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

Innovation in the services sector has not received much attention in Malaysia though, as the dominant sector, its potential role in the innovation-driven 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 firm-level drivers of innovation. Though both the definition of innovation and the variables likely to drive it were proscribed by the survey data, the findings are of interest, even if not comprehensive. Nearly half of the 303 firms (drawn from five 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 filing of patents and copyrights were less common. Innovators were more likely to be firms that collaborated in R D with other firms or agencies, firm that accessed technology from parent companies and those that were in a supplier-relationship with MNCs. Communications firms 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.