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 that large firms are more likely to innovate than small firms. Ownership structure is also found to be an important determinant of innovation, with private limited and public limited firms twice as likely to innovate than sole proprietorship firms. A surprising finding is the negative correlation between the propensity to innovate and the share of exports in total sales. There is also no evidence that innovation is related to the composition of foreign and local ownership of firms. While the influence of industry's technology level is inconclusive, the propensity to innovate is positively correlated with market concentration.