Fostering Global Innovation in a Developing Economy: Lessons from India

By Gosia Glinska

With a population of 1.3 billion people, India can claim an abundance of the world’s most important natural resource — the human mind and its capacity to innovate. Given this inherent advantage, what would it take to catapult India toward global economic leadership as an innovation powerhouse?

To address this question and to examine India’s human capital potential, University of Virginia Darden School of Business Professor Rajkumar Venkatesan led a dialogue in Mumbai among the country’s leading government officials, business executives, serial entrepreneurs, venture capitalists and angel investors. During the most recent Global Innovators Roundtable, an ongoing series of international discussions hosted by Darden’s Batten Institute for Entrepreneurship and Innovation, Venkatesan drew out a number of lessons about the present state and future prospects for innovation in the Indian economy.

Looking Inward: Solving Regional Problems

Today, India does not have a strong reputation for breakthrough innovations that disrupt industries globally. Rather, as a emerging economy, it faces and addresses a narrower set of domestic challenges and unfilled needs at home, such as access to safe drinking water, education, employment, energy, connectivity and financial inclusion.

“Innovation in India, most of the time, solves India’s specific problems,” said Akshay Mittal (MBA ‘11), a serial entrepreneur and angel investor at First Coffee Ventures, an early-stage investment firm in Mumbai.

“In India, we look at solving pressing problems first. Innovation around water, for example, is driven by an acute need,” said Paula Mariwala, partner at Seedfund, an early-stage venture capital fund, and co-founder of Stanford Angels.

As a result of this inward focus, many Indian entrepreneurs commercialize their innovations and technologies in other developing economies, especially in high social-impact sectors such as health care, agriculture and energy.

“Innovation in India doesn’t have to travel west,” said Rajan Mehra (MBA ‘93), managing director at Nirvana Venture Advisors, a venture capital fund focused on the Internet space. “It flows to Africa — Nigeria, Tanzania and Kenya.”

A case in point is Husk Power Systems (HPS), co-founded by Manoj Sinha (MBA ‘09). In 2007 Sinha and his friend were exploring ways to provide reliable power to remote villages in Bihar, an Indian state where they grew up. They ended up converting biomass waste, such as rice husks, which are abundant in Bihar, into electricity. In 2008, Sinha launched HPS to provide clean and affordable electricity to the rural populations, not just in India, but around the world. Today, HPS designs, builds, owns and operates a low-cost hybrid power plant and distribution network in India and Africa.

India’s Promise: From Regional Innovator to Global Leader

Can a talent for solving problems in the developing world  transform India into a truly global innovation leader? Darden’s Venkatesan is bullish.

“The next wave of growth in India will come from breakthrough ideas that will solve not only India’s problems, but also the developed world’s problems,” said Venkatesan.

Sreeshap Srinivasa, associate vice president at Biocon, India’s leading biotech company, echoed Venkatesan’s observation.

“If Biocon wanted to become a global company, like Genentech, and if we only addressed Indian regional issues, we would not get there,” he said. “It’s great that we address local problems, but to go to the next level, we have to tackle global problems.”

Developing innovative solution to global problems, especially in capital-intensive industries like biotech, requires funding and range of other resources. As Darden’s Venkatesan put it: “Opportunities in India exist in the human capital, in a variety and diversity of ideas. But to see some dividends, it’s necessary to make investments in higher education, in basic research and in other parts of the ecosystem.”

India’s Challenge: Developing a Vibrant Innovation Ecosystem

Countries like Switzerland, the U.S., Israel, Finland and Germany boast powerful ecosystems that support innovation and entrepreneurship. Even though each of these ecosystems is unique, they share common building blocks, such as high-quality scientific research institutions, a sophisticated private sector, access to capital, university-industry collaboration, strong protections for intellectual property, the availability of scientists and engineers and government support.

In successful innovation ecosystems different players also interact, collaborate, and learn from one another.  As those relationships deepen, the strength of the ecosystem increases. Seedfund’s Mariwala emphasized the importance of connecting various ecosystem participants in India.

She said: “To commercialize an idea from a lab, to come to a point where it can have a large impact in India, we don’t look at ideas in such a way, because we don’t talk to each other. Scientists don’t know what the business problems are.”

India has vibrant innovation hot spots like Bangalore, which has shed its reputation as an outsourcing center and now hums with innovative startups. However, the country’s overall innovation ecosystem is still nascent.

“It’s difficult to address the ecosystem issue, because of all the moving parts,” said Mariwala. “The government needs to help the people who want to address those issues. The private sector does business in spite of the government. We should not be asked to innovative in isolation.”

Government can certainly help catalyze the creation of an entrepreneurial ecosystem, by simplifying regulations and through tax benefits and other incentives. It can also hinder it with stifling bureaucracy and protectionism.

Said Arihant Patni, co-founder and managing director of Hive Technologies, a platform that incubates and invests in data-analytic startups in India, “How can you create Elon Musks in India if our government uses such protectionist approaches like banning or discouraging driverless cars?”

The credit market in India is especially mired in bureaucratic inefficiencies, which creates significant hurdles for startups and private investors.

“If you’re a startup debt financing from banks is impossible,” said Sinha. “Getting credit from OPIC (Overseas Private Investment Corporation), trying to bring that into India, is a paperwork nightmare. Because of that there are billions of dollars that are untapped.”

Most participants agreed that India could lead the world in innovation. Indian transplants to the U.S. thrive as entrepreneurs and innovators. However, for that to happen, India requires the right environment — an interconnected web of stakeholders who collaborate explicitly or implicitly to create something greater than what they could do alone. Creating such a successful ecosystem can be done if both the public and private sectors work together.

About the University of Virginia Darden School of Business

The University of Virginia Darden School of Business prepares responsible global leaders through unparalleled transformational learning experiences. Darden’s graduate degree programs (MBA, MSBA and Ph.D.) and Executive Education & Lifelong Learning programs offered by the Darden School Foundation set the stage for a lifetime of career advancement and impact. Darden’s top-ranked faculty, renowned for teaching excellence, inspires and shapes modern business leadership worldwide through research, thought leadership and business publishing. Darden has Grounds in Charlottesville, Virginia, and the Washington, D.C., area and a global community that includes 18,000 alumni in 90 countries. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.


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