Shifts in Innovation Power to Brazil and India: Insights from the Auto and Software Industries
IDS Research Report 73
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The global innovation map is changing. Until a few years ago innovation activities were concentrated in the US, Europe and Japan. Not anymore. The rising powers of China, India and Brazil are encroaching on the innovation stronghold of the old powers. This report explores how deep the change goes and how we can explain it. Most of the literature explains this shift in innovation power by concentrating on factors within the rising powers, such as their investment in high-level education, their low labour cost, their big and expanding internal markets and others.
This report concentrates on explanatory factors that emanate from the old powers, notably the organisational decomposition of the innovation process (ODIP). The empirical focus is on the global value chains that link Brazilian auto and Indian software suppliers with lead firms in the US and Europe. The report shows that subsidiaries and independent suppliers in Brazil and India were involved in advanced innovation capabilities: they engaged not only in ‘applied’ development, but also in ‘systemic’ development of products and services. In other words, the build-up of innovation capabilities goes further than is generally recognised.
Most of the report is then concerned with unravelling the processes through which this occurs, showing that ODIP emanating from US and European lead firms has knock-on effects within Brazil and India. The research also distinguishes between different types of ODIP showing that the biggest organisational and geographical changes occur when innovation and production activities are tightly integrated.
The resulting build-up of innovation capability is only partially visible in conventional R&D indicators. The causal connection between ODIP in the old powers and increase of innovation capabilities in the new powers is not one way. The accumulation of innovation capabilities in the new powers increases the possibilities for further rounds of ODIP in the old powers.