The Determinants of Innovation in the Malaysian Manufacturing Sector: An Econometric Analysis at the Firm Level

Econometric analysis of firm-level data from the recent National Survey of Innovation indicates large firms are more likely to innovate compared to small firms. Ownership structure is also found to be an important determinant of innovation - private limited and public limited firms are twice more likely to innovate compared to soleproprietorship firms. A surprising finding is the negative correlation between the propensity to innovate and the share of exports in sales. There is also no evidence that innovation is related to the extent or foreign vs. local ownership of firms. The findings on the influence of industry-level characteristics are mixed. While the influence of industry's technology level is inconclusive, the propensity to innovate is positively correlated with market concentration