30 June 2010
By Sumit Bhaduri
Innovation is the new buzzword among Indian corporates, but serious obstacles remain
R&D needs careful nurturing
It must not be forgotten that the primary driving force behind innovation is that of making profits, what the celebrated economist Joseph Schumpeter termed entrepreneurial "raw instinct".
An Austrian who also taught at Harvard, Schumpeter was probably the first economist to elaborate on the incredible power of technological innovation in the growth of a capitalist economy and coined the phrase "creative destruction", something that is brought about by new technologies replacing the old ones.
The game of innovation in the 21st century reflects the spin and hype of our time but the most discernible changes are those brought about by globalisation. Low–cost labour in the developing world and uniformity in patent rights in more than 100 nations are the two factors that have had maximum impact on the innovation process.
An educated workforce with specialised knowledge and abundant spending on research are critically necessary for any innovation. However, for a commercially viable technological innovation there are many other factors such as intellectual property law, tax codes, patent procedures, export controls, credit policies etc that come into play. The apparently conflicting signals from the innovation scene in India are to be understood against this backdrop.
A plan for an investment of Rs 10,000 crore for an innovation park spread over 5,000 acres in Mumbai metropolitan region that would employ 25,000 scientists of 100 nations initially, and on completion will generate almost a million jobs in allied sectors, is apparently under scrutiny. The proposed areas of technical activities read like a laundry list – no fashionable area of science is left behind. Why is it
difficult to take this grand road map for innovation seriously?
There are many causes, but the track record of the Indian corporate houses over the last several decades and the nearly dead scientific competency in India are reasons enough for being sceptical.
Setting up research laboratories, spending money and bearing the risk of long–term projects that may or may not lead to winning technologies are certainly not the hallmarks of Indian industry. With very few exceptions what passes in the name of research and development by industry is nothing more than glorified quality control and technical service.
This is evident from a cursory examination of the number of granted patents to Indian corporate houses in the US patent database. As the patent examination procedure in the US, though far from ideal, is a lot more rigorous than in India, it is that much more difficult to get away with false claims of novelty. Buying turnkey technologies from the West by paying hefty licence fees has been the only visible technology strategy for almost all large Indian corporate houses.
Is there any reason to think that the setting up of an innovation park would either propel them towards serious R&D or tempt them to change their technology buying habits?
The proposed innovation park is supposed to focus on several areas, many of which are biology related. Indian pharmaceutical companies will presumably be among the potential customers for new technologies. In the pharmaceutical sector, Indian players have so far enjoyed a specific advantage for the so–called generics drugs, i.e. pharmaceuticals for which the patents are no longer valid. Teaching and research in organic chemistry in India have traditionally been better than that in the many other areas of science. In developing cheaper manufacturing processes for a known organic molecule, it is this knowledge and competence that come into play.
The recent adverse court rulings in India on litigations brought about by global giants such as Novartis AG, Bayer etc have less to do with country–specific judicial perspective and more with lack of genuine innovation. A patent application with negligible technical novelty that delays the onset of competition by taking advantage of a legal loophole is a well–known tactic of large pharmaceutical companies the world over. It is to the credit of the Indian judiciary that it has interpreted the law keeping the interest of the huge majority of the Indian population in mind.
Discovering a new drug is a different ball game. It is a very expensive and lengthy process that requires integration of several scientific disciplines and associated skills and, like most major discoveries, a considerable amount of luck. All over the world, large pharmaceutical companies are trying to cope with the increased cost of R&D and reduced numbers of new drugs.
There may be an opportunity for innovation there but it is difficult to see how issues related to risk, ownership and cost are going to be resolved in an innovation park set up with scientists from 100 nations.
Innovation with an Indian face can only happen when corporate houses walk the talk by aligning their Schumpeterian "raw instinct" with the PM’s oft–quoted words about ‘technology–led accelerated inclusive growth’.
The writer is a visiting professor at Northwestern University, US.
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