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India's Innovation System: Exploring the Strengths

[Background] [Research Focus] [Proposed Methodology] [Objectives] [Summary]

A project of:

Project Members at TIM/TUHH:

Together with Dr. Dieter Ernst, Senior Fellow at East-West Center

Start: January 2007

Proposed duration: One year

Project status: Completed (Jan. 2008)

[Download project report as PDF, approx. 600 KB]

The project report has been published by the Honolulu-based East-West Center as a Working Paper in its Economic Series (No. 96, August 2008):

[Download EWC Working Paper as PDF, approx. 590 KB]

Project leader: Rajnish Tiwari



The reasons for, and potential advantages of, offshore R&D have been established, see for instance 'Globalization of R&D'. Many Fortune 500 firms have established R&D centers abroad. More recently the emerging markets of India and China have attracted substantial foreign direct investment (FDI) in R&D sector.

India alone has reportedly attracted over 200 of the Fortune 500 firms, including such renowned names as Microsoft, General Electric, DaimlerChrysler, SAP and Siemens, to conduct a part of their R&D activities there and is reputed to even enjoy a considerable advantage vis-à-vis China in this field. Many countries, including Germany, UK and USA, have signed government-level cooperation agreements with India in the field of R&D.

Research Focus

The emergence of India as a leading R&D hub is remarkable as India is generally thought to suffer from disadvantages caused by poor infrastructural facilities, red tape and corruption. This fact therefore throws up two interesting research issues:

  1. Which are the factors, whose endowment is crucial or at least beneficial for an innovation location (including for R&D purposes)?
  2. And is the impact of these factors of universal nature or does it vary for particular in-dustries? If yes, which factors are of crucial importance for which industries? (Focus on ceratin key-industries).

The above mentioned research issues are sought to be examined in the specific context of India to comprehend the Indian innovation system by:

  1. Understanding its inherent strengths and weaknesses
  2. Working out a resource upgrade plan, if desirable/feasible

These steps are crucial to fully exploit the chances presented by India and to integrate her in a global innovation system. The proposed research project seeks to do so by applying a conceptual framework introduced by Dieter Ernst. Hereby it proposes to identify the “Pull”, “Policy” and “Push” factors in an India-specific context for selected industries, in which India is reputed to enjoy significant capabilities (e.g. Information and Communication Technologies, Automotives and Automotive Components Sector, Pharmaceutics and Biotechnology, Space Sciences and Logistics etc.).

In a third step, we intend to integrate the “Technological Units” model proposed by Reddy (see: Reddy, P., 2000: The Globalization of Corporate R&D: Implications for Innovation Capability in Developing Host Countries), if found appropriate. This could help in identifying and assigning suitable roles (regional, global or corporate level technological units) to Indian subsidiaries within the global innovation network.

Proposed Methodology

As an initial step, it is proposed to conduct 1-3 case-studies of firms either already active or proposing to get active in India for relocating parts of their innovation activities. The case studies are to be conducted for each industry sector concerned. Following means are proposed to be applied:

  1. Identificaion of suitable candidates (via: literature review, industry contacts)
  2. Preliminary information (desk research)
  3. Interviews at the headquarters to ascertain motivation factors / induce cooperation
  4. On-site interviews in India
  5. Interviews at the headquarters to a to validate the data, if thought appropriate

Results of the case-studies shall be utilized to deduce sector-specific hypotheses on India ’s innovation system and the possibilities of its integration in a global innovation network. These hypotheses shall be put to test in an (industry-specific) empirical survey.


The objective of this research is to contribute to decision-making in firms, whether and under which conditions it may be recommendable to :

  1. indulge in offshore R&D activities,
  2. choose suitable industry-specific locations
  3. optimize exploitation of the opportunities while minimizing risks

A main advantage of this research work would be that the innovation drivers, when identified, would possess a great practical relevance for the industries in question.

Summarized Draft of Project Proposal

  1. Why India (Market size, resources, increasing role etc.)
  2. Factors / elements of Indian innovation system
    1. “Push”, “Pull” and “Policy” factors
    2. Innovation drivers (specific to industry sectors)
  3. Case studies phase (1 – 3 case studies to exemplify findings)
  4. Deduce hypotheses
  5. Empirical survey
  6. Working out industry specific recommendations

[ For further enquiries, please contact Rajnish Tiwari ]

[Download report as EWC Working Paper as PDF, approx. 590 KB]