Are electronics firms in Malaysia catching up in the technology ladder?

Using the technological capability methodology, this paper examines the development of technological capabilities and economic performance in a sample of electronics firms in Malaysia. The technological capabilities improved significantly in both the broader category of electronics and in the specialized category of semiconductors as firms upgraded to participate in the higher levels of knowledge intensities. However, the incidence of participation of firms in the highest levels of five and six knowledge-intensity activities was very low, which has slowed down labour productivity growth in the industry. The statistical results show that technological deepening through increments in skills and research and development personnel will raise labour productivity in the industry significantly. Hence, the paper argues that government policy should stimulate firms' participation in frontier innovation activities to quicken technological catch-up and productivity growth.