Working Paper by Kim-Song Tan and Sock-Yong
Phang, Singapore Management University 2005

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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 economy
How effective is the government’s approach?

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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 content
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

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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 capital

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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 research

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Phase I and Phase 2 can accomodate
6000 researchers when fully occupied
Houses Genome
Institute of
Singapore and
Bioinformatics
Institute

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Two-tower complex
Attracts companies across the media chain
Strong intellectual property laws a deciding factor in media companies’ decisions to relocate

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2000-seat performing arts center in Downtown
Opened in 2002
Designed to attract creative, innovative workers to relocate to Singapore

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Strong IP culture is conducive to innovation and
Singapore’s plans to become regional hub for IP management
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

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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 governmentlinked companies to promote venture capital investment

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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

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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

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Strategic industrial policy involves winnerpicking: 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 innovation

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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 diversity

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Comparative advantages:
◦ accessible, central geographical location
◦ strong efficiency infrastructure
Weaknesses:
◦ underdeveloped innovation infrastructure
◦ small domestic market
◦ political and social constraints of the business environment
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

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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

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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

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Deregulation of financial sector has allowed local firms to merge and foreign firms to enter
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

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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 11 th (2002) to 15 th
(2003) in Global Entrepreneur Monitor

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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