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Cover Story
R&D’s ultimate challenge: The ecosystem conundrum
A Tuck-IIPM Think Tank-B&E global joint study on innovation ecosystems
Issue Date - 30/05/2012
Does R&D actually create long term value for a company, or on a larger canvas, an economy? A number of research papers have tried to establish a correlation between the two. A 2004 IMF working paper titled R&D, Innovation & Economic Growth: An Empirical Analysis, prepared by Hulya Ulku, concluded that “there is a strong positive relationship between innovation (patent stock) and per capita GDP in both OECD and non-OECD countries”. Pelin Demirel, Nottingham University Business School and Mariana Mazzucato, The Open University, Economics Department, empirically analysed whether R&D led to improved growth in the US pharmaceutical industry between 1950 and 2008 in their paper titled, “Innovation and Firm Growth: Is R&D worth it?”. They saw mixed results, and concluded, “For large firms, patenting is the main criterion that allows firms to grow through their R&D efforts. For small firms, on the other hand, it seems harder to achieve R&D led growth.”

As developing economies increase their play in global economic growth, there seems to be a corresponding increase in their share of global R&D as well. The UNESCO Institute for Statistics reported that the number or researchers in developing countries has increased by 45% from 2002-2007. In 2007, developing countries had around 500 researchers per million inhabitants (3,600 is the average in developed countries) and accounted for 24% of expenditure. Unsurprisingly, India PM Dr. Manmohan Singh recently lamented our poor spends in R&D (0.9% of GDP) and the irony that MNCs like GE and Motorola had set up world class R&D centres in our country while our own industry lagged far behind.

However, this particular cover feature, which is a joint study between the Tuck School of Business (ranked number 1 in the Economist’s ranking of full time MBA programs globally last year), B&E and IIPM Think Tank along with primary reserch insights from the Indian Council for Market Research (ICMR), views R&D from the perspective of how we can maximise its outcomes, rather than just how much we can spend. Prof. Ron Adner, an award winning professor of strategy at the Tuck School of Business with a decade of research in the field of innovation behind him, provided the basis of this joint study with his seminal work on innovation ecosystems. In his widely acclaimed book The Wide Lens, he critically examines why the best of customer-driven R&D can fail to produce a successful product/service if the ecosystem for innovation that the company resides in (which includes the entire value chain) is inadequately equipped for that innovation. Our analysis that follows discusses the critical lapses in the ecosystem in India, with case studies on how companies that have faced specific ecosystem challenges in the country are managing them (with inputs from R&D heads of top Indian & international companies). This is followed by ICMR’s research, which presents the collective view of over 180 R&D professionals across India with respect to bringing the R&D stature of the country at par with the global best. The feature ends with an analysis undertaken by Prof. Arindam Chaudhuri, Honorary Director, IIPM Think Tank and Prof. A. Sandeep, Editor, Business & Economy on the correlation between R&D spends and ROI.



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