Singapore’s innovation hub. A source of rents for intellectual monopolies
Introduction
Different cities around the world (such as London, New York, Shenzhen, Qatar and Singapore) are emerging as innovation hubs (Belderbos et al., 2014; Chen & Ogan, 2017; Knight, 2014). These hubs can be defined as geographically limited spaces where synergies between firms, public research institutions and the state reinforce innovation. In the case of Singapore, since the 2000s, its government has sharply increased its Research & Development (R&D) investment and introduced different sets of policies, including science and technology plans aimed at creating an innovation hub. Policies included tax credit to companies investing in R&D, multiple instruments to promote start-ups’ creation, and assigned a key role to the National University of Singapore (NUS) and the Nanyang Technological University (NTU). Both universities should deliver the needed talent and be innovative organizations collaborating with established firms and creating spin-offs.
In globalized capitalism, there is an open question on who will capture the intellectual rents from such hubs. To answer this question, this chapter analyses Singapore’s innovation hub from the intellectual monopoly capitalism framework. Previous chapters have argued that contemporary capitalism is led by intellectual monopolies that plan and dominate innovation networks collecting intellectual rents from their successful results. Intellectual monopolies may outsource or offshore innovation modules in those hubs, garnering innovation rents, therefore potentially profiting from hubs as enclaves of science and technology. This can be particularly the case with developing or emerging countries pursuing knowledge and/or innovation hub strategies. In this context, our study of Singapore’s hub contributes to understanding the distribution of rents in innovation hubs in non-core countries.
Our methodology combines exploratory interviews conducted at the beginning and the end of our investigation, with grey literature and statistics on Singapore start-ups, patent co-ownership and innovation rents (thus not every form of intellectual rent but only those related to innovations, see Chapter 7).
* This chapter is co-authored with Prof. David Flaeher (COSTECH, Universite de Technologies de Compiegne).
Overall findings show that the Singapore state is subsidizing (directly but also indirectly) intellectual monopolies while the NUS, the NTU and startups’ innovation subordinates to those monopolies. University research is mostly dependent on public research grants, and the state is start-ups’ most frequent funding source. Simultaneously, research lines are set according to business needs and seeking for research commercialization. Furthermore, while the state funds the riskiest innovations, if successful, intellectual monopolies acquire the start-ups, turn them into regular subordinate suppliers or simply patent and profit from university research outcomes. Both the NUS and the NTU participate in transnational innovation networks, as evidenced by the multiple agreements and patents co-owned with leading multinational corporations. Generally, these research collaborations allow intellectual monopolies to save money, reduce their risk and garner the intellectual rents from successful results. Intellectual monopolies are thus profiting not only from their corporate R&D settled in Singapore but also predating knowledge from Singapore’s research universities and start-ups (all of which rely on public funds). Hence, the chapter invites us to question the possibilities for a non-core state to effectively capture part of the intellectual rents triggered by R&D that it significantly funded, passing over powerful transnational intellectual monopolies from core countries.
The rest of this chapter is organized as follows: Section 2 elaborates on knowledge hub policies in the context of intellectual monopoly capitalism with a focus on Singapore’s experience. Section 3 introduces our approach and methodology. Section 4 presents our findings, and results and conclusions are discussed in Section 5.
Knowledge hubs: the case of Singapore
In a recent review paper on cluster studies and Global Value Chains (GVC), Gereffi and Lee (2016) argue that despite the ongoing dialogue between the GVC and cluster literature, there is a lack of understanding of the interplay between GVC and industrial clusters in the global south. Clusters and hubs are close concepts. While the notion of clusters is more focused on a critical mass of firms concentrated in local geographic spaces (see seminal work of Porter, 1998), the idea of hubs has been developed to speak of the geographic concentration of a particular production process: that of knowledge and innovation. The innovation hub notion was coined in policy documents for Singapore and South Africa and referred to the aim of concentrating in the same location innovative companies with education and research institutions, such as universities and public research organizations (PROs), and venture capital (Aggarwal, 1995 cited in Wan et al., 2005; Kahn & Reddy, 2001; Moodley, 2003). Research institutions do not play a relevant role in clusters’ framework, whereas they have been placed at the centre stage of innovation hubs. Anyway, hubs can be conceived as a cluster where the critical mass of firms corresponds to start-ups and other innovating companies and is complemented by other key organizations such as universities and PROs.
Therefore, drawing on Gereffi and Lee’s (2016) argument, this chapter contributes to bridging the gap between GVC and clusters by analysing an innovation hub and the role of GVC leaders. As we explained in Chapters 2 and 7, following Durand and Milberg’s (2020) taxonomy of rents from intangibles, GVC leaders can be considered as intellectual monopolies because each has the exclusive knowledge of who can do what within its chain. This form of knowledge, defined by Johnson and Lundvall (1994) as know-who, is an advantage that enables to set the chain in motion, hence to organize it and put it together. Having the exclusive knowledge of GVCs structure and participants is an intangible asset that triggers vertical natural monopoly rents from network externalities (Durand & Milberg, 2020). In a global context of intellectual monopoly capitalism, hubs may end up favouring intellectual monopolies’ rent-seeking activity, further subordinating public science to private interests. If this is the case, unequal distribution of intellectual rents will reinforce centre-periphery dynamics.
By focusing on the case of Singapore, we expand the dependency theory on the unequal exchange of value between the centre and the periphery (Emmanuel, 1972). We include the unequal distribution of intellectual rents that results from innovations achieved in non-core countries, a form of knowledge extractivism (see Chapter 11).
Singapore has historically depended on foreign multinationals’ activity and technology (Wong & Goh, 2013). Since the late 1990s, the state has put in place policies to transform the country into a knowledge and innovation hub aimed at developing local capabilities. These policies were synthesized in ‘Science and Technology’ (S&T) Plans, renamed ‘Research, Innovation, Enterprise’ Plans since 2011. Colossal public investments in R&D have supported these policies (Mok, 2015; Sidhu et al., 2014).
In these plans, the Singapore government assigned to the NUS and the NTU a role that resembles that of Georgia Tech in the transformation of Atlanta into an innovation-driven economy (Youtie & Shapira, 2008). As our interviewees pointed out and as confirmed by the NUS, NTU and government’s official websites, the government (i) prioritized public investment in R&D for strategic fields (Sidhu et ah, 2014) and promoted a scheme of competitive grants that privileges applied research1 and partnerships with private firms, (ii) stimulated talent imports, (iii) promoted university spinoffs and entrepreneurship, and (iv) attracted foreign direct investment in higher education and research. This meant attracting foreign world-class universities both to settle branch campuses and to partner with the NUS and the NTU. In this context, patenting and creating start-ups became as encouraged and rewarded as publishing in high-impact factor journals.
Among many other policies within the mentioned lines, the S&T 2010 plan launched the Visiting Investigatorship Programme aiming “to bring top scientists to Singapore to help develop new capabilities in key areas” (Ministry of Trade and Industry, 2006, p. 18). In 2008, the Singaporean government also created the National Framework of Innovation and Enterprise aimed at commercializing “leading-edge technologies developed by the public research institutes (PRI) and institutes of higher learning (IHL) of Singapore through the creation of new high-technology ventures.” Next, in 2012, the Campus for Research Excellence And Technological Enterprise (CREATE) was established. It is an international research and innovation centre inside the NUS campus that also includes the NTU. It hosts joint research labs with foreign universities (such as the MIT, Berkeley and Peking University) and industrial partners. CREATE focuses on research with commercial potential (Ministry of Trade and Industry, 2009). Regarding competitive grants, interviewees explained that, in some cases, it is not required to find private matching funds but only letters of support from private companies. Proving a private interest in the project was enough to increase a project’s chances to be granted the funds.
Concerning stimulating spin-offs and entrepreneurship, start-up incubators were created as well as specialized programs like the NUS’s Graduate Research Innovation Programme. Moreover, besides horizontal policies to stimulate overall business expenditure in R&D,2 the Singaporean government deployed a bundle of policies to encourage technology start-ups’ creation (Cheah et al., 2016a; Intarakumnerd & Goto, 2016). The first R&D incentive for start-up enterprises dates from the late 1990s. Considering that start-ups need cash for investing in R&D, this first incentive - still available - allowed them to apply for cash grants. Since 2010, start-ups can also deduct up to 400% (maximum of S$800,000) of their expenditures from their income before paying taxes. Expenditures that can be deducted include R&D investment, intellectual property rights (IPRs)-related expenses and acquisition of automation equipment (Intarakumnerd & Goto, 2016).
The government also introduced more venture-friendly regulations. It made the bankruptcy process faster (from 29 to 10 months) and less costly. It put in place a scheme of partial tax exemption for new start-up companies3 in a country with one of the lowest corporate tax rates (17%).4 On top of these measures, the government provided a series of funds and policies to attract venture capital as well as a specific grant to promote start-up creation managed by A*Star (Singapore’s Agency for Science, Technology and Research) (Cheah et ah, 2016a). In a Global Entrepreneurship Monitor report from 2014, among the 27 countries considered, Singapore ranked first on government policies that facilitate entrepreneurship (Chernyshenko et ah, 2015).
Summing up, Singapore’s innovation hub relies on the planning capacity of its state, including both financial and political decisions aimed at making the NUS and the NTU the engines of the hub as well as to develop a cluster of start-ups that should become the hub’s bedrock. Yet, Singapore became an innovation hub as intellectual monopoly capitalism was spreading. In the following sections, we aim to evaluate the success of this strategy by considering results in terms of university research commercialization, spin-offs and overall start-up creation coupled with an assessment of the distribution of intellectual rents among the actors participating in the hub.
