Global Innovation in Emerging Economies
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Global Innovation in Emerging Economies In recent decades, there have been signifi cant changes in the way corporate innovation is performed. They include changes in the innovation process, fl ex- ibility to outsource innovation activities, and most importantly, the location of innovation. There are mainly two new trends: First, location of globally strategic R&D by the multinational corporations (MNCs) in some developing countries; second, more recently, some companies from the emerging econo- mies have also started performing R&D to develop products and services for global markets. These trends are occurring in a dynamic business environment that consists of mutually reinforcing economic and technological changes. These trends have managerial implications for companies and policy implica- tions for the emerging economies where such R&D is performed, as well as for the industrialized home countries of the companies. Further, innovative products and services resulting from R&D activities in emerging economies seem to better address the needs of consumers at the bottom-of-the-pyramid in other developing countries. Global Innovation in Emerging Economies examines the dynamics of the globalization processes and the emergence of new locations for innova- tion and its implications. Exploring twenty in-depth case studies of MNCs, local companies, and research institutes/universities based in Brazil, China, India, and South Africa (the so-called BRICS Group), Prasada Reddy devel- ops a conceptual framework of the evolution of globalization of corporate R&D. This unique books addresses many issues including the context for location of global R&D in emerging economies by MNCs and the driving forces behind this trend, performance of global R&D by companies from emerging economies, and national and corporate implications of these new trends for innovation systems. Prasada Reddy is a faculty member at the Research Policy Institute, Lund University, Sweden. He also worked at the Centre for Entrepreneurship, University of Oslo, Norway. He has been a consultant to several multilat- eral organizations. His broad areas of work include: foreign direct invest- ments, industrialization, innovation, and intellectual property rights. Routledge Studies in Innovation, Organization and Technology 1. Innovation in the U.S. Service 9. Mobility and Technology in the Sector Workplace Michael P. Gallaher, Albert N. Link and Edited by Donald Hislop Jeffrey E. Petrusa 10. Energizing Management Through 2. Information and Communications Innovation and Entrepreneurship Technologies in Society European Research and Practice E-Living in a Digital Europe Edited by Milé Terziovski Edited by Ben Anderson, Malcolm Brynin and Yoel Raban 11. Innovating for Sustainability Green Entrepreneurship in Personal 3. The Innovative Bureaucracy Mobility Bureaucracy in an Age of Fluidity Luca Berchicci Alexander Styhre 12. Organizational Capital 4. Innovations and Institutions Modelling, Measuring and An Institutional Perspective on the Contextualising Innovative Efforts of Banks and Edited by Ahmed Bounfour Insurance Companies Patrick Vermeulen and Jorg Raab 13. User-Innovation Barriers to Democratization and IP 5. Knowledge and Innovation in Licensing Business and Industry Victor R. G. Braun and Cornelius The Importance of Using Others Herstatt Edited by Håkan Håkansson and Alexandra Waluszewski 14. Working on Innovation Edited by Christophe Midler, Guy 6. Knowledge and Innovation Minguet and Monique Vervaeke A Comparative Study of the USA, the UK and Japan 15. Organization in Open Source Helen Brown Communities At the Crossroads of the Gift and 7. Industrial Innovation in Japan Market Economies Edited by Takuji Hara, Norio Evangelia Berdou Kambayashi and Noboru Matsushima 16. Theory and Practice of Triple 8. Managing and Marketing Radical Helix Model in Developing Countries Innovations Issues and Challenges Marketing New Technology Edited by Mohammed Saad and Girma Birgitta Sandberg Zawdie 17. Global Innovation in Emerging Economies Prasada Reddy This page intentionally left blank Global Innovation in Emerging Economies Prasada Reddy New York London International Development Research Centre Ottawa • Cairo • Dakar • Montevideo • Nairobi • New Delhi • Singapore First published 2011 by Routledge 270 Madison Avenue, New York, NY 10016 Simultaneously published in the UK by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business Published in association with the International Development Research Centre PO Box 8500, Ottawa, ON K1G 3H9, Canada www.idrc.ca / [email protected] ISBN 978-1-55250-504-5 (ebk) © 2011 Prasada Reddy The right of Prasada Reddy to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. Typeset in Sabon by IBT Global. Printed and bound in the United States of America on acid-free paper by IBT Global. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or here- after invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark Notice: Product or corporate names may be trademarks or registered trade- marks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Global innovation in emerging economies / by Prasada Reddy. p. cm. — (Routledge sutides in innovation, organizations, and technology ; 17) Includes bibliographical references and index. 1. Creative ability in business—Developing countries—Case studies. 2. Research, Industrial—Developing countries—Case studies. 3. Globalization—Developing countries—Case studies. I. Title. HD53.R415 2011 338'.064091724—dc22 2010028437 ISBN13: 978-0-415-87966-8 (hbk) ISBN13: 978-0-203-83367-4 (ebk) In Memory of My Parents Akepati Chengal Reddy and Akepati Kamalamma This page intentionally left blank Contents List of Figures xi List of Tables xiii List of Abbreviations xv Foreword xix Preface xxiii Acknowledgements xxv 1 Introduction 1 2 Global Business Environment 18 3 Globalization of Innovation—A Conceptual Framework 41 4 Innovation Environment in Emerging Economies 66 5 Global Innovation in India 108 6 Global Innovation in China 143 7 Global Innovation in Brazil 168 8 Global Innovation in South Africa 193 9 Implications for Innovation Systems 212 10 Innovations in Emerging Economies: Implications for Other Developing Countries (South-South Dimension) 236 11 Summary and Conclusions 251 Notes 263 Bibliography 269 Index 283 This page intentionally left blank Figures 2.1 Drug discovery and development process. 24 2.2 Chip design fl ow chart. 26 3.1 Globalization of corporate R&D—actor network. 59 3.2 Internationalization of corporate R&D in the 1960s and the 1970s. 63 3.3 Globalization of corporate R&D in the 1980s and the 1990s. 64 5.1 Innovation system of Motorola India. 114 6.1 Innovation system of Intel China Research Center. 153 6.2 Innovation system of HCR&D (Hitachi China). 158 6.3 Innovation system of Hanwang Technologies (China). 166 7.1 Innovation system of Motorola Brazil. 173 7.2 Innovation system of Rhodia Brazil. 177 8.1 Innovation system of DaimlerChrysler/CSIR Innovation System (South Africa). 200 8.2 Innovation system of the Naledi3d Factory (South Africa). 209 This page intentionally left blank Tables 4.1 Scientifi c Publications and GDP per Capita 69 4.2 SCI Citations and GDP per Capita 70 4.3 Number of US Patents and GDP per Capita 70 4.4 Technological Intensity of Brazilian and Indian Exports (%) (1989–2004) 73 4.5 Annual Cost of Employing a Chip Design Engineer (US$), 2002 75 5.1 Questionnaire Survey—The Driving Forces for Location of R&D in India 140 5.2 Questionnaire Survey—Type of R&D Unit and Driving Forces for Its Location 141 6.1 Intel’s R&D Laboratories and Their Features 150 This page intentionally left blank Abbreviations API Active Pharmaceutical Ingredient ARCI Astra Research Center India ASEAN Association of South East Asian Nations BITs Bilateral Investment Treaties BRICs Countries Brazil, Russia, India & China CAD Computer Aided Design CAE Computer Aided Engineering CAM Computer Aided Manufacturing CAS Chinese Academy of Sciences CDMA Code Division Multiple Access CITI Cape IT Initiative CMM Capability Maturity Model CoE Center of Excellence CRO Contract Research Organization CSIR Council for Scientifi c and Industrial Research CTU Corporate Technology Unit DST Department of Science and Technology EIU Economist Intelligence Unit EU European Union FDI Foreign Direct Investment FTA Free Trade Agreement G6 Countries US, Japan, UK, Germany, France & Italy GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GcP Good Clinical Practice xvi Abbreviations GDP Gross Domestic Product GMP Good Manufacturing Practice GNP Gross National Product GPD Global Product Development GSM General System for Mobile Communication GTU Global Technology Unit HCR&D Hitachi (China) Research & Development Corporation HEI Higher Education Institution HP Hewlett-Packard IC Integrated Circuit ICRC Intel China Research Center ICT Information and Communication Technologies IDRC International Development Research Centre IICT Indian Institute of Chemical Technologies IIL Internationally Interdependent Laboratory IISc Indian Institute of Science IIT