AROUND two-thirds of Singapore firms were financially resilient but neither productive nor innovative in 2019, according to a study of the pre-Covid corporate landscape in the latest Monetary Authority of Singapore (MAS) Macroeconomic Review released on Thursday (Oct 27).

Less than 1 per cent of firms displayed all three attributes. Another 16 per cent were “resilient-plus”, being both resilient as well as either productive or innovative.

The remaining were non-resilient, with the bulk – 15 per cent of all firms – possessing none of the three attributes.

The study was based on firm-level administrative data. Firms were considered financially resilient if they had a healthy debt-servicing ability, adequate cash cover to meet short-term liabilities or sufficient liquidity to cover cash burn.

They were deemed productive if they had sustained high value added (VA) per worker and revenue growth in two out of the past three years.

Finally, they were considered innovative if they reported research and development (R&D) expenses, received innovation-related grants over the past three years, or if their tangible and intangible assets made up a considerable proportion of total assets.

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“Singapore’s corporate landscape has been dominated by financially prudent firms which tend to lag somewhat their global peers in productivity and innovation,” said the study.

While only 16 per cent of firms were resilient-plus, these accounted for a disproportionately high share of VA and employment: half of total VA and one-third of employment.

Workers in these firms were also better paid and more productive than those in resilient-only firms, having wages that were 16 per cent higher and being almost twice as productive (86 per cent) on average.

Workers in resilient-plus firms were also slightly better trained, with almost half of local workers having at least tertiary education, compared to 40 per cent for resilient-only firms. Resilient-plus firms also hired a marginally larger share of higher-skilled foreign workers.

Across other firm-level characteristics, resilient-plus firms were found to invest more in information and communications technologies (ICT) and had somewhat more exposure to external markets.

While frontier firms in Singapore outperformed both resilient-only and resilient-plus firms in workforce quality, export orientation and ICT spending, they lagged their global counterparts on R&D spending, intangible assets, “which are important inputs to support innovation”, and debt-servicing ability.

Non-resilient firms were found to have weaker debt-servicing ability and lower cash cover, which indicate a higher risk of defaulting on their borrowings.

“To progress towards the global frontier, firms in Singapore need to be more productive and innovative,” the study concluded. “Meanwhile, the limited latent vulnerability of non-resilient firms could increase amid the ongoing headwinds of rising interest rates and slower economic growth.”