Sharpening Research, Innovation & Enterprise
By Mr Lim Chuan Poh, Chairman, Agency for Science Technology and Research (A*STAR)
The aftermath of the 2008 financial crisis prompted many countries to review their competitive strategy, in particular, that of their Research, Innovation and Enterprise System or RIE system.
The primary aim is to seek to translate more R&D into innovations that can catalyse economic growth and the creation of good jobs. In his 2013 State of the Union address, President Obama called for the US to return to a level of R&D “not seen since the height of the Space Race”. Part of this effort to boost US innovation included the launch of the Advanced Manufacturing and Accelerating Medicines Partnership. Countries closer to Singapore in Asia have also placed more emphasis on research and innovation recently, such as South Korea’s Creative Economy initiative and Japan’s Comprehensive Science, Technology and Innovation strategy.
What must Singapore do to remain competitive and relevant?
Small Research-Intensive Economies
While large countries like the US, UK and Germany are recognised research and innovation leaders, small countries similar to Singapore in size, like Finland, Switzerland, Israel, Denmark, Sweden, and the Netherlands, have done well in global innovation rankings. These small research-intensive economies had different approaches towards their research governance and strategy, shaped by their unique historical, economic and political circumstances. For example, Finland adopted a top-down, centralised planning approach, while Switzerland, comprising federal and cantonal governments, was very much more decentralised. Most of these RIE systems have a much longer history compared to Singapore, but a significant number have transformed their systems in recent years. For example, Denmark, Finland and Switzerland have restructured their ministries to enhance integration and coordination of their RIE policies.
Despite their differences, they also shared many common characteristics. First, they recognised that a successful RIE system required a coordinated approach across different government bodies. Second, all had a common desire to see greater impact from public sector R&D, and had either established or were evaluating the set-up of mission-oriented intermediates, or Science and Technology Organisations (STOs), to create focus and bridge the gap between academia and industry. These include Finland’s VTT Technical Research Centre, Netherlands’ Organisation for Applied Scientific Research (TNO), and Sweden’s Research Institutes of Sweden (RISe). Third, the experiences of these countries underscored the need for mission clarity of the different performers (e.g. academic excellence for universities and economic impact for STOs), and for research performers to be adequately resourced to carry out their respective missions. Other critical elements of a successful RIE system include an excellent university system, a vibrant enterprise sector welcoming of open innovation, and an open talent strategy.
How Larger Economies Do It:
Germany is a research and innovation powerhouse in the manufacturing sector, known for its effective translation of research to industry impact and its innovative corporate sector, including both large home-grown MNCs and SMEs (the Mittelstand).
A key pillar of Germany’s successful RIE system is the Fraunhofer Society, a network of government-backed research institutes established in 1949 to provide high-quality translational and applied research for German businesses. Over the last half-century, Fraunhofer has become one of the most established and successful STOs in the world that have enabled a robust group of indigenous MNCs, as well as a competitive Mittelstand sector that dominates global market niches.
In particular, Fraunhofer’s strong support for manufacturing innovation has made Germany one of the world’s leading exporters of high-tech manufactured goods, despite high wages. According to the Manufacturers Alliance for Productivity and Innovation, manufacturing accounts for nearly 21% of the German economy, compared with 13% for the US and 12% for the UK, and German exports have actually risen in the face of intense global competition.
The UK has a long and outstanding record of research excellence based on its world-renowned universities. However, it has been less successful in the translation of public sector R&D into innovations and commercialisation. With growing competitive pressures, including the impact of the 2008 financial crisis, and offshoring of manufacturing jobs, the Department for Business Innovation and Skills commissioned a 2010 review led by Lord Hermann Hauser on how UK could “close the critical gap between research findings and their subsequent development into commercial propositions”. The report noted that there was no coordinated, national long-term strategy to invest in translational infrastructure for research commercialisation.
Following the review, the UK launched a network of Catapult Centres, partly modelled after Germany’s Fraunhofer, to bridge the gap between academia and industry in areas strategic to the UK. While the Catapults do not yet receive as much funding as their STO counterparts like Fraunhofer, TNO or VTT, they receive strong government commitment and industry participation (with industry-led research agenda), are staffed by highly qualified talent, and have significant potential to grow.
The recent Review of the Catapult Networks testified to the early success of the Catapults in catalysing impact, and recommended growing the network to 30 Catapults by 2030, with a total combined funding of £400 million per annum. The Review was welcomed by the government and informed its recent Science and Innovation Strategy, which called for a “gradual expansion of the Catapult network”.
Like the UK, the US is a world leader in scientific discoveries, but a 2012 report by the President’s Council of Advisors on Science and Technology acknowledged concerns that it was lagging behind in efforts to translate knowledge into economic impact, and thus under-capturing the value of its R&D investments.
Given the large, diverse and decentralised nature of the US system, it is more pertinent to look at how different US states and cities fare. While there are well known innovation hot spots such as Silicon Valley and Boston that benefit from dynamic entrepreneurial environments centred on excellent research intensive universities, most other places are facing intense pressure to evolve their RIE systems to be more competitive.
In particular, both New York State and New York City mirrored the national dilemma of generating economic impact and high-tech start-ups from their excellent research capabilities. At the State level, a 2010 Task Force report led by the former Cornell President David Skorton stated that New York “lacks a state-wide culture that prioritises commercialisation activities and promotes university-industry collaborations”. At the City level, a 2009 Center for Urban Future report similarly stated that NYC’s world-class universities and research institutions “have not become powerful catalysts for entrepreneurship and local economic development”. Indeed, a leading academic observed that despite its excellent universities, NYC only attracted 4 cents of venture capital funding for every dollar in federal funding for research, whereas Silicon Valley attracted 68 cents and Boston 42 cents. According to the State Science & Technology Institute, New York State attracted only 9 per cent of the nation’s venture capital dollars in 2014 while California attracted 56 per cent, this was notwithstanding that New York ranked second after California in terms of Federal Grants attracted.
To deal with the challenge, both New York State and City administrations have launched concerted efforts to strengthen their research commercialisation, innovation and entrepreneurial capabilities. A large part involved leveraging universities to act as intermediates to translate research into impact. At the State level, the State University of New York was designated. At the City level, the Applied Sciences campuses, including the flagship Cornell NYC Tech campus on Roosevelt Island, were established.
According to the Center for Urban Future, Cornell NYC Tech, which will be completed by 2017, will help “realise the full potential of the city’s research institutions” and “spark the creation of a meaningful technology sector”. Through stronger government focus on R&D impact, NYC is undergoing a transformation and was recognised as the second leading technology hub in the US, in a 2012 report by the Center for Urban Future.
Singapore’s RIE System
Like the other RIE systems, Singapore’s RIE system was developed within our own context with a view to transform Singapore into a knowledge-based, innovation-driven economy. Notwithstanding that, it shares many similar characteristics with the small research-intensive economies studied.
These include: a strong government commitment to research and innovation, with our R&D investments increasing eight times from the first National Technology Plan in 1991 to $16.1 billion in the current five-year tranche for RIE2015; a diverse ecosystem of research performers with differentiated missions; a strong education system and world class research-intensive universities; dedicated research institutes in A*STAR that facilitate public-private partnerships and public-public partnerships for impact; and an open talent strategy.
We have made significant inroads in developing an innovation economy in a short period of time. Gross expenditure on R&D reached $7.6 billion in 2013, a ten-fold increase since 1991, and the number of researchers, scientists and engineers has grown six-fold to reach 32,000 in the same period. Global indices on innovation also validate the strength of our RIE system—in 2014, Singapore was ranked 2nd in the World Economic Forum Global Competitiveness Report and 7th in the Global Innovation Index.
Beyond such indicators, our efforts have helped to grow our economy and improve healthcare and other societal outcomes. In recent years, MNCs like Procter & Gamble and Applied Materials, Inc. have invested heavily into R&D here. Alongside that, over 1,000 SMEs that have worked with A*STAR achieved productivity gains of at least 20%. When SARS hit in 2003, our scientists collaborated with industry partners and hospitals to develop a diagnostic kit that could detect the presence of the SARS virus in 15 minutes, contributing to the containment of the SARS outbreak in Singapore. Our integrated efforts have also successfully brought the first made-in-Singapore cancer drug candidate into clinical trials in July.
This is the year of Singapore’s Golden Jubilee. It is also the year in which we finalise our plan for the next five-year RIE2020 plan. It is timely for us to reflect on our achievements and discuss how to innovate on our RIE system to ensure that we remain relevant and competitive. R&D and innovation must remain a priority and we need to catalyse greater socio-economic impact from our investments. Our public sector organisations have to be more coordinated in our efforts, and we will need to work more closely with industry to upgrade their capabilities, productivity and competitiveness. With these elements in place, Singapore’s RIE system will be well-positioned to support Singapore’s economic growth and overcome our national challenges so that we will have an even better Singapore at SG100.
This article is also available in The Business Times on October 15, 2015, with the headline ‘Sharpening Research, Innovation & Enterprise’.