R&D push to help firms ride on recovery

Small and midsize businesses can play major part in process of innovation, which is catalyst for economic recovery, says CompTIA official.
Written by Lee Min Keong, Contributor

KUALA LUMPUR--Despite the global economic crisis, technology companies worldwide have continued to increase spending on research and development (R&D) to be ready to ride on the markets' anticipated recovery, a senior industry official said.

Robert Kramer, vice president of public policy at the U.S. Computing Technology Industry Association (CompTIA), said: "Several IT companies increased R&D spending in the fourth quarter of 2008 to be prepared for recovery, for example, Microsoft, Intel, Cisco, AMD, Boston Scientific, Applied Materials and Qualcomm."

He added that R&D spending continues to be strong in the United States, having grown 4 percent overall in 2008, compared to 2 percent in Japan and a 1 percent decline in the European Union (EU).

"R&D spending rocketed more than 7 percent in China and India during the same period, according to Booze Allen estimates," Kramer said during his presentation at the APEC SME Technology Entrepreneur Seminar here Thursday.

He stressed that innovation was a catalyst for economic recovery, and that small and midsize enterprises (SMEs) could play a major role in this process. For example, he cited a 2007 IDC study that revealed that of the 730,000 ICT SMEs in the EU, 41 percent were "innovative".

Kramer also highlighted several structural impediments to the dissemination of new technologies, such as:

  1. the lack of investment capital for technological development;
  2. the lack of protection for intellectual property;
  3. industrial policies that prematurely (often wrongly) pick winners and losers;
  4. regulations or mandated standards that force government agencies and private companies always to choose one technology over others.

Kramer also said governments could play a role in fostering innovation in the private and public sectors. This includes supporting university research, development and dissemination of technological innovations and supporting strong intellectual property protections.

Private sector R&D could also be supported through tax incentives, he said.

Governments should also adopt technology-neutral, best-value for money, source-neutral procurement practices. In addition, they should foster interoperability through competing open standards and not prematurely pick winners or losers by mandating single standards, Kramer said.

From SME to conglomerate
Steven Furst, regional ICT practice lead, Booz & Company, Thailand, said historically, SME's have been significant contributors to global innovation and productivity. He cited the examples of multinationals like Microsoft, Dell, Nike, Starbucks, Hewlett-Packard and Cisco which started off as small businesses.

The challenge today is creating a nurturing and sustaining policy and programmatic environment for SMEs to maximize the value of their contribution and drive economic recovery. In his presentation at the seminar, Furst highlighted the key elements of the SME Innovation Development Cycle:

1. Define the potential: Governments have to identify and understand the creative potential and competitive themes within their technology industries, with a particular focus on SMEs
2. Policies and programs: Develop policies and programs that will stimulate innovation, and drive commercialization of innovation, to maximize the potential value
3. Promotion and investment: Develop awareness and PR campaigns around the themes, programs and investments, to attract investment from both foreign and domestic sources.

Furst also said careful analysis of the prevailing environment and conditions is required to identify the range of appropriate innovation themes. He said policies and programs can then be developed around the priority innovation themes. This would entail commercialization, informal networking, technology transfer, twinning of start-up technology companies, and technology parks.

Technology parks can provide support to SMEs throughout the innovation and commercialization process, he said, citing the example of Technology Park Malaysia (TPM), which is part of Malaysia's Multimedia Super Corridor (MSC) concept, a government-designated zone that houses technology companies.

Broad-based marketing and awareness programs are also critical to the success of any SME innovation promotion program, Furst said.

National SME ICT programs
Stephen Lau, advisor of EDS Hong Kong and chairman of Apicta (Asia Pacific ICT Awards) noted all countries have identified the development of the ICT industry as a strategic tool for economic growth.

"SMEs are the majority and backbone of the national economy, and the ICT industry is mainly [made up of] SMEs," Lau said during his talk on "Innovation & Technology--the Sustaining Power of SMEs in the Global Economic Crisis" at the event.

Many countries in the region have national programs to grow ICT SMEs, he said. These include Australia, Hong Kong, India, Indonesia, Japan, Malaysia, Thailand, Vietnam and Singapore. For example, in Australia, for ICT contracts of US$20 million and above, the Australian government agencies are to include a minimum target level for SME participation ranging between 10 percent and 20 percent of the contract value.

In Japan, there is a program to match knowledgeable retirees to advice on business strategy, which tends to be lacking in SMEs, through a retirees' database, he added.

Meanwhile in Malaysia, the MSC Malaysia Inno Tech is a focused initiative to push the cream of Malaysian SMEs on an accelerated path towards funding and market access. This provides a platform for selected companies to pitch themselves to global and local venture capitalists for funding, Lau explained.

He emphasized that government-industry partnership is a key ingredient for effectiveness. "Aim to grow SMEs to achieve critical size to compete internationally…[but] there is no quick magic bullet. India took 25 years to be where it is today," he cautioned.

The thee-day seminar was organized by the International Trade Administration, U.S. Department of Commerce and Malaysia's Small and Medium Industries Development Corporation. It was opened by the Deputy Minister of International Trade and Industry Mukhriz Mahathir with U.S. Ambassador to Malaysia James Keith in attendance.

Lee Min Keong is a freelance IT writer based in Malaysia.

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