Malaysia’s Manufacturing Innovation Experience

The lack of radical innovation capabilities for a long time provided little stimulation for researchers to analyze the drivers that contribute to technological upgrading in developing countries. This began to change when attempts were made by evolutionary economists to inductively examine its incidence, nature and drivers at host sites. It is from this perspective that this study investigates the R&D and the internationalization activities of foreign firms in Malaysian manufacturing. The evidence amassed shows that the Malaysian manufacturing systems of innovation is weak with much of the innovative activities confined to process innovation and product adaptation. Also, innovation intensities diff er among states and sectors owing to diff erences locationspecific institutional coordination. Although Malaysia has yet to figure as a major site for the off shoring of R&D activities, one very important driver of innovation in the country has been the role played by multinational corporations in driving innovation spillovers. Process innovation is conducted by most foreign subsidiaries, while a handful of them undertake product design activities. However, although technological catch up eff orts of local firms has benefitted considerably from linkages and subcontracting with foreign multinationals, weaknesses in the meso organizations has restricted technological upgrading towards higher value added activities.