rishikesha t. krishnan1 professor, iim bangalore [email protected]
TRANSCRIPT
The Story So Far…
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Some years ago,
the US Media raised the
prospect of India & China
overtaking the U.S. in the
Innovation Sweepstakes…
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India has aWorld-class Software Industry
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India is a favoured location for MNC R&D
– Who’s who of global corporations– 1998-2003, investment of $1.3B in R&D– 135 companies employing 22,980 sc/engrs– Account for 45% of the US patents from India
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India has a Strong Public R&D System
– Strategic R&D programs that have built missiles, nuclear bombs, satellites & combat aircraft
– One of the largest S&T workforces in the world
– A civilian R&D network (CSIR) that has recently been transformed into a “global innovation platform”
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World-renowned institutions of higher education
Getting into an IIT is tougher than
getting into any of the top schools in
the U.S.
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And several
Innovative Companies– Pharmaceuticals
• Ranbaxy, Dr. Reddy’s
– Automobiles • Tata Motors, Bajaj Auto
– Automobile components • Bharat Forge
– Biotechnology - Biocon
• Industry’s share of R&D spending has slowly increased to > 20%
Looks like India has all the ingredients to become the next
innovation powerhouse….
But, let’s take a closer look…
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Public R&D System
• Limited spillovers of strategic innovation• Persistent problems in production/scaling-
up/commercialisation– Missiles program – Indigenous nuclear power stuck at 250 MW– LCA not yet in commercial production– Space alone has managed to move on
• CSIR is the largest holder of US patents from India but patent revenues are paltry– Several labs are under-performers– Emphasis on patents even if they have poor
commercial value
CSIR Patents & Licensing Revenue
Indian Patents granted
Foreign Patents granted
Revenue from licensing patents (1US$=INR40)
2002-03 166 190 $700,000
2003-04 276 218 $490,000
2004-05 175 283 $500,000
2005-06 277 227 $1,000,000
2006-07 281 332 $750,000
Source: IP Mgmt Divn, CSIR, quoted in Businessworld 14 April 2008
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Indian Software Companies
– Pioneered new paradigms such as • offshore devpt centers, • proximity devpt centers • global delivery models
– Ability to quickly absorb and rapidly diffuse new technologies on a large scale
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Indian Software Industry
• Has not proved that it can ride the next wave or change strategy when it loses its cost advantages
• Process capabilities are being emulated by companies elsewhere
• Chip design forms a small part of the software industry and is largely driven by MNCs
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MNC R&D• Is it really R&D?
– Largely software development
– Very low R, some D, lots of routine SW
• Often part of global supply chain meeting requirements of MNC– No end-to-end
expertise– Limited spillovers
• Some academic collaborations…
• …. but few start-ups
Three Models:
1. Innovation in cutting edge tech:e.g. Google, Microsoft
2. R&D focused on emerging mkts:e.g. Yahoo, Cisco
3. Software development forproducts designed at HQ:Large majority of companies
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Innovative Companies
• Do not represent Indian industrial sector– ~89% of Indian companies have no reported R&D expenditure
(Bowonder, et. al., 2003)– Labour productivity of modern Indian industrial sectors estimated
to be 15% of global best => majority of companies are far away from the global productivity frontier (MGI, 2001)
• Success not yet proven– No new chemical entity from India has reached market– Ranbaxy sold out because they needed more resources
• Little to no presence in sectors such as semiconductors, nanotechnology, etc.
• Industry share of R&D spending is far away from developed countries
• Jugaad is the dominant paradigm
The Problems with Jugaad
• Based on individual ingenuity
• Inadequate scientific or engineering base– More craft than science
• Difficult to solve complex problems
• Not scalable
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Higher Education
• Poor research output except in selected fields and a few institutions– 80% of engineering PhDs from 20 institutions– “There has been a complete neglect of
research culture in universities” – government review panel
• Emphasis on quantity not quality
• Compare India & China…
• No universities in the THES top 50
• IITs score 44.5/100
• No vision for improvement/upgradation
• India graduates about 19,000 PhDs a year (1058 in Engg/Tech in 2005-06)
• 4 Universities in the THES top 50
• Peking Univ score 67.9/100
• Coherent plan to have Chinese Univs in top 100; dollar-denominated salaries to attract scholars from US
• Peking University has 4000 doctoral students
Is this an overly-critical view?
Source: DST, 2006
….Compare India’s R&D Intensity
With that of others…….
Source: USPTO, 2008
Source: Arunachalam, 2008
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Innovation Performance Index (EIU) 2007
10 9.48 9.1 8.78
5.16 5.08
0
2
4
6
8
10
12
Japan(1)
U.S.A.(3)
Israel(10)
Korea(15)
India(57)
China(58)
India’s projected rank in 2012 is #56!
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New Steps by the Govt.
• Knowledge Commission set up to recommend policy changes to help India take advantage of knowledge economy
• Spending on higher education to increase manifold during 11th 5-year plan (2007-2012)
• New IITs, IIMs, IISERs, Central Universities
• Special grants to IISc, selected universities
And…
• Several schemes to support R&D by industry and collaborative R&D – Technology Development Board– New Millennium Technology Leadership
Initiative– Small Business Innovation Research Initiative
(Biotechnology)
From Jugaad toSystematic Innovation
Change needs a “systems view”
Innovation byFirms
Inputs
PeopleFunding
KnowledgeInfrastructure
Capacity to Innovate
Incentive toInnovate
BenefitsCompetition
AppropriabilityRewards
Social Environment
Political Environment
Economic Environment
TechnologyEnvironment
Government Policy
InternationalEnvironment
Inputs
PeopleFunding
KnowledgeInfrastructure
Capacity to Innovate
Incentive toInnovate
BenefitsCompetition
AppropriabilityRewards
Start-up
LargeEnterprise
MSME
Firm 1
LeadershipManagerial Practices
Organisational Structure
Govt
Academic Instns
Research Instns
AngelsVCsTax Policy
Funding, Mentoring
R&D Funding, Shared Infrastructure
Incubators
Consultants
IndustryAssns
Support Infrastructure
Technical Knowledge
INPUTS CAPACITY
International, Technological, Social, Political & Economic Environment
Funding
Accreditation
Governance Norms
Funding
Governance Norms
Trained People
Basic Research
Ideas, TechTrained People
Basic ResearchIdeas, Tech
Firm 2
Inter-firm collabAlliancesAcquisitions
Users
User Needs
Tech Intermediaries
Firm 1Leadership
Managerial PracticesOrganisational Structure
CAPACITY
International, Technological, Social, Political & Economic Environment
INCENTIVE
Customers / users
Government
Capital Mkt/Analysts
Exit Options / Mkt for corp control
Opportunity to meet Customer N
eeds
IP Regime & enforcement
Tax Breaks
Competition Policy
Industrial Policy
Trade Policy
Valuation
Barriers to Innovation in Indian Organisations
Originate from Indian society and culture
• Poor teamwork • Enduring importance of upward hierarchical progression• A brahminical attitude that gives brainwork a superior
position over physical work• A weak systems and strategic orientation (and the
resulting paucity of appropriate change paradigms) • Low tolerance of failure• A lack of confidence in innovation capabilities• A failure to positively reinforce innovation efforts • A strong need for control that comes in the way of joint
working with other organisations.
From Jugaad to Systematic Innovation:
An Agenda for Change
From Jugaad to Systematic Innovation
1. Create a critical mass of new, innovative, technology-driven firms,
2. Enhance the technological capability of existing micro, small, and medium enterprises,
3. Transform large enterprises, 4. Create a new incentive system for universities
and other institutions of higher education, 5. Continue and enhance the process of dynamic
reform of public R&D organisations, 6. Change the structure of government involvement
in supporting industrial R&D, and 7. Create supportive societal conditions for
industrial innovation.
From Jugaad to Systematic Innovation: The Company Agenda• Strong user / customer orientation• Kindle intrinsic motivation
• Match people and jobs• Don’t over-critique, tolerate failure• Give quick feedback on ideas/suggestions• Form diverse teams
• Create internal market for capital, ideas & talent
• Design organisation for experimentation• Develop innovation capabilities through
carefully conceived projects
Thank you