CHALLENGES IN MOVING FROM INCREMENTAL TO RADICAL LOW-COST INNOVATION IN EMERGING AND TRANSITION COUNTRIES: Institutional Perspectives Based on Rechargeable Battery Innovation in China and Point-of-Use Water Purification Innovation in India

Low-cost innovation is increasingly becoming the focus of attention of both firms and policy makers in emerging and transition countries. Previous research has elaborated on the ‘market-based’ view of low-cost innovations captured under various terminologies such as ‘frugal’, ‘good-enough’, ‘resource-constrained’, etc. This study, however, demonstrates that low-cost innovation capabilities are profoundly influenced by the structuring of institutions, particularly the public-science system. The analysis in this paper is structured around innovation in rechargeable batteries in China and point-of-use water purification in India, drawing upon strategies at the Chinese firm BYD and Indian firm Tata, respectively. Both the cases illustrate that diffusion-oriented policies and weak university–industry links played a critical role in firms low-cost ‘incremental’ innovations. However, as regards ‘pre-competitive’ research conducted in the public-science system, with the potential for better performing ‘radical’ technologies at lower costs, the current structure of institutions and firms strategies does not encourage firms to appropriate value from them into innovative output. This has important implications for both firms and policy makers in scaling-up low-cost radical innovations.