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Innovation in India: A review of past research and future directions

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DOI: 10.1007/s10490-015-9442-z

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Asia Pac J Manag (2015) 32:925–958
DOI 10.1007/s10490-015-9442-z
REVIEWS

Innovation in India: A review of past research

and future directions

Anil Nair 1 & Orhun Guldiken 1 & Stav Fainshmidt 2 &

Amir Pezeshkan 3

Published online: 9 November 2015

# Springer Science+Business Media New York 2015

Abstract The rapid economic growth that India enjoyed following the start of its
economic reforms in 1991 has led to a growing scholarly interest in Indian organiza-
tions and management practices. In this paper, we bring together extant yet dispersed
research on one important and salient element of Indian economic growth: innovation.
We organize and review the substantive innovation research in India based on its scope
and focus, and find that it has yielded unique insights about India’s innovation systems
and processes at both the institutional and firm levels. Three interesting trends emerge
from this review of the literature. First, a growing body of research has started
identifying innovation phenomena unique to India, such as Bfrugal innovation^ and
the related notion of Bjugaad.^ Second, a discernible arc in Indian innovation research
can be observed, that is, a shift from a focus on the role of the state to the role of MNEs
and Indian businesses in innovation. Finally, unlike much innovation research else-
where, there appears to be significant interest in innovation that serves the need of the

Orhun Guldiken, Stav Fainshmidt, and Amir Pezeshkan contributed equally to this work.

* Anil Nair
[email protected]
Orhun Guldiken
[email protected]
Stav Fainshmidt
[email protected]
Amir Pezeshkan
[email protected]
1
Department of Management, Strome College of Business, Old Dominion University, Norfolk,
VA 23529, USA
2
Department of Management and International Business, College of Business, Florida International
University, Miami, FL 33174, USA
3
Department of Management & International Business, Merrick School of Business, University of
Baltimore, Baltimore, MD 21201, USA
926 A. Nair et al.

poor. We conclude with directions for future research on innovation within the Indian
context.

Keywords Innovation . India . Review

BWe originally came to India for the [low] cost. We stayed because of the quality,
and now we’re investing because of the innovation.^ ~ Dan Scheinman, Former
Senior Vice President of Cisco Systems’ Media Solutions Group.

The rapid economic growth that India enjoyed following its economic reforms
starting in 1991 has led to a growing scholarly interest in Indian organizations and
management practices (Jain & Sharma, 2013; Nair, Ahlstrom, & Filer, 2007). This
work has covered a wide range of topics and identified many unique aspects of Indian
management in areas such as corporate governance, state and family firms, interna-
tionalization, venture capital, entrepreneurship, and innovation (e.g., George, Rao-
Nicholson, Corbishley, & Bansal, 2015; Lockett, Wright, Sapienza, & Pruthi, 2002;
Maheshwari & Ahlstrom, 2004; Ramani & Szirmai 2014). As the opening quote
suggests, India’s economic growth in the years following initial economic reforms
was driven by low cost labor, particularly in information technology (IT), coupled with
a surge in private sector and international investments subsequent to the removal of
capital restrictions (Chari & Banalieva, 2015). The labor cost arbitrage in IT and related
industries spurred the initial exports and brought India much needed foreign exchange;
indeed it was dwindling foreign exchange reserves that helped to precipitate the 1991
crisis and propelled financial and industrial reform (Li & Nair, 2007) as it did in China
over a decade earlier (Ahlstrom, Young, & Nair, 2003; Harding, 1987). The initial
increase in domestic and international investments allowed many sectors of the econ-
omy (e.g., communication, media) that were long starved for funds to catch up with
latent demand and also upgrade technology and improve productivity. Despite many
problems with corruption and stubborn poverty, India’s growth has been swift and
visible, increasing employment and income, while creating a vibrant middle class and
introducing many modern management reforms (Ahlstrom, 2014; Cooke & Saini,
2015; Gupta & Wang, 2009).
Even with a recent slowdown in economic growth, India is already the fourth largest
economy in the world in purchasing power parity terms (Giles, 2014), and is emerging
as an innovation powerhouse (Forum for the Future, 2013). 1 In fact, while India’s
innovation capacity has clearly contributed to its economic growth thus far (Fan, 2011),
many now argue that India will have to rely even more on innovation and entrepre-
neurship (Chakraborty & Kumar, 2013; Kulkarni, 2013), which are central to both firm
and economic growth (Aghion & Howitt, 1992, 1998; Ahlstrom, 2010a). Global clients
have started demanding innovation in service delivery (Arora, Drev, & Forman,
2009; Schrage, 2011), and some have noted (e.g., Anand & Anand, 2009) that
India’s poverty and challenging social problems can be best solved by innovation

1
https://www.forumforthefuture.org/sites/default/files/images/GreenFutures/India/India_lowres_SPREADS.
pdf
Innovation in India 927

60

50

40

30

20

10

0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Fig. 1 Count of peer reviewed publications with BIndia^ and BInnovation^ in abstract (Based on search on
ABI/Inform database)

that serves the poor (Alvarez, Barney, & Newman, 2015; Bruton, Ahlstrom, &
Si, 2015; George et al., 2015).
India’s capability to engage in low cost, unique innovation has already attracted the
attention of academic and popular media (Govindarajan & Ramamurti, 2013; Prabhu &
Jain, 2015; Prahalad & Mashelkar, 2010; Rai, 2014). Cooper (2009) pointed out that
the strong education system and the leadership in software and IT services may allow
India to use a more innovation-based development path, instead of the low cost path
followed by a number of other developing economies. A further indication of the
critical importance of innovation to India’s growth is the declaration of 2010–2020 as
India’s Innovation Decade by former Prime Minister Manmohan Singh.
Accordingly, because innovation is a topic particularly appropriate and interesting in
the Indian context, our aim is to bring together the disparate literature investigating this
phenomenon, better defining and thus facilitating its analysis (Ahlstrom, 2010b;
Christensen, 2006). As Fig. 1 shows, over the past 20 years we have seen a rise in
the number of books and articles focusing on innovation in the Indian context. Thus, in
this paper we examine the themes in the various streams of management literature on
Indian innovation, and identify issues that need to be addressed in future research to
align and categorize the many developments in the field (Christensen, 2006).
While innovation has been studied by scholars from a range of areas such as
marketing, economics, and engineering (e.g., Aghion & Howitt, 1992, 1998;
Govindarajan, Kopalle, & Danneels, 2011; McCloskey, 2006, 2010, 2013; Mokyr,
1990; Petroski, 1994), our focus is primarily on Indian innovation research that has a
management perspective (Christensen & Raynor, 2003; Nair & Ahlstrom, 2003). That
is, our review includes research that addresses institutional, industry, and firm factors
that drive (primarily) firm and product innovation. We do not review innovation
research in general or specific streams which examine, for instance, individual adoption
and diffusion of new product innovations. 2 In the next section, we review existing
definitions of innovation first to clarify the domain (e.g., Ahlstrom, Lamond, & Ding,
2009; Christensen, 2006) and proceed to discussing the recent record of innovation in

2
Excellent reviews of innovation research in other contexts and domains include Crossan and Apaydin
(2010), Fagerberg, Mowery, and Nelson (2006), Gopalakrishnan and Damanpour (1997), Shafique (2013),
and Wolfe (1994).
928 A. Nair et al.

India. Then we organize the existing literature into distinct streams. Finally, we suggest
directions for future research.

What is innovation?

The word innovation has Latin origins, and began to appear in English language in the
mid-1500s, and not unexpectedly, according to Google word-use graph, the usage of
Binnovation^ has increased steadily ever since that time. Innovation means, Bsomething
new or different^ (Webster). Economists, business scholars, and practitioners have long
realized the value of innovation (e.g., Aghion & Howitt, 1992, 1998; Ahlstrom, 2010a;
Christensen & Raynor, 2003; Mokyr, 1990); and while scholars may disagree about
many aspects of innovation research and the findings may be inconsistent (e.g.,
Shafique, 2013; Wolfe, 1994), in general they view innovation as a net positive. Even
before Schumpeter (1934, 1942) highlighted the role of (radical) innovation in creative
destruction, writers such as Adam Smith had written about the role of technological
improvements on society and factories and the role of innovators:

BAll the improvements in machinery, however, have by no means been the

invention of those who had occasion to use the machines. Many improvements
have been made by the ingenuity of the makers of the machines, when to make
them became the business of a peculiar trade; and some by that of those who are
called philosophers or men of speculation, whose trade is not to do anything, but to
observe everything; and who, upon that account, are often capable of combining
together the powers of the most distant and dissimilar objects.^ (Smith, 1776: 18)

Despite this recognition of the relevance of innovation among early social scientists,
it was the Austrian school led by Schumpeter that placed innovation at center stage in
economics, and explicated its role in economic growth and industry transformation.
Besides Schumpeter, several management scholars have also studied innovation and its
impact on organizational outcomes. According to Thompson (1965: 36), innovation is
the B. . . generation, acceptance and implementation of new ideas, processes, products
or services.^
Thompson’s definition above, and a review of writings on innovation, point out that
innovation is not limited to new products, but also includes new processes, organiza-
tional structures, and policies (Daft, 1982; Damanpour, 1991; Goswami & Mathew,
2005). For instance, Baregheh, Rowley, and Sambrook (2009) analyzed the content of
60 different definitions of innovation from multiple disciplines and found many of them
converging on the following: BInnovation is the multi-stage process whereby organi-
zations transform ideas into new/improved products, services or processes, in order to
advance, compete and differentiate themselves successfully in their marketplace^
(1334).
Innovation is also rooted in societal institutions such as education systems, social
interactions, culture, and labor market structure (Lam, 2000; Landes, 1998). That is, the
structure, communication, and specialization of societies are a major driver of innova-
tive activity (Damanpour, 1991; Kaplinsky, 2011; McCloskey, 2006, 2010). Not
surprisingly, many use the term Binnovation ecosystem^ as a way to describe
Innovation in India 929

Bcollaborative arrangements through which firms combine their individual offerings

into a coherent, customer-facing solution^ (Adner, 2006: 98). Hence in this review, we
focus on factors driving Indian innovation not just at the firm level, but the industrial
and macro (institutional) levels as well.

Innovation in India: A historical perspective

India obtained independence from British rule in 1947. While Jawaharlal Nehru, India’s
first Prime Minister, was convinced about the need to embrace technology and inno-
vation to spur India’s economic growth, one prominent Indian freedom fighter and
leader, Mahatma Gandhi, believed that it was (British) technology that had ruined the
Indian economy, and therefore argued in favor of a low-technology, small scale
industry-based development model that would emphasize employment for India’s
hundreds of millions. Though Nehru’s vision prevailed and India adopted central
planning with the state controlling many sectors of the Indian economy with a
technology-intensive development policy (Ramesh, 1991), Gandhi’s views were shared
by many who harbored ambivalence or even a lingering suspicion of foreign busi-
nesses, technologies, and innovations (Basu, 2004).
In 1950, Nehru launched India on a path of economic development through a series
of 5-year plans (Jalan, 1996). Even after his death, successive administrations contin-
ued with Nehru’s policies. Over time, the public sector came to dominate India’s
economy, investing in big ticket items such as large factories, infrastructure, and tertiary
educational institutions, while seeking to indigenize science and technology (Jain &
Kharbanda, 2003). Yet by the early 1980s, there was increasing concern that India’s
economic plans had not delivered the economic growth that had been achieved in East
Asian economies such as Korea, Malaysia, and Singapore. Between 1950 and 1980,
India realized an average real growth rate of only 3.5 % (versus the typical 7 % in East
Asia) and the government-dominated and heavily-regulated system yielded inefficien-
cies, shortages, and corruption (Li & Nair, 2007). It was only in 1991, when India faced
a severe foreign exchange reserve crisis, that leaders introduced radical reforms to
improve the economy. Prime Minister P. V. Narasimha Rao and Finance Minister (and
later Prime Minister) Manmohan Singh used the crisis to justify the introduction of far-
reaching economic reforms that continued through the 1990s despite changes in
administration and leadership (Bajpai, 2002).
The economic reforms have led to greater awareness about innovation among Indian
businesses, academia, and government. While in the pre-reform era, suspicion of
foreign technology, protection from foreign competition, and regulatory approvals for
importing technology had isolated Indian businesses from innovation occurring else-
where, opening the economy created imperatives for Indian businesses to adapt to the
new competitive landscape and adopt new technologies and innovation for survival
(Hitt, Keats, & DeMarie, 1998). This is vital not only for generating new innovations,
but also for adopting innovations from elsewhere and responding to the entry of
innovative foreign competition into the domestic market.
One sign of the growing awareness of the importance of innovation is the annual
competition run by India’s National Innovation Foundation Innovation. At the first
competition organized in 2000, more than 1600 entries were submitted, and the
930 A. Nair et al.

winning innovations included a bicycle made of bamboo and a water pulley that lets
women take rest while drawing water from a well (Appropriate Technology, 2001). 3
Moreover, R&D expenditure made by Indian firms in many sectors has increased over
the years, especially after reforms led to the entry of foreign firms. As a result, the
number of patent applications and approvals has increased gradually over time (see
Fig. 2).
In the past decade, several scholars (e.g., Govindarajan & Ramamurti, 2011; Gupta
& Govindarajan, 2001; Khanna, 2013) have noted the growth of Indian entrepreneur-
ship and innovations by Indian firms or multinational enterprises (MNEs) in India.
Firms such as Tata, General Electric, Infosys, Selco, Bharti Airtel, Aravind, and
Narayana Hrudalaya have been in the news for their novel offerings and disruptive
innovations (Ahlstrom, 2010a; Li, 2013; Prahalad & Mashelkar, 2010). For example,
the Tata Electrical division designed a tamper evident electric meter. 4 Tata also
produced the Swach water filter line, which has brought potable water in large numbers
in the developing world (Ahlstrom, 2010a). Dr. Reddy’s lab developed Methyldopa, an
inexpensive blood pressure reducing medication. Airtel’s business model innovation
involved the introduction of modularity, or outsourcing the operation and maintenance
of network equipment, towers, lines, IT, and customer service so that it could focus on
low cost service. In addition to its business model innovation, Airtel also engages in
numerous product innovations. For instance, it recently introduced Song Catcher,
where callers can adopt the ringtone of the person they are calling. Naryana
Hrudyalaya’s business model innovation offers low cost cardiac care by using patient
families to offer post-operative care, while other Indian hospitals have recently been
recognized for their innovative ways of serving the masses with world-class health care
(Govindarajan & Ramamurti, 2013).

Literature on Indian innovation

Methodology

We searched for articles containing the keywords BIndia*^ and Binnovation^ in leading
management journals that appear on widely cited journal listings such as Financial
Times Top 45 Business Publications and The University of Texas at Dallas list. Our
initial search found that the following journals had not published a significant number
of articles on Indian innovation: Journal of Engineering and Technology Management,
Strategic Management Journal, Academy of Management Journal, Academy of Man-
agement Review, Journal of Management, Journal of Management Studies, Organiza-
tion Science, and Management Science. Thus, we broadened our search and queried for
peer reviewed publications in the ABI/Informs database that had used the terms BIndia^
and Binnovation^ in the abstract. This search yielded 530 articles. From this list we
dropped articles that had a distinct practitioner focus or were not about innovation in
India—for example, our query pulled up articles about Indiana, Native American
Indians, or that had mentioned India in the abstract, but were about other emerging

3
http://nif.org.in/innovation/pulley_with_stopper/93, accessed Mar. 30, 2015.
4
http://www.tata.com/company/articlesinside/Showcasing-outstanding-innovations
Innovation in India 931

40000

35000

30000

25000
Resident Applications
20000 Non-Resident Applications
15000 Resident Approved
Non-Resident Approved
10000

5000

Fig. 2 India: Patents applications and approval (resident/non-resident) (Source: World Intellectual Property
Organization, http://www.wipo.int/ipstats/en/#data)

economies or one of the BRICs. 5 Eliminating such articles resulted in 236 articles.
Details of a representative sample of the articles included in our review are presented in
Table 1.
Based on the articles included in our sample, we started to organize the literature into
distinct clusters as a means to form an analytical framework for our review (Ginsberg &
Venkatraman, 1985). After several iterations of considering different dimensions (e.g.,
product versus service, technical versus administrative, simple versus complex, incre-
mental versus radical; Damanpour, 1991; Downs & Mohr, 1976; Gopalakrishnan &
Damanpour, 1997), we concluded that the literature could be parsimoniously organized
using the following two dimensions: Micro versus macro and outcome versus process
(also see Crossan & Apaydin, 2010). Here, micro refers to studies that examine
innovation at the firm-level, while macro means those examining innovation at the
industry or national level. Outcome focused studies investigate innovation outcomes
such as patents, products, and new business models, while process oriented studies
examine processes such as information flows, routines, and learning in firms, industries
or regions. The framework is shown in Table 2.
Clearly, some research will either fall outside of the categories or straddle the
categories. For example, Mishra (2006) examined R&D investments and patents and
linked it to the market structure, patent laws, fiscal incentive system as well as firm
specific factors such as organizational structure and culture. In this review, we ensure
that we do not exclude papers that fall outside of our organizational framework. As
changes in India’s macro environment sparked its economic growth, FDI, and rise of
Indian MNEs, we start with the macro perspective.

Macro/outcome studies

Within the macro-outcome quadrant, we include studies that have examined how
institutional conditions and industry structures have impacted innovation outcomes.
In recent years, India’s economic liberalization program and the impact it had on
innovation have attracted the attention of many scholars. Specifically, scholars have
examined how increased FDI, entry of MNEs, and liberalized industry, trade, and

5
Brazil, Russia, India, and China.
Table 1 Select studies on innovation in India
932

Year Authors Journal Title Method Findings/Abstract

1986 Chaudhuri Research Policy Technological innovation in a Study of a major Found the following factors were critical to
research laboratory in India: technological innovation: (1) support of product champion
A case study innovation in India during technology development stage, (2)
support of project by leadership, (3) effective
relationships developed by the product
champion with decision makers in
government, (4) close association of the
design group team, and (5) links between the
technology development and manufacturing
enterprise.
1997 Reddy World Development New trends in globalization of N/A Since mid-1980s MNEs started performing
corporate R&D and strategic R&D in developing countries; such
implications for innovation R&D helps integrate developing countries
capability in host countries: into global technology development activities.
A survey from India
1999 Sikka Technovation Technological innovations by Survey of SMEs Weak linkages exist between universities/R&D
SMEs in India laboratories and technology users; little
motivation for SMEs to upgrade their
capabilities.
2004 D’Costa and Sridharan Book India in the global software N/A Provides a review of innovations and strategies
industry: Innovations, firm of Indian firms in the global software industry
strategies and development
2004 Roy and Wilkinson International Journal International long term business Longitudinal study of the Joint venture provides a context for experts to
of Technology relationship, communities of impact of a long-term interact and develop explicit and tacit
Transfer & practice and innovation: A international JV by a knowledge and skills. Interactions create
Commercialization longitudinal case study of Swedish company on communities of practice involving networks
NDDB, India and Tetra Pak, innovation of suppliers and customers, who in turn create
Sweden further knowledge and innovation.
A. Nair et al.
Table 1 (continued)

Year Authors Journal Title Method Findings/Abstract

2005 Subrahmanya Technovation Pattern of technological Technological Radical product innovations emerged due to
Innovation in India

innovations in small innovations by small internal factors whereas incremental product

enterprises: A comparative enterprises in innovations emerged due to external factors in
perspective of Bangalore engineering industry in both the regions. Lack of spread of previous
(India) and Northeast Bangalore and innovations, low R&D intensity of small
England (UK) Northeast England industry and Indian economy (reflected in
India’s low technology achievement index) as
well as lack of technical background of
entrepreneurs explains the lesser extent of
radical and incremental innovations of
enterprises in Bangalore relative to that of
Northeast England.
2006 Zhao Management Science Conducting R&D in countries Empirical: More than Firms performing R&D in India and China with
with weak intellectual 1,500 firms weak IPR tend to use outputs internally to
property rights protection compensate for weak external institutions.
2006 Som Thunderbird Bracing for MNC competition 11 in-depth case studies HR innovations lead to organizational
International through innovative HRM innovation.
Business Review practices: The way ahead for
Indian firms
2006 Seshadri, Kommi, South Asian Journal Creating a crucible of Case study of Indian It is the role of the front line managers in the
and Ray of Management innovation at Trilogy India subsidiary of US firm company to drive innovation through
Trilogy corporate entrepreneurship.
2007 Lewis Studies in Technology acquisition and Study examines the Substantial technical advances are possible in a
Comparative innovation in the developing technology relatively short time. Suzlon and Goldwind
International world: Wind turbine development strategies pursued similar licensing arrangements to
Development development in China and pursued by Suzlon and acquire basic technical knowledge.
India Goldwind, India and Goldwind’s technology development model
China’s leading wind lacked Suzlon’s network of strategically
turbine manufacturers positioned global subsidiaries that contributed
933
Table 1 (continued)
934

Year Authors Journal Title Method Findings/Abstract

to its base of industry knowledge and

technical capacity.
2007 Popkin and Iyengar Book IT and the East: How China and China and India Argues how innovation in IT is shifting to China
India are altering the future and India. Explores the reasons for the shift.
of technology and innovation
2008 Richman, Health Affairs Lessons from India in Case study of two Organization innovations allow hospitals to
Udayakumar, organizational innovation: A hospitals: Fortis and provide low cost care.
Mitchell, and tale of two heart hospitals Care Hospitals
Schulman
2008 Altenburg, Schmitz, World Development Breakthrough: China’s and Innovation systems, Past efforts in developing innovations rarely led
and Stamm India’s transition from global value chains to cutting-edge innovations; paper suggests
production to innovation and professional that if capital accumulation proceeds at the
networks in four current pace, innovation capabilities will
industries eventually be built up India.
2008 Prakash and Gupta Singapore Exploring the relationship Survey of 250 employees Relationship found between complexity,
Management between organisation of four manufacturers formalization, participation in
Review structure and perceived of India decision-making and perceived innovation.
innovation in the Negative and significant relationship was
manufacturing sector of India found between centralization and perceived
innovation.
2009 Flores, Boër, Huber, International Journal Universities as key enablers to Three successful Described local university’s key role in
Plüss, Schoch, and of Production develop new collaborative collaborative developing new collaborative environments.
Pouly Research environments for innovation: environments located Proposes method to benchmark and assess
Successful experiences from in different settings different initiatives carried out by universities
Switzerland and India to develop new successful collaborative
environments and identify critical success
factors.
A. Nair et al.
Table 1 (continued)

Year Authors Journal Title Method Findings/Abstract

2009 Subrahmanya Innovation: Nature and strategy of product Traces the nature and Domestic market supported and absorbed
Innovation in India

Management, innovations in SMEs: A case strategy of product innovated products of the Japanese SMEs,
Policy & Practice study-based comparative innovations of two whereas the Indian SMEs targeted its
perspective of Japan and SMEs in two different innovated products at international markets.
India economic
environments—Japan
and India
2010 Mehra and Joshi Innovation: The enabling role of the public Biotechnology based The public sector plays a key role in facilitating
Management, sector in innovation: A case antifungal drug the successful commercialization of
Policy & Practice study of drug development in development indigenously developed drug.
India
2011 Fu and Zhang Journal of Chinese Technology transfer, indigenous Solar photovoltaic (PV) Role of national environmental innovation
Economic and innovation and leapfrogging industry. systems in sustaining technology acquisition,
Business Studies in green technology: The adaptation and development.
solar-PV industry in China
and India
2011 Franco, Ray, and Ray World Development Patterns of innovation practices Sample of over 1,200 Demonstrated role played by host nations’
of multinational-affiliates in MNE-affiliates, factor industrial policy in shaping innovation
emerging economies: analysis and practices of MNE-affiliates.
Evidences from Brazil and segmentation
India techniques
2011 Dolfsma, Leydesdorff Innovation: Innovation systems as patent Uses patents granted by Maps innovation systems using social network
Management, networks: The Netherlands, the World Intellectual analysis to identify co-classification of patents
Policy & Practice India and nanotech Property Organization among classes and indicate what characterizes
(WIPO) an innovation system. Also offers an analysis
of the Dutch and Indian innovation system.
2012 Mathew, Ogbonna, Journal of World Culture, employee work Empirical: Survey Impact of organizational culture on quality of
and Harris Business outcomes and performance: work; quality of work is presented as a
contributor to organizational innovation.
935
Table 1 (continued)
936

Year Authors Journal Title Method Findings/Abstract

An empirical analysis of
Indian software firms
2012 Pai, Tseng, and Liou Innovation: Collaborative innovation in Empirical analysis of a Collaborative innovation is better than
Management, emerging economies: Case patent and citation independent innovation in China/India.
Policy & Practice of India and China dataset comprised of Collaborating with countries with advanced
all patents granted by technologies results in better innovative
the US Patents and performance.
Trademark Office to
inventors residing in
India and China from
1980 to 2009.
2012 Crescenzi, Rodríguez- Journal of Economic The territorial dynamics of Panel database for regions In India, innovation is dependent on a
Pose, and Storper Geography innovation in China and India in China and India combination of good local socioeconomic
structures and investment in science and
technology. Indian innovation hubs also
generate positive knowledge spillovers to
other regions.
2012 Sharma, Nookala, and Industry and India’s national and regional Structured interviews, Develops conceptual framework for studying
Sharma Innovation innovation systems: archival data India’s innovation system; explores and
Challenges, opportunities and explains the challenges and opportunities of
recommendations for policy India’s innovation capacity formed within
makers India through a mapping of industrial firms,
educational/research institutions and
innovation parks.
2012 Lynn, Meil, and Journal of Asia Reshaping global technology 190 interviews conducted MNEs do not tend to think in terms of
Salzman Business Studies development: Innovation and in China, India and home-country; mobility of employees, and
entrepreneurship in China other countries short-term focus prevent emphasis on
and India implications of off-shoring of technology
A. Nair et al.
Table 1 (continued)

Year Authors Journal Title Method Findings/Abstract

innovation, moreover policies of technology

Innovation in India

nationalism are futile.

2012 Tiwari and Herstatt Journal of Indian Assessing India’s lead market In-depth analysis of four Identifies characteristics of frugal innovations,
Business Research potential for cost-effective successful product their development process and success in
innovations innovations from India domestic and overseas markets.
from different
industries
2013 Velu and Khanna Journal of Indian Business model innovation in Examines sample of New entrants use business model innovation,
Business Research India innovative firms based incumbents adopt efficiency innovation.
on reports in business
press
2013 Schreiner and Lerman Banking Law Journal Using patents to protect Case study Discusses how the US, Europe, China, and India
financial process innovations examine patent applications for financial
in Europe, China, and India processes, and how different countries allow
patent holders to enforce their patent rights.
2013 McMahon and Research Policy Pursuing endogenous high-tech Case study Innovations in Brazil, China and India are
Thorsteinsdóttir innovation in developing demand-driven and occur under conditions
countries: A look at unique to countries with lower-resources.
regenerative medicine Firms play a smaller role in innovation;
innovation in Brazil, China important to consider wider innovation actors
and India in the study.
2014 Lodh, Nandy, and Corporate Innovation and family Empirical: Firms listed in Family ownership and business group affiliation
Chen Governance: An ownership: Empirical BSE has a positive impact on innovation
International evidence from India productivity.
Review
937
938 A. Nair et al.

Table 2 Framework used in this study to classify existing research on Indian innovation

Level: Micro Level: Macro

Focus: Outcome Impact of firm variables on innovation outcomes Impact of macro factors on
innovation outcomes
Typical antecedents: Ownership, structure, Typical antecedents: Institutions
strategy, HR systems/policies, business and institutional changes:
group membership, firm R&D investment Liberalization, FDI, patent
policies, industry structure, R&D
tax policies
Contingencies: Size, profitability, Contingencies: Ownership, industry,
export markets competition
Focus: Product, service, and business Focus: Product, service, and business
innovations and patents innovations and patents at firm,
industry, and country levels
Theory: IO, contingency, RBV Theory: Institutional
Methodology: Positivistic, regression Methodology: Positivistic, regression
Focus: Process Impact of firm variables on processes or Impact of macro factors on processes
impact of processes on outcomes
Typical antecedents: Employee skills, Typical antecedents: Institutions and
team/organization culture, HR policies, institutional changes, liberalization,
leadership, structure and strategy, resources FDI, patent policies, industry
and capabilities, inter-organizational linkages structure, R&D tax policies
Contingencies: Micro processes, motivations, Contingencies: Firm factors, regional
learning, absorptive capability socio-political and economic
systems
Focus: Product, service, and business Focus: Agglomeration, spatial
innovations and patents, ROI and micro economics, linkages among
processes involved in innovation: institutions and knowledge flows,
knowledge knowledge spillovers
creation, learning & retention
Theory: Learning/knowledge, RBV Theory: Learning/knowledge,
agglomeration
Methodology: Descriptive/positivistic, Methodology: Descriptive/positivistic,
cases, regressions cases, regressions

patent policies have impacted innovation. For instance, Das (2004) found that after
economic liberalization, while R&D in certain segments of India’s private sector
increased, it decreased in the public sector; overall, R&D spending among firms in
most industries decreased, and innovation output suffered. According to this study, easy
access to foreign technology likely reduced the need for in-house R&D. Similarly,
Kathuria (2008) examined the impact of FDI on R&D investments by medium and
high tech firms, and found that FDI flows have a negative impact (initially) on R&D;
economic reforms allowed such firms to import technology instead of investing in
development and innovation.
Though Das (2004) found that overall R&D spending has decreased, Dubey and
Dubey (2010) noted that spending by R&D centers set up as wholly owned subsidiaries
(or partnerships) by MNEs in India has increased. For example, Singh (2006) noted that
Innovation in India 939

large firms such as IBM, AMD, Intel, Broadcom, and Cisco have set up chip design
facilities in India. Confirming this trend, Chakrabarti and Bhaumik (2009) found that
United States (US) MNEs have driven recent growth in patenting from India. However,
as Asakawa and Som (2007) noted, increasing R&D spending in India by MNEs did
not necessarily mean that it was effective; instead they urge MNEs to be aware of the
unique challenges posed by the institutional environment.
While MNEs have played a critical role in innovation during recent years, several
studies have noted the role played by the Indian government in innovation in the past.
Mahmood and Singh (2003), using US patent data, examined the role of foreign
multinational, business groups, individuals, domestic firms, and research institutes on
innovation over 30 years. They found that patent holding in India was relatively
concentrated—the top 50 patent holders had a larger share of the patents than China.
Furthermore, though there was a significant proportion of domestic firms and MNE
subsidiaries in the top 50, the largest patent holder was Council for Scientific and
Industrial Research (CSIR), a government owned organization. Consistent with this
theme, Krishna (2007) discussed the critical role of public research organizations such
as CSIR in innovations in India. He supported his thesis by describing CSIR’s role in
developing greener leather tanning technologies, and using tissue culture to reduce the
time it takes for bamboo plants to flower.
While the above studies make clear that the government played a critical role in
innovation policies prior to reforms, the impact of such policies on innovation remains
unsettled. Some have suggested that the constraints and barriers to technology imports
allowed the development of domestic R&D and innovation, while others note that it
was adversely impacted (e.g., Fan, 2011; Bhattacharya, 2011). Supporting the positive
perspective, Guennif and Ramani (2012) noted that India’s pharmaceutical industry’s
success in global markets (compared to Brazil’s) can be attributed to government
policies. Likewise, Kingston (2013) stated that Ireland’s joining the international patent
system in 1925 does not appear to have helped with innovation, whereas India’s refusal
to join may have helped with the development of its generic drug industry. In contrast,
Sahoo and Shrimali (2013) in a study of the solar power industry, discussed how
domestic content requirement in solar cell technology (favoring crystalline silicon cells
and modules) adversely impacted innovativeness and competitiveness of the solar
industry as developers preferred thin-film technology. Desai (1984) offered a more
balanced perspective on the impact of government policies and explained how import
substitution pressures led to the development of different types of domestic technology,
which may have helped trigger the innovative capabilities of Indian firms. However, he
acknowledged that there were many downsides as well, such as high cost, poor quality
of capital equipment, and inability to import state-of-the-art technology.
Some studies have examined the impact of government policies on specific indus-
tries, with the pharmaceutical industry generating substantial attention in recent years.
While in the past, the Indian pharmaceutical industry was largely content to reverse
engineer products for domestic markets, Chaturvedi, Chataway, and Wield (2007)
analyzed how changes prompted by public policy created new opportunities for
pharmaceutical firms and made them research driven firms focusing on global markets.
Within the broader liberalization theme, scholars have also examined the impact of
specific changes, such as India’s signing the Trade Related Intellectual Property Rights
(TRIPS) patent law provision in 1994. Sampath (2006) conducted a survey of the
940 A. Nair et al.

Indian pharmaceutical industry to analyze the impact of patent rights on biomedical

innovation. She found that patent protection in the biomedical sector had a negative
impact on the number of projects pursued by firms under the TRIPS compliant regime.
We also found that studies that have conducted cross-country comparisons (e.g.,
Tseng, 2009) were particularly helpful in identifying India’s unique innovation ecosys-
tem. Tseng (2009) examined the technological innovation, innovation configurations,
and strengths of BRIC countries. Based on an analysis of patents granted by the US
Patent and Trademark office from 1976 to 2006, the study examined whether the
innovations were incremental/radical, fundamental/applied; India scored higher on
incremental innovation.
In contrast to the above studies that examined national institutions, several studies
have focused on industry level factors and their impact on innovation. Desai (1985)
examined how market structure was related to innovation generation and adoption by
firms across 37 industries. The paper provides rich discussion of the complex factors
that drive innovation. Similarly, Misra (2007) examined the impact of market structure
on R&D spending from 2000 to 2006 in more than 100 industries in the Indian
manufacturing sector and found that there is an inverted U-shaped relationship between
market concentration and industry innovativeness. He also found that the nature of the
relationship was different for investment in product and process innovation and such
investments were dependent on potential profit margins. Adopting a more focused
approach, Prasad Mohanty and Augustin (2014) examined the evolution of one Indian
firm, Mahindra & Mahindra (M&M), and how it has become innovative in response to
challenges and opportunities in its industry. Specifically, the liberalization of automo-
tive industry in the 1990s encouraged M&M to pursue internationalization by
upgrading its technological capabilities and adopting an entrepreneurial growth model.
Overall, the macro-outcome based studies offer a rich area of work. As the above
discussion suggests, scholars have examined how Indian regulations, patent laws,
integration with the global economy, and national R&D policies have impacted firms
in several industries. Based on past research, we believe that it is fair to characterize the
impact of the role of the Indian state on Indian innovation as mixed. While tariffs may
have prevented Indian firms from being exposed to state-of-the-art technologies and
innovation, it also shielded Indian firms from sophisticated foreign rivals and forced
local firms to improvise. However, prior studies have failed to disentangle endogeneity
and other mixed impacts of the governmental policies and interventions on innovation
across various industries. Longitudinal cross-industry studies that incorporate the
industry life-cycle into the analysis may be able to offer unique insights as to in what
stage and what industries protectionist policies could encourage/hurt innovation. Due to
the Indian state’s deep involvement in many aspects of the Indian economy in the past,
recent reforms and regulatory changes offer an attractive context to examine questions
about innovation (cf. Jain & Sharma, 2013, on the telephone industry in India).
In addition, India exhibits a substantial diversity in sub-national institutions, which
may also result in heterogeneous innovation outcomes across regions (cf. Chan,
Makino, & Isobe, 2010; Gong, Chow, & Ahlstrom, 2011). Unfortunately, studies
looking into the array of formal and informal institutions within the Indian context,
particularly in their role in innovation, are still few. Needless to say, the broader Indian
innovation eco-system is in a state of flux and it is too early to discover any clear
patterns on how it will shape innovation outcomes. Based on early studies, it appears
Innovation in India 941

that a very uniquely Indian eco-system is developing that involves MNEs, and
professionally/family managed local firms that are tapping into the vast pool of Indian
knowledge workers to develop innovations that serve the global elite and the local poor.
In terms of theoretical background, institutional theory and industrial organization
frameworks could offer the conceptual underpinnings for research in this stream. For
instance, Schneider and Paunescu (2012) draw on the varieties of capitalism and
national business systems literature to demonstrate how institutional configurations,
as opposed to individual institutions, result in radical versus incremental innovation. A
more holistic approach to institutions and industry conditions in the Indian context is
likely to enhance our understanding of innovation outcomes in India as well. Increasing
availability of data about patents (and other innovation metrics) make intra-national,
regional, single industry, multi-industry studies, and cross-national comparisons
feasible.

Macro/process studies

Studies in this group examine how national institutions influence innovation processes
across firms and industries. One exemplar in this category would be Zhao’s (2006)
research, which found that weak intellectual property (IP) rights protection required
MNEs to be careful about R&D investment in India. According to Zhao’s results, in
such instances, MNEs may engage in R&D that can be internally utilized, or develop
alternative technology protection regimes that are internal. It is not just the weak
IP protection, but also its lack of transparency that could pose hurdles to
innovation (Acemoglu & Robinson, 2012; Rodrik, Subramanian, & Trebbi,
2004). Abraham and Moitra (2001) found, based on their analysis of patent
applications in the field of Electric Communication Techniques in India and
the US, that to make Indian patent data more useful for Indian firms, Indian
industry needed access to detailed information on rivals’ innovations. The recent
changes in Indian patent laws have also attracted scholarly attention; Bowonder,
Thomas, Rokkam, and Rokkam (2003) examined its impact on innovation
processes at Dr. Reddy’s laboratories (DRL)—they found how it led to DRL’s
focus on molecular discovery, which eventually led to DRL’s expansion into
international markets.
Some scholars have examined how institutional differences across countries explain
differences in innovation processes among them. Chataway, Tait, and Wield (2007)
investigated the research capabilities of pharmaceutical industry in developed countries,
and then examined if Indian pharmaceutical industry’s innovation model replicated the
Western model or created an alternative model. They found that since liberalization,
innovation in the Indian pharmaceutical industry is industry-led and imitative; however,
it has not pursued risky and radical innovation, and lack linkages with governments,
MNEs, and international funding agencies, which may prevent it from having a more
significant impact on global markets. Similarly, in a comparative study, Franco, Ray,
and Ray (2011) examined how host country industry policies (in Brazil and India)
impacted knowledge and technology transfer into MNE affiliates. The study revealed
how the MNE’s innovation processes responded to their institutional environments.
Specifically, in India, high tariffs to import of technology and government-funded
research for certain areas resulted in a blend of practices among MNEs that involved
942 A. Nair et al.

development of internal competencies combined with linkages with partners to access

complementary skill sets.
While the above group of studies focused on the impact of macro factors on firm
processes, another group of studies has focused on the impact of such factors on
industry and regional innovation processes. Research in spatial economics and regional
agglomeration has examined how market and regional policies interact to create
regional innovation systems (for example, software firms in Bangalore) and how they
influence innovation (Chaminade & Vang, 2008). Chaminade (2011) compared the
geography of linkages of the automotive and software industries in (Pune) India and
(Greater Beijing) China. Using surveys and interviews, she identified how the networks
among customers, suppliers, and MNEs are different in the two regions and across
industries and how they impact innovation. Results revealed that there was a significant
difference between Pune and Greater Beijing with regard to both the organization and
the geography of the networks. Firms in Pune depended more heavily on local–global
relationships while those in Beijing were more concentrated in domestic markets.
Similarly, Crescenzi, Rodríguez-Pose, and Storper (2012) used patent data to com-
pare and contrast the spatial patterning of innovation systems across China and India. In
contrast to China, they argued that in India, such clusters generated positive knowledge
spillovers. They relate the landscape of innovation in India to Bspecific socioeconomic
and institutional conditions of Indian states, such as the differences in social filter,
networks, policies and practices^ (Crescenzi et al., 2012: 1078).
Within this stream, one group of studies has examined linkages among firms,
customers, universities, and developmental organizations. For instance, Roy and
Banerjee (2011) identified the differences across Indian cities in terms of the interaction
between university, government labs, and industry in bio-medical research. Several
scholars working in this stream have noted the weak linkages that exist between the
technology generators (universities and R&D laboratories) and technology users (es-
pecially the smaller organizations and their lack of motivation to upgrade capabilities)
(Sikka, 1999). Joseph and Abraham (2009) examined the factors that increase the
industry-academia linkages and the outcomes of such linkages, specifically finding that
in the Indian context firm-academia interaction led to innovativeness. Similarly,
Chandra and Krishna (2010) examined the linkages of the five Indian Institutes of
Technology (IITs) with industries and analyzed the interfaces and knowledge transfer
process. Providing an example of a successful collaboration, Samii, Van Wassenhove,
and Bhattacharya (2002) discussed how the UN Industrial Development Organization
(UNIDO) linked up with other organizations to upgrade the capabilities of automotive
component suppliers in India to enable them to supply world class manufactures.
Relatedly, Reece (2007) examined how an Indian firm bred a salt-tolerant form of
hybrid rice through linkages with national and international institutions. Some guidance
on how these networks could be developed is offered by Sharma, Nookala, and Sharma
(2012) who used a survey of managers to examine India’s opportunities and challenges
in cooperation between industry, education intuitions, and government labs. The need
to establish a more vigorous link between industry, academia, and the government
R&D labs appears to be a common theme (Chandra & Krishna, 2010; Chidambaram,
2011) among many of the macro process studies.
A few studies have examined the role of the national culture and informal
institutions on innovation processes. Russell (2008) noted that while innovation
Innovation in India 943

remains a critical priority for Indian industry’s competitiveness, cultural factors, hier-
archical structure, and testing practices deterred innovative performance. Though not
explicitly focusing on cultural analysis, Liu, Kaza, Zhang, and Chen (2011), using
network analysis, described the important role of status in social networks on diffusion
of knowledge and innovation in the nano-technology literature in China, Russia, and
India. Likewise, Khandwalla (2014), one of India’s leading writers on creativity and
innovation, developed a model that integrated the role of government, educational
institutions, and civil society in generating innovation. As studies in this category
illustrate, innovations comprise various micro processes, including learning and knowl-
edge flows. Thus, unraveling the links between the macro structure (institutional and
industrial) and their impact on micro processes will be critical to understanding how
innovation occurs in the Indian context.
Overall, studies in this category suggest that over the years, India’s policies and
societal structure have created a very unique eco-system that drives the innovation
processes within and across firms, industries and regions. While the policies are
undergoing rapid changes, it is not clear whether the past processes have changed
uniformly across sectors or new processes have been fully established. In our view,
innovation efforts may be constrained by processes that were established over the years
when state control and regulations were more intrusive—processes tend to be inertial
and sticky, hence the challenge for innovators would be to identify ways to prune and
modify them. Additionally, we still lack a proper understanding of how and why the
innovation process differs across industries in India. The unique features of the Indian
eco-system and industries provide fertile grounds to pry open the black box of the
innovation process in India by bringing in theories of industry recipes, mental models,
and imprinting. Recent changes in India’s institutional and competitive environments
offer opportunities for scholars to examine how such changes are impacting or
disrupting innovation processes within and across firms.

Micro/outcome studies

Studies in this category examine firm level factors and how they influence innovation
outcomes. Within this group we include studies that have examined the impact of firm
ownership, R&D, HR policies, structure, and strategy on innovation. For example,
Lodh, Nandy, and Chen (2014) found that family ownership and business group
affiliation have a positive impact on innovation in India. Some studies have
specifically examined the link between R&D investment and innovation. For
example, Dubey and Dubey (2010) found that despite increased R&D spending, Indian
pharmaceutical firms have not seen a substantial increase in their drug pipeline and
approval of new molecular entity (NME) rate, though there has been an increase in
incremental innovations and applications for new drug approvals.
Some studies in this group also looked at the moderating factors that influence the
link between R&D and innovation outcomes. Mishra (2010) pointed out that the
changes in Indian patent law in 2005 had led to an increase in R&D investment;
however, the investment was not uniform across firms, and has not led to a propor-
tionate increase in innovations. He found that more than half of the Indian pharmaceu-
tical firms did not engage in R&D spending, and that such spending was a function of
the past profitability, size, capital intensity, and exports. Highlighting the role of
944 A. Nair et al.

appropriate skills-sets for innovation, Deolalikar and Roller (1989) found that patenting
by Indian firms was related to the availability of human capital rather than R&D
investment, capital, or organization size. Findings regarding the effectiveness of
R&D spending on innovation appear to be mixed, and more studies are needed to
understand the contingency factors that influence the relationship.
Because of India’s strengths in service exports, several studies have looked at service
innovations. Thakur and Hale (2013) compared factors influencing service innovation
in the US and India and their impact on firm performance. The study tested its
hypotheses using a survey instrument in the financial, medical, food, hospitality, and
communication services. They found that there were some differences in factors driving
service innovation in India and the US; in India, it was the competitive environment
that was more strongly associated with service innovation, whereas in the US, it was
demanding customers. However, in both countries innovation was associated with
superior performance.
While a majority of studies have examined product/service innovations, Velu and
Khanna (2013) focused on business model innovation. They identified 95 business
model innovations reported in popular business media and examined each one in detail
to identify its characteristics. They found that business model innovations tend to be
made by new firms, whereas existing firms adopt efficiency innovation. Examples of
business model innovation included pharmaceutical firms that do contract research for
Western pharmaceutical firms—a topic that has also been examined by Awate, Larsen,
and Mudambi (2015) and Haakonsson, Jensen, and Mudambi (2013). Such business
model innovations were not just limited to pharmaceutical and IT, but were also
occurring in consumer goods and other areas.
Surprisingly, this group of research was underrepresented in our review. While
scholars have examined the impact of ownership and R&D spending on innovation
outcomes, there are several other firm level factors that could have potentially been
examined as determinants of firm innovation. Corporate governance practices, mana-
gerial capabilities, business and corporate strategy, and organizational change capacity
and routines are all areas which remain unexplored in the context of innovation in
India. Here, rich theoretical frameworks such as the resource-based view or dynamic
capabilities view could offer strong theoretical framing for additional inquiry. Such
theoretical framing would allow scholars to not only examine the impact of firm factors
on innovation, but also how they interact to influence outcomes. Also, due to govern-
ment’s involvement in many sectors of Indian economy, examining the firms’ capabil-
ities and resources such as political ties or network attributes could help disentangle the
mixed results.
Given the changes occurring in the Indian corporate landscape, scholars have
significant opportunities to engage in this area of research. We highlight some of this
potential in the section on future research.

Micro/process studies

This group of studies examined intra-firm processes that are related to innovation.
Broadly, these studies focus on the Bhow^ of innovation. Among one of the earlier
studies in this group, Chaudhuri (1986) examined the managerial processes involved in
a major technological innovation and found that the following factors were critical:
Innovation in India 945

presence of product champions and upper leadership support, effective relationship

between leaders and key decision makers in government, close association among
innovation team members, and connection between the technology development and
manufacturing enterprise.
The role of the individual and the individual’s interaction with the organizational
eco-system in the innovation process was examined by Waychal, Mohanty, and Verma
(2011) in an empirical study within an IT company. They found that employee self-
confidence and a culture of celebrating success were related to innovative thinking and
value creation. Organizational culture’s impact on innovation has also been examined
by others (e.g., Dixit & Nanda, 2011); Mathew, Ogbonna, and Harris (2012) found that
organizational culture impacts quality of work, which in turn impacts innovation.
Bhatnagar (2014) examined the role of perceived supervisor support, reward, and
recognition on employee innovative behaviors. She found that recognition and rewards
mediated the relationship between perceived supervisor support and innovation. Dril-
ling down further into a more micro level, Bhaduri and Kumar’s (2011) study focused
on the role of extrinsic and intrinsic motivators in innovation activities and concluded
that innovation was driven by intrinsic factors.
Taking a broader structural view, Krishnaswamy and Kamala (1979) discussed how
investment in R&D could be more effective when the function was linked to marketing
and production. In contrast, adopting a more strategic approach, Bettiol, Di Maria, and
Grandinetti (2012) examined the competing pressures of standardization and creativity
to generate innovation in knowledge intensive business services firms (KIBS) in India
and Italy. Similarly, Krishnan (2012) examined the innovation strategies (e.g., explo-
ration versus exploitation, market-pull versus technology push, internal versus external
development of capabilities, and product versus process focus) within leading Indian
firms. He found that leading firms use business model innovations to enhance afford-
ability of their products and services, and use technology as a means to deliver such
innovation. Such firms differed in their innovation process from other firms in that they
were ambidextrous on all four innovation dimensions identified above. Plechero and
Chaminade (2013) examined how firms in three industries (auto component, software,
and green biotech) have globalized their innovation. They included three distinct modes
(or processes) of globalization of innovation in their study: exploitation of innovation,
sourcing of technology, and research collaboration.
Some studies have focused on firm level resources and capabilities required for
innovation. Kale (2010) examined the learning processes involved in the development
of R&D capabilities that support innovation. He examined inter-firm variation in such
capabilities and how they were created. Many firms lacked innovation capabilities, and
after economic reforms, such firms sought to acquire them through internationalization
and acquisitions (Chittoor, Sarkar, Ray, & Aulakh, 2009). Focusing on acquisition
integration process and innovation, Sen and Rubenstein (1989) examined the role of
R&D in acquisition integration and found that involving in-house R&D groups in both
the acquisition and implementation phases of the external technology process was very
beneficial in improving the efficiency of the process.
Several studies have approached innovation processes from a knowledge creation
and management perspective. Birasnav and Rangnekar (2010) surveyed employees in
Indian manufacturing firms to identify knowledge management processes and how
these processes were linked to innovation culture. Veng Søberg (2011), employing
946 A. Nair et al.

knowledge creation theory and a case study approach, identified factors that prevent
knowledge creation within Scandinavian R&D centers in China and India, and skill sets
involved in process innovation. He found that while weak socialization skills may
impede effective knowledge transfer and consequently hurt the innovation process in
foreign invested R&D units, it was codification skills that spurred innovation in India.
Likewise, Roy and Gupta (2007) examined product development in a small foundry in
India and analyzed how the processes depart from Nonaka and Takeuchis’
socialization-externalization-combination-internalization (SECI, 1995) model. The au-
thors discussed how the case study setting supported as well as departed from each
element of the model, thus helping reveal the uniquely Indian way of knowledge
creation.
Another group of studies look at the influence of inter-organizational linkages on
innovation processes. For example, Kumar and Subrahmanya (2010) examined how
small and medium enterprises (SMEs) partner with MNEs in the auto industry and
found that SMEs mostly received product related and purchase process assistance with
little assistance for their production, marketing, human resource, financial, and organi-
zational requirements. Yet even such assistance was critical in enhancing these SMEs’
innovativeness and performance. Rai, Pedersen, and Kazakevičiūtė (2010) used three
case studies to understand the co-creation of innovations in India’s ICT industry. They
found that much of the co-creation was focused on the domestic market; co-creations
occurred through joint ventures rather than alliances, and it led to sharing of knowl-
edge. According to Maini (2005), the development of India’s first electric car company
REVA occurred through knowledge sharing within a joint venture between Maini
Group and AEV LLC of California.
Taking a broader approach, Karna, Täube, and Sonderegger (2013) examined
characteristics of MNE subsidiaries embedded in networks within geographic clusters
(such as Bangalore) and their impact on innovation through knowledge flows. Like-
wise, Pai, Tseng, and Liou (2012) offered a solution to the problem of low effectiveness
of R&D spending; examining patent data, they found that in India, collaboration with
participants from advanced countries on innovations were more effective than inde-
pendent work.
While many studies above examined linkages among Indian firms and MNEs or
government institutions, some have examined linkages among firms and customers.
Subrahmanya (2007), for example, examined how Indian SMEs in the Bangalore area
have responded to customer demands that resulted in innovation and have even allowed
two of the foundries to enter international markets. In another study, Kim, Basu, Naidu,
and Cavusgil (2011) examined the innovativeness of born global firms and how their
customer orientation leads to innovativeness—the relationship being mediated by their
technological expertise. Alam (2012) investigated how local firms and MNEs
differ in business to business new service development processes. Interestingly,
he found that MNEs tend to target new markets with new services, whereas
Indian firms tended to focus on moderately innovative services. He also found
that MNEs had a more rigorous idea generation process than the indigenous
firms. Another paper on service innovation (Alam, 2013) used a longitudinal
study to examine the development process of new service projects in real time
and found that firms used different approaches such as customer advisory panel
and innovation retreats to generate new services.
Innovation in India 947

This stream of research on organization processes associated with innovation has

identified one uniquely Indian approach to innovation—jugaad. Jugaad is a word in
the Hindi language, which is spoken in much of northern India. It means improvisation
under resource constraints, which speaks to the heart of the Bfrugal^ nature of Indian
innovation and pragmatically minimizing the use of resources across the value chain in
order to reduce offering cost, while maintaining an acceptable quality standard (Jain,
2012; Prabhu & Jain, 2015; Prahalad & Mashelkar, 2010). Tiwari and Herstatt (2012)
examined characteristics of frugal innovation, its development process and success in
domestic and overseas markets. Their work offers MNEs insights into developing
frugal innovations and asserts that such innovation need not be national, but could be
part of global innovation networks. However, more research is needed to explain how
Indian MNEs can integrate the innovation initiatives across their global networks and
how they can translate their experiences overseas into local innovations.
Overall, the research on innovation processes, factors that influence them, and how
they differ across firms, appear to be fairly rich with the most interesting ones focusing
on processes that are uniquely Indian. More studies that identify processes like jugaad,
and compare them to organizational processes in other contexts, would help enrich the
broader literature on Indian innovation. In essence, while what we know about the
different innovation processes Indian firms develop, and the unique organizational
characteristics driving these differences, is impressive, many open questions remain.
For instance, given the dynamic nature of Indian economy, it is surprising that few
studies discuss organizational imprinting and the evolution of innovation processes
over time within Indian organizations.
In terms of methodology, unlike the previous group of studies that used archival
data, studies in this group tend to use surveys or detailed case studies. For instance, a
comprehensive case study of Ranbaxy Pharmaceuticals by Bowonder and Mastakar
(2005) illustrated how leadership, strategies (e.g., joint ventures), and market focus
together led to innovation and growth. These studies are rich in detail, though it would
be helpful for studies in this group to validate their findings with archival sources and
more rigorous methods. In any case, process based studies have the potential to uncover
uniquely Indian issues that enable or constrain innovation.

Discussion

In recent years, scholars, practitioners, and policy makers alike have argued that
innovation by Indian firms will play a critical role in India’s economic vitality and
growth. The purpose of this paper was to contribute to this discussion by reviewing
extant studies on innovation in India to not only take stock of the research but identify
its contours, uniqueness, and develop some implications and guidance for future
research.
We were encouraged by the richness of Indian innovation research. While its impact
has not been pervasive in top management journals, high quality work has been done in
management and allied fields by a large group of scholars, some of whom have
dedicated years or even decades to this research stream. As must be evident from the
above review, scholars have adopted several different perspectives and theories to
frame research on Indian innovation, including institutional, industrial organization,
948 A. Nair et al.

social network, resource/knowledge-based view, cultural, governance, and structural

theories. Studies on innovation have included large samples as well as detailed case
studies within firms and sometimes across firms within an industry. While it is difficult
to say that an overarching, simple and generalizable theme can capture the state of
Indian research, our review finds that the Indian innovation eco-system is distinctive,
rapidly undergoing changes, and thus offers exciting opportunities for future research.

Future research directions

Our review suggests that there are many unanswered questions in the Indian context for
innovation research. As Fig. 2 suggests, the number of approved patent filings from
India continues to be low. Researchers could examine the macro and micro factors and
processes that positively or negatively impact the ability of firms to translate innovation
processes and applications to actual commercially-viable innovation in the Indian
context. At the macro level, scholars could further explore how institutions impact
innovation. For example, how do Indian university and secondary school curricula
impact the development of research capabilities and innovation? It is clear that the
Indian Institutes of Technology (IITs) and many other well- respected scientific and
engineering institutes in India have the potential to play a much larger role in generating
innovation. Policy makers could examine how incentive systems in such institutes
influence faculty involvement in research and enhance linkages with industry. Further,
scholars and policy makers could examine the level and effectiveness of funding to
support research and innovation processes. For example, in the US, National Science
Foundation (and other federal and state governments organizations such as Department
of Energy, Department of Science) have established an extensive framework to solicit,
evaluate, and fund research projects at universities. In addition, private foundations and
funds complement such government-funded projects.
Beyond formal institutions, scholars could examine how informal institutions facil-
itate or hinder innovation (Acemoglu & Robinson, 2012; Parente & Prescott, 2002;
Wang, Ahlstrom, Nair, & Hang, 2008). For example, Tansuhaj, Gentry, John, Lee
Manzer, and Jin Cho (1991) examined how cultural values of fatalism, traditionalism,
and religious commitment were related to the willingness to try new products. Similar
studies that incorporate such institutions could help develop a uniquely Indian perspec-
tive on innovation. For instance, what is the role of culture in interpreting and valuing
innovations and their impact? How does India’s unique socio-cultural environment
influence knowledge flows and risk taking attributes and impact innovation and
diffusion process? Such institution based studies could uncover how India’s national
business system is configured in relation to other varieties of capitalism (Judge,
Fainshmidt, & Brown, 2014), and what these institutional differences entail for inno-
vative output. As discussed earlier, a more nuanced approach focusing on sub-national
institutional differences and their influence on innovation output and process is war-
ranted as well.
At the micro-level, a fascinating area of work could be to follow Koppman and
Gupta (2014) and examine how distributed work—where scientists and engineers work
on different parts of projects in different geographic locations—combines knowledge
and creates innovations. As Khavul, Peterson, Mullens, and Rasheed (2010) argue,
globalization of innovation by emerging market firms may require development of new
Innovation in India 949

capabilities. In this context, scholars could examine how effective foreign companies
(and Indian MNEs) are in managing innovation across subsidiaries. How do ownership
structure (e.g., business group, family, state), governance, firm size, and firm age
independently and in interaction influence innovation? What are the uniquely Indian
organizational problems (and solutions) in managing innovation? For instance, Duran,
Kammerlander, van Essen, and Zellweger (2015) showed that family firms tend to
invest less in R&D, but are more innovative on average due to a unique process of
translating research investment into innovative output. How does this process work in
Indian family, state-owned, or foreign-affiliated firms? Much work remains to be done
in order to pry open the black box of the Indian innovation process.
In addition, more work is needed that examines administrative innovations, as well
as the reasons for Indian firms’ preference for incremental instead of radical innovation,
innovation commercialization, and product development. In addition to studies that
examine the antecedents of innovation at a firm level, we also need studies that
examine the impact of innovation on firm performance, customers (Tarafdar, Singh,
& Anekal, 2013) and corporate governance (Ravishankar, 2013). 6 At the industry,
regional, or national level, scholars could use established theoretical frameworks such
as the Diamond Model (Porter, 1990) to understand Indian innovation type, volume,
and productivity. Finally, it is still unclear how Indian firms’ internationalization affects
their innovation process and outcomes, which future research could endeavor to
uncover.

Limitations

Any study that attempts to review a broad topic such as innovation is constrained to
limit its scope due to journal page limit guidelines. While our focus in this review was
primarily on the antecedents of innovation, a vital area of research on innovation, which
we excluded from this review, examines the consequences of innovation. Both macro
and micro studies have examined the performance implication of innovation
(Manimala, Jose, & Thomas, 2006). For instance, Hsu (2009) found that patent stocks
were positively associated with market returns and premiums. Similarly, Chadha (2009)
found that foreign patent rights of Indian pharmaceutical firms were positively associ-
ated with export performance. However, we also find cases (e.g., Amitabh’s [2013]
study of the glass industry) where increasing competition was causing some firms to
focus more on efficiency and productivity improvement rather than innovation. Clearly,
there is need for more studies in this area.
Another significant omission in this paper was the review of research on agricultural
innovation. Unlike Dong and Saha (1998), we do not examine technology adoption or
diffusion rate of innovation in the unorganized, agricultural sector (Raina, 2003). Das
(2011) pointed to the need to integrate rural SMEs into the formal sector, the financial
markets, and global markets; such integration would also unleash innovation and
productivity. Relatedly, we also did not examine innovations in social entrepreneurship
(Bhatt & Altinay, 2013). We believe these are areas that deserve more research.

6
Messner (2011) pointed out the role of governance in tapping into the potential gains from innovation in
offshoring activities (in addition to factor cost savings).
950 A. Nair et al.

While we noted the omissions, we must also acknowledge that sometimes we

included papers in our review that may have fallen outside the boundaries we defined
if they helped us understand the uniquely Indian innovation process. For instance, we
included papers in our review that were not strictly about innovation processes or
outcomes, but focused on R&D spending. While R&D investment is not equivalent to
innovation, we found that including papers that focused on R&D did help us assess the
Indian innovation landscape.

Conclusion

With its large number of renowned universities and research institutions, India has the
potential to become a global hub of (growth-encouraging) innovation. However, the
lack of successful patent filings from India suggests that there are several hurdles that
must be overcome for India to become an innovation superpower. First, our review
shows that India suffers from a lack of innovation infrastructure. As Mathew (2011)
notes, while many have iPhones, a vast section of India’s populace lacks access to
necessities that are taken for granted in more developed countries. In order to fully
maximize its innovative potential, India needs to develop its legal, physical, scientific,
technological, and medical infrastructures. Thus, more research is needed not only on
the outcomes associated with infrastructure investment, but also on how such invest-
ment results in innovation. The role of MNEs entering India in filling these institutional
voids is another fruitful research avenue. In addition to development of such infra-
structure, policy makers need to examine how to strengthen the linkages among the
different institutions (Acemoglu & Robinson, 2012).
Second, India needs to develop its eco-system to support entrepreneurship. In our
view, innovation and entrepreneurship go hand in hand; fostering entrepreneurship
requires a focus on the channels to fund new business ideas, such as angel investors and
venture capitalists (Alvarez et al., 2015; Bruton, Ahlstrom, & Singh, 2002; Lerner,
2009). Relying on banks alone to support new start-ups will not be enough, as such
institutions are more geared to fund large ongoing enterprises and may be more risk
averse. Prior studies have proved the significant role of venture capital (VC) industry in
fostering entrepreneurship and innovation in the West (Florida & Kenney, 1988) and in
Asia (Bruton, Ahlstrom, & Yeh, 2004). Here, research looking into factors attracting
international VC funds, and the effective ways in which a VC industry can flourish
within India is warranted (cf. Bruton et al., 2002).
Finally, and perhaps most importantly, in order to realize the enormous innovative
potential of the Indian population, rural areas must be developed by introducing
policies that advance education, health, and wealth creation. Furthermore, the
emerging literature on Indian innovation suggests that innovation needs to
address the widespread poverty in the country and be appropriate to the context;
thus, we believe that the title of a paper by Kaplinsky (2011) BSchumacher meets
Schumpeter^ regarding lower-end technological innovation, captures India’s inno-
vation needs perfectly. We hope that this paper brings to light the need for more
concerted and collective scholarly efforts (Abrahamson, 2008) to study innovation
and supporting prescriptive measures to further encourage innovation in India
(Acemoglu, 2003).
Innovation in India 951

Acknowledgment The authors thank Sanjay Jain for his extensive comments on an earlier version of this
paper. The authors also thank Marc Ahlstrom of Rowan College at Burlington County for his editorial
assistance.

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958 A. Nair et al.

Anil Nair (PhD, New York University) is a professor at the Strome College of Business, Old Dominion
University. His research interests include competitive strategy, risk, innovation, and entrepreneurship. He has
published over two dozen articles in journals such as the Strategic Management Journal, Management
International Review, Long Range Planning, and Asia Pacific Journal of Management.

Orhun Guldiken (PhD Candidate, Strome College of Business, Old Dominion University) is interested in
corporate governance, international entrepreneurship/innovation, and resource-based theory. His work has
been published or is forthcoming in the Asia Pacific Journal of Management and Management International
Review. He has received best paper awards at the Academy of Management and Southern Management
Association. He presented his academic work at the annual meetings of Academy of Management, Strategic
Management Society, Academy of International Business, Southern Management Association, and Babson
College Entrepreneurship Research Conference.

Stav Fainshmidt (PhD, Strome College of Business, Old Dominion University) is an assistant professor of
international business and strategy in the College of Business at Florida International University. His research
focuses on institutions and governance, organizational capabilities, and methods in organizational research.
His research has appeared in the Journal of International Business Studies, Journal of International Man-
agement, Strategic Management Journal, British Journal of Management, International Business Review,
Managerial and Decision Economics, Journal of Trust Research, and Group & Organization Management.

Amir Pezeshkan (PhD, Strome College of Business, Old Dominion University) is an assistant professor at
University of Baltimore, Merrick School of Business. He received his PhD in Strategic Management and
International Business. His research interests are international venture capital firms’ strategic behavior and
performance, global strategy in emerging economies context, organizational capabilities, and strategic entre-
preneurship. His research has been published in the South Asian Journal of Global Business Research, VINE,
and presented at the annual meetings of Academy of Management and Southern Management Association.

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