Drivers of Innovation in the Malaysian Services Sector: An Analysis Based on Firm-Level Data

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Suresh Narayanan
Mehrshad Parvin Hosseini


 Innovation in the services sector has not received much attention in Malaysia though, as the dominant sector, its potential role in the innovationdriven economy as envisioned by the New Economic Model is immense. This paper draws from data sourced from a national-level innovation survey of service establishments to investigate frm-level drivers of innovation. Though both the defnition of innovation and the variables likely to drive it were proscribed by the survey data, the fndings are of interest, even if not comprehensive. Nearly half of the 303 frms (drawn from fve major service subsectors) in the sample were innovating with the majority reporting improvements in quality or cost in both service products and processes. Developments of major new service lines and the fling of patents and copyrights were less common. Innovators were more likely to be frms that collaborated in R&D with other frms or agencies, frm that accessed technology from parent companies and those that were in a supplier-relationship with MNCs. Communications frms were the least innovative while there were no significant differences in innovative behaviour among firms in the other four subsectors. Important policy implications are discussed based on these findings.


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