Technology Innovations in Emerging Markets: An Analysis with Special Reference to Indian Economy

Article excerpt

Emerging Markets (EMs) are very volatile and risky but there are enormous opportunities for business. Yet, most of the emerging markets are not up-to-date with technology in order to tap potential business opportunities. This paper, tries to understand technology innovations from the EMs point of view, with special focus on India. R&D investments, availability of Technology Institutes, and number of working patents owned by the country are taken as proxy measures for technology innovations. It has been shown how, country specific factors such as market structure, patent laws, and fiscal incentive system as well as firm specific factors such as organizational structure and culture, influence technology innovation to a large extent. Also, a few propositions have been developed relating to technology innovations and the factors which influence them. Finally, a framework has been provided for building a successful technology portfolio.

INTRODUCTION

Technology is embodied in every 'value activity' within a firm. Value activities include not only core technologies encompassed within a firm's products and production processes, but also those in support activities, for instance procurement, office technology, transportation or design (Porter, 1985). Technological change can affect competition through its impact on any of these activities, the collection of which Porter calls the 'value chain' (Porter, 1985). Yet, most of the emerging markets are not up to date with technology in order to exploit untapped potential of business opportunities. Hence, this paper tries to explain the emerging markets first, followed by technology innovations and finally shows how technological strategies give competitive advantage in emerging markets.

EMERGING MARKETS

Arnold and Quelch (1998) have classified countries into three categories based on their economic conditions. First is the absolute level of economic development usually indicated by the average GDP per capita, or the relative balance of agrarian and industrial/commercial activity. If the economic development is low, then these countries are known as 'Less Developed Countries' (LDCs) or Third World Countries'. Second, is the relative pace of economic development, usually indicated by the GDP growth rate. Third, is the system of market governance and in particular, the extent and stability of a free market system. If the country is in the process of economic liberalization from a command economy, it is sometimes defined as a 'Transitional Economy'.

Antoine W van Agtmael, an employee of the World Bank's International Finance Corporation, is credited with coining the term "Emerging Markets" in 1981. Broadly defined, an EMs is a country making an effort to change and improve its economy, with the goal of raising its performance to that of the world's more advanced nations. EMs however, are not necessarily small or poor. India, China, and Bangladesh, for example, are considered as EMs, as all these countries have gone to considerable lengths to make their economies strong, more open to international investors, and more competitive in global markets (emdirectory, 2005). ' The US Department of Commerce, lists 18 big EMs: China, Hong Kong, Taiwan (the Chinese Economic Area), Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei (ASEAN), Vietnam, India, South Korea, Argentina, Mexico, Brazil, Poland, Turkey, and South Africa. The Economist adds Chile, Venezuela, Greece, Israel, Portugal, the Czech Republic, Hungary, and Russia (Cavusgil, 1997). Based on economic and political criteria, Hoskisson et al. (2000) have identified 64 emerging economies out of which 51 are rapidly growing developing countries and 13 are in transition from centrally planned economies often called 'Transition Economies' (Wright et al., 2005).

Even though every EM is a unique one, the most common characteristics of EMs could be summarized in the following way (Miller, 1998):

* Physical characteristics, which includes inadequate commercial infrastructure as well as inadequacy of all other aspects of physical infrastructure (communication, transport, power generation);

* Socio-political characteristics, which includes political instability, inadequate legal framework, weak social discipline, and reduced technological levels, besides (unique) cultural characteristics;

* Economic characteristics, which includes limited personal income, centrally controlled currencies with an influential role of government in economic life, and in managing the process of transition to market economy. …