Innovativeness of Indian firms - Catalysts and deterrents

Innovation is the driving force that is crucial for firms to sustain their competitive advantage and for economies and industries in general to surge forward. In comparison to developing economies, developed economies have always maintained more focus on national innovation systems while the firms from these economies have been investing considerable effort on promoting organisational innovation. However, as firms became increasingly global, consumers across the world, especially from the emerging economies, were also getting a taste of more sophisticated products and services. There was also an infusion of knowledge pertaining to cutting edge technologies, innovations, processes and management systems into this part of the world. However, studies on organisational innovation have largely been confined to firms from developed economies to understand the effects of its determinants (Anderson et al., 2004; Choi and Williams, 2014; Li et al., 2013). Given the differences in the socio-cultural milieu between the developed and emerging economies, more nuanced understanding of the factors affecting and the processes associated with innovation in emerging markets is required.

Several of the globally leading MNCs (multinational corporations) from developed countries like IBM, GE and Honda have set up R&D operations in emerging markets. India, one of the big emerging markets has close to 1000 R&D centres owned by MNCs and accounts for 23 per cent of the overall global engineering R&D outsourcing market (IBEF, 2013). However in spite of such developments, emerging markets like India still lag behind their western counterparts when it comes to innovation and some of its related indicators. India’s R&D expenditure (as % of GDP) has been on a gradual rise from 0.7078 in 2003 to 0.7571 in 2007, but still lags behind its western counterparts. Similar trends can be noticed when it comes to patent indicators as well. However, innovations are not necessarily limited to these indicators alone and there could be innovations that still add value but could be much smaller in scope and scale. While western economies typically rely more on a planned and systematic approach to organisational innovation that involves huge R&D budgets, emerging economies like India rely more on low cost improvisations that adopt a more flexible and open approach towards innovation that is based on ingenuity and resourcefulness (George et al., 2012; Govindarajan and Ramamurti, 2011). This is especially valid in the context of emerging economies who have limited resources at their disposal. Frugal innovations, often referred to as ‘Jugaad’ in India, are vital to the innovation ecosystem in these countries (Radjou et al., 2012). These innovations focus on creating value for the consumer while still being affordable and relatively cheap since they are based on simple ideas developed by leveraging the available resources (that are scarce) and adapted suitably to the local environment. This creative improvisation helps turn adversity into opportunity and is something that the Western firms are also increasingly endorsing since several of their customers have also been facing economic crunch in the recent past (Guardian, 2013). Instances of this flexible and open mind-set to innovation could be found in SELCO’s environmentally and economically sustainable energy distribution system, the world’s cheapest car, Nano, launched by Tata and the low cost water purifier, Swach (Radjou et al., 2012).

All of these aspects make India an ideal setting for a study on organisational innovation. There are very few empirical studies exploring the links between HR practices and organisational innovation (Laursen and Foss, 2003; Shipton et al., 2006) and especially in emerging markets. Hence this study employs a cross sectional survey of 174 Indian firms to understand the factors promoting and hindering innovation. Data will be analysed and the findings will throw light on the main factors promoting and hindering innovation along with their relative importance, from a managerial perspective.