This paper examines the impact of the embedding environment on learning, innovationand productivity in the computer and related component industries in Penang and Johor –two regions in Malaysia facing similar federal policies but different state-levelcoordination. Following a review of the works of economists such as Marshall (1890),Perroux (1950, 1970), Myrdal (1957), Hirschman (1958; 1970) and Krugman (1980),geographers such as Saxenian (1994), Cooke and Morgan (1998), Garofoli (1992),Darwent (1969), Scott (1988) and Storper (1997), industrial district exponents such asPiore and Sabel (1984), Sabel (1989), Sengenberger and Pyke (1988), Hirst and Zeitlin(1991), Brusco (1986), Wilkinson and You (1995), Rasiah (1994) and Becatini (1992)and subsequently business exponents such as Porter (1990) and Best (2001) andevolutionary economists such as Nelson and Winter (1982), Freeman (1986), Lundvall(1988; 1992), Dosi (1982), Pavitt (1984), Kim (1997) and Edquist (2004) the paperconstructs a stylized model for evaluating the development of learning and innovationsynergies in Penang and Johor. Four policy pillars that require simultaneous coordination are identified in the systemicquad as the basis for promoting systemically technological and productivity synergies.The four pillars are: one, basic infrastructure to provide systemic stability and efficiency;two, high tech infrastructure to provide systemic support for participation in learning andinnovation; three, network cohesion to provide the systemic price, technological andsocial relationships necessary to drive interactive and interdependent coordination; andfour, integration in global markets and value chains to provide the scale, scope andcompetition to drive learning and innovation. This paper is organized as follows. Section 2 reviews past literature related toagglomeration economies and provides the justification for using the systemic quad as theapproach for comparing computer and related component firms in Penang and Johor.Section 3 presents the methodology used and breakdown of data collected from Penangand Johor. Section 4 examines the state of development of the four pillars that drivesystemic synergies in the two states. Section 5 assesses the impact of these developmentson technological capabilities and productivity in these states. Section 6 finishes with theconclusions.
