Innovation Policies for Small and Medium Size Enterprises in Asia: An Innovation Systems Perspective

The point of departure for this chapter is that in developing countries SMEs2 are responsible for the largest part of employment and a significant share of added value. And that innovation policy supporting the particularities of SMEs has been widely ignored (occasionally SMEs have even been discriminated). This chapter aims at shedding soe light on the immensely complicated issue of innovation policy for SMEs in developing countries, or more specifically Asian SMEs. The chapter applies the so-called regional innovation systems approach. In this paper, we analyze four clusters of SMEs that have been especially successful in entering the global market; special attention is paid to the so-called soft infrastructure, the industry specific needs for cluster (e.g. interaction) and RIS dynamics/polices (e.g. needs for devolution; industry specific needs for building knowledge creating institutions).The chapter is structured as follows. After introducing stylized facts on SMEs innovative performance attention is turned to the theoretical framework. Taking into account the localized nature of SMEs economic activity, our level of analysis is the regional system of innovation (RIS). We provide a general introduction, contextualize this to Asian situation, and introduce the industry differences (inspired by Pietrobelli and Rabelotti’s typology). Then we turn to the empirical section where special attention is paid to the four cases. Finally, we turn to drawing general conclusions on innovation policies and need for restructuring of Asian innovation systems (the accent is on the former).Innovation Policy; Developing countries; Innovation systems

Human Capital and Inward FDI

After a review of the literature, we conclude that there is potential for significant “spillover effects” from FDI into host countries. However, we identify some limitations of this potential to do with the stock of human capital, the interest in local firms of promoting skills transfer and the competition environment. We suggest comparing conditions and effects between regions, particularly between East Asia and Latin America, where transfer in the former has been more consistent than in the latter. We propose further that an analysis of the type of FDI flowing to different regions and countries could provide clues to the potential for maximising the gains to local skills accumulation. Finally, studies are needed which examine the nature of skills provided by FDI, and ways in which training institutions, business schools, for example, can complement in-service training by firms in FDI host countries.MNCs; FDI; Spillovers

Regional heterogeneity and firms’ innovation: the role of regional factors in industrial R&D in India

This study makes an early attempt to estimate the magnitude and intensity of manufacturing firms’ R&D by Indian states during the period 1991‒2008 and analyses the role of regional factors on firm-level R&D activities. As there is little research on state-wise R&D performance of firms in India, this study serves an important contribution to the academic and policy realm. It has brought out the fact the total manufacturing R&D investment in India is unevenly distributed regionally with a few states accounting for disproportionate share of it. Regional heterogeneity or inter-state disparities in R&D has increased between the 1990s and the first decade of the twenty-first century. In view of this persistent regional heterogeneity in R&D, the study has developed and estimated an empirical model for a sample of 4545 Indian manufacturing firms with R&D facilities located in single state and that explicitly includes regional factors as probable factors affecting R&D. The three-step Censored Quantitle Regression results confirm that regional factors play an important role in shaping the R&D intensity of the sample of firms. This led us to some useful policy suggestions for regional governments to promote local firms’ R&D activities.Regional heterogeneity, R&D, manufacturing firms, Indian states, censored quantitle regression.

The Enigmatic Services Sector of India

The share of services in India’s GDP, at round 60%, is much higher than that in other emerging economies including China. Since the year 1991 Growth of services in the economy has surpassed that of agriculture and manufacturing, a feature that defies received wisdom on the growth pattern of economies. Received wisdom, grounded in the Kuznets paradigm, is that growth in the productivity of agriculture and agricultural incomes provides the manufacturing sector both low cost agricultural raw materials and a demand for its output. In time, the continued growth in incomes promotes the growth of the services sector both through a demand for consumer services and for services as growth promoting inputs into manufacturing and agriculture. India’s services sector, though, has grown alongside an agriculture sector that is none too productive, and a manufacturing sector that accounts for a relatively low 20% of the GDP. This paper provides an explanation, grounded in the country’s history and economic policies of the pre- liberalization era, for the growth of the services sector and argues that, contrary to popular opinion, it can lead the economy

Linking Technical Education to Business Growth: A Case Study on Building Technical Skills in India

Education has been recognized as the most important source of competitive advantage for a nation. It is the key determinant of firm level productivity which in turn drives business growth and profitability. Technical knowledge, in particular, is required both for industrial as well as service development. Technical institutions contribute to the growth of business and industry in a variety of ways. The most influential and direct impact is through their graduates who bring in new skills and perspectives to firms. Industries also seek advanced training on specific topics as well as consultancy from technical institutions. Often these institutions collaborate with academics to design and develop new technologies. In this paper we have argued that technical education plays a crucial role in building these capabilities and consequently in the growth of industry. We use the case study of the Indian technical education system to explore the nature of this system, mechanisms used to govern it, linkages between the education regime and the industry, and the roles that different stakeholders play in ensuring that such a regime delivers sustained advantage to the society. We study the business growth in a few select sectors and the changing needs of technical skills therein. These sectors are agricultural implements, auto-components, chemicals, construction, garments and machine tools. We also illustrate the link between technological innovation and technical skills thereby pointing towards the trajectory of developing industrial competitiveness.

International Mobility of Engineers and the Rise of Entrepreneurship in the Periphery

entrepreneurship, knowledge economy, start-ups, information technology, venture capital, China, India, USA

The post-reform performance of the manufacturing sector in India

Manufacturing played an important part in sustaining India’s economic growth in the 1970s and 1980s. The economic reforms of the early 1990s did not lead to sustained growth of the manufacturing sector. After an acceleration in the mid-1990s, growth slowed in the decade’s second half. The analysis presented in this paper reveals that manufacturing-sector growth in the postreform period is “input driven” rather than “efficiency driven,” with significant levels of technical inefficiency. The paper advocates policies to improve production efficiency by encouraging investment in research and development, technical training for workers, and technology-aided managerial processes