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Past Issue • Apr-Jun 2011

Research to Marketplace: The Missing Links

This article examines research and innovation in the country and presents a model on how to improve the linkages from research to marketplace.

A splendid economic growth and a rising socio-economic disparity characterise the dichotomous story of India. Sustaining this growth, while ensuring equitable development, hinges on inclusive innovations and pervasive entrepreneurship. The country’s major challenge today is how to unleash the potential of many indigenous innovations through marketable products and services that have tangible social and commercial outcomes. A contextual assessment of the current enabling environment for innovation highlights the need for identifying the critical missing elements and reinventing to build a unique ecosystem that accelerates the transition from research to marketplace.
India is often characterised as an emerging superpower with economists predicting that by 2030, the country will become the third largest economy in the world. However, as the Legatum Prosperity Index indicates (India’s rankings slipped from 70th in 2008 to 88th in 2010), the country is still impaired by growing disparities. Unless this rising dichotomy is immediately addressed through broad-based growth, the economy and society could be adversely affected. Inclusive innovations coupled with pervasive entrepreneurship are the drivers of this much needed paradigm of sustainable growth.
Most discussions on India’s innovation potential focus on highlighting the country’s huge resource base of research and engineer talent and significant lower costs of conducting R&D. But we cannot be complacent with progress on such parameters. By emphasising research that merely pushes the knowledge frontiers, one fails to emphasise the need for innovations that have the potential to create large scale direct economic benefits, and social and environmental good.
As India embarks on the growth trajectory, it is confronted with the heterogeneous nature of challenges and opportunities posed by ‘inclusivity’. India’s major challenge today is not only how to foster more, but also how to diffuse and absorb existing innovations, and how to create marketable solutions that work around the resource constraints and address the needs of the majority. It is when one considers these dimensions that the country’s underperformance relative to its potential becomes evident.
This reality, combined with the cultural context of the country, calls for an ecosystem that fosters innovations and enables their value realisation. In doing so it would be mistaken to assume that a strategic approach merely based on the best practices from other countries could be transplanted to the Indian context. The country needs to reinvent itself and build its own unique and home-grown model of innovation. India’s existing innovation system, in context of its conduciveness for enabling transformation of indigenous research into useful social and commercial outcomes, needs to be assessed. This analysis will lay the groundwork for identifying the missing building blocks and holistic actions needed for evolving the ecosystem.

Contextual Assessment
India has made notable progress in many fields – food grain production, space program, nuclear energy, biotech industry, pharmaceutical industry, and information technology. Like other emerging economies, majority of R&D funding, about 75 percent, comes from government. But India has historically spent less than 1 per cent of its GDP on R&D, which is about quarter that of China. Additionally, the bulk of this funding is in defence, space and energy with only 20 percent of the public funds earmarked for civilian research. In addition, many of the research institutions, supported though such public funds, have displayed little impetus for value creation through marketable products and services. The incentive and legal frameworks do not necessarily encourage producing, diffusing and  commercialising knowledge relevant to the needs of the larger section of the society.
Studies indicate that research spending by India Inc. is almost exclusively due to increase in R&D expenditure by foreign firms (of the top 50 applicants for patents in India in 1995-2005, 44 were foreign). Even India’s largest private companies by market value spend less than 0.25 percent of their revenues in this area. Other than a few SMEs in knowledge sectors, they too do not see innovation as a strategic tool to achieve necessary competitiveness. Their absorptive capacity to recognise opportunities presented by new innovations, and leverage their potential is limited by lack of adequate knowledge, skills and strategy.
Academically, few universities have contributed to advancing research. Unlike the west, there is a lack of incentives for academicians in the country to take entrepreneurial routes and create solutions for the market based on their innovations. Interactions between academia and industry are also very limited. Studies show that only a small proportion of private sector (about 30 percent of large firms and less than 10 percent of SMEs) partner with public institutions on collaborative innovation efforts. When it comes to grassroots innovations, the efforts of organisations such as National Innovation Foundation are commendable. But given the challenges of scouting the grassroots innovations, adding value by assisting in experimentation and validation and protecting with IPR, there are many more innovations that are yet to be identified, diffused and commercialised. The current approaches, channels, networks and incentives are inadequate to scale up the grassroots innovations. The required linkages of the grassroots innovators with academia, research institutions, industry and market are inadequate and inaccessible.
Investments at pre-seed and seed stages, especially in ventures based on innovative products and services, are poor. The incentives to spur pro-poor early stage technology development and commercialisation through matching grants, guarantee schemes and other traditional sources are also missing. Studies indicate that in dollar terms early stage deals account for less than 10 percent of risk capital invested. Formal venture capitalists do not typically cater to this stage. On the other hand, angel financing which is intended to bridge this gap, is still isolated and in a nascent stage with not many successful syndicated deals.

The country needs to reinvent itself and build its own unique and home-grown model of innovation.

The Way Ahead
From the above brief contextual analysis, a set of intriguing questions arise:

  • How can the entrepreneurial skills of the country be harnessed to create affordable products and services around the many indigenous innovations?
  • How can the public R&D institutions and academia be incentivised and supported to focus on innovations that address the challenges of larger section of society?
  • What support mechanisms need to be in place to encourage domestic enterprises to be more proactive in harnessing R&D?
  • How can inclusive and grassroots innovations be tapped, disseminated and scaled up?
  • What collaborations and partnerships are needed to bolster the research to marketplace linkages?

In sum, the overarching question is how the country could unleash its innovation potential through entrepreneurship to address the growing socio-economic disparities, and how an enabling environment for this could be facilitated. The critical elements of the innovation ecosystem – Entities (R&D, Academia, Financial, Government and Civil society), Capital (Human, Finance and Social) and Institutions (Laws, Regulations and Policies) – while in isolation necessary for conduciveness, are not alone sufficient to sustain it.
An evolved and holistic innovation ecosystem is one that encompasses more than the entities that are involved in creation of knowledge, and involves other relevant entities that facilitate dissemination of knowledge and generation of value from such knowledge through application. A strategic and holistic approach that is conducive to each of these three elements – Creation, Dissemination and Application of knowledge – has to be developed (Refer Figure 1).

Elements-of-an-Evolved-Innovation-Ecosystem

Figure 1: Elements of an Evolved Innovation Ecosystem

In particular, the higher educational system needs to be revamped to enhance both the quantity and quality of the pool of researchers. Institutional and individual autonomy must be enhanced to achieve research excellence. The scientific community should be incentivised to create, protect and commercialise research that has large scale impact on the society, and to take on entrepreneurial risks. Platforms and institutional support to harness traditional knowledge must be scaled. Research collaborations within and amongst institutions across sectors should be encouraged. Policy, law and regulatory frameworks need to be enhanced to encourage collaboration between the different agencies. Open innovation platforms (similar to Innocentive) are needed to encourage the best minds to collectively innovate and solve the myriad challenges of discovering and  commercialising.
Financial support for promoting inclusive innovations, supporting early stage technology development, and building the capacity of domestic enterprises is required. The absorptive capacity of domestic enterprises, SMEs in particular, to scour for relevant innovations and integrate it with their operations needs to be improved through better infrastructure support and information flows.
India would benefit from evolving newer metrics of measuring research productivity. The current indicators such as R&D spending and number of research publications or patents filed are too narrow. Alternative higher resolution indicators that reflect the entire innovation spectrum – creation, dissemination and application – are needed.
Good governance frameworks that ensure an effective regulatory regime for protecting and transferring intellectual property rights and facilitates efficient knowledge flows should be developed. The collaborative partnerships must also be transparent and accountable to the community. Newer collaboration models that balance the interests of various stakeholders in the ecosystem need to be developed.
In conclusion, the need for an evolved ecosystem with the creation, dissemination and application elements of the ecosystem cannot be emphasised enough. As a next step, India’s emerging strategic growth trends, cultural context, and human, financial and social capital need to be carefully analysed and assimilated to shape the innovation ecosystem. For priority sectors such as agriculture, education and healthcare, sector specific innovation policies, systems, barriers, driving forces and ecosystem elements need to be further examined. Stakeholders across boundaries need to come together to explore, analyse, brainstorm and implement strategies for harnessing the innovation potential for large scale and sustainable commercial and social outcomes.

ABOUT THE AUTHORS

  • Krishna-Tanuku

    Krishna Tanuku

    Executive Director of the Wadhwani Centre for Entrepreneurship Development (WCED) at the Indian School of Business (ISB).
  • Santosh-Srinivas

    Santosh Srinivas

    Associate Director, Wadhwani Centre for Entrepreneurship Development at the Indian School of Business (ISB).
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