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Technology in Society 35 (2013) 41–54

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Technology in Society

journal homepage: www.elsevier .com/locate/ techsoc

Connecting all the dots: Identifying the “actor level”challenges in establishing effective innovation system inIndonesia

Benyamin Lakitan a,b,*

aMinistry for Research and Technology (RISTEK), S&T Institution Affairs, Jalan MH Thamrin 8, Jakarta DKI 10340, IndonesiabCollege of Agriculture, Sriwijaya University, Palembang, Indonesia

a r t i c l e i n f o

Article history:Received 12 February 2013Received in revised form 11 March 2013Accepted 12 March 2013

Keywords:National innovation systemInnovation ecosystemR&D institutionIndigenous technologyDomestic industryEconomic development

* Ministry for Research and Technology (RISTEKfairs, Jalan MH Thamrin 8, Jakarta DKI 10340,81298115560; fax: þ62 213102014.

E-mail addresses: blakitan@ristek.go.id, blakitan

0160-791X/$ – see front matter � 2013 Elsevier Ltdhttp://dx.doi.org/10.1016/j.techsoc.2013.03.002

a b s t r a c t

Establishing an effective innovation system is a gigantic effort for Indonesia and surely willface many and diverse challenges. The challenges can be found at all three levels (core,ecosystem, and anatomy) within the innovation system. At the core level, communicationand interaction between domestic technology developers and users have to be intensified.At the ecosystem level, it is more complicated for creating a favorable atmosphere fornurturing an effective and productive innovation system which will significantlycontribute to economic growth and social welfare improvement. Hard challenges at theecosystem level are to harmonize all regulations and public policies such that they aremore in favor of innovation system development; and to synchronize prioritized programsand activities of all related public and private institutions. Deeper insight into each actor ofinnovation system and the challenges faced is required for advancing innovation. Thisanalysis uses case methodology to identify these challenges. Scientific collaboration amongtechnology developers is low; therefore, it could cause inefficient use of national R&Dbudget. In-house R&D activities and technology absorptive capacity of domestic industriesare also low. Finally, the role of an intermediation agency is not yet significant.

� 2013 Elsevier Ltd. All rights reserved.

1. Introduction

One of eight Indonesian development missions as clearlystated in Law Number 17-2007 on Long Term NationalDevelopment Plan (RPJP) 2005–2025 is improving humanresource quality and Science and Technology (S&T) capacityand its application for increasing national competitiveness.This RPJP is divided into four Medium Term NationalDevelopment Plans (RPJMs). While the first RPJM (2005–2009) did not specify the role of S&T inn reforming Indo-nesian development aimed at creating a safe, peaceful, just,democratic, and prosperous Indonesia; however, starting

), S&T Institution Af-Indonesia. Tel.: þ62

@yahoo.com.sg.

. All rights reserved.

from the second RPJM (2010–2014), the needs for increasingthe quality of human resources, including efforts to buildcapacity in S&T and strengthen economic competitivenessare clearly declared. At the third RPJM (2015–2019), Indo-nesian economic competitiveness will rely on sustainablenatural resources management, competent human re-sources, and improved S&T capacity.

The role of S&T in economic development has also beenrecognized in Presidential Decree Number 32-2011 onMaster Plan for Enhancement and Expansion of IndonesianEconomic Development 2010–2025 (known as MP3EI).There are threemain pillars for supporting future economicdevelopment in Indonesia. Firstly, the establishment of sixeconomic development corridors based mainly on naturalresource potentials and geographical characteristics. Sec-ondly, the development of the required infrastructure forstrengthening – corridor connectivity across and within

B. Lakitan / Technology in Society 35 (2013) 41–5442

corridors, especially transportation networks for facili-tating workforce mobility, raw materials, and processedproducts. Thirdly, the improvement of human resourcecompetency and the development of relevant technologiesfor enhancing economic growth.

In comparison, China formally recognized the impor-tant role of S&T in economic development as early as 1978,when Deng Xiaoping declared the guidelines for devel-opment of China. His inspiring tagline was ‘S&T are theprimary productive force’ (for economic and social devel-opment). In 1995, China launched its national develop-ment strategy, focusing on ‘Invigorating China through S&Tand education’ [1,2].

Despite recognizing the important role of S&T for thefuture development, an actionable, measurable, and well-defined plan for S&T development has yet to be formu-lated in Indonesia. Based on his long working experiencesin many Asian countries, Sharif [3] recommended that it iscrucial to define technology in away that enables managersto pull levers for actions that will produce desirable out-comes in order to integrate technological innovation con-siderations with development investment decisions.

An actionable and measureable S&T development planis urgently needed. It is a prerequisite for establishing aneffective and productive innovation system. In this regard,Hyung-Sup Choi’s view as quoted by Sharif [3] is wise toconsider: “Adaptive implementation of a progressivelyimproved simple plan is far better than obsession withgrandeur but non-implementable grand plan”.

Indonesia should have an applicable and measurable‘simple’ plan for establishing an effective innovation sys-tem. To be applicable, the plan has to be based on actualcurrent conditions (potentials and limitations). To bemeasurable, the plan should be clearly defined; currentconditions must be comprehensively understood; and themain objective and targets for achieving desirable goalsshould also be firmly set.

2. The national innovation system and economicdevelopment

It has been firmly believed for many decades that onlyinnovative countries will achieve high performance ineconomic development, except for few small countrieswith extremely rich oil and gas resources. From the 1960sonwards, differences in economic performance weremainly caused by differences in technological capacity; andtwo decades later, during the 1980s a lot of studies werepublished on cross-country differences in the levels ofdevelopment and growth performance associated withtechnology. It was commonly concluded in these studiesthat unsuccessful countries in developing appropriatetechnological capabilities should be expected to continueto lag behind. Concepts of a “national innovation system”

were suggested during the 1990’s and, since then, a bur-geoning empirical literature has emerged, focusing onthese aspects of development [4].

In the first decade of the twenty first century, morestudies on innovation systems were conducted. Somelarge-scale, well-organized, and more comprehensive sur-veys were initiated by international organizations. For

example, INSEAD commenced to publish its annual reportson the global innovation index in 2007; and in 2012, WIPOjoined INSEAD in publishing the report. Empirical evidencegathered from this global-scale survey confirmed thestrong positive correlation between innovation capacityand economic development [5].

INSEAD and WIPO [5] clustered 141 surveyed countriesinto three groups, i.e., underperformers, learners, andleaders. The clustering was based on correlation betweenGDP per capita and Global Innovation Index (GII) score.Underperformers were countries with low GII score andtypically also low GDP per capita, for instance Sudan,Angola, Syrian Arab Republic, and Algeria; but some coun-tries included in this category may also have high GDP percapita due to high oil and gas resources, such as Qatar,United Arab Emirate, Brunei Darussalam, and Bahrain.Learners are countries with a higher GII score, but haverelatively low GDP per capita. Two new economic superpower countries (China and India) are among the learners.Leaders are countrieswith a highGII score and highGDPpercapita, including Scandinavian countries (Swedish, Finland,Denmark, and Norway), Western European countries(Switzerland, Netherland, United Kingdom, French, andGermany), Northern America countries (United States andCanada), East Asian countries (South Korea and Japan),Australia, and Singapore. Some other countries, such asIndonesia, Russia, and Brazil are among countries in tran-sition, positioned better than the underperformers but notyet as good as the learners.

Sound theoretical foundation and solid empirical evi-dence on the significant role of technological innovation forenhancing economic development compelled many coun-tries to establish or strengthen their national innovationsystem (NIS). However, efforts in improving human resourcecompetencyandR&Dcapacitywereunconnectedlyexecuted.This leads to mismatch between competencies of humanresource and required technologies to be developed for sup-porting economic development caused ineffectiveness andlow efficiency in some national systems of innovation.

Based on their study on OECD countries, Guan and Chen[6] identified that overall efficiency of NIS was mainlydetermined by downstream commercial efficiency; there-fore, improving commercial efficiency should be a primaryconsideration in formulating innovation policy. They alsoconfirmed that public policy exhibited a positive impact onNIS performance and suggested that the policy should becountry-specific and process-specific. They also confirmedthe significance of technology adoption by industry orother users in establishing effective and productive NIS.Unfortunately, this segment of NIS is frequently overlookedduring the early stage of NIS establishment.

NIS is much more complex than just having high qualityhuman resources and high R&D capacity. Most successfulcountries implement a more comprehensive approach indeveloping their NIS; tailoring the system for its best fitinto socio-cultural norms and values, and continuouslyadjusting to global economy and political dynamics. Inshort, it should be more broadly understood that a NIS is amuch more complex system and cannot be simplified tojust improving the quality of human resources andstrengthening R&D capacity.

B. Lakitan / Technology in Society 35 (2013) 41–54 43

Fagerberg and Martin [4] identified four different ele-ments of economic capabilities: the development of aninnovation system, the quality of governance, the char-acter of the political system, and the degree of economicopenness. Among these four elements, they found thatinnovation systems and governance are of particularimportance for economic development. However, sincethese four elements are strongly interrelated to eachother; if an innovation system was developed based onand implemented according to good governance princi-ples; and also be simultaneously adjusted to political dy-namics and the degree of economic openness; then, thisinnovation system could act as main driver for economicdevelopment.

Moreover, Castellacci and Natera [7] indicated that thedynamics of a NIS was driven by the coevolution of threeinnovative capability variables (innovative input, scientificoutput and technological output) and three absorptive ca-pacity factors (infrastructures, international trade andhuman capital). In addition, the NIS specific pattern wasalso characterized by its level of development.

Sun and Liu [8] suggested that observations of thestructural transformation of China’s NIS since 1999 wasuseful for understanding the rapid economic growthexperienced in China; and for adjusting S&T developmentstrategies of other late-comer or underperformer coun-tries. The structural changes included shifting fundingstructure from a government to an enterprise-centeredmodel; and a performing structure from a double-centered model (enterprise and research institution) tosolely lead by enterprise. However, the central governmentremained as the leading force in reforming China’s NIS.Based on Sun and Liu’s explanation, it implies that strategyfor technology development should be shifted from asupply-push approach to demand-driven approach. En-terprises and other technology users are the ones thatcreate demand.

Gao et al. [9] found that outputs of S&T in Chinawere growing faster than its economic growth. Thisfinding indicates that, even though China has beenclassified as learner and its innovation system wascategorized as efficient [5], there should still be roomsfor optimizing the efficiency of its NIS. Marxt andBrunner [10] also underlined that even a very innova-tive country, such as Switzerland, still needed to keepits leading position by enlarging and strengthening itsNIS in a sustainable way.

Since communication and direct interaction amongstinnovation actors are very crucial in improving the per-formance of the NIS; the role of information andcommunication technology (ICT) in enhancing a NISdevelopment has been assumed to be positive. Wisemanand Anderson [11] found that ICT-based education hadthe potential to build capacity in knowledge develop-ment, which was a key component in the establishmentof NIS. However, the results of their study in the GulfCooperation Council (GCC) countries suggested that theways ICT were used in education did not build capacity inknowledge development in youth. Although evidenceshowed that GCC countries do have institutional capacityin ICT, it was not (yet) used for knowledge development,

in part because of limitations imposed by the culturalcontexts for education in the Gulf. This finding impliesthat it is not just the technology (as hardware) which isadvantageous for the development of a NIS, but also moreimportantly, how the technology is used in intensifyingpositive communication and productive interactionamongst innovation actors.

Social, cultural, and political factors should not bedisregarded in developing NIS. Svarc [12] figured out thatCroatia had failed to capitalize on its inherited sciencebase, which could have been used as a starting point in thetransition towards a knowledge-based economy (KBE),because it had not made the shift from an obsoletesocialist-style science policy to a modern innovation policy(IP). The latter was seen as the new policy paradigmnecessary for structural adjustment to the KBE. Thecountry-specific historical heritage prevented recognitionof need for structural adjustment to the new technologyregime, and have led to belief that the IP was not onlyirrelevant but also was a relic of the state interventionisminherited from socialism, which was the most seriousobstacle to policy reform. Moreover, he concluded that thetransition of a Central and East European Countries (CEEC)from a conventional economy to a KBE required a seriousredesign of the development policy. The effectiveness ofthis transition depended on social change, determined bythe political recognition and social assimilation of the newtechnological regime.

A national innovation system is not an isolated orformulaic system. It is affected by technical factors withinthe system, such as use of ICT [11] and can also be affectedby past national policy, such as in the case of Croatia [12],or it could be influenced by economic turbulence at theglobal level. Filippetti and Archibugi [13] observed thatthe effects of the economic downturn in terms of firms’innovation investment were not the same across Europeancountries. The competences and quality of the humanresources, the specialization in the high technology sector,together with the development of the financial systemappeared to be the structural factors which were able tooffset the effect of the economic downturn on innovationinvestments of firms across Europe.

Lessons learned from this brief review include thatthere are solid empirical evidence and a sound theoreticalbasis for a strong positive correlation between innovationcapacity and economic development. However, it shouldalso be noted that:

1) A national innovation system is a complex systemwhichcan perform well if all actors communicate and interactintensively in a mutualistic manner;

2) A national innovation system is country-specific andcharacterized not only by its developed technologies, butalso by social, cultural, and political sphere in which theNIS is established;

3) A national innovation system is not an isolated system,many internal and external factors could influence itscharacteristics and effectiveness; therefore, these factorsshould also be comprehensively considered.

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3. Methodology, data sources and theoreticaldevelopment

This study uses a conceptual analysis methodologybased on the qualitative and quantitative methodologyadvanced by Furner [14]. In 2011, the Ministry for Researchand Technology (RISTEK), Republic of Indonesia conducteda survey on R&D and innovation activities at public R&Dinstitutions. The total targeted sampling units were 366R&D centers and 272 centers returned the questionnaires.After verification, data from 250 centers were analyzed, or68.3 percent of total targeted centers. In 2012, a similarRISTEK’s survey was conducted, but it was aimed at publicand private universities. Of 75 targeted universities,returned questionnaires from 56 universities (74.7 percent)were analyzed. Results of these two surveys were used asempirical evidence for portraying the current capacity oftechnology developers and intensity of their communica-tion and interaction with domestic industries and othertechnology users.

In addition, data was collected which spans the lasteight years, combined with data and information obtainedfrom focused group discussions, and survey data to identifythe actor level challenges for establishing an effectiveinnovation system in Indonesia. Conceptual analysis wascarried out, systematically breaking down the innovationsystem into the constituent parts in order to gain a betterunderstanding of a particular philosophical issue in whichthe concept is evolved. Furner [14] explained that the goalin using conceptual analysis as a method of inquiry into agiven field of interest was to improve our understanding ofthe ways in which particular concepts are (or could be)used for communicating ideas about that field.

While the conceptual analysis is the methodology usedfor this study, the theory is that of a three layered innova-tion system. It has been well recognized that innovationpolicy must be complemented by wide range of otherpolicies, including policies on education, mobility of humanresources, trade, industry, tax and finance. Collectively,Metcalfe and Ramlogan [15] named these complementarypolicies as the innovation ecology. Faulkner [16] used thesame term. Segura-Bonilla [17] also recognized the impor-tance of explaining national innovation system as a dy-namic and evolutionary system that continuously interactswith other sectors. However, he did not identify a specificterm for “the other sectors”. Most recently, Archibugi et al.[18] observed that innovation activities at the firm levelwere affected by the 2008 economic crisis, implying thatthe innovation systemwas significantly affected by externalfactors. All of these studies, however, only focused on twolayers, i.e. the innovation system and the innovation ecol-ogy [15,16], the other sectors [17], or external factor [18].

Not connecting or bridging these layers when discus-sing a national innovation system and the innovationecology leaves a gap in our theoretical understanding. Inthis study, the innovation system is perceived as a largerand unified system that includes the innovation ecology asa part of this system. Therefore, in this study’s theoreticalframework, there are structurally three levels of interactivesubsystems recognized within innovation systems: thecore, the ecosystem, and the anatomy. The core of an

innovation system is represented by direct interaction be-tween technology user and developers, facilitated andregulated by government as the third actor in this subsys-tem. The ecosystem consists of all factors (outside the core)which are capable of influencing performance of the core,including human resource capacity, natural resourceavailability, market demands, and existing regulations andpublic policies. This layer is equivalent to the term “inno-vation ecology” used in Metcalfe and Ramlogan’s andFaulkner’s studies. However, in this analysis, it is treated asa subsystem of the innovation system. The anatomy, anadditional subsystem, describes inward observation withina cluster of technology developers or users and character-izes the internal conditions of these primary actors ofinnovation. This theoretical framework was developed as amechanism for bridging or connecting the factors identi-fied across major theoretical constructs.

Based on this conceptual analysis we identified tenchallenges in total: four challenges at the core level, andthree challenges each at the ecosystem and the anatomicallevels in the Indonesian context.

The results of this conceptual analysis have been intro-duced and ‘tested’ using focus groups in stakeholder meet-ings. The last forum for tapping experts’ opinion was theSpecial Session on Indonesia, at the Asia-Pacific EconomicCooperation (APEC) Research and Technology Workshop in2013.

4. Challenges at the core level

It is believed that any technology innovation systemshould have at least three major actors or institutionsdirectly involved: the technology developer, the technologyuser, and the government as regulator. The technologydevelopers include university, public R&D institution, andany other institutions or individuals that develop technol-ogy. Technology users include industry (producing goods orservices), government (especially for providing betterpublic services, also for national security and defense), andany other institutions or individuals who require technol-ogy for executing or improving quality and/or efficiency oftheir activities. Besides its regulatory role, government isalso expected to proactively facilitate communication andinteraction between technology developers and users. Inthis context, regulation should be formulated with mainaim to establish favorable ecosystem for innovation systemto blossom (Fig. 1). Tax incentives are common tool used bymany governments for directing prioritized technologies tobe developed, improving absorptive capacity of the users,and facilitating interaction between developers and users.

It should be noted that this core of innovation system isnot isolated. It surely interrelates with its ecosystem.Auerswald and Branscomb [19] described that today theinvention-to-growth relationship was more complex andless bounded than ever before. Therefore, emerging policyconsensus should focus on three steps. Firstly, generatingresearch ideas suitable for commercial exploitation; sec-ondly, converting basic science inventions into market-ready innovations; and thirdly, providing new firms withfinancial and managerial resources required for rapidgrowth. These Auerswald and Branscomb’s three steps are

Fig. 1. Core of the innovation system.

B. Lakitan / Technology in Society 35 (2013) 41–54 45

entirely accommodated in the core of innovation system asshown in Fig. 1.

Indonesia has shown noteworthy efforts in strength-ening the R&D capacity of universities and public R&D in-stitutions. Indonesia has enacted many regulations andpublic policies aiming to facilitate or create a conduciveenvironment for establishment a national system of inno-vation. However, these efforts seem to be inadequate. Moresystemic efforts must be initiated. For this reason, the mainissues at all levels need to be comprehensively identified.

At the core level, there are at least four main issueswhich have been recognized. Firstly, there are few indige-nous technologies which have been adopted by domesticindustries or other domestic users. Secondly, technologicaldemand of domestic industries is considerably low; thirdly,communication and interaction between technology usersand developers has not been intensive; and lastly, the ‘IvoryTower Syndrome’ still exists at universities and public R&Dinstitutions.

4.1. Low adoption of indigenous technology

Despite intense efforts at institutional levels, the inno-vation system is only considered successful if developedtechnologies are adopted by users in manufacturing goodsor providing services. To improve the probability for suc-cessful adoption, the developed technology should alignwith user’s needs. Otherwise, it will have a slim chance tobe adopted by users. Clearly, the demand-driven approachin developing technology has advantages over the supply-push approach. Unfortunately, the majority of technologydevelopment in Indonesia is still using the supply-pushapproach: ignore the needs, create technology, and thentry to market the technology. In addition, technology de-velopers, in most cases, do not have marketing skills and

are unable to identify potential users of their technologies.Moreover, most of technology developers do not feel thatmarketing the technology is part of their responsibility.

Actually, even a technically-relevant technology cannotbe guaranteed to be adopted by users, since there may besimilar technologies already available which become com-petitors for the indigenous technology. Under these cir-cumstances, users have options in acquiring technology theyneed. Therefore, in addition to technically relevant, theindigenous technology must also be economically competi-tive. At present, more Indonesian enterprises acquire foreigntechnology to be utilized in their business activities. Won-glimpiyarat [20] found that Malaysia and Thailand were alsoheavily reliant on foreign multinationals to drive theirtechnology development and innovative activities.

One approach for encouraging indigenous technologydevelopment is to have government institutions set theexample in adopting the indigenous technology. The ‘AkuCinta Produk Indonesia’ (I Love Indonesian Products)campaign could be enforced after indigenous technology istechnically viable and even if it is slightly less competitiveeconomically.

Research culture at universities and public R&D in-stitutions has to be invigorated. Government budget allo-cation for R&D must be treated as a public investmentreturn on investment coming in the form of beneficialtechnologies or the advancement of knowledge. Technol-ogy developed should create economic or academic value.Basic research at universities should provide strong scien-tific foundation for development of relevant indigenoustechnologies. Higher education institutions (both publicand private) in Indonesia are expected to perform threemissions mandated by the government. These are expectedto educate students to become knowledgeable and skillfulhuman resources. They are expected to conduct R&D for the

B. Lakitan / Technology in Society 35 (2013) 41–5446

advancement of science and technology. Finally, they areexpected to contribute directly to national or local devel-opment. In the context of Indonesia’s national innovationsystem, this triple mission (known as Tridharma) shouldinclude the dissemination of relevant indigenous technol-ogies to potential users.

4.2. Low technological demand of domestic users

Business in Indonesia is dominated by trading.Manufacturing industries are mostly subsidiary companies,focusing on mass production and doing very limited in-house R&D activities. They implement technologies devel-oped by their parent companies. Large capital-intensivemulti-national companies rely on technologies created attheir own in-house R&D department. Domestic industriesare dominated by small and medium enterprises (SMEs).These SMEs generally have low absorptive capacity foradvanced technologies; therefore, they opt to adopt lessexpensive available technologies. All of these circum-stances lead to a limited option for marketing indigenoustechnologies created by domestic universities and publicR&D institutions.

Most of domestic industries are associated with com-modity handling and early-stage processing to produceintermediary products which require low to mediumtechnologies, except for those in the ICT business. Frontierindustries requiring cutting-edge technologies are verylimited. The establishment of SMEs that require medium tohigh technology should be encouraged, in order to increasedemand on indigenous technology. It should also be facil-itated with suitable government incentives.

Recent government policy to cease activities onexporting rawmaterial is a positive gesture. Facilitating andproviding incentives for downstream industries areanother appropriate policy. If these policies are consistentlyand persistently implemented for a long period of time, itwill generate and increase the needs for indigenous tech-nologies by domestic industries. National and local tech-nology developers should not miss this opportunity.

There is a large gap in technology capacity betweenuniversities and public research institutions (as technologydevelopers) and business enterprises (as technology users)in Indonesia. This gap was similarly observed in China.There is a large gap also in the process of technologytransfer and adoption. Subsequently, R&D activities atuniversities and public research institutes in China do notcontribute to technology advancement in Chinese firmswith great significance [21]. China has subsequentlyopened the possibility for human resource transfers fromuniversity to industry.

Improving absorptive capacity for SMEs by temporarilymobilizing human resources from public university to in-dustry has also been suggested by the Indonesian NationalInnovation Committee. Besides increasing absorptive ca-pacity, this policy is expected to create opportunities forSMEs to establish their own in-house R&D units fordeveloping affordable and appropriate technologies. Basedon China’s experience, however, Mu and Qu [21] affirmedthat there were still major barriers to the mobility ofhuman resources in S&T from universities or public

research institutes to business enterprises. In Indonesia,current regulation does not permit academics or re-searchers (who are officially civil servants) to fully work inprivate businesses.

Even if a change is legally approved, the mobility ofhuman resources from government institutions to businessenterprises may not be smooth, due to the differences inworking culture between the two institutions. In China,universities and public research institutions tend to devotemore attention to publishing in international scientificjournals rather than improving market potential for theirresearch. At the same time, enterprises focus more on thepotential profits of their activities [20] and do not givemuch attention to scientific publication. These conditionsare similar to those of universities, R&D institutions, andbusiness enterprises in Indonesia.

4.3. Limited of interaction between technology users anddevelopers

In the context of technology innovation, the intensity ofinteraction between technology developers and users inIndonesia is relatively low. Many Memorandum of Under-standing (MoU) between university and/or R&D institutionas technology developer with industry or other technologyusers have been signed. However, in most cases, imple-menting activities following-up with the MoUs and suc-cessfully developing technologies is relatively scarce.

An innovation system will not work unless concernedactors or institutions intensify their communication andinteraction, as a precondition for information exchange tooccur. Moeliodihardjo et al. [22] argued that university andindustry in Indonesia appeared to be still in the state oflacking understanding about each other. Universities andR&D institutions would have a better chance to createrelevant technologies if they received precise and sufficientinformation on technological demands and preferencesdirectly from potential users. Trust and willingness to shareinformation should be fostered between users anddevelopers.

A lack of intensive interaction between university,public R&D institution and industry is also observed inChina. Despite China has become one of the largest coun-tries in terms of number of enterprises, universities, andpublic research institutes, the linkages between these in-stitutions are still relatively weak [20]. In the case of Korea,Eom and Lee [23] prompted that industry–university andindustry–public R&D institute cooperation cannot guar-antee the success of a firm in technological innovation.Rather, it may have an influence on the selection or direc-tion of the research projects of the firm. In contrast, Lee andPark [24] found that collaborative R&D, especially betweendownstream firms and universities, would likely improveinnovative activities’ chance of success.

The national innovation system (NIS) of Korea remainedunbalanced or immature with the strong dominance ofgovernment and a few big firms called Chaebols, andweaker roles of universities and SMEs. These unbalancedcharacteristics of the Korea’s NIS caused its knowledgeindustrialization systems to remain underdevelopedcomparedwith those in the advanced countries. It was only

B. Lakitan / Technology in Society 35 (2013) 41–54 47

during the late 1990s that Korea realized the significance ofknowledge industrialization and started to promote itthrough government initiatives [23].

Compared to the US, Lane [25] believed that success ofthe US as the world leader in S&T and R&D in the 60 yearsfollowing World War II was due, in part, to a successfulpublic–private partnership in research and higher educa-tion. Public institutions involved in this partnership wereuniversity and Public R&D institutions. While privatepartners were business enterprises.

If it is wisely managed, partnership or collaborationbetween technology developers and users will createreciprocal benefits such as an increase in R&D capacity ofthe developer and financial benefits for the user. In the caseof Indonesia, it is suspected that both sides (developers andusers) contribute to the low interaction. Technology de-velopers are generally not sufficiently pro-active andtechnology users, on the other hand, do not rely on indig-enous technology in doing their businesses. Reciprocalneeds between technology developers and users have notyet emerged.

4.4. Ivory Tower Syndrome is still existed at universities andpublic R&D institutions

Academicians and researchers tend to work on R&Dtopics associated with their field of expertise and are notfocused on actual issues. Only a few academicians or re-searchers are willing to dedicate their time for familiarizingthemselves by direct encounters with real problems. Themajority of them feel more comfortable staying withintheir academic sphere.

It is hard to drag them out of their comfort zone since –

for one reason – performance and promotion of academicsare evaluated based on their academic achievementswithin their field of expertise. This regulation needs to beamended. Higher appreciation should be awarded to aca-demicians or researchers who directly contribute in solvinglocal or national problems or for creating appropriatetechnology for development in any sector at all levels. Be ita very simple or very sophisticated advanced technology, aslong as the technology were adopted and proven to in-crease productivity or the efficiency of user’s activity.

The mindset of researchers is mostly stuck in an oldparadigm that they should lead and direct the innovationprocesses. Consequently, the approach used in developingtechnology is dominantly supply-push. First, create tech-nology and then create demand for the technology. Thisapproach has been practiced for a very long period inIndonesian R&D history. The demand-driven approach hasbeen seriously elevated during last few years. Shifting fromsupply-push to a demand-driven approach will require achange in mindset for the academician and researcher.Systematically engaging this process of change is a chal-lenging task.

Change is a keyword.Mashelkar [26] explained that overthe centuries, India’s scientific and technological positionamong developed and developing countries has shifted.Several centuries ago, India was characterized by scientificthought, capabilities, and techniques more advanced thanmanycountries. However,when the scientific and industrial

revolutions took place in the West, India was in a stagnantperiod. However, during last ten years, Rao [27] noted thatsignificant changes have been made in the Indian govern-ment’s S&T structure and new institutions for S&T andhighereducationhavebeen created. India’s total investmentin R&D is expected to rise to 2 percent in next few years.Indonesia will stay in a stagnant period if it is not makingsome fundamental changes, including changes in themindset of technology developers.

Academics and researchers need to be more pro-activein reaching out for partnerships with industry and otherbusiness enterprises. Indonesia should learn from devel-oped countries. In the US, the collaborative culture be-tween government, academia, and industry has beenfostered and R&D has been closely linked to the market-place [28].

There are two other options worth pursuing. Firstly,encouraging and facilitating academics to create start-upcompanies so that they will have first-hand experience inmanaging business and increase their understanding ofconsumer’s needs. Hopefully, some of the start-up com-panies will progress further into profitable business en-terprises. However, success or fail, at least they alreadyhave better understanding on demanded technologies bybusiness enterprises. Secondly, assisting universities todevelop entrepreneurship programs for students and non-students to learn and directly involve them in businessactivities. Direct exposure to business culture wouldaccelerate the process of changing the academic mindsetand culture.

5. Challenges at the ecosystem level

The performance of technology developers andinvolvement of technology users in an innovation system isinfluenced by many factors, such as availability and qualityof human resources, related policy and regulation,comprehensiveness of knowledge on available natural re-sources, and market demand (Fig. 2). It should not beoverlooked that all activities at the core level and theirinteractions with related elements at the ecosystem levelare taking place within the Indonesian cultural-social-political sphere. The national innovation system ofIndonesia should be understood based on this compre-hensive perspective. Yet, it is not an isolated system. It isopen to foreign technologies, be it directly acquired orthrough spillover of foreign direct investment (FDI).

The availability and quality of human resource arecrucial elements in shaping and propelling the innovationsystem. The role of the university in providing knowl-edgeable and skillful human resources with relevantexpertise is very significant. Sohn and Kenney [29] studiedthe Korean experience and suggested that the mostimportant contribution of universities to economic devel-opment was not through the transfer of research results,but rather it was indirectly through the preparation ofhigh-quality graduates.

Even in a borderless world, the primary playing field ofan innovation system is domestic resources. Indira Gandhi(as Indian Prime Minister at the time) announced India’sfirst technology policy statement, whose very first

Fig. 2. Ecosystem of innovation: External factors influencing performance of the core.

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objective was to attain technological competence and self-reliance for reducing vulnerability, particularly in strategicand critical areas; and making the maximum use of indig-enous resources [30]. Natural resource rich nations will notbe prosperous unless they are able to couple these richresources with ability to develop relevant technologies formanaging the resources. Otherwise, they will be trappedwithin the ‘resource curse’ (The Paradox of Plenty) [31].

Policy and regulation are the most dynamic factorsinfluencing innovation system. They are the main gate forpolitical interest to intervene in an innovation systemeither positively or negatively. Ratchford and Blanpied [32]argued that in many ways competence in science and en-gineering was the ‘controllable’ driving factor. A policyframework, stable governance, and military power wereboundary conditions. They were necessary but not suffi-cient for sustained economic growth. But these boundaryconditions could help assure a flourishing economy drivenby S&T, if structured correctly. These realities can be seen inthe case of Indonesia.

5.1. Uncoordinated human resource and technologydevelopment

Recommended topics of government-funded research,as clearly mentioned in the National Research Agenda(NRA), does not fully match with the expertise of domesticresearchers. Research priorities in the NRA were selectedbased on domestic natural resources and aimed for

fulfilling basic needs of the people, enhancing economicgrowth, and national security. The priorities includeresearch on food and agriculture, new and renewable en-ergy, transportation, information and communication,health and medicines, new and advanced materials, andsecurity and defense.

At the macro level, there are available human resourcesfor each prioritized research field. However, it might beinsufficient in term of quantity, quality, and relevance oftheir expertise to cope with current challenges. In additionto S&T human resource, there are other constraints for S&Tactivity in Indonesia, such as lack of laboratory facilities andlow R&D budget allocation.

In the case of Indonesia, research topics are predomi-nantly determined by the expertise and preference of re-searchers. Unfortunately, a large portion of the selectedtopics are not directly oriented toward solving real prob-lems or satisfying user’s needs. Therefore, the results ofthese researches do not lead to the accumulation ofknowledge required for developing relevant technologies.

Higher education and technology development inIndonesia are managed by two different ministries. Thereare some efforts to intensify coordination between thesetwo ministries, including efforts on synchronizing researchpriorities. The NRA has been used as reference in setting upresearch priorities at universities, with some additionalfields to accommodate wider spectrum of academic fields.

On idea of merging the Directorate General for HigherEducation at Ministry of Education and Culture with

B. Lakitan / Technology in Society 35 (2013) 41–54 49

current Ministry for Research and Technology into a newsingle ministry has been brought up inmany occasions. Yet,there is no action to follow it up so far. In the meantime,efforts to formulate implementable regulation and policy toalign higher education and technology development pro-grams should be pursued.

Even though many Indonesian universities havedeclared their desire to become reputable research univer-sities; themain activity in almost all Indonesian universitiesis teaching. Consequently, the contribution of the univer-sities to economic growth is more on delivering educatedhuman resources than relevant technologies for establish-ing effective and productive innovation system (Fig. 3).

Higher education institutions should also produce askillful workforce for industry. Consequently, more poly-technics orvocational schoolsneed tobeestablished.Ahighlyskilled workforce will directly strengthen industrial produc-tion capacity. Hopefully, it is also positively affecting techno-logical absorptive capacity of the industry. There should alsobe training programs at the university for incorporatingbusiness perspectives to engineer and scientist mindsets.

5.2. The priority of technology development is not linked withnatural resource potential

Even though Indonesia is an archipelagic country, mari-time technologies have not been prioritized, resulting inweak national capacity for managing marine resources assources of nutritious food, pharmaceutical active sub-stances, renewable energy, and mass transportation mode.Technologies for managing marine biodiversity for ecolog-ical purposes are also not well developed. Furthermore,despite being a tropical country situated on ‘the ring of fire’,the development of technologies for harvesting solar andgeothermal energies has not been satisfactorily progressed.

Fig. 3. Current path of university con

These examples are indications of a mismatch betweenhuman resource competencies, R&D capacities, and needsfor domestic natural resources management.

Efforts in directing R&D activities to focus on indigenousresources have been attempted, for instance by formulatingthe NRA. However, the NRA’s recommendation may onlywork if there are sufficient academicians and researcherswith relevant expertise for developing the needed tech-nologies. Subsequently, there should be more universitiesoffering fields of study on, or related to, management ofmarine resources and for harvesting available renewableenergy sources; so that needs for qualified human re-sources with relevant expertise could be fulfilled.

Indonesia should strengthen R&D capacity and encouragebusiness activities in managing marine resources andrenewable energy sources in the tropics. However, it shouldalways be kept in mind that any effort dealing with nationalresource must comply with the constitution. The Indonesianconstitution clearly states that the objective of natural re-sources utilization is for improving the prosperity of thepeople. This mandate has to be adequately and consistentlyimplemented. It shouldbenoted thatprosperity isnotonlyaneconomic issue, but should also include ecological consider-ations, so that economic growth could be sustained.

It is clear that natural resource management has twosides, i.e., economy and ecology. Obviously, business en-terprises are more interested on economic benefits, butgovernment has to play its role for balancing economic andecological benefits.

5.3. Ineffective regulations and policies for supportinginnovation

The survey conducted by the Ministry for Research andTechnology (RISTEK) in 2011, indicated that most of R&D

tribution to economic growth.

B. Lakitan / Technology in Society 35 (2013) 41–5450

spending at public R&D institutions was for appliedresearch (63.7 percent). Spending on experimental devel-opment was only 18.6 percent and basic research was 17.7percent. Based on the RISTEK survey in 2012, compositionof funding sources for R&D activities in 56 public and pri-vate universities in Indonesia were 52.8 percent fromgovernment, 33.0 percent from international institutions,and 14.2 percent from domestic industries.

Based on a low R&D budget disbursed by public R&Dinstitutions on experimental development and a low shareof industry to the total university R&D expenditure (fromthe two RISTEK’s surveys), it is fair to assume that only afew results from R&D activities at public R&D institutionsand universities will be potentially attractive for industries.Moreover, the low budget share from industries for R&Dactivities at universities may indicate that university is nota main technology source for domestic industries.

In the US, industry devoted about 70% of the totalnational investment in S&T in 2006. This high share ofindustry might have been stimulated by the R&D taxcredit (now called the research and experimentation taxcredit); however, the main driving force for the growth inindustry-funded R&D has been the recognition thatinnovation is the key to competition in future markets.Most of these R&D activities were conducted at industryitself, not in partnership with university, since industrialsupport on university research was still relatively small,i.e. around 5% of total academic research expenditures in2003 [25].

The higher percentage of industry-funded R&D at uni-versity in Indonesia is due to the low public R&D budget(only 0.08 percent of GDP in 2010, see [33]). Due to the lowpublic R&D budget, industry support for R&D activities atuniversity and public R&D institutions is very important.Therefore, efforts to increase involvement of business en-terprises have been intensified. The Indonesian govern-ment had enacted two regulations, i.e. GovernmentRegulation Number 35-2007 and 93-2010.

Regulation 35-2007 is designated for granting tax in-centives and/or technical assistances to business enter-prises in return for their support to R&D activities atuniversity or public R&D institution. Up to now, the taxincentives have not been implementable since the formaltechnical guidance has not been endorsed by the Ministryof Finance. The technical assistance offered seems to be notappealing, since in-house R&D activity at domestic enter-prises is considerably limited.

As an alternative, Regulation 93-2010 encourages busi-ness enterprises or individuals to contribute to supportingsocial and educational programs, including R&D activity.The amount of contribution is limited to up to five percentof net income of last fiscal year. In return, the contributorswill be taxed based on their net income after beingdeducted for the contribution. In other words, the taxableincome is deducted, not the tax. This incentive schemeseems to be unattractive for business enterprises.

Inappropriate regulation may be ineffective in boostinginnovation and also could restrain innovation process.Technically relevant and financially affordable technologycould not always make a significant contribution to eco-nomic development, if it is restricted by improper

regulation or public policy. For example, locally-developedprocessing technology for modified cassava flour (knownas ‘mocaf’) has been widely adopted by small-scale ruralindustries in East Java, Indonesia. This flour could be usedfor producing cassava-wheat composite flour, acceptablefor modern food industries. However, a 20-percent tax forprocessed products is applied to cassava flour and unrea-sonable free import tax was granted for wheat flour in2008. Consequently, locally-produced cassava flour loses itscompetitive edge.

Putranto et al. [34] also recognized that the integrationof business and technology strategies was an attractiveapproach for industries in developing countries, such asIndonesia. However, to be successful, these strategiescould not be implemented according to company’s ob-jectives alone, and ignoring involvement of other players.The inclusion of related technologies (developed by part-ners) should be positioned as part of the strategy ifthe strategy was expected to perform well and remainsustainable.

Wong [35] highlighted the importance of industrialpolicy and value-enhancing rents for indigenous technol-ogy development and suggested that developing econo-mies should pursue an industrial development strategythat promoted indigenous technologies in order to obtainlinkages and technology spillover that were similar to thosein many of the newly industrialized economies in Asia. Forinstance, Singapore recorded significant progress in indig-enous technology development. This was largely attributedto an industrial support mechanism that promotedlearning in the indigenous production system.

6. Challenges at the anatomical level

An additional constraint in establishing an effectiveinnovation system in Indonesia is not only the lack ofinteraction and unsynchronized priorities between tech-nology developers and users at the core level, it is alsooccurring among institutions within R&D clusters. Limitedinteraction and collaboration among R&D institutions,including among universities, may repetitive R&D activitieswhich in turnwill trigger an inefficient use (of already low)R&D budget.

Domestic industries are characterized with lowabsorptive capacity for newly introduced or state-of-the-art technologies, except for few technology-based in-dustries. Constraints in inspiring Indonesian industries tobecome actively involved in establishing effective andproductive innovation system include: firstly, their lowtrust of indigenous technology, therefore, they prefer toacquire foreign technology; and secondly, they are mostlyfocusing on current market demands, therefore, theycannot afford to wait for technology development pro-cesses and are not willing to take risks for researchfailure.

The role of government-affiliated intermediationagencies have not been significant and are overly focusedon the ‘marketing’ of indigenous technologies. There is nosignificant effort on mining information on technologydemand, preference, and absorptive capacity of domesticindustries or other potential users.

B. Lakitan / Technology in Society 35 (2013) 41–54 51

6.1. Low R&D collaboration among domestic technologydevelopers

Based on co-authorship in scientific publications, collab-oration among domestic R&D institutions and among Indo-nesian universities is noticeably low. On the other hand,Indonesianuniversities andpublic R&D institutions showed astrong preference for collaboration with foreign institutions[36]. A hesitancy to collaborate among domestic institutionsis associated with limited resources to be shared, unclearshared goals, and also possibly due to institutional pride.

Preference for collaboration with foreign partners ismainly generated by the roles of foreign partners inproviding funding, facilities, and knowledge. Numpra-sertchaia and Igel [37] argued that universities in devel-oping countries that had limited in-house resources andwished to strengthen their research capability shouldimplement strategies that aimed at extending their poten-tial through collaboration with a variety of external part-ners, especially with universities and R&D institutions indeveloped countries. Kang and Park [38] also found thatinternational linkages were much stronger than domesticconnections in R&Dactivities of Koreanbiotechnology SMEsand concluded that networking with foreign universitiesand research institutions was strategically important.

RISTEK has encouraged R&D collaboration among univer-sity, public R&D institutions, andbusiness enterprises throughcompetitive research incentives. The formation of researchconsortia on specifically assigned topics has also been facili-tated. However, outcomes and positive impacts of these ef-forts have not been satisfactory. Reformulating incentiveschemes for encouraging workable and sustainable collabo-ration among domestic technology developers are needed.

6.2. Low technological absorptive capacity of domesticindustry

Some domestic industries do not feel the urgency forestablishingR&Dunitswithintheirbusinessorganization,butsome of them do assign their staff for conducting experi-mental development. Typically, in the caseof China andmanyother countries, including Indonesia, the purpose of tech-nology development in enterprises is tomeet presentmarketdemand insteadofdeveloping futuremarkets [21]. If businessenterpriseshave sufficient capital and limitedR&Dpersonnel,they prefer to acquire proven technologies than to developtheir own technology, for enhancing the commencement ofproduction activities in order to be competitive in earlypenetration to potential markets. Certainty and quick actionsaremuchmore desirable inbusiness activities. Unfortunately,developing new technology will consume an uncertainperiod of time and has no guarantee for success.

Madanmohan et al. [39] studied Indian and Indonesianmanufacturing firms and revealed that R&D investmentand availability of technical personnel; the transfer chan-nels; government’s involvement; and the firm’s learningculture were significant contributors to the technologycapability process. In contrast, the acquisition of maturetechnology just to boost production capacity or improveproduct quality but contributed very little to the develop-ment of technological capability of the firms. In contrary,

Blalock and Veloso [40] believed that importing was asource of international technology transfer and linkages.Import-driven technology transfer occurred through ver-tical supply relationships.

Subsidiary companies are generally not equipped withadequate R&D capacity since they are obligated to applytechnologies developed by their parent company.Most of thesubsidiary companies in Indonesia focus on manufacturingmarketable products and/or providing services. Multi-National Companies have their own R&D department fordeveloping technologies, so they are almost untouchable fordomestic R&D institutions. The large domestic market ofIndonesia is the primary factor attracting foreign investmentbesides the abundance of natural resources.

Due to the high capital investment needed and hightechnology sophistication, i.e. for exploration activities inmining sectors and for managing maritime resources, therequired technology of state-own enterprises (SOE) inthese sectors is still mainly acquired from foreign sources.However, technologies required by SOE in agriculturalsectors are mostly acquired from domestic sources. Do-mestic R&D institutions in agriculture have beenadequately prepared to play their role in developing anddelivering technologies for agricultural businesses.

Realistically, since there is only a small window openingfor indigenous technology by MNCs, subsidiary companies,and SOEs; technology development in Indonesia should bemore concentrated on satisfying the needs of SMEs (Fig. 4).Motohashi [41] found that smaller firms achieved higherproductivity through university-industry collaborationsthan large firms did. In light of the findings, it appeared thatthese collaborations were likely to play a strong role inreducing the dependence of Japan’s systemof innovation onin-house R&D conducted at large corporations.

The government of Indonesia has encouraged the use ofdomestic products. For government institutions, it is anobligation to prioritize the use of domestic products whichhave highest domestic content (President Instruction 2-2009 on Increasing Use of Domestic Products). R&Dexpenditure in developing the products is considered partof the domestic components. This regulation is expected toenhance R&D activity at business enterprises.

Aminullah [42] argued that constantly low investmentin national R&D was caused by three situations: very lowprivate R&D investment, most of industries were low andmedium technology (LMT) industries that did not requireR&D, and constantly declining government support to sci-ence, technology, and innovation (STI) development. Ifthese situations persisted in the future, in 2025 and beyond,R&D intensity in Indonesia would still be less than 0.5percent of GDP. To cope with declining R&D intensity,Indonesia needs to apply the concept of ‘multiplyingabsorptive capacity’ in STI. Increasing absorptive capacity ofdomestic industry was a strategy worthwhile to pursue.

6.3. Inadequate contribution of government-affiliatedintermediation agencies

Persuading domestic industries and other technologyusers to adopt indigenous technologies is an intense chal-lenge if the technology itself is irrelevant to needs of the

Fig. 4. Indigenous technology should be focused on satisfying SME’s demand.

B. Lakitan / Technology in Society 35 (2013) 41–5452

users. The mismatch between developed technology anduser’s need is a serious issue for establishing a nationalinnovations system in Indonesia, andmay also be in severalother countries. Intermediation agencies should play a rolein both directions, i.e. marketing indigenous technology topotential users and passing along the user’s technologicalneeds and preferences to developers. In current conditions,rather than putting all efforts in marketing the unneededtechnologies; the intermediation agency should focusmoreon gathering and analyzing information on technologydemands of potential domestic users and delivering theinformation to appropriate R&D institutions.

At the time when direct communication and interactionbetween technology developer and user have not beenwellestablished, the role of the intermediation agency should beintensified. Authority and resources of the intermediationagency should be strengthened. Then, government couldhavea facilitating role through this agency.Unfortunately, atpresent, the existence and role of intermediation agency hasnot been well recognized by other R&D actors.

Indonesia had established a Business Innovation Centerfor executing this task; however, government support tothis agency has not been significant. Currently, Indonesiaalso initiated a program to establish an Indonesian ScienceTechnology Park (I-STP) as an innovation cluster for facili-tating interaction between technology developers andusers, by revitalizing current R&D facilities at PuspiptekSerpong, located on the outskirts of Jakarta.

George and Prabhu [42] indicated that DevelopmentalFinancial Institutions (DFIs) can play an intermediationrole. If the DFIs are proactive in making technology as-sessments, it will be an important link between developing

a firm’s absorptive capacity and building a nation’s inno-vative capacity.

Indonesia should maximize the use of R&D budget as apolicy instrument for directing researchers to developrelevant technologies for fulfilling the needs of domesticindustries, especially the SMEs. Based on his study onthe implementation of a national innovation system inThailand and Malaysia, Wonglimpiyarat [20] concludedthat it was the government of both countries that tookleading roles in terms of providing supportive institutionalarrangements as well as financing programs to support theprocess of bringing R&D to commercialization.

7. Concluding remarks

Research and development (R&D) activities inIndonesia are mainly funded by the government andconducted at universities and a few public research in-stitutions. Unfortunately, these R&D activities are mostlyacademic and rarely focused on solving actual problemsor providing relevant technologies for economic devel-opment and/or social welfare improvement. Public R&Dinstitutions responsible for developing technologies forsupporting national development have drifted into aca-demic mainstream.

At the core level, all of these unfavorable circumstanceslead to sequential problems:

1. There is a mismatch between technology developed byuniversities and those needed for economicdevelopment

2. The low availability of relevant indigenous technologies

B. Lakitan / Technology in Society 35 (2013) 41–54 53

3. The adoption of indigenous technologies by domesticindustries or other users is very limited

4. The contribution of indigenous technologies to eco-nomic growth and social welfare improvement has beeninsignificant. Since only disseminated and adoptedtechnologies can be categorized as innovations [43],therefore, low indigenous technology adoption has beena major obstacle for establishment of an effective NIS.

At the ecosystem level, current R&D policy and its sup-porting sectors’ policies are clearly worth to be reexamin-ing. Technology policy will not be successful if it is notupheld by complimentary policies in other supportingsectors. Trade and industry strategies should be alignedwith technology policy. Higher education and technologypolicies should also be synchronized in human develop-ment scenarios. In Indonesia, education and technology arecurrently administered by two different ministries. Thisinstitutionally separated condition does not make it easierfor establishing an effective NIS. Unifying the twoministershas been discussed in many occasions and is believed to bea better option for synchronizing human resource andtechnology development programs.

At present, there are also regulations regarding in-centives for business enterprises that financially supportR&D activities. However, these incentives do not seem to bealluring from the business perspective.

During the last few years, the demand-driven approachin developing technologies has been encouraged in order tocreate more relevant and affordable technologies. It isrecognized, however, that changing the mindset of the re-searchers will not be an easy task. Industries and othertechnology users have been urged to be directly involved inidentifying or pinpointing relevant technologies for eco-nomic and social development.

Formulating technology policy for establishing aneffective national innovation system is not as simple andstraight forward as some might envisage. Synchronizing allsupporting policies is essential, yet very hard to realize, inorder to create an advantageous atmosphere for the inno-vation system to flourish. It should also be highlighted thatestablishing an effective national innovation system willtake a considerable and consistent period of time. Action-able andmeasurable policies are needed, and hopefully willalso be consistently implemented. Shared goals and aroadmap for achieving the goals should be disseminated to,and understood by, every stakeholder.

Challenges at the anatomical level are even moreproblematic. The commitment of all actors involved is anecessary precondition. Indonesia has relied heavily onuniversities and public R&D institutions in developingtechnology for more than half century. Meanwhile, the‘ivory tower’ syndrome at Indonesian universities still ex-ists. Getting commitment from researchers and academi-cians to focus on developing relevant technologies to user’sneeds has not been easy. It requires a radical mindsetchange of these technology developers since they havebeen for so many years focused on his/her field of academicexpertise. There are two other constraints that preventmindset change. Firstly, the promotion of researchers andacademician in Indonesia is heavily based on academic

achievement. Secondly, there is inadequate appreciationgiven to those who have made their contribution to eco-nomic or social development. This focus on academicachievement easily leads to development of technologiesthat do not match with user’s needs.

Meanwhile, business leaders in Indonesia prefer to ac-quire available foreign technologies rather than to collabo-rate with domestic researchers or academicians fordeveloping their required technologies. There are two mainrationales for this preference. Firstly, in a very competitivebusiness world, certainty is preferred and quick action isneeded. In contrast, success in developing indigenous tech-nology is relatively uncertain and will take a considerableperiod of time. Secondly, most of technology developers inIndonesia have not been able to prove their full commitmentto develop economically competitive and technically reliabletechnology.Meanwhile, in-house R&D at domestic industriesis relatively inadequate and technology spillover fromforeign investments is considerably low.

It is clear that there are challenges at the core, ecosystem,and anatomical levels for establishing an effective innovationsystem in Indonesia. These identified challenges cannot beundertaken partially in order to make the national innova-tion system work. Every single challenge has to be tackledsystematically and comprehensively as an integrated andessential element of developing a national system ofinnovation.

Acknowledgments

Constructive comments and suggestions from all col-leagues at the Indonesian Institute of Sciences (LIPI),including Lukman Hakim, Husein Avicenna Akil, BambangSubyanto, Erman Aminullah, and Dudi Hidayat are greatlyappreciated. My sincere appreciation is also conferred toBetti Alisjahbana (Indonesian National Research Council)and Achmad Lubis (Indonesian National Innovation Com-mittee). I would like also to express my deep gratitude toKrisnamurthy Ramanathan (Consultant, Australia), MarioCervantes (OECD, Paris), and Jeong Hyop Lee (STEPI, Korea)for their comments, suggestions, and constructive critiquesat the 2013 APEC Research and Technology Workshop. Thecomments and feedbacks contributed by anonymous re-viewers and editor-in-chief of this journal are deeplyappreciated.

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