NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, July 16, 2008

The development of science and technology (S&T) in Malaysia has been policy-driven and strategically triggered by the government. This is not an anomaly in any developing economy; however, based on findings of the National Survey of Research and Development conducted by the Malaysian Science and Technology Information Centre, Malaysia seems slow in the S&T development process compared to its East Asian counterparts such as Japan, Korea, Taiwan, Singapore, China and India.

Perhaps, one of the differentiating factors between Malaysia and other East Asian countries is the level of academic entrepreneurship in the national innovation system. The fact is, even the development of the national innovation system has been policy-driven.

How has this policy-driven approach been effective in enhancing academic entrepreneurship in higher education institutions and the national innovation system?

In the last two decades, various programmes and initiatives were undertaken to facilitate the nation’s transition from a production-based to an innovation-based economy, beginning with the transformation towards becoming a developed society through Vision 2020 in 1991 and the re-focusing of efforts on the development of a knowledge-based economy after the Asian financial crisis.

Among the key initiatives were the Third Outline Perspective Plan (2001-2010), the Knowledge-Based Economy Master Plan, 2002, and the Malaysian Knowledge Content (MyKe) Survey, 2003. In fact, government research funding under the Ninth Malaysia Plan (2006-2010) at 1.5% GDP was a threefold increase from the Eighth Malaysia Plan (2001-2005) at 0.49% GDP.
Further, among the significant decisions that could be related to academic entrepreneurship in higher education were the designation of four public universities as research universities – University Malaya, Science University of Malaysia, National University of Malaysia and Putra University of Malaysia – and a RM5.3 billion allocation for science, technology and innovation initiatives to strengthen the national innovation system. Focus was directed at biotechnology, advanced materials, manufacturing, nanotechnology and information and communication technology to generate 300 science and technology-based companies through public-funded R&D, and 50 companies with global partnerships.

Nevertheless, without a world-class national higher education system, the quest to become a sophisticated knowledge-based economy is likely to be frustrated because this is a prerequisite to improve the national innovation system and overcome a disjointed research and innovation system, with weak private sector demand for R&D and weak university-industry linkages.
To develop a world-class higher education system, utmost attention and consideration must be given to the development of academic entrepreneurship, which includes a better understanding of what it is and putting in place the right internal systems and mechanisms within the academic institutions to facilitate its development.

What is academic entrepreneurship?
Academic entrepreneurship is defined here as the leadership process of creating economic value through acts of organisational creation, renewal or innovation that occurs within or outside the academic institution that results in research and technology commercialisation. It occurs at the level of individuals or groups of individuals acting independently or as part of faculty or university systems, who create new organisations or instigate renewal or innovation within or outside the academic institutions. These individuals can be referred to as academic entrepreneurs or entrepreneurial academics (academic intrapreneurs). Value from academic entrepreneurship is achieved through the integration of organisational and commercialisation activities.
Based on the definition above, the phenomenon consists of three components. Firstly, it creates value in the marketplace, as well as within the academic organisations. A university creates economic value by becoming entrepreneurial. In the value creation process, leadership at all levels of the academic organisation is important in facilitating, nurturing and supporting academic entrepreneurial activities. Without strong and effective leadership, the transition or transformation towards an entrepreneurial university may not be realised.

Secondly, the value creation process occurs through acts of organisational creation, renewal or innovation. The table above provides the mechanisms that can be undertaken when pursuing these entrepreneurial actions.
And thirdly, academic entrepreneurship results in research and technology commercialisation. This is because it facilitates and encourages university technology transfer between the university and industry. Thus, a higher degree of academic entrepreneurship orientation will result in a greater number of technology transfer and commercialisation activities.

In an entrepreneurial university, academic entrepreneurship processes and activities are embedded in the university system, encultured in its academic faculties, embodied in its community of practice and “embrained” in each individual academic. By indulging in academic entrepreneurship, university agents – that is, academic inventors and entrepreneurs – use available organisational resources and state resources and organise their entrepreneurial activities towards exploiting perceived opportunities in the knowledge-based economy. This means that academic entrepreneurship is a process that occurs within the organisational boundary of the university. This is shown in the figure above, where academic entrepreneurship (AE) falls inside the circle denoted as entrepreneurial university (EU).

Previous research into academic entrepreneurship tended to equate academic entrepreneurship with university technology transfer, more specifically with the creation and development of new organisations, commonly known as the academic or technology based spin-off. However, when academic entrepreneurship is interpreted as encompassing not only organisational creation but also strategic renewal, transformation and innovation within the university systems, a boundary then exists between academic entrepreneurship and university technology transfer.

This means that not all academic entrepreneurship processes and activities will result in university technology transfer. However, the process of transferring technology to the industry or the commercialisation of the technology or invention through licensing agreements, research joint ventures and university-based start-ups are entrepreneurial activities. The figure above describes how the entrepreneurial university interacts with industry and extends its academic entrepreneurship processes and activities beyond the organisational boundary through university technology transfer.

These activities and entrepreneurial developments will not only contribute to organisational growth, profitability and wealth creation in the university but will also impact the external environment and economy as a whole by increasing productivity, improving best practices, creating new industries and enhancing international competitiveness and contributing to the growth and development of a knowledge-based economy and society.

For national and local governments, universities are a source of key assets for a technology-driven innovation economy. They provide skilled people and valuable researchable ideas. They attract other key economic development resources, such as educated people, firms and venture capitalists. Since universities usually remain in a particular location, they can be relied upon for long-term sustainable relationships. Universities which have been successful in teaching and research have vast untapped resources for nurturing and establishing innovative start-ups and technology-based ventures.
Through academic entrepreneurship, the university becomes the agent of industrial innovation, technological development, economic development and social development especially in the context of growing knowledge-based economies and globalisation.

The above basically suggests that a university’s leadership role is becoming multifaceted. Not only are universities required to educate people, but are needed to train skilled undergraduates, graduates and post-doctorates. To contribute towards knowledge-based innovation systems and economies, universities need to increase the stock of codified useful knowledge such as publications, patents and prototypes. They have to participate in problem-solving activities in industry and community through contract research, cooperative research with industry, technology licensing and faculty consulting, as well as provide access to specialised instrumentation and equipment and incubation services.

Further, the impact of the National Higher Education Action Plan (2007-2010), which is triggering the higher education transformation and consequently the S&T development, is that:

• Malaysian universities are expected to contribute more to economic development through R&D and commercialisation activities;
• Universities must seek closer relationships with the government and industry; and,
• Universities need to drive resource efficiency and quality management approaches through all aspects of their business, requiring a high level of both financial and outcome accountability.

This naturally leads to several issues and challenges for the leaders of Malaysian universities who want to nurture academic entrepreneurship in their universities, which include:

• Can universities accommodate a third mission of enterprise development on top of primary roles of education and intellectual discovery?
• Can universities stand up to their local role and gear up to their international role?
• How will the university leadership address the conflict between role of disciplines and role of inter-disciplines?
• How will the leadership address the conflict between academic freedom, scientific autonomy, curiosity-driven “fundamental” research versus directed, user-driven, shorter-term development “applied” research? In other words, can academic leadership find a balance between technology-driven innovation and market-driven innovation?
• Can universities handle the issues relating to conflict of interest and conflict of commitment?
• How will universities decide between centralised versus decentralised management of the university-industry boundary?
• How will universities select the appropriate commercialisation model for their technology transfer offices?

It was reported in the National Survey of Research and Development, 2006, that in 2004, R&D expenditure by the private sector accounted for 71.5% of the national gross expenditures on research and development. In relation to academic entrepreneurship and research commercialisation:

• Can universities attract funding from the private sector?
• Would the private sector be willing to pour their R&D expenditures into research and commercialisation activities in universities?

In addition, the entrepreneurial activities in universities need to be fuelled by venture capital funding and investment. Not only is the number of venture capitalists in Malaysia small but their focus of late has been on portfolio management rather than on funding university spin-offs. Currently, only the Malaysian Technology Development Corp Sdn Bhd and Malaysian Venture Capital Management Bhd, both set up by the government, have shown interest, but academic entrepreneurs and intrapreneurs need to be trained to meet venture capital requirements and to understand the challenges and
rigours of academic entrepreneurship.

In conclusion, to nurture the academic entrepreneurial paradigm and mindset across the university organisation and system, a shift from a focus on (basic) research and teaching to the development of a collective, innovative, entrepreneurial and sustainable source of S&T needs to be made. There has to be facilitation from inside the university system to accelerate technology diffusion. Conflicts arising from creative tension between teaching and research, applied and basic, entrepreneurial and scholastic interests are inevitable and expected.

But, for the academic entrepreneurial paradigm to be sustainable, compromise, normative change and reconciliation of different and seemingly opposed ideological elements, such as entrepreneurship and the extension of knowledge, need to be facilitated and embedded in the university system. This should be the way forward.