Financing of Innovation - A Survey of Various Institutional Mechanisms in Malaysia and Singapore

  • Mani, Sunil (Centre for Development Studies, Trivandrum)
  • Published : 2004.09.01

Abstract

Production of goods and services always necessarily depends on the use of knowledge. The knowledge intensity of production , however, has increased manifold in the last two decades or so. This is clearly indicated by the rise in the share of knowledge intensive products, which are traded. The production and export of these advanced products are not confined to developed countries alone, but also among developing countries. But in the latter there is considerable concentration of it in a handful of countries primarily in the Asian region. Knowledge underlying production, whether industrial or non-industrial, embodies two types of knowledge: formal and non-formal. In this paper we are entirely concerned with the financing of the creation of formalized knowledge in the context of two similar Asian developing countries, namely Singapore and Malaysia. Three broad types of financial instruments are considered: research grants, tax incentives and venture capital. Both the countries are shown to be having very similar financial instruments for promoting innovation. The timing of these instruments is quite similar too. But one country has performed much better than the other. The main argument of the paper is that while financial instruments are a necessary input for innovation, the sufficient condition lies in the supply of a sufficient quantity of scientists and engineers.

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