According to Leslie and Philip (2012), innovation is the commercial exploitation of new knowledge, in other words, developing new ideas into products and production processes and selling them on to customers. Innovation is also the process of translating an idea or invention into a good or service that creates value or for which customers will pay. The term innovation can be defined as something that are original and, as consequence, new that ‘breaks into’ the market. Innovation is needed for businesses to produce new products.
Multinational Companies (MNC) can be defined as corporations which have their home in one country but operate and live under the laws ...view middle of the document...
In order to for the MNC to survive in this competitive environment, they innovate becomes important. In this report, the important of innovation will be study under the four component global business environment that is politic environment, economic environment, social environment and technology environment.
The government play important roles to encourage companies including MNC to keep innovate so that the status and economic growth of a country can be improved. There are some ways that government can do to encourage the companies to make innovation so that the MNC can survive in the competitive global business environment.
Firstly, the government should enforce the law in the country. One of the examples for the law on copyright is Copyright Act 1987 in Malaysia on 1 December 1987. Copyright can help the company to protect their original ideas not steal by another person or company. If someone uses the ideas that belong to another with permission, that person may be defendant. Government have used the copyright to protect entrepreneur or company’s intellectual property. Besides that, copyright that had been introduced by the government in Malaysia can reduce the risk of their technology products from being stolen and copied without prior permission. Punishment can be imposed to anyone who have uses other people’s ideas without any permission from the owner. The punishment can be in fine, imprisonment or both co-imposed in Malaysia. So, MNC not will be able to imitate or copy other people's idea because it against the law and punishment will be given to them if they copy or use other people's idea. Because of that, MNCs need to invest resources in R&D in order to come up with their own innovation. This is because without the innovation, the MNC will fell in the competition and lost their customers to their competitor. Therefore, innovation is important to MNC in order to survive in competitive market.
Secondly, the government need to give some supports to MNC to encourage innovation. This is because innovation involves a lot of money, time, and at least a group of staffs. This may cause financial problem to the company if they keep continuous innovate without any support. So, the government could give financial support to MNC so they able keep continuous to innovate. For example, R&D tax incentives. The government in each country have been offering tax incentives to companies for their R&D spending. It has been show that R&D has a good effect of higher productivity besides of produce a new product innovation to the companies. The high productivity of the products and produce new products can gain more income for the MNC. This is because the companies have extra budgets to produce innovation for their business from the R&D tax incentives. So, the R&D tax incentives that promote by the government able to encourage MNC to innovate in order to survive in competitive market.