Innovation and IP in India * what

Science, Technology, Innovation
and IP in India
– new directions and prospects
Department of Economics Discussion Paper
Series Number 660 June 2013
Christine Greenhalgh
Presentation 31 October 2013
Seminar for OIPRC Oxford
Four routes to technological
improvement in less developed
economies (LDCs)
• Importing technology - Technology transfer
from rich countries
• Top down - Domestic innovation in high
technology fields
• Spreading out - Diffusion of innovation across
firms and industries
• Bottom up – frugal innovation and alternative
technologies developed by small and medium
Technology transfer and intellectual
property rights
Two channels for importing technology:
• Foreign direct investment (FDI) by MNEs
• Licensing by domestic firms in LDCs
Trade Related IPRs – impact of TRIPS agreement:
• Did TRIPS enhance rate of FDI into LDCs? - Hassan et al.
(2009) give cautious ‘Yes’.
• Does a rise in FDI lead to more technology spillovers
and faster economic growth? - Clark et al. (2011) find
evidence mixed – more positive if host LDC has some
high tech sectors (such as India)
• Did TRIPS make licensing more or less attractive to
domestic firms? - Kanwar (2012) finds stronger IPRs are
associated with higher royalty and licence fees from
LDCs – are rich countries now more willing to licence?
Intellectual property rights and
domestic imitation and innovation
• TRIPs agreement – would firms in LDCs suffer loss of
ability to imitate as country strengthened IPRs
• This might outweigh rise in domestic incentive to
• Chen and Puttitanum (2005) contrast benefits of low
IPRs in poorest LDCs (imitation dominates) and
benefits of stronger IPRs in richer LDCs (innovation
• C. and P. find empirically that the income per capita
turning point is US$854 p.c. in 1995 prices
• If uprate this value to 2012 prices then India is above
this turning point in average income per capita
• Hence optimal for India to have strengthened IPRs
following TRIPS
Intellectual property rights and
• Inherent contradiction - IPRs encourage invention of
new technologies and products, but slow diffusion
• Green technology – speed is critical - global warming
will get worse with rapid growth in LDCs
• Policy needs to work within existing legal framework
to speed up adoption
• Support dual pricing? Rich pay higher prices requires effective separation of markets
• Allow compulsory licensing by LDCs for some forms
of technology?
Frugal/Jugaad innovation and
alternative technology
• Frugal innovation - Design products and processes
delivering key characteristics of modern products
using less expensive materials and technology,
e.g. plastic shell Nano car
• Jugaad – Hindi word for improvisation
• Alternative/appropriate technology – from 1970s LDCs need technology and design to fit resource
base that uses less capital and energy, more small
scale and labour intensive
• IPR policies that may help – introduce petty
patents, educate about design rights, trademarks
• Create equivalent of an open source register for
manufactured items with General Public Licences
India’s economic imbalances
Shares of GDP – like a rich country
– Agriculture 19%
– Industry 26%
– Services 55%
(within which Manuf. 14%)
Shares of employment – like a poor country
– Agriculture 51%
– Industry 22%
– Services 27%
(Population 1.2 billion of which
61.7% are aged 15-60 = 750m
so Agriculture = 380m workers)
Balance of payments
– Current account deficit is 3% of GDP
– Visible trade is in deficit, especially in petroleum
– Invisibles approx. balance
Source: The Economist Pocket World in Figures 2013
Good news on cost competitiveness:
- Wage rates in India are lower than in other emerging
- Real wages are not rising as in China and Russia
Source: Ashenfelter (2012) Nominal Wage is in $ at dated current exch. rates;
Real Wage is Nominal Wage/Price of Big Mac within that country
Nominal Wage
Real Wage
Real Wage ratio
Technology and Industrial Policy
• 1970-90:
– technology and industrial policy of ‘self-reliance’
– high tariffs on imports
– restrictions on FDI via limits on foreign equity shares
– Patent Act 1970 favoured basic necessities:
limited protection to process only - not products - in food, chemicals
and pharmaceuticals with duration 7 years (14 for other products)
• Since 1991:
– recognised protectionist policy harboured inefficiency
– also slow adoption of new technology in majority of manufacturing
– bal. of payments crisis precipitated huge structural reforms
– industrial policy relaxed to permit more competition
• After 1994:
– WTO and TRIPS Agreement forced changes in IP regime
– India signed TRIPS in 1994 with obligation to comply fully by 2005
– Patent law to give all products protection by this deadline
Changing strength of patent rights in
emerging economies
Index numbers of protection and enforcement
(max. value = 5), source Hassan et al. (2009)
IP rights post TRIPS
India’s IP rights system:
IP right
60 years
+ author’s
20 years
10 years
10 years
Time to
60 + life
4-5 years
20 years
9 months
1 x 5 years 15 years
2-3 years
10 years,
for ever
Source: UK Trade and Investment (2008)
Did R&D and patenting by high tech
larger firms respond to TRIPS?
• Dutta and Sharma (2008) investigate innovation activity
post TRIPs (signed in 1994)
• PROWESS database of publicly traded medium to large
Indian firms (sample is 3k firms 1989-94 and 5k firms
1995-2005, unbalanced panel)
• Compare firms according to innovation intensity of their
industry to control for trends
• Find rise in R&D is 20% higher in firms that were +1 S.D.
above industry mean in innovation intensity
• Also find US patenting by Indian inventors rose faster
post-TRIPs cp. to US and EU firms
• So it appears that incentives rose with TRIPs
Success stories in manufacturing
• Early success developing capability for bulk drugs and
formulations for delivery to patients
• 70s to 90s patent regime -> process innovations, finding noninfringing methods of producing patented formulae, and
producing generics for expired foreign patents
• By 2010 India’s volume was 10% of global production
• In value terms India ranked 14th in the world
But Ray and Bhaduri (2012) warn world competition increasing
Tata manufacturing:
• Has grown to become an Indian MNE
• Has taken over Jaguar and Land Rover in UK
• Developed and produced Tata’s Nano car
• Uses ‘frugal engineering’; ‘the cheapest car in the world’
• In 2012 selling at $3,000 for 624cc two-cylinder engine
Chasing technology of the future
• India’s capability in Wind Power
1995 - former Indian textile manuf. founded Suzlon
2000 - in world top 10 wind turbine manuf.
2005 – initial public offering of shares was oversubscribed X 5
2006 - ranked 5th in world and supplying 52% of domestic market
• India’s efforts closely followed by China
1998 – Goldwind estab. by Xinjiang Wind Energy Co.
2006 – ranked 10th in world, supplying 39% of its home market
• Lewis (2007) attributed greater initial Indian company success to
its network of global subsidiaries
• But China is overtaking:
2009 – Goldwind and Sinovel ranked above Suzlon in top 10
producers and 3rd Chinese firm Dong Fang was just behind
Too much science, not enough
technology and innovation?
• GERD/GDP has risen but still only 0.8% (compare South
Korea at 2.8%)
• R&D public-private spending imbalance :
80% of GERD spending is publicly funded
70% is conducted in government research institutes
• Only 25% of GERD is industrial R&D financed more by
industry (5% public and 20% private)
• Science in govt. research institutes and universities is not
transferring to industry
• Scientific publications record is extensive
• Patenting record is weaker especially in citations
Source: Dutz (2007)
Indian IP rights applications relative to
Source: WIPO Country Profiles – figures are ‘000s
of IP filings (resident and abroad)
China: ratio of patent apps. residents:non-res = 4:1
India: ratio of patent apps. residents:non-res = 1:4
World Bank Report, Dutz 2007
Titled Unleashing Indian Innovation this report recommended a
three-pronged strategy:
• Improve innovation infrastructure: increasing market
competition, training for vocational skills, install better
communication infrastructure, raise venture capital funds for
early stage start-ups
• Strengthen creation and communication of knowledge: aid
catch-up to best-practice technol., raise private R&D, increase
flow from science to industry, tap into the Indian diaspora
• Foster more inclusive innovation: scale up existing pro-poor
initiatives; expand work by Council for Scientific and Industrial
Research and the National Innovation Foundation; simplify
and cheapen system of IP protection and enforcement
Changing mood within policy circles
• In 2009 declared the ‘Decade of Innovation’ as 2010-20
• In 2010 set up National Innovation Council charged with
charting the way forward
• Science, Technology and Innovation Policy Statement just
published in 2013
• Begins by recognising ‘India has hitherto not accorded
due importance to innovation as an instrument of policy.’
• STI Policy: A New Paradigm of ‘STI for the people’
– focus on integration of each of S, T, and I to
create social good and economic wealth
– recognises Indian society as its major stakeholder
• Good intentions but how to make them work?
Route A - High technology sector
• Improving technology transfer from domestic
science base
• Picking potential winners in high tech sector
for public science funding
• Continuing general subsidies to R&D and
improving markets for technology
• Raising R&D incentives for private firms
• Improving technology transfer from overseas
Improving technology transfer from
home science base
India’s Bayh Dole draft act – ‘The Protection and Utilisation of Publicly
Funded Intellectual Property Bill 2008’ – not yet passed - controversy
• Goes beyond US act as includes patents, trademarks and copyrights
• Researchers will have IP rights except in cases of national security
• Places obligations on researchers to set up IP management system
• Also must not disclose any research findings before IP is in place
• Sets large penalties if grantee does not comply with rules/objectives
Motivation for legal changes:
• Licensing revenues for universities
• Technology transfer to industry
• Promoting IP awareness
Sampat (2009) critical of this legislation as risks inducing unnecessary IP
Saha & Ray (2013) motivation of researchers not matched by act
• Find that interest and productivity in research rise over career
• Driven by a consumption motivation not investment in career
A future in nanotechnology?
2001- 12 - Publicly funded R&D in nanotechnology
Much more spent during 2007-12 than in 2001-7
• Total spending 973.4 crores (10m rupees) = US$180m
• Major investments by Dept. of Sc. & Tech. and Dept. of
Info. Tech.
• Minor investments by Central Manuf. Tech. Inst. and
Indian Council of Agric. Research
• Complex web of relationships between regulatory
bodies, R&D Institutes (including universities), firms,
NGOs and some international actors
• Centres of excellence in 10 different locations across
Sources: CSIR-NISTADS 2012a
Next slide: CSIR-NISTADS 2012b
Nanotechnology R&D outputs
Output of science publications, patents, products
• Scientific papers - country ranks by 2011 were:
China, US, Japan, Germany, South Korea, India 6th and had
fastest growth from 2001-11 but from low base
• Paper citations - India ranks lower – for top 1% papers
ranks 14th and for top 10% of cited papers ranks 9th
• USPTO Patents – country ranks in apps. and grants by
2011 were as follows (Indian presence negligible):
US, Japan, South Korea, Taiwan, China, Germany
• Products – country ranks in the Woodrow Wilson
database of globally available products to 2011 are:
US, Germany, South Korea, China, Japan (India 2 prods.)
Innovation incentive systems for
domestic R&D
Fiscal incentives include:
• 100% write off for current and capital expre. on R&D
• 200% weighted tax deduction on expre. in approved inhouse R&D facility in selected manufacturing sectors
• Also 200% for sponsored research in national labs. and
universities and IITs
• 10 year tax holiday for commercial R&D companies
• 40% accel. depr. allowance on plant + mach. based on
indigenous technology
• Customs duty exemptions for imports for R&D and excise
duty waivers for indigenous goods used for R&D
• 3 year excise duty waiver for specific goods developed by
Indian company or laboratory and patented in two
countries among India, US, Japan, or the EU
Increasing technology transfer
• Expand links with non-resident Indians (NRIs): c.20 million
Indians live abroad - Silicon Valley’s engineering and
scientific workers, 40% US, 28% Indian, 32% all other
• Software sector hugely successful due to links from San
Francisco Bay Area to Bangalore - Can this be replicated for
any other sectors such as green technology?
• Total FDI entering India over the period from April 2000 to
October 2012 was US$275bn
• Annual inflows for 2012-13 were US$36.8bn of which
1/3 was related to NRIs and 2/3 to foreign equity
• Compared with FDI of US$2-3bn in the late 1990s it appears
India has begun to shake off its reputation for shunning FDI
• Recent policy changes on foreign ownership will help: in
2012 Indian government relaxed ownership restrictions in
retailing, commodity exchanges, power exchanges,
broadcasting, and non-banking financial institutions
Route B – Strategies for enhancing
alternative technology
• Document domestic innovation in SMEs and see
what if any use these firms make of IP and what
factors constrain innovation
• Jugaad innovation (frugal innovation) tradition in
India exists and can be extended
• Educate/train managers of SMEs and encourage
them to use IP and technology markets
• Change education and skills of rural poor so that
they can work with and adopt innovations
New information on innovation
• New database of innovation for MSMEs (micro
and small or medium enterprises)
• Covers production units in Agric, Industry, and
Services, i.e. factory or production site so
enterprise data
• Sample uses as basis the Annual Survey of
Enterprises (running since 1960) covering all
factories/production units employing >10
workers with power or >20 without power
• Rolled out nationally in 2011 to 31 states and
union territories (such as Delhi)
• Refer to ‘firms’ in preliminary reports – confusing
Sources: CSIR-NISTADS (2011-12)
Evidence from Innovation Survey
(full sample report still awaited)
• Sample is skewed towards industry, esp. manufacturing
• Surveyed 9002 reporting units in 2012; wide questionnaire
• In all three sectors vast majority of reporting units employ
under 100 workers: Agric. 93%, Industry 89%, Services 97%
• ‘Innovation’ can be: new product, new process, change in
product qual. or standards, more efficient input use, use of
alternative materials, new machines, or other
• Survey does distinguish ‘new to firm’ from ‘new to market’
but so far this is not tabulated frequently
• Share of ‘innovative firms’ in the sample is approx. 35%
• Varies by state from highs of 56% Andhra Pradesh, 54% Delhi,
to lows of 13% Gujarat, 8% Bihar
• Varies by sector from 50% motor vehicles to 20% crop prodn.
• So far have not see any data about IP use promised in pilot
• As yet all single factor tables/charts not multi-factor analysis
Using Internet for Knowledge Transfer
• Honey Bee network set up 1986-7 by Prof. Anil Gupta at
Indian Institute Management, Ahmedabad as a creative
commons for ‘Jugaad innovations’
• Aimed to seek out inexpensive new designs that are propoor and use green technology and help to spread
knowledge and use across India
• National Innovation Foundation established 2000 in
Ahmedabad using gov. funds with Honey Bee as a partner
• Has a repository of more than 50,000 grassroots
innovations and traditional knowledge practices
• Aims to assess commercial potential and develop IP rights
for inventors
• Offers prospects for matching ideas to venture capital
• NIF has been criticised for being too slow and adding costs
to inventions so that they fail in the market place
Empowering SMEs and rural poor to
understand and use IPRs
• Since 2009 India has started an on-going identity
registration system aiming to register all 1.2bn
• Uses biometric data (photo, finger prints and eye
scans) to provide unique ID number for each citizen
• This will assist rural poor to obtain rights to benefits,
but also to own IP assets and participate in IPR markets
• As IT spreads in rural areas can use web for education
and training both in general and for IP rights
• For MSMEs focus on encouraging use of trade marks
and design registration (and also copyright) as more
likely to use these than to obtain patents
• Consider speeding up award of IP rights – saw above
very long times for granting rights
• Consider cheapening routes to enforcement of IP – UK
has initiated ‘fast track’ courts for low value cases
Continuing weaknesses
The most obvious difficulties are in the following
• insufficient spillovers from publicly funded
science to private industry
• low volume of private sector investment in R&D
• low levels of international patenting relative to
other emerging countries
• difficulty of scaling up Jugaad innovation to share
its benefits across small enterprises
What research by IP economists could
be helpful to policy and performance?
• Examination of flow through of scientific
discoveries to innovation by firms – are there
signs of improvement?
• Exploring enforcement issues – does IP system
function effectively to protect IP rights?
• Database development for patents, designs,
trademarks within India by matching records of IP
assets to firms in new innovation database of
MSMEs and the PROWESS large firms database
• Monitor use of trade marks and designs by
MSMEs and relate to innovation
• Explore firm survival and profitability when new
years of data are created
References - Articles
• Arora, P. (2011) ‘Innovation in Indian firms: evidence from the
pilot National Innovation Survey’, ASCI Journal of Management
41(1): 75-90.
• Ashenfelter, O. (2012) ‘Comparing real wage rates’, Working
Paper 570, Industrial Relations Section, Princeton University.
• Chen, Y. and T. Puttitanun (2005) ‘Intellectual Property Rights and
Innovation in Developing Countries’. Journal of Development
Economics 78(2): 474–93.
• Clark, D. P., J. Highfill, Oliveira Campino, and S. S. Rehman
(2011) ‘FDI, Technology Spillovers, Growth, and Income
Inequality: A Selective Survey’, Global Economy Journal Volume
11, Issue 2.
• Dutta, A. and S. Sharma (2008) ‘Intellectual Property Rights in
Developing Countries: Evidence from India’, World Bank Working
Paper 47524.
• Dutz, M. (ed.) (2007) Unleashing India’s Innovation: Towards
Sustainable and Inclusive Growth, Wash. D.C.: The World Bank.
References – Articles (continued)
• Hassan, E., O. Yakub and S. Diepeveen (2009) Intellectual Property and
Developing Countries – A Review of the Literature, a Rand Europe report
for UK Intellectual Property Office and UK Department for International
• Kanwar, S. (2012) ‘Intellectual Property Protection and Technology
Licensing: The Case of Developing Countries’, Journal of Law and
Economics, Vol. 55, No. 3 (August), pp. 539-564.
• Lewis, J. I., (2007) ‘Technology Acquisition and Innovation in the
Developing World: Wind Turbine Development in China and India’,
Studies in Comparative International Development, Vol. 42 Nos. 3-4.
• Ray, A.S. and S. Bhaduri (2012), ‘Competing Through Technological
Capability: The Indian Pharmaceutical Industry in a Changing Global
Landscape’, JNU CSSP Electronic Working Paper Series, Paper No. 3,
• Saha, S. and A.S. Ray (2013) ‘Research and knowledge creation in Indian
Universities’, mimeo March.
• Sampat, B.N. (2009) ’The Bayh-Dole model in developing countries:
reflections on the Indian bill on publicly funded intellectual property’,
UNCTAD-ICTSD Policy Brief No.5 October.
References – Documents
• Government of India, Ministry of Science and Technology (2013)
Science, Technology and Innovation Policy 2013, New Delhi.
• CSIR-NISTADS (2012a) Nanotechnology Development in India:
Investigating Ten Years of India’s Efforts in Capacity Building,
Strategy Paper I July.
• CSIR-NISTADS (2012b) Nanotechnology Research and Innovation in
India: Drawing Insights from Bibliometric and Innovation Indicators,
Strategy Paper II, July.
• CSIR-NISTADS (2011-12) Understanding Innovation: The Indian
Context, Bulletins relating to the Innovation Survey, Nov. 2011, and
Feb., June, Aug., Oct. 2012.
• Dutz, M. (ed.) (2007) Unleashing India’s Innovation: Towards
Sustainable and Inclusive Growth, Washington D.C.: The World
• UK Trade and Investment (2008) Intellectual Property Rights Primer
for India: A Guide for UK Companies, London: HMSO June.

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