THE efforts to develop a Covid-19 vaccine have brought home the importance of research and development (R&D).
Innovations on the back of R&D promote a nation's competitiveness. They drive growth. It is for these reasons that the Biden administration has committed to investing in cutting-edge technologies and R&D programmes.
Studies show that the most innovative economies are also the most competitive ones. Take, for example, South Korea,the United States, Germany, Finland, Sweden, Switzerland, France and Japan. These are among the most innovative and competitive nations.
Even China has entered the fray. A 2019 study found that China published more high-impact research papers than the US in 23 out of 30 pioneering fields such as Artificial Intelligence, renewable energy and biotechnology.
In the US, there is also a discernible uptick in private-sector innovations. Witness the amount of research money Tesla and Virgin pour into the development of space rockets and space travel.
Or the amount of private research that takes place in autonomous and hybrid vehicles by Tesla, Google and Toyota. But these are big companies. In Malaysia, 98 per cent of our businesses comprise small- and medium-sized enterprises (SMEs).
In 1937, Ronald Coase, a Nobel Prize-winning economist, argued that technological developments would lead to a proliferation of smaller firms and fewer larger firms.
With the increasing adoption of Industry 4.0 technologies, we can expect SMEs to be the mainstay of our economy.
However, SMEs are largely inimical to R&D spending. There are many reasons for this. Being short-termist in their operations, SMEs are reluctant to commit resources on ventures, whose results only become evident many years later.
Moreover, innovations are risky. Only one out of 10 projects succeeds. Even where it succeeds, innovations diffuse to an extent that imitators and competitors benefit.
One study even finds that the public benefits from R&D are almost double the benefits accrued by innovating firms.
Way back in the 1960s, Kenneth Arrow, another Nobel Prize-winning economist, reasoned that private sector innovations would not be sufficient for economies to maximise their growth. It therefore behoves the government to shell out more dosh to compensate for the failures in private investment.
Accordingly, most rich countries such as Japan, Germany and South Korea have doubled down on public R&D spending. Our government should do likewise. Here are five suggestions. FIRST, the government should shunt more funds to the best research institutions. More funds to the best will attract even better research.
As with the case of the specialised Fraunhofer institutes of Germany and the United Kingdom's "catapult" programme, the government should initiate a consortium to pool research funds from business, university and the government; SECOND, the mismanagement of research grants should be curtailed, if not eliminated. Inspections, and tight key performance indicators and targets by grant giving authorities should purge such malpractices.
Agencies that promise impressive research outcomes but fail to deliver them should be backlisted; THIRD, universities are far removed from the hustle and bustle of production lines. As such, they tend to lose sight that their research should create value for citizens in their everyday lives. This is where private sector and civil society engagement is crucial.
As they say: "Build a better mousetrap and the world will beat a path to your door."; FOURTH, universities should commercialise and license their inventions. One Organisation for Economic Co-operation and Development (a club of mostly rich nations) report suggests that the purchase of technology has far more impact on productivity growth than direct R&D spending by industries; and, FIFTH, the government should be quick to spot R&D potential in strategic sectors and give firms tax breaks.
Research in advanced countries shows that a 10 per cent reduction in R&D costs would result in a long-run 10 per cent increase in research spending. Simplifying patent application that now takes about three to four years would also contribute to such cost reduction.
As the economy recovers, the time to boost innovation has never been more urgent. And research must always be carried out with the end user in mind.
The writer is the Institute of Medicine, Science and Technology University (AIMST)'s vice-chancellor