that tend to describe the innovative or reinforcing sustainable growth that is provided by research: exogenous and endogenous. But before examining these two concepts, it must first be established that sustainable growth as the main objective of R&D will always be likened to economic growth. This is because the main motives to conduct research have always been due to the need to support or uplift the society’s basic needs. Exogenous growth of R&D came from an earlier neo-classical theory that regards knowledge as a variable that affects productivity by increasing the output, bettering the operations, and increasing its capital (Czarl & Belovecz 11). In this regard, R&D initiatives are intended to find ways on enhancing the productivity of the company’s value chain—whether from the procurement of more cost-effective raw materials to developing shorter but more effective production lines. With the kind of investment that is often allocated for R&D projects, expectations have often been high, especially from the company’s top management. In the U.S., for example, it is purported that the estimated elasticity of output with respect to R&D is around 0.07, which says that for a 10% increase in R&D expenditure there will be a bit less than a 1% increase in output (0.7%) and a rate of return of around 27% for R&D (Voolward 3). On other studies, it is claimed that R&D return could be as high as 30% (Voolward 3). On the other hand, the endogenous growth of R&D states that “investments in R&D that provide new knowledge are seen as an important factor that explains growth and increased productivity” (Czarl & Belovecz 11). In this mindset, investments in R&D can provide long-term growth and could lead to rising returns to scale. This is due to the fact that “previous R&D investments that were made to generate specific knowledge do not need to be made again; the replication of previous production does not therefore have to bear the burden of any R&D costs” (Czarl & Belovecz 11). At this point, clarification has to be made on the sectors of society that usually benefit from R&D initiatives. 2. Sectors of Society that Benefit from R&D Generally, the private and the public sectors of society usually benefit from R&D. Private companies usually reap the immediate benefits of their R&D undertakings as evidenced by improvements in measurable facets of the company—as in the increase of production outputs, leadership in terms of market share and industrial rankings, and development of new lines of products and services. In this regard, Czarl & Belovecz noted that “besides knowledge needed sectors like IT, the desire of improving R&D in the ‘original’ productivity sectors, such as agriculture is also strengthened. Production improving becomes global strategic question for the enterprises and creates new challenges, both operative and strategic”. (25) In this light, it could be stated that the discovery or enhancement of bodies of knowledge that are often used by the company is also influenced by external factors such as global trends in consumer lifestyles and purchase behaviors, political and social happenings, and technological breakthroughs. However, it must be pointed out the drawing of the intended goals of R&D initiatives are always a product of the top management’s strategic business direction. Competitive advantage, therefore, guides the carrying out of R&D projects which could either be for the tapping of new market segments, expanding the company’s line of products or services, or eradicating its direct or indirect competitors. The public sector of society essentially pertains to government offices and other non-profit organizations that cater to the welfare of society. R&D, in this regard, is used by the government in order to promote programs that will enhance the living situation of its citizens. Examples are government-funded medical experiments and military-enhancement activities. In each of the cases, it can be said that the results of R&D can be viewed either as private or public—private as pertaining to the benefits for the company and public for the government. 3. Key Issues surrounding R&D Initiatives in Private Companies At this point, it is important to note that the clear differentiation between the two major benefits given by R&D poses two critical issues—(1) the seeming conflict between the public versus the social benefits of R&D for the company; (2) the issue of spillovers as the main setback for the mounting R&D projects in companies. While the benefits of R&D projects for companies are obviously geared toward the enhancing of its business operations in order to increase revenues, it is inevitable that other companies could also utilize these system enhancements or product innovations for their own sake. These ‘spillovers’ are deemed to be the social return of R&D (Svensson 7). From an economic perspective, the social returns of R&D seem to be advantageous not only for the industry where the company participates in, but also for society in general as it paves the way for the creation of better products and services. Indeed, industrial movements are often caused by breakthroughs and innovations in the companies’ R&D. However, from a business perspective, spillovers often lead to product homogenization, which could ultimately lead to price war (as positioning is slowly eradicated), thus negatively affecting the company’s ‘bottomline’. Indeed, while R&D possesses endogenous and exogenous attributes that could internally impact the company, it could also be devastating: firstly, due to the costliness of this activity; and secondly, due to spillovers. Therefore, there is a need to balance the private and public (or social) benefits of R&D. And this could only be done through the major intervention of the government. C. Commercialization of R&D: General Reasons and Procedures The commercialization of R&D is needed as it apparently provides countless benefits to private companies and societies as a whole. There are a lot of ways to commercialize R&D, and the government has a big role to play in this set-up. And this is why it is crucial to review the main providers of R&D programs, and how such initiatives could be commercialized. 1. Providers of R&D Programs There are three main providers of R&D programs: (1) research agencies; (2) universities and colleges; and (3) research arm of private companies. Firstly, research agencies are those entities that have been set-up to conduct intensive studies on their specific area/s of expertise. Such fields may include information technology, agriculture, and business management. Some of their usual clients include offices from the government and private companies. Secondly, universities can also render basic research services to either the government or private companies. As posited by Czarl & Belovecz, knowledge produced in the universities can either be disseminated and be used publicly through codification (publishing in journals) or be patented and sol to companies (17). Indeed, university-based researches do not only help the government or private companies save on their research costs, they also enrich the pedagogical aspect of university studies. Thus, as the authors further commented, “in the case of R&D at companies, conducting research at universities means that the personnel get further training and that their ability to absorb new knowledge increases” (Czarl & Belovecz 17). Lastly, companies can also create their own research arms for their own use. Multi-national companies in the industry of fast-moving consumer goods (FMCG) such as Proctor and Gamble (P&G) and Unilever often have their consumer study departments that are meant to constantly monitor trends in consumer behavior and lifestyle. Such undertakings often guide these companies in arriving at powerful consumer insights that drive changes in the companies’ product offerings. For example, consumer study departments could monitor the changes in the way facial wash products are used by teenage girls, which could be summarized and sent to the marketing department to come up with either a new product variant or a new campaign. Companies in the pharmaceutical industry such as Pfizer have also set-up its own medical research departments to enhance the effectiveness of their drugs; as well as discover, commercialize, and patent specific medicines to unexplored human ailments. 2. Commercialization of R&D Programs The commercialization of R&D programs can be beneficial to both the researchers and its intended recipients. For obvious reasons, research studies can provide economic and socio-political benefits once applied. However, the commercialization of R&D programs can be more advantageous to the researchers as the cost of their studies can be lowered. In this regard, the government can intervene by sponsoring the R&D initiatives of research agencies, universities and colleges, and private companies through financial support or tax incentives. Through this, more researchers are encouraged to conduct studies that will be truly beneficial to human society. II. Commercialization of R&D: The Case of Malaysia Now that the nexus between R&D and economic and socio-political growth has been very well established, it is now time to focus the discussion on the status of R&D in Malaysia. To make the discussion more focused, this part will be bifurcated into: (1) brief study on R&D in Malaysia by revisiting past studies; and (2) overview of the Malaysian Innovation Agency. A. Status of R&D in Malaysia – 800 R&D in Malaysia has focused more on the manufacturing sector in order to achieve the country’s economic targets. As such, pressure has been raised for this sector to “continue to diversify, seek product definition, be export-oriented and above all be competitive” (Nor 2). This is the primary reason why R&D in Malaysia emphasized more on technological innovations, specifically in the aspect of system enhancements and digitalization. While manufacturing-focused R&D projects have been mostly launched by large multinational companies that operate in Malaysia, there are also a limited number of local companies that have started business process improvements through direct or indirect transfer of technology with these multinational companies (Nor 2). Moreover, the Malaysian government has been very active in promoting R&D in small- and medium- scale businesses as it cannot entirely rely on the importation of technology. With this, it is assumed that the commercialization of indigenous technologies has been very important in the overall development of small- and medium- scale enterprises in Malaysia, as it has “for a very long time funded a large number of R&D projects undertaken by local universities and research institutions which have resulted in a number of new, commercially viable, products and processes, and could be commercialized by local SMIs” (Nor 2). Looking at statistical figures, “Malaysia has a total of 33 public sector R&D organizations which include statutory research institutions and 8 universities” (Nor 2). Conducting a wide range of R&D activities, the main focus of these institutes are agriculture and medicine. For example, the Rubber Research Institute of Malaysia (RRIM) has helped improve the business operations of local rubber-based businesses, and has provided innovations in breeding new varieties of rubber (Nor 2). In addition to this, there has been a small number of research arms that obtain most of their funding from their parent companies such as the Petronas Research and Scientific Services, Tenaga National Research and Development and PROTON Research and Development. As regards the commercialization of R&D in Malaysia, most research agencies have formalized and promoted their services through consultations, contracts, and collaborative engagements with their clients (Nor 3). This usually takes the form of technology licensing, joint-venture formations, and creation of new businesses. In this regard, 11 companies have been created as spin-off businesses of public sector R&D institutions, which were mostly financed by the Malaysia Technology Development Corporation, Standard and Industrial Research Institute of Malaysia (SIRIM) and MARDITECH, the venture capital arm of the Malaysian Agriculture Research and Development Institute (Nor 3). At this point, it can be further stated that the goal of the Malaysian government to initiate various efforts that centralize and coordinate the funding of R&D projects has led to the establishment of the Intensification of Research in Priority Areas (IRPA). Essentially, the funding of IRPA is “bottom up” in which the researches would submit their research proposals to any of the give IRPA panels (Agriculture, Medical, Industry, Strategic, and Social Science). Some of the example projects that were sponsored by the Malaysian government include: The laser technology and applications program undertaken by the Institut Pengajian Tinggi, in the Universiti Malaya. The research on the modification of natural rubber by Universiti Kebangsaan Malaysia The multidisciplinary research on organotin chemical compounds conducted at Universiti Malaya Due to the numerous challenges posted by the commercialization of R&D projects (either by research agencies or universities), the Malaysian government has executed various measures that are geared toward the streamlining of business operations: 1) the creation of a One-Stop Business Units at all public sector R&D institutions to manage the business relationship with companies; and 2) the provision of greater flexibility and authority for these research agencies; As further reported by Nor, “only 13 out of the 33 public sector R&D institutions have established One-Stop Business Units like the Consultancy and Development Bureau, Universiti Kebangsaan Malaysia which have been very active in promoting and selling services to the private sector (Nor 4). It can be further commented that these business units have emphasized more on rendering consultancy services since the return for such activity is faster. Furthermore, it can be stated that from the company’s perspective, joint- or start-up ventures have proven to be an attractive option due to these reasons: It provides good exposure to local researchers (especially for university students who are conducting the study; It helps fund the host university especially when the research project is successful; and It gives greater control to the researchers especially during the commercialization process of R&D results. B. Malaysian Innovation Agency –250 Having presented a snapshot of the status of R&D in Malaysia, it is logical to surmise that there is still a need to empower research agencies and universities through the help of the government. In this regard, it is now vital to review the Malaysian Innovation Agency as an organization that could support current and future R&D initiatives. The Malaysian Innovation Agency has the primary vision of “wealth creation through knowledge, technology and innovation” while having the mission of “stimulating and developing the innovation ecosystem in Malaysia towards achieving Vision 2020” (Malaysian Innovation Agency 2). As such, the main objectives of the organization are summarized as follows: Generate additional revenue and contribute to Malaysia’s GDP; Create more jobs for the Malaysian workforce; Inspire and produce a new generation of innovative entrepreneurs; and Facilitate the evolution of Malaysian companies into major global players. The Malaysian Innovation Agency employs a strategy called “Innovation Nation” that is claimed to uplift the global competitiveness of the country by “providing the Nation and its people with the skills, knowledge and competencies required to overcome problems, challenges or obstacles, creating long-term sustainability for the enduring development of a country and improving the lives of the people” (Malaysian Innovation Agency 5). In order to ensure the translation of this strategy into tangible economic results, the Malaysian government is expected to formulate programs that could inspire research agencies and universities to conduct various research undertakings. III. Recommendations on Further Commercializing R&D in Malaysia As this point, it can be stated that the possible solution toward the full commercialization of R&D in Malaysia could be found in the subsidization of such initiatives. In this set-up, the Malaysian government, in partnership with the Malaysian Innovation Agency, can mount business and marketing related programs that could bolster the partnership of the agency with: (1) research agencies and universities; and (2) possible clients. Bibliography Czarl, Adrienn & Belovecz, Maria. Role of Research and Development in the 21st Century. Revista Informatica Economică. April 2007. Web. 9 January. 2013. Malaysian Innovation Agency. National Innovation Strategy. 2011. Web. 9 January 2013. Nor, Anuar. Building a High-Tech Innovative Culture in Malaysia. World Intellectual Property Organization (WIPO). August 1997. Web. 10 January. 2013. Svensson, Roger. Growth through Research and Development. Vinnova Report. December 2008. Web. 9 January. 2013. Voorwald, Herman. The Importance of Research for Progress. Journal of Aerospace Technology and Management. January 2010. Web. 9 January. 2013. Read More