R&D in Indian Industries

Introduction
Prior to deregulation in the early 1990s, Indian firms had small incentive to build capabilities because of the stringent licensing system which hindered them from launching new products or extending current capacities. Innovation was mostly focused toward absorbing foreign technology rather than improving efficiency or improving current offerings to the consumers. However, post deregulation, as the economy opened up to foreign competition, Indian firms had to quickly adapt themselves and focus on innovation to stay competitive. They did so not through technological innovation, but by adapting technology for business model innovation. The primary strategy for Indian firms for the domestic market has been: business model innovation for affordability a strategy for price sensitive market.

Post Deregulation
Innovation in Indian companies was characterized by the following Cost competitiveness India was cost competitive in terms of labor as compared to other countries in the world. Science and Technology Policy Patent protection was given for only 7 years. TRIPS was signed in 1994 bringing intellectual property protection standards in India up to the global level. There was a marked increase in the number of patent applications post TRIPS. Strengths The pharmaceutical industry developed before the TRIPS adoption, and frugal innovation by Tata (specifically in the case of Tata Indica) are examples of Indian innovation strengths. Weaknesses Private sector spending on R&D is very low as compared to other developing countries. The public R&D spending is focused toward basic sciences rather than new technology.

Indian Innovation Policy

Several steps have been taken like setting up of the National Innovation Council and formation of a policy document on science, technology and innovation. They primarily focus on 4 key areas: Domestic Innovation This focused on stimulating public and private innovation. Fiscal incentives like CAPEX write offs, tax deductions and depreciation allowances accorded to private enterprises to encourage innovation. Technology Transfer Policy changes like FDI ownership in a wide range of sectors aimed at technology transfer from companies in developed markets to India. NRI population also increasing investments in India. Juggad Innovation Companies are focused toward building inexpensive solutions that are pro poor and use green technology.

Small enterprise innovation Theres little information about innovation activities happening in small enterprises in India. The policy is to collect all information in a database of innovation.

Success Stories
There have been a few companies which have been phenomenally successful since the deregulation. Theyve been able to distinguish themselves through innovation by a better understanding of the market. A few characteristics of these companies are: A better market understanding than their foreign competitors Growth through acquisition of foreign firms Product and process innovation not taken separately. Both done simultaneously to improve efficiency aimed at bringing down production costs and making final product more affordable to the market Ambidexterity Indian companies do not have the same resources as their foreign counterparts. In such circumstance an Indian market oriented innovation was required. Since there was no precedent, companies needed to be dexterous in providing. E.g. Indian telecom giant went for the new model of partnering with equipment firms like Ericsson who invested in the network infrastructure.

Collaborative Innovation
There is a strong belief that SMEs and individuals can be a source for innovation. Indian businesses are now looking at innovation by taking the collaborative route. They believe that their firms would be more successful with partnership than if they were to do it alone. There are multiple motivations behind partnership Access to new technology Entry to new markets Improving profitability of existing offerings Invention of new business models

There are also a few barriers to collaboration Talent poaching Lack of protection of confidentiality/Intellectual Property Mismanagement of time allocation to meeting technology partners

Considering that a major chunk of Indian population is still employed in the agriculture sector, the Indian policy should be catered to promoting innovation in agriculture and growing inclusively. Capital accumulation is another aspect that should be targeted to make India an attractive investment proposition for foreign investors. The technology transfer that it would ensue would aid Indias innovation effort.

References Innovation strategies of Indian market leaders a research paper by Rishikesha T. Krishnan