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Reverse Innovation Case Study
Reverse Innovation Case Study
Reverse Innovation Case Study
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Andrea Piccaluga
Scuola Superiore Sant'Anna
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OVERVIEW: Reverse innovation is not always either foreseeable or explicitly pursued by Western companies operating in
emerging economies. Sometimes, it arises from the initiative of the foreign subsidiary and results when products initially
intended strictly for an emerging market threaten the primary market of the parent company. This has been the case for
Speres, an Italian company that developed a product exclusively for the Chinese market that, surprisingly, was eventually
more successful in Europe than in the market for which it was developed. The development of the product presented chal-
lenges and difficulties to be dealt with at both the subsidiary and the corporate levels.
KEYWORDS: Reverse innovation, China, Emerging economies
The role of emerging economies as potential sources of global selective foreign direct investment and strategic R&D poli-
innovation has been increasingly acknowledged (see, for in- cies, developing economies have gained a foothold in global
stance, Immelt, Govindarajan, and Trimble 2009; Govindarajan innovation. An increasing number of companies from emerg-
and Trimble 2012). Thanks to a combination of progressively ing economies are now entering global markets with prod-
ucts developed in their countries of origin (Govindarajan and
Ramamurti 2011). At the same time, Western firms are at-
Simone Corsi is the program manager for the Lancaster China Catalyst Pro- tempting to harness the economic and innovation energy of
gramme at Lancaster University and research associate at the Research In-
developing countries by developing local R&D centers and
stitute on Global R&D Management (GLORAD) at Tongji University. He has
been a postdoctoral research fellow at the Istituto di Management of Scuola even full subsidiaries. In either case, the result is often what
Superiore Sant’Anna (Pisa, Italy), where he earned his PhD in management. Immelt, Govindarajan, and Trimble (2009) christened reverse
His research focuses on foreign R&D investment in emerging economies innovation—innovation that makes its way from the develop-
and reverse innovation. s.corsi@lancaster.ac.uk
ing world to Western consumers.
Alberto Di Minin is assistant professor of strategy at the Istituto di Management–
In spite of the wealth of work on reverse innovation, it
Scuola Superiore Sant’Anna (Pisa, Italy); a visiting professor at the De-
partment of Operations, Organization and Human Resources–Twente remains difficult to understand what specific dynamics
University in the Netherlands; and a research fellow with the Berkeley facilitate reverse innovation in an organization. Western
Roundtable on the International Economy. His research and teaching deal companies typically take an ethnocentric approach, seeing
with the appropriability of innovation. In particular, he focuses on open in-
innovation as a process triggered by actors located in ad-
novation and business model innovation. He also works on technology
transfer, intellectual property, and R&D management. His publications have vanced economies while emerging economies represent no
appeared in California Management Review, Journal of International Business more than interesting markets or passive recipients of the
Studies, R&D Management Journal, and Research Policy. a.diminin@sssup.it outputs of these processes. This line of thinking may cause
Andrea Piccaluga is professor of innovation management at the Istituto di Western multinationals to miss the innovation potential of
Management, Scuola Superiore Sant’Anna (Pisa, Italy), where he is the dep-
their emerging market subsidiaries, and hence to miss out
uty director and coordinator of the PhD program in management. He is a
member of the board of Netval, the Italian network of university technology on important market opportunities. This was the approach
transfer offices and responsible of the annual survey of Proton Europe. He taken by Speres, a mid-sized Italian high-tech company,
holds a PhD from Scuola Superiore Sant’Anna and a Master in Technology when it sought to move into the Chinese market with mod-
and Innovation Management from SPRU (University of Sussex). He is an
associate editor of R&D Management Journal and has published books
ified versions of its European products.
and papers in the fields of R&D management and technology transfer. However, Speres quickly discovered that success in China
a.piccaluga@sssup.it would require a product developed to meet the needs of its
DOI: 10.5437/08956308X5704215 Chinese customers. The company then sought to develop a
by a team of 20 software engineers; the focus of the lab was objective of establishing the subsidiary. A detailed investi-
on software development and market intelligence. From gation by Speres China’s management team revealed that
2005 to 2007, the Chinese subsidiary operated successfully, the company’s standard technological platforms, which it
serving Western customers in China and Chinese companies had simply transplanted from Italy, were not suitable for
whose products were exported to advanced markets with the the local market, which had different technological needs
company’s standard technological platforms, imported from and a stronger price focus.
Italy and adapted for the local market. Mario Rossi, Speres China’s general manager, analyzed
However, the European management team became the products of Chinese competitors, even visiting some
concerned that the company did not appear to be growing in companies, to learn the “secret recipe” for electronic control-
the Chinese domestic market, which had been the primary lers for industrial air conditioning and refrigeration systems
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