1. No category

Innovation in Indian Industry: Evidence from the
First National Innovation Survey
Third Asia-Pacific NIS Forum
NIS Diagnosis and STI Strategies in the Open Innovation Framework
8-9 April 2015 in Bangkok, Thailand.
Dr Parveen Arora, Ph.D
Advisor &Head
National Science and Technology Management Information System (NSTMIS)
Department of Science & Technology
Ministry of Science & Technology
New Delhi
India
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National Innovation Survey
Outline
 Centrality of Innovation, growth and competitiveness of
economies

Understanding Innovation – National Innovation Survey
 International comparisons
 Learning and Policy Implications
2
Innovation Surveys
• Recognition of
importance of Innovation in enhancing the
competitiveness of an economy, the focus has shifted to the
Innovation policies and hence Innovation Surveys.
• Innovation is defined as
the transformation of new ideas /
knowledge into commercial applications or process of
development of knowledge of economic relevance.
• R&D is recognised as only one of the several inputs along the
innovation chain.
• Innovation chain includes various elements like Idea generation
Basic R&D, Applied R&D, Demonstration, Commercialization and
Diffusion.
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Importance of Innovation in Developing & Developed Context
Developing Context
•
Innovation is often about a series of minor
improvements in existing technology,
adaptations which follow adoption and about
non-technological change, such as new and
social business models.
•
Innovation is within reach of the developing
countries as it does not necessarily have the
high financial and human capital
requirements of high-tech R&D.
•
Experience shows that without innovation,
the accumulation of human capital results in
underemployed of the skilled and
accumulation of physical capital in higher
costs and lower productivity.
•
New models to be invented, with
innovation as a key driver.
•
Innovation needs to be inclusive to
contribute to reducing poverty and overall
welfare of the society.
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Developed Context
•
Short-term Shocks-linked to the economic crisisand long-term shocks-environmental, demographic
and societal- have put OECD economies before
unprecedented challenges.
•
In this agenda, Innovation policies have assumed a
pivotal role, more than ever, of restoring growth
and competitiveness.
•
Innovation policies need to adapt to the new
context : have to be relevant (to address economic
or societal goals), coherent (with each other and
other policies) and inclusive (in terms of scope and
of the concerned actors).
- OECD Science, Technology and Industry
Outlook 2012
4
Innovation Survey Definition: OECD

An innovation is the implementation of a new or
significantly improved product (good or service), or
process, a new marketing method, or a new
organizational method in business practices,
workplace organisation or external relations (OECDEurostat 2005).

The minimum requirement for an innovation is that the
product, process, marketing method or organisational
method must be new (or significantly improved) to
the firm.
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Innovation Definition in Developing Context

Mytelka (2000) defined innovation within the context of developing
country as the process by which firms master and implement the design
and production of goods and services that are new to them (firm)
irrespective of whether they are new to their competitors, their
customers or the world.

According to UNU-INTECH (2004), innovation includes purchase of
new machinery and equipment as well as licensing.

According to the National Knowledge Commission of India,
“Innovation is defined as a process by which varying degrees of
measurable value
enhancement is planned and achieved, in any
commercial activity”. This process may be real through or incremental, and it
may occur systematically or sporadically in a company; it may be achieved by:
(i) introducing new or improved goods and services and/or, (ii) implementing
new or improved operational processes and/or, (iii) implementing new or
improved organizational/managerial processes” (NKC, 2007).
Understanding Innovation :
Indian National Innovation Survey
2014
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http://nationalinnovationsurvey.nstmis-dst.org/
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National Innovation Survey - Key Questions
•How innovative are the Indian firms ?
(intensity of innov.)
•What kind of innovative activities are carried out ? (Machinery acquis, R&D,
Extramural R&D...)
•How novel are the innovative outputs ?
Whether new to the Firm / Market / World ?
•Where do firms stand against the international benchmark ?
• Do firms Interact with public research organisations for innovation?
•Whether interactions are present or does the National Innovation
System exits (systemic character) ? or the actors exist in isolation ?
•Usage level of ICT; non-technological innovations
• Sources of Innovation ? Factors favouring/ hindering innovation ?
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Innovation in Firms/Production Units

As it is broadly defined, innovation is ‘application of new knowledge in
the production system, and realisation of the benefit of the new
application from the market’.

Two important aspects:
First, ‘production units’ as innovators - as it is to be applied and
taken to the market. This makes the distinction between innovations
and other discoveries or inventions.
The other aspect is the ‘newness’ or Novelty. An innovation is new
to the world has the highest novelty factor compared to the one that is
new only in the domestic market or in the local market. Innovation that
is new only to the innovator firm has novelty value only for the firm.

For the present Survey first we have identified changes introduced by a
firm. Then the novelty factor.
Science, Technology, Innovation and Creation of Knowledge (STICK),2010
Measuring Innovation : National Innovation Survey
 Objective: To develop innovation
indicators to understand the role of
innovation and knowledge creation
activities with the economic growth and
Benchmarking the performance of the
national innovation system
 Launched : 2009 -10
 HISTORY
o Ideation : 2004-05
o NIS
Experts Committee – series of
meetings to take forward the initiative of
measuring innovation, identification of
targets, objectives
o Development
of
National
Innovation
Framework/ Model
-Involved
various
stakeholders,
conducted innovation tours, sponsored
sectoral innovation studies and piloted
the innovation survey while adapting the
internationally accepted concepts and
definitions
- International Workshop (Feb 2009, New
Delhi): Finalized the framework for the
conduct of National Innovation Survey
- Ques. Design Finalization : CIS4+other
countries such as SA +experts inputs
+pilot study +Intl workshop

Implementation Focus: Measuring Innovation and
knowledge capabilities in terms of product/ process,
organizational and marketing innovation to develop
indicators

Identification of Network Partners: NISTADS, New
Delhi, Survey Agencies: Market insight Consultants,
Noida, Zinnov Management Consulting Pvt Ltd,
Bangalore

Target identification/ Scope: Organized Industrial sector,
Sampling Frame- ASI frame

Survey Launched : 2010-11 ; Data period : 2007-8 to
2009-10

Target Population :more than 2 lakh enterprises in
various industrial sectors spread across 26 states
and 5 UTs (90% of are small & tiny units)
Survey Design/ Size: Stratified random sampling with
a sample size of 9,001 industrial units


Deliverables : National Innovation Indicators Report
- 5 Special Bulletins brought out

Outcome/Benefits : Understanding the innovation
system in Indian context and suggest policy
imperatives for inclusiveness and strengthening of
innovation eco system.

Outreach: Held interactions with the Chairman, National
Innovation Council, Invitation from the Global Forum on
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Innovation and policy ‘Globelics’
Schematic View of Innovation
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Limitations
• The survey is based on ASI 2009-10 database of a sample of 208415 firms. A
sample was drawn from the ASI sample that was representative of whole of India.
A sample out of sample may not be an ideal population base to work on. The
sample with its geographical spread, however, provided a reliable and workable
population base for all parts of the country. There is no other data source with
preliminary identification of the industrial units for drawing samples.
• International practice is mainly mail survey and chances of receiving responses.
Ours is the largest sample size.
• There is no other data source with preliminary identification of the industrial units
for drawing samples.
• No time series information.
Understanding Innovation :
Indian National Innovation Survey
Key Findings
Types of Innovation and Innovation Activities
Types of Innovation (Innovative firms %)
68.0
32.7
34.6
42.4
25.5
14.3
Other
New machines
Alternative
material
3.6
Saving/efficient
use of inputs
80
70
60
50
40
30
20
10
0
Product quality
and standard
•
Process
Innovation
•
Total sample 9001. Innovative firms 3184 or 35.37%
86% firms with innovation potential have workforce less than 100 (focus on
MSMEs) i.e small firms dominate all types of innovation. Only 2.2% firms have
workforce more than 500.
About 70% firms have innovations in the form of introducing new machines,
followed by quality and standard related activities by 40% of the firms.
About 53% of innovative firms don’t employ any scientist or engineers.
Product
Innovation
•
•
Firm size and innovation
• Firms within larger size categories show more propensity to innovate.
Share of Innovative firm in total innovative firm(%)
Share of the group in total sample (%)
Share of innovative firm in the total sample in the group (%)
100
50
0
Below 100
100 to 499
500 to 999
1000 & Above
• Larger firms are more active in R&D activities, technology in-licensing, employing qualified
manpower, organisational and marketing practices than their smaller counterparts.
• Product innovations by the small firms are mainly minor innovations and ‘new to the firm’ type.
Large firms engaged in product innovation have gained increased market share.
• Involvement in R&D activities increases with size and most of these activities are in-house activities.
Extramural R&D activities are rare and even rarer for the small size firms.
• Innovations by the small firms are mostly by using their own sources. Accessing external source for
knowledge and information is mostly practiced by the large firms.
Novelty of
ofInnovations
Innovations
Novelty
• Predominant types of innovation are ‘new to the firm’ category. ‘Use of alternative
material’ has about 20% innovative firms claiming ‘new to the Indian market’ and
about 10% claiming innovations ‘new to the world market’.
Novelty of Innovations (Innovative firm %)
56.56
60
40
20
9.01
7.54
3.17
0
New in India
New in the world
New to the firm
NA
•In terms of novelty aspect of innovations, R&D firms have higher percentage of firms
claiming their innovations to be ‘new to market’ than Non-R&D firms.
R&D and Innovation
• Out of the total innovative firms 36.90% have formal R&D setup.
35.05% of the total innovative firms have intramural R&D setup
whereas 11.43% of them have opted for extramural R&D.
• Firms with formal R&D setup are ahead in product innovation and
process innovation whereas firms, which do not have formal R&D
setup, (i.e. Non-R&D firms) have more focus on New Machines.
• In terms of novelty aspect of innovations, R&D firms have higher
percentage of firms claiming their innovations to be ‘new to market’
than Non-R&D firms.
• R&D firms have done more of both organisational and marketing
innovations than Non-R&D firms.
• R&D firms have more number of firms with higher number of
‘scientist & engineers’ as compare to Non-R&D firms.
Non-technological Innovations
50%
43.09%
46.48%
Organisational
Innovation
Marketing Innovation
40%
40.11%
30%
20%
10%
0%
•
•
•
NO Non-tech
innovation
59.89% of innovative firms are involved with non-technological innovations, out of which
46.48% of the innovative firms are into marketing innovation and 43.09% are into
organizational innovation.
There are no clear cut relationship between size, age and ownership of the firm with the
occurrence of non-technological innovations. Types of innovation also do not seem to vary
over firms doing or not doing non-technological innovations.
Innovative firms that are inclined towards non-technological innovations are slightly ahead of
their peers (in their opinion), in gains from innovations in comparison to the innovative firms,
which are not into non-technological innovations.
Internal and External mode of Innovation:
technology, human resource training and information
Internal Source
External Sources
With other enterprises or institutions
100%
80%
60%
40%
20%
Other
New
machines
Alternativ
e material
Saving/mo
re efficient
use of
inputs
Product
quality,
standardiz
ation
New
process
New
product
0%
•Internal source appeared as the widely prevalent source of innovation by the firms.
•External sources are important for innovations in introduction of new machines.
•Highly skilled manpower is not much in use among innovative firms for augmenting innovation.
• On an average 50% firms provide training to the employees. Even for the training innovative
firms hardly access any external institutional facilities.
•More than 80% firms go for internal arrangements for training of their employees.
Using external sources for getting patented technology is most
preferred by the innovative firms
Patented Technology
Know how
Trade Secret
10%
8%
6%
4%
2%
Others
New machines
Alternative material
Saving/more efficient use
of inputs
Product quality,
standardization
Process Innovation
Product Innovation
0%
Another aspect of external source of innovation strategy is the
preference for full set technology while sourcing technology for
innovations
Full set technology
Partial or complementary technology
40%
30%
20%
10%
Others
New machines
Alternative material
Saving/more efficient use of inputs
Product quality, standardization
Process Innovation
Product Innovation
0%
ICT usage and
Gains from innovation
• R&D and technology management are the areas where ICT is used by
about on average 20% of firms by all types of innovation.
•
ICT for ERP is strong among the firms engaged in new process and new
product technology.
• It is interesting to note that market source has preference over
institutional sources for access to information by innovative firms.
• Improvement of quality, cost reduction, environment/health/safety and
meeting government regulations remain the main types of gains from
innovations. Social issues are not the concerns of innovations.
Barriers
Innovation
Barriers to
to innovation
• Access to knowledge/information has been found most important barrier by
about 40% of the innovative firms.
• Availability of skilled manpower is the most important problem for 88% of
the innovators. Problem with access to market information and availability
of information technology follow closely as Knowledge/information barrier.
• Infrastructure as barrier has been expressed by much less percentage of
innovative firms.
• Govt. regulatory requirements have scored highest as market barrier,
followed by established players in the market.
• Internal resources or finance remain a strong cost barrier for all types of
innovations.
• Accessing institutional sources of finance / training prog. for HRD is rare
among innovative firms.
• Innovation cost for ‘product’, ‘process’ and ‘alternative material’ is another
cost barrier as expressed by more than 70% of the innovators.
Understanding Innovation : Indian National Innovation Survey
Key Findings
•
Accessing institutional facilities (NIS) for technological support to innovation,
institutional sources of finance, institutional training programme for human resource
development is generally very rare or low, indicative of disconnect between
innovation infrastructure and the production system.
•
Regional Innovation System(RIS) on the other hand has high positive
correlation with innovation potentiality of the states. States ranked lower in RIS
also have poor innovation potentiality. Weak RIS leads to ineffective innovation ecosystem.
•
Sectoral Innovation System(SIS) can provide a short-cut route to trigger
innovation by initiating high-tech high-innovation led industries at the states.
Sustainability would depend on the corresponding responses from RIS and NIS.
(Higher % of firms reporting ‘new to India’ innovation in Himachal Pradesh is due to the
presence of Drugs & Pharma and Electrical goods industry)
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International Comparisons
•
In terms of percentage of innovative firms India is close to the eastern European
countries at the bottom of the list.
•
India earns similar status for product and process innovation.
90
80
Percentage of innovative firms in different countries
70
60
50
40
30
20
10
Germany
Brazil
Luxembourg
Iceland
Belgium
Portugal
Sweden
Ireland
Estonia
Netherlands
Austria
Italy
Finland
Denmark
France
EU-27 (1)
Czech Republic
Serbia
Turkey
Slovenia
Cyprus
United Kingdom
Norway
Croatia
Malta
Spain
Slovakia
India
Lithuania
Hungary
Romania
Latvia
Poland
Bulgaria
Russia
China
0
International Comparisons
•
Acquisition of machinery equipment and software has been observed as
one of the most important innovation activity accessed by many countries
including BRICS.
•
In innovation related activities India is far behind the developed countries
in intra-mural R&D, but compares well with countries like Poland, but
compares poorly for extra-mural R&D and acquisition of external
knowledge.
•
Indian firms, compared to innovative firms in other countries, widely use
external sources for information and knowledge and have experienced
similar level of outcome/ gains from innovation.
•
India’s position at the bottom in technological innovations is reasoned by
the perceived barriers to innovations. India is far ahead of other countries
suggesting cost, knowledge, and market factors as major barriers to
innovations.
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International Comparisons
80
70
60
50
40
30
20
10
0
South…
India
Brazil
Germany
Luxemb…
Austria
Finland
Denmark
Greece
Belgium
Estonia
Portugal
Cyprus
Slovenia
Czech
Turkey
France
Malta
Norway
Netherla…
Poland
Lithuania
Romania
Hungay
Latavia
Bulgaria
Russia
Non-technological innovation by the innovative firms
(% of innovative firms)
•
For non-technological innovations India figures in the top along with Brazil
and South Africa.
•
Complementarity between technological and non-technological innovations is
more pronounced among the innovative firms in India than it is in other countries. It is
possible that in the developing countries where innovation eco-system is more
matured, non-technological innovations are well in place with the innovative firms.
Innovation as an intended act being at nascent stage in Indian firms, the imperative
of non-technological innovation is more visible.
Learning
and
Policy Issues
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Learning and Policy Issues
• The national innovation survey report, first of its kind, benchmarks innovation
potentiality of Indian firms, largely MSMEs, while corroborating the findings of
the pilot innovation study and the developing economies context of innovation in
general.
• The innovation survey highlights small firms acquiring new machines, striving for
quality and standards, and cost reduction are the dominant aspects of innovations.
• Most of these changes or innovations are new to firms or incremental in nature, or
in other words efforts to match the industry peers could be seen as means for
development rather than the outcome of the development (Survival in the Mkt).
•
Again, most of the innovative firms do not have adequate strength of qualified
scientific and technical manpower. They depend mostly on internal sources for
fund, new knowledge, and training of manpower. R&D is quite insignificant
among the innovative firms; whereas non-technological innovations have been
observed as a wider practice.
• Disconnect between the innovation support system and the production system to
be bridged. Linkage across lead actors or players of the National Innovation
System needs to be strengthened.
Learning and Policy Issues
• Sectoral strengths as is evident from the national innovation survey report could be
leveraged to attain high innovation potentiality. The same also happens to be the
goal of STI 2013 i.e Science, Research and Innovation System for High
Technology-led path for India (SRISHTI)
• When seen from the perspective of NIS, RIS and SIS, a macro level scenario
emerges where the innovations systems require to be rejigged to be more inclusive
to accommodate small firms.
• Barriers of innovation needs to be addressed for strengthening of innovation for the
global competiveness as is clear from the case of most emerging and developed
economies. This calls for synergizing STI with other pillars of the economy such
as basic requirements, infrastructure, legal framework, governance etc for its
effectiveness and sustainability and global positioning.
•
The study has immense relevance in the present context, in enhancing and shaping
the innovation eco-system and the growth of MSME sector in the country. As a spinoff,
separate studies have been launched for the machinery sector, work culture and HRD,
stakeholders perspective in understanding the innovation eco-system for devising
evidence based policy prescriptions.
Thanks for your patient hearing
www.nstmis-dst.org, [email protected]
India
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