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Go For Open Innovation Model, Malaysian Firms Urged [ 25-10-2011 ]

KUALA LUMPUR, Oct 19 (Bernama) -- Malaysian companies need to adopt the new paradigm of 'open innovation model' which strategically leverages internal and external sources of ideas.

This new and growing business model can lead to the creation of more investment opportunities and stimulate economic growth, said Malaysian Life Sciences Capital Fund (MLSCF) co-chairman/director Dr Roger Wyse.

"Open innovation is a necessary paradigm for companies to remain competitive and for countries to make the leap to the next phase of economic development. Sole reliance on organic innovation is too slow and costly.

"They must identify, adapt and integrate global innovation in sectors where Malaysia has a sustainable competitive market advantage," he told Bernama.

Risk capital, he said, is essential to accelerate open innovation where a venture fund with global presence and deal flow can provide a global window on relevant innovation.

He suggested that pension funds such as the Employees Provident Fund (EPF) and Kumpulan Wang Persaraan (KWAP) could participate responsibly in venture capital (VC) to help the nation achieve innovation-led growth by 2020.

"Pension funds in developed economies have long invested in venture capital and private equity funds as a way to diversify and to drive growth in innovation-led economic sectors," he said.

In order to achieve the goal of the National Economic Model (NEM), which is to double the gross domestic product per capita (GDP), each person must generate more economic value.

Thus, individual efforts must be leveraged with technology, said Dr Wyse who is also managing director/general partner at San Francisco-based Burrill & Co., a life sciences merchant bank.

He said Malaysia must increase funding and management of innovation via VC as most innovations occur in small companies, the major source of new jobs and economic growth.

In the United States, he said, revenues from US VC-backed companies represented 21 per cent or US$14.3 trillion of the US GDP in 2008, while only comprising three per cent of total US market capitalisation.

In Malaysia, venture capital is still primarily funded by government agencies, he said, adding that of the RM4.6 billion total committed funds under management as at 2008, RM2.2 billion was sourced from government agencies.

Investments by insurance companies or pension funds were relatively insignificant, he said.

While noting that concerns about risk by EPF and KWAP contributors are understandable, Dr Wyse said in reality the risk to their overall portfolio is minimal.

He said the relative amounts invested in VC or private equity are typically six to 10 per cent by international pension funds.

"If EPF and KWAP would allocate 0.1 per cent of their assets under management each year it would provide a major portion of the capital needed to adequately capitalise the NEM," he said.

Dr Wyse said increased investment in VC is strategic for Malaysia and the risk can be further mitigated if the right fund manager is chosen and if private equity investments are made into companies with proven technologies that are being commercialised in Malaysia.

"The funds need to be managed by people with domain expertise, both technical and managerial, who can proactively work with the company to accelerate value creation and increase the chances for success," he said.

MLSCF is a life sciences venture fund specialising in early stage investments in agriculture as well as industrial and healthcare biotechnology.

Founded in 2006, it is co-managed by Malaysian Technology Development Corporation Sdn Bhd (MTDC) and Burrill & Co. It currently has US$150 million in committed capital.

-- BERNAMA

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