The Growth of Knowledge-intensive Entrepreneurship in India, 1991-2007

There is enough consensus to show that India's economic performance since 1991 is a direct result of the economic liberalization measures that have been put in place. One of the outcomes of this improved performance is the growth of innovations in the country. This was accompanied by or caused by the emergence of a number of technology-based enterprises. This paper takes a critical look at the available quantitative evidence on the growth of knowledge or technologybased entrepreneurship. It then looks at five facilitating factors for the emergence of this phenomenon in terms of the existence of increased market opportunities, availability of financial support schemes in the form of venture capital funds, existence and enlargement of a number of government programmes, a number of private sector initiatives and education, and training leading to the supply of technically trained personnel. The paper concludes with certain policy suggestions for the continued sustenance of this activity.knowledge-intensive entrepreneurship, knowledge process, outsourcing venture capital, angel financing, business incubators

Foreign R&D Centres in India: An Analysis of their Size, Structure and Implications

The study measures the contribution of MNCs to the generation of innovations from India. The focus is on innovations that are carried out in foreign R&D Centres. After having mapped out the size of this sector, the study develops a way of classifying them into two categories on the basis of their actual record with respect to performance of innovations. Further we survey the policies that are available in India to promote FDI in R&D services. The study also identify the characteristics of these foreign R&D centres in terms of a number of indicators like their, size, domain expertise, physical location and then it distils out the interaction of these centres with India’s National System of Innovation. The latter is carried out through a primary survey. The contribution of this study is an identification of the size of foreign R&D Centres in India from official sources of data and its actual working. The study has thus a number of pointers for public policy for promoting this activity so that it is beneficial to the host economy of India.

The mobile communications services industry in India : has it led to India becoming a manufacturing hub for telecommunication equipments?

The growth performance of the Indian mobile communications services industry is now reasonably well recorded. It is one of the few industries in India which has travelled significantly from being a monopolistic and somnolent industry from the innovation point of view to an extremely competitive and technologically speaking dynamic industry. This is despite the fact that it’s very recent history has been punctuated by a few financial scams of sorts essentially due to the discretionary powers still wielded by the government in allocating the much needed spectrum and so on. Also notwithstanding the very recent distinction that is made between active users and the total number of subscribers (the former is only 70 per cent of the latter); the industry has witnessed a phenomenal increase in the length and indeed breadth of its coverage. There is also quantitative evidence to show that the extent of urban-rural divide too is on the decline. India now has one of the most competitive telecom services in the world and this has positive implications for its outsourcing industry where significant decline in communications costs is tremendously helpful for making this industry too remaining competitive when other factor prices have been showing an increasing trend. While all these augur well, questions had been raised about the ever rising trade balance in telecom equipments as the phenomenal growth of new subscribers that are added per month (in 2010 it averaged 18 million new subscribers per month) was met with equal amount of equipment imports. The increasing share of equipment imports was due to the weak manufacturing base that India possessed; ironic though as telecom equipment production was one of the first manufacturing industries that the Indian state had sought to develop through explicit state participation right after independence. Subsequently the state even attempted to craft a sectoral system of innovation in the telecom equipment industry. However none of these efforts resulted in India being successful in establishing a manufacturing hub. In the context the paper argues that the growth of market for telecom equipments precipitated by the growth of services has jump started an extremely dynamic manufacturing industry, especially over the last five years or so. The dynamism of the industry can be gauged from the fact that for the first time, India has a positive trade balance in mobile handsets facilitated by India emerging as a manufacturing and export base for cheaper handsets. Although the industry is dominated by MNCs, domestic firms have started making an entry into domestic manufacturing and indeed in innovations as well. However there is some evidence to show that most of the manufacturers are now more of assemblers of imported parts and components than manufacturers per se. This unique story of growth in services leading to the emergence of a manufacturing industry is the focus of attention and analysis in this paper. JEL Classification: L96;O25;O38 Key words: telecommunications, fixed, mobile, telecom equipment, Indi

The flight from defence to civilian space : evolution of the sectoral system of innovation of India's aerospace industry

India is one among the few developing countries that have sought to establish an aerospace industry. The industry has two components, namely aeronautical and astronautic. I first map out the sectoral system of innovation of this industry which is actually located as a cluster in the south Indian city of Bangalore. The paper identifies the three building blocks of the cluster: lead actors, knowledge or technology domain, and the demand. Changes in each of these blocks over time are discussed. The study concluded with a comparison of the performance of the sector in terms of exports and competitiveness and also delves on the policy instruments that are required for placing the industry on a sure flight path. Key words: India, sectoral system of innovation, aerospace industry, aeronautical, astronautic, offset policy JEL Classification: L62; O31; O32; O3

Financing of industrial innovations in India : how effective are tax incentives for R&D?

The paper surveys the instruments that are available for innovation financing in India. It identifies three such instruments, namely research grants and loans, venture capital and tax incentives. The effectiveness of all these instruments are then examined in some general fashion, but one of the instruments, namely tax incentives are subject to a detailed empirical scrutiny in terms of its effectiveness. We have constructed a dataset containing firm belonging to four different industries which have claimed these tax incentives. For these firms we estimated the elasticity of R&D expenditure wrt tax foregone. The resulting analysis showed that while the instruments have been targeted well at the right sort of industries its effect in spurring additional investments in R&D is open to question. Key words: Public R&D support; R&D investment; Evaluation, Tax foregone, Innovation policy, R&D policy, R&D investment, Innovation, India. JEL Classification : H32; 031; O3

The dragon vs. the elephant comparative analysis of innovation capability in the telecommunications equipment industry in China and India

China and India have one of the largest telecommunications equipment markets in the world. The paper employs a sectoral system of innovation framework towards understanding the differential outcomes in innovation capability building in the industry achieved by China and India. The countries have pursued widely diverging strategies for developing their domestic innovation capability. India followed a very rigid policy of indigenous development of domestic technologies by establishing a stand-alone public laboratory that developed state-of-theart switching technologies. These were then transferred to manufacturing enterprises in both public and private sectors. The enterprises themselves did not have any in-house R&D capability. The public laboratory was also not given any strategic direction, even though it was technologically speaking, very competent. Consequently the country, despite possessing good quality human resource was unable to keep pace with changes in the technology frontier and the equipment industry has now become essentially dominated by affiliates of MNCs. China, on the contrary, first depended on MNCs for her technology needs in this area. But subsequently encouraged the emergence of three national champions, two of which are erstwhile public laboratories. The country has built up considerable hardware capability in both fixed line and mobile communications technology and has also emerged as a major player in world markets. Although the sectoral system of innovation in both the countries were promoted and nurtured by the state through a variety of instruments, the quality of such interventionist strategy is found to be better in China. The final outcome proves this line of argument. Key Words: Innovation capability, China, India, Telecommunications industry, Digital switching systems, Mobile telephony JEL Classification: L630, O310, 0320, 038