Transcript From Efficiency-Driven to Innovation

Working Paper by Kim-Song Tan and Sock-Yong
Phang, Singapore Management University 2005
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This paper discusses Singapore’s efforts to
increase innovation and R&D in its economy
Early 2000s: Singapore was billed as efficient and
capable of operating existing technologies, but
lacking in capacity to create new technologies,
compared to world frontier
Improvements in infrastructure of other Asian
countries have indicated that Singapore must
increase its innovation to stay competitive
This paper aims to determine whether an
innovation-driven economy requires a different
kind of infrastructure than an efficiency-driven
economy
How effective is the government’s approach?
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Goal: to develop comparative advantage in innovation
by developing supporting infrastructure
Changes to: internal environment of firms and
external social policies and regulations
Innovation policy deals with large and small firms in
sectors of high tech manufacturing, services, creative
content
Increased awareness of innovation potential in small
firms and service and creative sectors shifted focus
from high tech MNCs to broader target
In 2001-2005 plan, National Science and Technology
Board aims to put infrastructure in place for basic
research programs, esp. in life sciences
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Supply-push strategy: build up supply of
innovative workers and activities to gain a
first-mover advantage over competitors
Attract creative workers by providing a
culturally enriching lifestyle: increase
availability of artistic performances, social
interaction with other creative workers
Increase availability of R&D facilities,
intellectual property protection, venture
capital
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One-North is an R&D hub that holds public and
private research institutes, business offices,
residential buildings, shopping centers and parks
$8.5 billion, 200 hectare development began in
2001, close to Central Business District
Serves biomedical sciences, information
technology and media industries
Two major complexes: Biopolis houses
biomedical sciences research and Fusionopolis
houses information technology and media
research
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Phase I and Phase 2
can accomodate
6000 researchers
when fully occupied
Houses Genome
Institute of
Singapore and
Bioinformatics
Institute
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Two-tower complex
Attracts companies
across the media
chain
Strong intellectual
property laws a
deciding factor in
media companies’
decisions to
relocate
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2000-seat
performing arts
center in Downtown
Opened in 2002
Designed to attract
creative, innovative
workers to relocate
to Singapore
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Strong IP culture is conducive to innovation and
Singapore’s plans to become regional hub for IP
management
Need for well-defined, strictly enforced IP laws
and institutions that promote IP knowledge
creation and management
Registry of Trademarks and Patents became a full
statuatory board, the Intellectual Property Office
of Singapore, in 2001
IPOS signed treaties with US, EU and Japan to
develop regional and global IP networks
Launched Intellectual Property Academy, a
research and education center
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Over 100 venture capital firms in Singapore
Government provides 1/5 of total capital
funding for venture capital firms
Economic Review Committee recommended
implementing harmonized tax incentives and
additional partnerships with governmentlinked companies to promote venture capital
investment
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Recent increase in funding for research
programs and graduate programs
Government gave more automony to
Singapore’s three research universities
Singapore universities are recruiting more
foreign research faculty and working on more
joint projects with universities abroad
First private foreign university opened its
Singapore campus in 2004
Government grants for joint research projects
between local and foreign universities
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Singapore’s government has historically tried to
regulate people’s social and political lives,
encouraging conformity and obedience
Efforts to promote entrepreneurship by slowly
loosening government’s control over society and
becoming more accepting of diversity
Housing Development Board loosens restrictions
on use of public housing as office space
Education Ministry allows for more private
schools to open and relaxes entry requirements
for foreign students at all levels of education to
study in Singapore
Could especially help innovation in creative
content sector because those workers tend to
value a liberal working environment
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Strategic industrial policy involves winnerpicking: government decides which industries
to push
None of the established innovative cities have
taken this approach
Worked for industrialization policies of 19701980s when making an efficient economy,
but the same approach might not work for
innovation
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New PM Lee Hsien
Loong urges
Singaporeans to aim
for creativity and
abandon conventional
thinking at National
Day Rally 2004
Promises to change
the government into
one more accepting of
diversity
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Comparative advantages:
◦ accessible, central geographical location
◦ strong efficiency infrastructure
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Weaknesses:
◦ underdeveloped innovation infrastructure
◦ small domestic market
◦ political and social constraints of the business
environment
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Creative content is culture specific and thus more
difficult succeed in foreign markets compared to
high tech manufacturing and services industries
Size of domestic market may be a greater
obstacle for creative content firms
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Specialization risk: Less certainty about which
industries will succeed when pushing the
frontiers of technology instead of merely
adapting existing technology
Concentrating limited amount of resources into
just a few sectors
Strong focus on electronic industry has recently
caused volatile swings in GDP
Justification: high-tech manufacturing is where
Singapore has the most comparative advantage
and pre-existing capacity for innovation
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Economic Review Committee recommended a
becoming a regional hub for service industries as
part of the goal of innovation development
This requires significant regulatory reforms
Singapore has already been a leader in financial
services, transport and logistics, and healthcare
but has trouble staying competitive
After two major shipping lines, Maersk and
Evergreen, relocated from Singapore to Malaysia,
the Port of Singapore Authority made drastic
changes to its operations
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Deregulation of financial sector has allowed
local firms to merge and foreign firms to
enter
Healthcare reforms aimed at cost reduction
have helped reduce shortage of doctors in
Singapore, but changes to foreign medical
student quotas still have not taken place
Education reforms (previously discussed)
have positive externalities: channeling
creative people into Singapore
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Results have been mixed
Number of R&D workers has increased due to
influx of foreign researchers, but effect on
number of innovations is yet unknown
Number of patents filed increased from 1750
in 1995 to 5090 in 2000, but still less than
3% of patents and very few trademarks are
filed by Singapore residents
Singapore’s rank fell from 11th (2002) to 15th
(2003) in Global Entrepreneur Monitor
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Concern of overinvestment in innovation
infrastructure with such an aggressive strategy
What is the socially optimal level?
Authors argue for a more well-defined way of
evaluating innovation infrastructure
There is a minimum level necessary to create a
general innovation-oriented culture
Value should be measured by an investment’s
impact on the overall economy’s innovative
capacity, rather than impact on targeted industries
Innovation infrastructure also has consumption
benefits, improving quality of life is an additional
social benefit, so over-investment is less likely
than previously thought