Assessing India's Lead Market Potential for Cost-Effective Innovations
Journal of Indian Business Research, Volume 4 issue 2, pp. 97 - 115.
Posted: 6 Jun 2012
Date Written: June 1, 2012
Purpose – The purpose of the present study is to assess India's potential as a lead market for cost-effective frugal innovations. This is of special interest since lead markets have traditionally existed in economically highly developed countries, whereas developing countries have faced negative country-of-origin effects. In the case of India a reversal of this trend may be observed, for some time. The paper aims to identify factors which are impacting India's emerging role as a fountainhead of frugal innovations. The research will have implications for locational decisions in setting up global innovation/ research and development (R&D) activities.
Design/methodology/approach – The study crystallizes the inherent characteristics of frugal innovations, their development process and market success in the domestic and overseas markets by undertaking in-depth analysis of four successful product innovations from India from multiple industries. The obtained results can be treated as critical success factors for frugal innovations. These factors are then incorporated in the “Lead market” model so that propositions about India's potential as a lead market can be formulated.
Findings – Whereas frugal innovations were so far driven primarily by affordability for the consumer and economies of scale for the manufacturer, a shift towards value proposition was discovered. Intensifying competition and growing customer aspirations are changing the character of frugal innovations and the customer is looking for factors such as attractive designs. Better-designed products, in turn, have positive impact on the lead market potential, creating a virtuous cycle. The study also discovered that frugal innovations are increasingly taking place in “open global innovation” networks and are no more a purely national or “Jugaad” affair.
Practical implications – Lead markets are a critical consideration while setting up R&D/innovation labs. Our research gives multinational corporations (MNCs) a useful instrument to assess India's lead market potential for their respective field of business. Both domestic and foreign firms can employ the model also to identify interesting adopter markets for their respective products.
Social implication – The research confirms that frugal innovations can benefit end-consumers and firms, simultaneously. It may encourage more firms to tap markets at the bottom of the economic pyramid. Intensifying competition would potentially bring even better products for the consumers.
Originality/value – Lead markets have been traditionally regarded to exist - almost by default - only in highly developed economies. Innovations emanating from developing countries, especially from their domestic firms, have been considered to be of inferior quality. This mindset caused country-of-origin barriers for non-commodity, technology-intensive exports from developing economies. This research demonstrates that lead markets can exist even in developing economies, frugal innovations can have high technological quality, and frugal innovations are increasingly created in “open global networks”.
Keywords: Bottom of the pyramid, Disruptive innovations, Emerging markets, Frugal innovations, India, Innovation, Lead markets
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