Commercialization of Public-funded Agrobased Technology to SMEs in Malaysia: The Roles of Government Research Institutions and Private Firms

Commercialization of Public-funded Agrobased Technology to SMEs in Malaysia: The Roles of Government Research Institutions and Private Firms

Published: 2021.11.15
Accepted: 2021.11.15
10
Technology Commercialization and Business Development Centre, Malaysian Agricultural Research and Development Institute
Technology Commercialization and Business Development Centre, Malaysian Agricultural Research and Development Institute
Former Director
Strategic Planning and Innovation Management Centre, Malaysian Agricultural Research and Development Institute (MARDI)

ABSTRACT

This study discusses the commercialization of public-funded agro-based technology in MARDI, one of the Government Research Institutions (GRIs) in Malaysia, and the challenges that limit the commercialization of the technology. MARDI was recognized as one of the best models in commercialization of GRI’s technology in Malaysia. Studies have shown that, despite its few successes, most of the GRIs are still at the beginning journey of commercialization. Commercializing GRIs’ research and development (R&D) outputs are the major management challenges, and there are limited studies to describe this phenomenon from the perspective of private firms.   The experiences of ten private firms were gathered through semi-structured interviews. Twelve critical success factors that represent the roles of the GRI and private firms were revealed, namely R&D product and market readiness, good partnership with GRIs, researcher’s motivation and commitment, availability of resources, government support and motivation. The other factors are control and ownership of intellectual property rights, GRIs’ management support, entrepreneurial culture in the GRIs, open communication and trusting relationship, researchers’ skills, risk-taking attitude, and existence of performance measures as important to commercialize the GRIs’ R&D outputs in Malaysia. The challenges that limit the commercialization were also discussed in this study.

Keywords: Commercialization, Government Research Institution, Challenges, Commercialization partner, Critical success factors

INTRODUCTION

Commercialization is a process of bringing the Research and Development (R&D) outcomes or technology from the laboratory to the market. Commercialization is a process whereby a technology benefits the users and allows manufacturers to gain profit from it. It is a commercial attempt to gain profits from technological innovation by packaging it into suitable products, processes, and services and selling these in the marketplace. In the context of this paper, new products are referred to the agro-based technology or the application of a technique or system or process developed through R&D projects that can be reproduced and adopted by the target group. Technology commercialization is one of the most effective and efficient ways to turn ideas into real services/products that will eventually satisfy people’s needs. The term often connotes special entry into mass market (as opposed to entry into a niche market, but also includes a move from the laboratory into commerce). Commercialization of technology is not an easy task. It is a complex interaction between the policy direction, funding mechanism, innovation structure, and human resource capability in government research institutions and private firms.

 Commercialization of public-funded technology is relatively low in Malaysia. A report by the Ministry of Science, Technology, and Innovation (MOSTI) in 2019 revealed that the commercialization of R&D products is between 8% and 9% during the 11th Malaysian Development Plan (2016-2020). It is, however, higher than that in the 10th Malaysian Development Plan (2010-2015) that stood at 5% and 6%. As a comparison, the commercialization of R&D outcomes in developed countries such as the United States of America, Germany, Sweden, and Great Britain is between 12% and 14% (WIPO, 2020).

Every year GRIs, Universities, and Business Enterprises filed the intellectual property rights (IP) of the newly developed technologies. According to the National Research and Development Survey 2018, 7,899 IPs were filed in 2017, but the returns on investment from the R&D projects were only RM1.60 (US$0.38) million (MASTI, 2020). This return on investment is lower than that of the project carried out by Business Enterprises (BE). As a comparison, the BE has filed 464 IPs in 2017, and these IPs were able to generate an income of around RM15.40 (US$3.67) million. In other words, the intellectual property (IP) generated from the newly developed technologies by GRIs do not meet the needs of the industry. In general, researchers who carried out public R&D projects are more likely to publish their findings in scientific journals and create IP, while the attempts to commercialize the goods or services are weak.

Many factors contributed to the low percentage of technologies from public research institutions and universities that made it to the market. MOSTI has identified several root causes as follows:

1. Funding mechanism for research is not conducive for commercialization;

2. Researchers are often not concerned about the commercial potential of their findings;

3. Researchers focus mainly on publications rather than commercializing their research outputs;

4. Lack of clear incentives and rewards to stimulate commercialization activities; and

5. Commercial partners are often not involved in research and development planning. They buy readily available technology.

The Government has approached new strategies to address the weaknesses in the Eco-innovation system by increasing the number of innovations, enhancing research, development, commercialization, and innovation (R&D&C&I) to get the return on investment. The strategy has increased Malaysia’s position in the Global Innovation Index (GII) from 35th to 33rd as reported by the World Intellectual Property Organization (WIPO) in 2020. Malaysia’s achievement was supported by five high performances of the GII pillars namely market sophistication, human capital and research, business diversity, knowledge, and technology output, and creative output (MyIpo, 2021). In addition, Malaysia focused on strengthening the cooperation and trust between government research institutions (GRIs) and the private firms or industry players. Thus, it can overcome the silo culture and reinforce the collaboration between GRIs and the industry.

Studies have shown that, despite its few successes, most of the GRIs are at the beginning journey of commercialization (Kadir, 2017). Commercializing GRIs’ research and development (R&D) outputs are major management challenges, and there are limited studies to describe this phenomenon from the perspective of private firms (Min, Kim, and Vonortas, 2020). Hence, this study was conducted to discover critical factors that influence the commercialization of technology in Government Research Institutions (GRIs) and the challenges that limit the commercialization of the technology.

COMMERCIALIZATION OF TECHNOLOGY

Generally, government research institutions involved in agriculture-based research have been established to conduct and promote R&D in specific areas, such as biotechnology, horticulture, industrial crops, and mechanization and automation. Every year, these research institutions received funds and research grants from the government, international institutions, and private firms to conduct research, and develop new technologies that can increase the productivity and efficiency of agricultural commodities and related products. In return, these new technologies are transferred and utilized by society.

Technology transfer is one of the sources of industrial innovation that can trigger and stimulate industry development, leading to the national economic development (Kamariah, Wan Zaidi, and Izaidin, 2009). The term technology transfer is always referred to the commercialization of technology and the word is used interchangeably. The objective of technology transfer is to commercialize a newly developed technology. Technology can be transferred once it is developed and ready to be transformed into public good products.

In general, the commercialization of technology involves two parties: the government research institution and the private firm. From the perspective of the private firm, the adoption of technology requires huge resources and capital. The recipient firm aims at high profitability when it adopts a new technology developed by the GRI. Therefore, the private perspective, recognition of business opportunities is important in their technology adoption decision. On the other hand, the process of commercialization requires the full support of the top management and the people involved in the process of commercialization.

Commercialization of technology is a complex process of transforming outcomes of research and development by research institutions into industrial or commercial products by private firms. It involves two different organizations with different work cultures. Cultural differences between organizations have been reported as one of the big challenges in the process of commercialization. Moreover, the process and the duration of the commercialization are difficult to predict. A simple technological innovation may take a shorter time, whereas a complex and high-end technology needs a longer time to reach completion.

 Farsi and Talebi (2009) suggested three key aspects of the technology transfer process: i) the opportunity created from the technology, ii) the exploitation process, and iii) the support community. Farsi and Talebi argue that the development of new technology is initiated by the recognition of opportunity from problems faced by consumers in the markets. The needs of the consumers in the markets motivate the entrepreneur to purchase the technology from the GRI, manufacture it, and sell it in the marketplaces.

This study found that at least 12 factors can lead to the success of the commercialization of public-funded agro-based technology. These factors can be classified as the roles of the GRI and the private firm.

The roles of government research institution

The government research institution (GRIs) is one of the main sources of new products or technologies in the markets. Every year, GRIs and universities generate thousands of new technologies and around 8% of them are commercialized in the marketplace. Some roles of the GRIs that can contribute to a successful commercialization of R&D outputs are as follows:

The availability of R&D products and market readiness

  • The objective of technology transfer is to commercialize a newly developed technology for the benefit of consumers. The ability of the researchers to recognize problems that arose in the markets will motivate them to develop new technologies. For example, low productivity in the production of vegetables is because farmers used the conventional method and traditional variety of seeds. The lack of technology in the market has led the researchers to invent a plant factory that can increase the productivity and quality of the vegetable. 
  • The GRI produces appropriate technologies that are needed by customers and the community. Technologies needed by consumers will likely be purchased by private firms because it has the potential to generate more income and profitability. If the consumers are not ready to adopt the new technology, the commercialization of the technology will likely fail. 

Researcher motivation and commitment

  • In the past, there was the resistance of the technology generator in supporting the technology transfer to a certain organization or SME. Many factors demotivated the researchers to commercialize their technologies, such as lack of support by top management, lack of funds for conducting market studies, and dissatisfaction with the distribution of royalty. A study by Rozhan (2013) found that self-satisfaction is the greater motivation for researchers to commercialize their technology, followed by a financial return (royalty) and promotion in their careers. 
  • The commitment of the researcher is another factor that can lead to the success of the commercialization of technology. The involvement of the researcher in the whole process of commercialization speed-up the process and the activities run very smoothly. He/she must be willing to share all information related to the technology and teach the technology recipient how to manufacture the newly developed technology.

Government support and motivation

  • The government policies on the commercialization of R&D outcomes will serve as a guideline for the GRI and the researchers to commercialize the technology. Policy on filing the IP, the management of IP, and the distribution of royalty will motivate or demotivate the researchers. 
  • The government provides full support to the commercialization of R&D outputs by making available technical expertise, training, dissemination of information, and financing. For example, the government provides the budget for R&D through funding agencies such as the Ministry of Finance, MOSTI, and MAFI. The government also provides a special fund for commercialization called Technofund. This fund is dedicated to a newly developed technology that has the potential to be commercialized. It can be used for starting the pilot project, developing the prototype products, conducting market studies, and other related processes of commercialization. 
  • MOSTI introduced the Year of Commercialization of Malaysia (MCY) in 2016. The main target is to boost research, development, and innovation (R, D & I) from local research institutions as a wealth generator through the commercialization process. The Malaysia Commercialization Year initiative is hoped to boost innovation and commercialization activities in all sectors and at all walks of life in Malaysia

GRI’s management support

  • Success in the commercialization of technology is dependent upon the technology transfer office (TTO) in the GRI. Many GRIs in Malaysia have established their TTO to support the researchers in commercializing their R&D outcomes. A study by Kamariah et al., (2009) found that the decision to seek patents protection was made by the technology transfer office, while the decision to commercialize the technology is made by the technology generator. 
  • The management also gives incentives and rewards to the researchers. For example, MARDI has changed the policy on the distribution of royalty to its researchers from 10% to 50%. In the past, the researcher only received 10% of the royalty of his/her commercialized technology, while MARDI kept the balance of 90%. The Board of Directors has agreed to divide the royalty equally, 50% for MARDI and 50% for the researcher. The change in the policy has increased the number of technologies being commercialized. 
  • The top management of the GRI will decide on the commercialization of the products, the approach of the commercialization process, the collaboration with the SME, and the price that the SME needs to pay in terms of the licensing fee and royalty. 

Entrepreneurial culture in GRIs

  • Commercialization of technology involves two different organizational cultures. One of the great challenges is the ability of researchers from GRIs to change their scientist’s working culture to a business lifestyle. Some of the business cultures that must be adopted by the researchers include integrity, performance-oriented, innovation, and teamwork.

Researcher’s skill

  • Researchers must be knowledgeable in the area of research and thus develop and transfer the technology. They must be able to recognize problems that arose in the markets and generate a new technology that can solve them efficiently and effectively. They must also understand the process of commercialization that includes the procedures, rules and regulations, and communication skills. 

Roles of private firms

Private firms are important partners in the commercialization of public-funded technology. A public–private partnership is a cooperative arrangement between public and private sector, typically of a long-term nature. In other words, it involves government and business that work together to complete a project and/or to provide services to the population. The commercialization of technology involves mutual collaboration between individuals in the GRIs and the private firm. It needs full commitment and involvement of project members from both organizations.  Among the roles of private firms in the process of commercialization of agro-based technology are as follows:

Control and ownership of intellectual property right (IP)

  • Commercialization of technology can increase the competitive position of a company in the business environment, especially if the company holds the IP of the technology. In other words, the company has the right to manage the IP of the technology. The company also has the right to lead and control the price of the products in the markets.
  • Commercialization of technology involves the technology recipient or the SME. Thus, the success still depends on whether the technology is fully commercialized or diffused into the markets. The ability of the private firm to manage the IP will determine its success. 

A risk-taking attitude

  • Despite the business opportunity created from the technology, the adoption of a newly developed technology is a risk. An entrepreneur must be a person who is a risk-taker and has the passion to venture into a new business. 

The existence of performance measure

  • One of the business cultures is to measure the performance of the staff regularly. During the performance measurement, the management will define the target, collect, verify and validate the data, analyze the information and implement the improvement. 

An open communication and trusting relationship

  • Commercialization of technology is a reciprocal activity, by which government research institutions have licensed the use of its technology to be developed and marketed elsewhere. The interaction involves the transfer of technology, information, knowledge, and property rights, and in return, the private firm pays the licensing fees and royalties and manufactures the products agreed upon in the agreement. 
  • The agreement between the GRIs and PF must be in black and white and both parties must honor the agreement. For example, the PF cannot share the information related to the technology with the third party or make a third party agreement before the consent from the GRI.

Good partnership with GRI

  • A good partnership between the GRI and PF will speed up the process of technology commercialization. Good partnerships need good communication between the PF and GRI. Partnerships between private companies and GRI provide advantages to both parties. Private-sector technology and innovation, for example, can help improve the operational efficiency of providing public services.

Availability of resources

  •  Adoption of new technology requires huge resources and capital. Generally, the SME aims at high profitability when it adopts a new technology developed by a GRI. To succeed in commercialization, the private firm must have sufficient resources that include financial, human resources, and technical knowledge. 

Challenges that limit the commercialization of the technology

While implementing the technology commercialization activities, various issues and challenges arose and need to be addressed because each technology commercialized has its characteristics, and the approach used is different and unique (Bozeman, Rimes, and Youtie, 2015). Kamariah and Masibu (2013) have highlighted seven problems faced by the private firm during the process of the commercialization of R&D outcomes as follows:

i. The unpredictable marketplaces as changes are unavoidable;

ii. Technology acquisitions;

iii. Political and economic instability;

iv. Social and consumer awareness;

v. Skeptical perception of local products;

vi. Problem lies in finding the right investments; and

vii. Insufficiency of experienced professionals in the industry

The problems reported above play a part in hindering the commercialization process. The mindset of the local consumers toward local technology was the greatest challenge faced by the private firms. The local people are skeptical about the performance of local technology or products. Financial providers such as banks are also quite skeptical and don’t want to take risks in financing the projects. The unpredictable market places are also the other challenge they have to go through in commercializing the R&D outcomes.

CONCLUSION

Commercialization of public-funded agro-based technologies from government research institutions to private firms is a process of matching the technological opportunity created by the technology generator to the business opportunity demanded by the entrepreneur. The process of commercialization involves two parties with different organizational cultures, but with the same objectives are to improve the productivity of the agro-based industry and benefit the community. The success of the commercialization of the technology is determined by good cooperation between and among the government, the GRIs, and the private firms.

ACKNOWLEDGEMENT

The authors would like to express their gratitude to the companies that were participated in this study.

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