Direct investments as an engine of technological change in Malaysia: The role of networked policy

1. Direct investments as an engine of technological change in Malaysia: The role of networked policy Globelics Academy in Lisbon, 02-11 May 2007 Manja Jonas University of Duisburg-Essen, Germany

2. A. Motivation FDI-based development strategy Aim: leveraging foreign technology for local development But: Mixed results. Study question:How can developing countries facilitate effective technology diffusion from FDI to local industry?  Innovation Systems (IS) as key facilitators of technology diffusion (Freeman 1987; Freeman, Nelson et al. 1988; Lundvall 1992; Nelson 1993)  Midwifery role of economic policy (Evans 1995)  Greater social interaction leads to higher levels of cooperation for the provision of local public goods (White and Runge 1995; Molinas 1998)

3. B. Policy learning as network embedded collective action - Policy learning as “the process by which consensual knowledge is used to specify causal relationships in new ways so that the result affects the content of public policy” (Haas 1990: 23) - Respecification effort as a communicative process of sense-making (Nedergaard 2006) • frequent communication leads to a certain convergence of beliefs • Public good character of individual investments in interaction and IS development (assuming a certain commonality in the preferences and causal relationship models of MNEs in the same industry)  collective action problems • socially constructed trust and reputation may facilitate collective action to build economic institutions (Ostrom 2000, Tang 1994) • network management activities to facilitate interaction: activation, framing, mobilizing, synthesizing (Carlsson 2000; Keast, Mandell et al. 2005; Meier and O'Toole 2001; Klijn 1996; Klijn and Koppenjan 2000)  public network management may overcome collective action problems

4. State Policy Network Management: Activation, Framing, Mobilizing Synthesizing Private and Collective action Institutions of the Innovation System Foreign-owned Enterprises LocalEnterprises Political influence on institutional development Informal Communication C. A unified framework of FDI embeddedness in policy learning networks

5. D. Theoretical propositions Proposition 1: If collective action problems are solved, MNEs integrate themselves into the local policy network. Proposition 2: If the state actively manages the policy network, interactive policy learning is facilitated. Proposition 3: Technology policy is more effective, if it builds on interactive policy learning.

6. F. Data collection methodology Industry survey among 400 foreign-owned enterprises from the US, Japan and Germany in the electronic industry (response rate so far 10%), questionnaire administered over the phone or in person by a professional survey company, whenever possible use of tested survey instruments on their technology-related networking 22 personal semi-structured interviews with representatives of Business associations, training institutes in public-private partnership, and public agencies on their networking patterns with foreign-owned enterprises in Malaysia

7. F. Innovation system issues Business services Supplier base Infrastructure HR Regulation Notes: n=27; values normalized from 5-point Likert scale

8. G. Commitment and activism of FDI Notes: n=28 A minimum value of zero denotes that responses were on average not above the lowest value, i.e. no special agreement on the matter. The maximum is 4.0. Acquiescence bias was eliminated by including two positively and two negatively formulated items in each category, and subsequently adjusting to the mean. Since the items are heavily loaded with value judgements, social desirability bias had to be controlled, too. This was achieved by discounting the minimum adjusted value for each respondent.

9. Proposition 1: If collective action problems are being solved, MNEs integrate themselves into the local policy network. Network Management by BAs: • Activation: , private benefits • Framing: , unilateral or collectively • Motivation: , reputation mechanisms • Synthesizing: , interaction platforms, equal contribution schemes Examples of embeddedness: council participation; ASIALICS; PSDC;

10. Proposition 2: If the state actively manages the policy network, interactive policy learning is facilitated. (the national level) Network management by national level public agencies: • Activation: - , phone calls based on databases • Framing: -, participatory (general government- business meetings) or top-down (dedicated councils) • Motivation: , some use reputation mechanisms, others remuneration • Synthesizing: -, equal contribution schemes Examples of interactive policy learning: NPC

11. Proposition 2: If the state actively manages the policy network, interactive policy learning is facilitated. (the state level) Network management by (successful) local level public agencies: • Activation: , private benefits • Framing: , participatory • Motivation: , reputation mechanisms, private benefits • Synthesizing: , equal contribution schemes, networking platforms Examples of interactive policy learning: PSDC, InvestPenang

12. Proposition 3: Technology policy is more effective, if it builds on interactive policy learning. Comparison between the evolution of industrial training in PSDC (co-operative approach) and SHRDC/KISMEC (top-down approach) Comparison between supplier development activities of InvestPenang (co-operative approach) and SMIDEC (top-down approach initially )

13. Thank you very much!