Establishing an effective innovation system is a gigantic effort for Indonesia and surely will
face 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, communication
and interaction between domestic technology developers and users have to be intensified.
At the ecosystem level, it is more complicated for creating a favorable atmosphere for
nurturing an effective and productive innovation system which will significantly
contribute to economic growth and social welfare improvement. Hard challenges at the
ecosystem level are to harmonize all regulations and public policies such that they are
more in favor of innovation system development; and to synchronize prioritized programs
and activities of all related public and private institutions. Deeper insight into each actor of
innovation system and the challenges faced is required for advancing innovation. This
analysis uses case methodology to identify these challenges. Scientific collaboration among
technology developers is low; therefore, it could cause inefficient use of national R&D
budget. In-house R&D activities and technology absorptive capacity of domestic industries
are also low. Finally, the role of an intermediation agency is not yet significant.
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