Riding the Biotechnology Wave: A Mixed-Methods Analysis of Malaysia’s emerging Biotechnology industry by Melvyn Wei Ming Loh A thesis submitted to the Victoria University of Wellington in fulfilment of the requirements for the degree of Master of Commerce and Administration in Management Victoria University of Wellington 2009 Abstract Building a sustainable bioeconomy requires strategic alliances, intellectual property, funding and talent. The research focus of this empirical study was to assess Malaysian biotechnology companies regarding their opinions on priorities and capabilities necessary to establish a thriving bioeconomy. The research questions that form the basis of this paper explore the extent to which initial factor endowments affect the trajectory of biotechnology industry development and how Malaysia should prioritise, mobilise and coordinate resources to build a bioeconomy. A mixed methods approach using qualitative interviews and case studies, as well as a quantitative survey, indicated that respondents advocated a resource-based-view in terms of resource allocation and agglomeration towards building Malaysia’s bioecnomy. That is, there was strong support to leverage Malaysia’s existing capabilities in agriculture and biofuels to derive value-added products towards gaining leadership positions in these respective biotechnology sectors globally. Access to funding and talent emerged as the highest priority capabilities necessary for commercialising discoveries, conducting research and development and accelerating innovation. Respondents perceived the government as having a ‘very important’ role in building and accelerating the Malaysian biotechnology industry. The gap between required capabilities and strategic priorities provides a framework within which the government may play a central role in coordinate, accelerating and resourcing Malaysia’s nascent bioeconomy. ii Acknowledgements I would like to thank my supervisor, Professor Mark Ahn during this MCA programme. His guidance, patience and expertise assisted me to complete this paper successfully and with great pride. I would also like to thank the management team of Malaysia Biotechnology Corporation for the opportunity to cooperate on this successful research project. I also hope the results and recommendations will greatly assist Malaysia’s bid to establish their own bioeconomy. I thank the journal reviewers on reviewing and considering this paper for future publications and their inputs on editing this paper. Lastly I would like to thank my parents for their financial and mental support of my studies and their endless love. iii Table of Contents Introduction......................................................................................................................... 1 Literature Review ............................................................................................................... 3 Global Biotech Industry.................................................................................................. 3 Building Biotech industry Clusters............................................................................... 12 Global Biotech Clusters ............................................................................................ 14 Asian Biotech Industry ................................................................................................. 16 Asian Biotech Clusters.............................................................................................. 25 Malaysian Economy...................................................................................................... 28 Malaysia Bioeconomy .................................................................................................. 29 Malaysian Government Strategies for biotech sector growth................................... 33 Malaysian Biotech Fund and Venture Capital.......................................................... 38 Malaysia Intellectual Property Competitiveness ...................................................... 43 Biotech Cluster strategies in Malaysia...................................................................... 46 Methodology..................................................................................................................... 49 Introduction of methodologies...................................................................................... 53 Research Design............................................................................................................ 53 Research Methods......................................................................................................... 58 Limitations of methodology.......................................................................................... 60 Case Studies...................................................................................................................... 62 IOI Group Sdn Bhd....................................................................................................... 62 Chemical Company of Malaysia (CCM) Berhad.......................................................... 67 BioFact Life Sdn Bhd ................................................................................................... 71 Malaysian Bio-Diagnostics Research (MBDR) Sdn Bhd............................................. 75 StemLife Malaysia Sdn Bhd ......................................................................................... 80 Results............................................................................................................................... 84 Discussion....................................................................................................................... 106 Recommendations........................................................................................................... 113 Conclusion ...................................................................................................................... 114 References....................................................................................................................... 117 Appendix......................................................................................................................... 131 Questionnaire .............................................................................................................. 131 iv List of Figures Figure 1: Global Biotechnology Clusters Map……………………………………………….… 15 2: Malaysia Healthcare Spending Growth Rate……………………………………….…29 3: Biotechnology Focus Areas…………………………………………………………...31 4: Stages of Understanding in Case studies……………………………………………...55 5: Business Processes and Valued Added Activities……………………………………63 6: Roles of Participants………………………………………………………………….84 7: Years of Experience………………………………………………………………......85 8: Malaysian Bioeconomy – Priority Sectors vs. Competitiveness……………………..87 9: Malaysian Bioeconomy – Priority Capabilities vs. Competitiveness………………...88 10: Access to Funding…………………………………………………………………...90 11: Cronbach’s Alpha on Access to Funding……………………………………………90 12: Access to Talent……………………………………………………………………...93 13: Cronbach’s Alpha on Access to Talent………………………………………………93 14: Malaysian Bioeconomy Ecosystem………………………………………………….95 15: Proximity to Research centres……………………………………………………….97 16: Quality of Life Factors……………………………………………………………99 17: Lab and Office Space……………………………………………………………….100 18: Entrepreneurial Environment……………………………………………………….101 19: Access to patients and Markets……………………………………………………..103 20: Favourable incentives and tax treatment…………………………………………...105 v List of Tables Table 1: Global Biotechnology Clusters by Region……………………………………………15 2: Application and Registration of Patents……………………………………………....45 3: Patents Based on Field of Technologies………………………………………………45 4: Case-studies Company Profiles……………………………………………………….54 vi Introduction Biotechnology, information technology, and the globalisation of capital markets are entrepreneurial mega-force multipliers for future economic development and productivity. The biotechnology industry has similarities to the innovation and diffusion patterns of the information technology era. To date, the biotechnology industry and market has evolved from a technologically-advanced and highly specialised area to an increasingly common and enabling technology with vast commercial applications and entrepreneurial opportunities throughout all sectors of the global economy. This can be attributed to advancements in biologic insights, decreasing costs of new discoveries and widespread availability of research tools. Even though the biotechnology industry can be termed as an ‘emerging’ after only three decades of scientific and entrepreneurial resolve, there is great potential in addressing significant challenges in developed and developing nations like healthcare, security, substitute or renewable energy sources, environment rehabilitation and agricultural productivity (BIO,2007; Burrill 2007; CHI, 2006; Ernst & Young, 2008). Public and private stakeholders wanting to create and increase bioeconomy competitiveness and reduce the effect of distance face enabling trends such as increasing numbers of science graduates, accelerating pace of scientific advancement leading to greater public-private sector collaboration enabled by globalisation, democratising forces of the internet and the relentless competitive pressure to innovate (Furman et al, 2002; Iammarino and McCann, 2006; Casper, 2007). Earlier studies on multinational