India - a lead market for frugal innovations? Extending the lead market theory to emerging economies
India has emerged as a vibrant and versatile source for cost effective, disruptive innovations of various varieties. Price-sensitive consumers in a large and growing market keep inducing firms to apply frugal engineering for creating affordable products and services without compromising excessively on quality. Because, as The Economist asserts: Frugal does not mean second-rate. Such innovations are characterized by high affordability, robustness, and good enough quality in a volume-driven market. Resource constraints motivate firms and entrepreneurs to think out-of-the-box. The trick lies in creating solutions that are able to circumvent given environmental constraints in a cost effective way. India's large and enormously young population faced with limited budgets, but well-endowed with high aspirations, provides an ideal experiment ground for many firms. Solutions created for the Indian market are often suitable for other developing countries in Asia, Africa and Latin America that frequently face similar socio-economic conditions. In some instances they succeed even in developed country markets by enabling significant cost reductions. This emergence as a hub for frugal innovations possibly suggests a lead market role for India. On the other hand, lead markets, as understood today, are characterized by high per capita income, great customer sophistication and high quality infrastructure. Such assumptions imply that lead markets, almost by default, can only exist in economically developed countries because only they can finance the development effort. Using two anchor-cases of product innovations aimed at price-sensitive segments in India we generate preliminary evidence to challenge some of the core assumptions of the lead market theory and propose that lead markets can emerge in developing countries too because market attractiveness (e.g. volume of demand, export possibilities) and technological capabilities are able to offset many other deficiencies. The supposed absence of customer sophistication is channelized into a challenge for supplier-side sophistication to design cost effective, good enough solutions (low-cost, thin-margin) that can meet the aspirations of consumers in a highly competitive market. In order to master this challenge companies need access to a competent and sufficiently large technical base with first-hand knowledge of the ground situation of targeted customer groups (social capital).
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49/ (0)40/ 42878 - 3777
Fax: +49/ (0)40/ 42878 - 2867
Web page: http://www.tu-harburg.de/tim/index_en.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brown, James E. & Hendry, Chris N. & Harborne, Paul, 2007. "An emerging market in fuel cells? Residential combined heat and power in four countries," Energy Policy, Elsevier, vol. 35(4), pages 2173-2186, April.
- Marian Beise & Klaus Rennings, 2004. "National Environmental Policy and the Global Success of Next-Generation Automobiles," Discussion Paper Series 154, Research Institute for Economics & Business Administration, Kobe University.
- Birgit Kuchler & Jan Goebel, 2003. "Smoothed Income Poverty in European Countries," Discussion Papers of DIW Berlin 352, DIW Berlin, German Institute for Economic Research.
- Martin Jänicke & Klaus Jacob, 2004. "Lead Markets for Environmental Innovations: A New Role for the Nation State," Global Environmental Politics, MIT Press, vol. 4(1), pages 29-46, 02.
- Cantwell, John, 1995. "The Globalisation of Technology: What Remains of the Product Cycle Model?," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 155-74, February.
- Herstatt, Cornelius & Tiwari, Rajnish & Buse, Stephan, 2008.
"India's National Innovation System: Key elements and corporate perspectives,"
51, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Cornelius Herstatt & Rajnish Tiwari & Dieter Ernst, 2008. "India's National Innovation System: Key Elements and Corporate Perspectives," Economics Study Area Working Papers 96, East-West Center, Economics Study Area.
- Beise, Marian & Rennings, Klaus, 2005. "Lead markets and regulation: a framework for analyzing the international diffusion of environmental innovations," Ecological Economics, Elsevier, vol. 52(1), pages 5-17, January.
- Moncada-Paternò-Castello, Pietro & Vivarelli, Marco & Voigt, Peter, 2011.
"Drivers and Impacts in the Globalization of Corporate R&D: An Introduction Based on the European Experience,"
IZA Discussion Papers
5582, Institute for the Study of Labor (IZA).
- Pietro Moncada-Patern�-Castello & Marco Vivarelli & Peter Voigt, 2011. "Drivers and impacts in the globalization of corporate R&D: an introduction based on the European experience," Industrial and Corporate Change, Oxford University Press, vol. 20(2), pages 585-603, April.
- Marian Beise & Heike Belitz, 1998.
"Trends in the Internationalisation of R&D - the German Perspective,"
Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research,
DIW Berlin, German Institute for Economic Research, vol. 67(2), pages 67-85.
- Marian Beise & Heike Belitz, 1998. "Trends in the Internationalisation of R&D: The German Perspective," Discussion Papers of DIW Berlin 167, DIW Berlin, German Institute for Economic Research.
- Tiwari, Rajnish & Buse, Stephan & Herstatt, Cornelius, 2007. "Innovation via global route: Proposing a reference model for chances and challenges of global innovation processes," Working Papers 49, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Rammer, Christian & Beise, Marian, 2003.
"Local User-Producer Interaction in Innovation and Export Performance of Firms,"
ZEW Discussion Papers
03-51, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Rian Beise-Zee & Christian Rammer, 2006. "Local User-Producer Interaction in Innovation and Export Performance of Firms," Small Business Economics, Springer, vol. 27(2), pages 207-222, October.
- Frédérique Sachwald, 2008. "Location choices within global innovation networks: the case of Europe," The Journal of Technology Transfer, Springer, vol. 33(4), pages 364-378, August.
- Tiwari, Rajnish & Herstatt, Cornelius, 2011. "Role of "Lead Market" factors in globalization of innovation: Emerging evidence from India & its implications," Working Papers 64, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Stephan Buse & Rajnish Tiwari & Cornelius Herstatt, 2010. "Global Innovation: An Answer To Mitigate Barriers To Innovation In Small And Medium-Sized Enterprises?," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 215-227.
- Chaudhuri, Kausik & Schneider, Friedrich & Chattopadhyay, Sumana, 2006. "The size and development of the shadow economy: An empirical investigation from states of India," Journal of Development Economics, Elsevier, vol. 80(2), pages 428-443, August.
- Gassmann, Oliver & von Zedtwitz, Maximilian, 1999. "New concepts and trends in international R&D organization," Research Policy, Elsevier, vol. 28(2-3), pages 231-250, March.
- Marian Beise, 2005. "Lead markets, innovation differentials and growth," International Economics and Economic Policy, Springer, vol. 1(4), pages 305-328, January.
- Kumar, Nagesh, 2001. "Determinants of location of overseas R&D activity of multinational enterprises: the case of US and Japanese corporations1," Research Policy, Elsevier, vol. 30(1), pages 159-174, January.
- Narayanan, K., 1998.
"Technology acquisition, de-regulation and competitiveness: a study of Indian automobile industry,"
Elsevier, vol. 27(2), pages 215-228, June.
- Narayanan, K., 1997. "Technology Acquisition, De-regulation and Competitiveness: A Study of Indian Automobile Industry," UNU-INTECH Discussion Paper Series 3, United Nations University - INTECH.
- Johny K Johansson & Ilkka A Ronkainen & Michael R Czinkota, 1994. "Negative Country-of-Origin Effects: The Case of the New Russia," Journal of International Business Studies, Palgrave Macmillan, vol. 25(1), pages 157-176, March.
- Tiwari, Rajnish & Herstatt, Cornelius, 2009. "The emergence of Indian multinationals: An empirical study of motives, status-quo and trends of Indian investments in Germany," Working Papers 56, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Beise, Marian & Cleff, Thomas, 2004. "Assessing the lead market potential of countries for innovation projects," Journal of International Management, Elsevier, vol. 10(4), pages 453-477.
When requesting a correction, please mention this item's handle: RePEc:zbw:tuhtim:67. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.