Lead markets play a crucial role in the global diffusion of innovations. Innovative firms actively seek access to such markets whilst policy makers, especially in Europe, have attempted to foster lead markets by concerted policy measures. Below, Rajnish Tiwari and Cornelius Herstatt suggest that the conventional wisdom on the emergence and functioning of lead markets needs a rethink to better reflect the changing dynamics in the global economy, and argue that dynamic economic growth in largely unsaturated markets and increasing technological capabilities are letting new lead markets emerge in the developing world.
Posts Tagged ‘Lead Markets’
2013年09月26日 | 6.30 P.M.
Cornelius Herstatt, Professor, Hamburg University of Technology (TUHH)
Many developed countries including Japan are undergoing comprehensive demographic change, marked by a growing share of elderly people. Product and service innovation can play a role in coping with the resulting societal challenges, especially when these help to support the preservation of elderly people’s personal autonomy. The range of these age-specific innovations is enormous and includes, for example, mobility aids and household devices but also special financial products.
|Title:||Assessing India’s lead market potential for cost-effective innovations|
|Author(s):||Rajnish Tiwari, (Institute for Technology and Innovation Management, Hamburg University of Technology, Hamburg, Germany), Cornelius Herstatt, (Institute for Technology and Innovation Management, Hamburg University of Technology, Hamburg, Germany)|
|Citation:||Rajnish Tiwari, Cornelius Herstatt, (2012) “Assessing India’s lead market potential for cost-effective innovations”, Journal of Indian Business Research, Vol. 4 Iss: 2, pp.97 – 115|
|Keywords:||Bottom of the pyramid, Disruptive innovations, Emerging markets, Frugal innovations, India, Innovation, Lead markets|
|Article type:||Research paper|
|DOI:||10.1108/17554191211228029 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Abstract:||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”.
Published in: Journal of Indian Business Research, Vol. 4, Issue 2, pp. 97-115.