Routes to technological learning and development: An assessment of Malaysia's innovation policy and performance

In this article we review the range of policy options pursued by national g overnments for generating innovation within domestic firms. Against this co ntext we examine Malaysia's formal policies for technology acquisition and their implementation. Our analysis draws on an assessment of formal governm ent policy, interviews at public organisations responsible for the implemen tation of policy, and private domestic and transnational firms, which are a ctive in the target sectors. In total, thirty private and public organisati ons were visited. It is clear that the Malaysian government has developed a coherent set of policies, which aim to move the economy from its current f ocus on manufacturing to higher value-added activities such as research and development (R&D), marketing, and distribution. However, we found little e vidence of the implementation of such aspirations. In almost all cases tran snational companies have confined Malaysian subsidiaries to manufacturing a ctivities, albeit in "high-technology" sectors, and have located developmen t and marketing functions overseas. In fact, growth of value-added and capi tal intensity have been lower in those sectors dominated by FDI, than in ot her sectors. Nevertheless, there are isolated cases of indigenous companies which have been able to exploit joint ventures as an opportunity for learn ing from overseas companies, and this approach appears to offer greater opp ortunity for achieving the Malaysian government's objectives, (C) 1999 Else vier Science Inc.