From Efficiency-Driven to Innovation-Driven Economic Growth

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From Efficiency-Driven to Innovation-Driven Economic Growth Powered By Docstoc
					Working Paper by Kim-Song Tan and Sock-Yong
 Phang, Singapore Management University 2005
   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
   How effective is the government’s approach?
   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
   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
   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
   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
   Phase I and Phase 2
    can accomodate
    6000 researchers
    when fully occupied
   Houses Genome
    Institute of
    Singapore and
   Two-tower complex
   Attracts companies
    across the media
   Strong intellectual
    property laws a
    deciding factor in
    media companies’
    decisions to
   2000-seat
    performing arts
    center in Downtown
   Opened in 2002
   Designed to attract
    creative, innovative
    workers to relocate
    to Singapore
   Strong IP culture is conducive to innovation and
    Singapore’s plans to become regional hub for IP
   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
   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 government-
    linked companies to promote venture capital
   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
   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
   Strategic industrial policy involves winner-
    picking: government decides which industries
    to push
   None of the established innovative cities have
    taken this approach
   Worked for industrialization policies of 1970-
    1980s when making an efficient economy,
    but the same approach might not work for
   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
   Comparative advantages:
    ◦ accessible, central geographical location
    ◦ strong efficiency infrastructure
   Weaknesses:
    ◦ underdeveloped innovation infrastructure
    ◦ small domestic market
    ◦ political and social constraints of the business
   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
   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
   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
   Deregulation of financial sector has allowed
    local firms to merge and foreign firms to
   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
   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
   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

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