Internal and external resources for enhancing innovation capabilities – an exploratory study based on cases from the Malaysian automobile sector

Abstract

The Malaysian automotive sector is an interesting case in the region, given that it is anchored by large national vehicle manufacturing firms which have been protected by several policy measures, along with foreign assemblers. This offers the backdrop to this exploratory study on the internal and external sources for developing innovation capabilities in the Malaysian automotive sector. The paper is based on cases developed through interviews in the field. Overall findings indicate the sector itself is dominated by supplier firms that are mostly involved in parts that are not very high tech, like plastic or metal parts, and there is little by the way of product innovation, and most innovation relates to changes in processes (this is with the exception of the two national car manufacturing firms Proton and Perodua). The foreign players have been mostly assemblers and while they are well linked in terms of intra-firm networks with access to technological resources, this does not seem to have spilled over to the supplier firms – offering an option for policy to leverage this resource, as done in the electronics sector. While there are indications that several of these firms are passive in terms of innovation activities/capabilities and could be in danger of not being competitive if they lose their anchor customer, there is anecdotal evidence where firms (small and large) have become competitive and gone into export markets by developing external linkages, and internal resource developments thus overcome barriers to limited resources or markets size for innovation.

Keywords:

• innovation capabilities
• internal sources
• external sources
• automotive sector
• Malaysia

Acknowledgements

This research was conducted as part of the research project entitled ‘Network Management: How to Enhance Innovation Capability with Internal and External Sources’ March 2011 of the Economic Research Institute of ASEAN and East Asia, whom the author would like to thank for their support.