Download Knowledge-based industries and the national system

Knowledge-based industries and
the national system of innovation:
Experiences from India
Anand Patwardhan
Executive Director
Technology Information, Forecasting and Assessment Council
Department of Science & Technology
Outline
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IT/ITES success story
Linkages with the national system of innovation
Structural changes and reform in the national
system of innovation
Towards a knowledge-based economy
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IT-ITES business volume (billion $’s)
60
50-52
50
40
30
20
17.2
12.8
10
4
6.2
2.5
FY 00
FY 01
1.9
13-15
9.6
7.7
2.6
3
3.9
4.8
FY 02
FY 03
FY 04
FY 05
0
Domestic
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FY 09
Export
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IT-ITES employment
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The IT industry is important in other ways…
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Excellence in industrial age was not prerequisite for success
in knowledge age
Success in one part of knowledge economy drove
development and success in other parts
Creating right environment for a new industry was easier than
dismantling / rebuilding for existing industries
Government’s supportive measures enabled the growth (but
otherwise the government stayed out of the picture)
First-generation entrepreneurs, often not from traditional
business background
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Importance of role models
This is perhaps a lasting benefit of the dot-com boom & bust
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Sustainable competitive advantage in services
outsourcing?
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Process quality
Innovation in service delivery
Global scale and reach
Broadening and deepening the services portfolio
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From software to ITES and BPO
Knowledge process outsourcing (KPO) – R&D outsourcing
Integrated service offering
Implications of FDI in R&D
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Driving forces
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IT industry in India grew on two factors
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Historical coincidences brought in the opportunity
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Historical coincidences
Structural and systemic factors
Y2K
Internet and dot-com boom
Structural factors built up on these opportunities and
aided fast growth of the IT industry in India
Thus the IT industry was able to grow very quickly
from retrofitting to coverage across the entire
software product life-cycle and beyond
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Structural factors
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Human resources
Institutional networks (clusters)
The diaspora (non-resident Indians) and the market
linkages
Government support
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Government support and facilitation
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For the most the government was not an active
participant in the IT industry growth. Two notable
interventions: SEEPZ & STPI
Santacruz Electronics Export Processing Zone (SEEPZ),
set up in 1973-74
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Today exports software around $2.5 billion
Infrastructure support
Tax and other fiscal concessions
Procedural support
Software Technology Parks of India (STPI), set up in
1991, extended the SEEPZ model to other cities,
including 2nd tier cities
At a time when infrastructure was poor, and procedural
formalities very tedious, these were very helpful
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SEEPZ
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Tax holiday for SEEPZ SEZ units as per the provision of the Income-tax Act.
Duty free import of capital goods and equipment from preferred sources.
Exemption from Customs duty on imported capital goods, raw materials, components,
consumables, spares, tooling and packaging materials.
Exemption from Central Excise duties and other levies on products manufactured
within the Zone.
Excise exemption on capital goods, raw materials, computers etc. procured from
Domestic Tariff Area.
Special dispensations and relaxations in local laws and levies including Octroi, Sales
Taxes and Property Tax.
Capital Goods and all other inputs supplied to the Zone from the rest of the country, are
treated as Deemed Exports and are eligible for deemed export benefits such as Duty
Drawbacks, Terminal Excise Duty and CST Reimbursement. This enables easy
availability of materials at International Prices at Zero Inventory.
The SEEPZ Service Centre within the Zone is the One-Stop Shop, which caters to all
the needs of the Zone units. The supportive administrative system helps new firms to
get down to production within the shortest possible time, concentrate on their export
activity and run their operations smoothly.
Foreign Equity upto 100% is permissible in the case of SEEPZ SEZ units.
Remittance of profits and dividends earned by foreign investors in the zone is allowed
freely after payment of taxes.
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STPI
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Started in 1991, the STPI’s aim at promoting export of software and IT services and
providing conducive environment and infrastructure facilities for export of software
and IT services.
Scheme was not limited to capital cities, but it also spread across to secondary cities
like Mysore, Noida and Jaipur, now 20 locations
Offers benefits like:
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Income tax holiday as per section 10A of the IT Act.
100% customs duty exemption on imports of capital equipments.
Equipment can also be imported on loan or lease basis.
All relevant equipment/goods including second hand equipment can be imported
(except prohibited items).
100% excise duty exemption on indigenous items procurement.
Central Sales Tax reimbursement on indigenous items procurement.
Green card enabling priority treatment for government clearances / other services.
100% foreign equity investment in the companies permissible under the 'Automatic
Route' of RBI.
Sales in the DTA (Domestic Tariff Area) up to 50% of the foreign exchange earned by
the STP/EHTP unit.
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Human resources and early choices
regarding investment in education
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Emphasis on higher technical education
Technical education given importance ever since 1950 when the first
IIT was created in Kharagpur, West Bengal
To follow were the IIT Bombay in 1958, IIT Madras in 1959, IIT
Kanpur in 1960, IIT Delhi in 1961 and IIT Guwahati in 1995 and IIT
Roorkee in 2001
Technical education, on an average, has received almost 15 percent
of total plan expenditure for education sector in every plan period.
This figure was highest, i.e., between 21-25%, during 1960’s
Expenditure on technical institutes, viz., the IIT’s, IISc, REC’s and
AICTE institutes has almost tripled from Rs. 2.7 billion in 1993-94 to
Rs. 10.3 billion in 2003-04
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Why Bangalore, Hyderabad and Pune?
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Mumbai was important as a starting point (SEEPZ), and remains
important today; Delhi, Chennai and Kolkata are not insignificant
But Bangalore, and to a lesser extent, Hyderabad and Pune are the
visible symbols of the IT industry
Geographical clustering and institutional networks
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Between them Bangalore, Hyderabad and Pune account for almost onethird (of all publicly funded R&D institutions in India, together with a
strong base of academia
Corresponding to this clustering of R&D institutions is the large number
of engineering institutes in the states of Maharashtra, Karnataka, Andhra
Pradesh and Tamil Nadu
Number of engineering degree colleges per million persons in these
states range between 2.2 to 3.8 (as against the national average of
approx 1.4)
Linkages with the diaspora – composition of the non-resident Indian
community
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Elements of the national system of
innovation
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Sources of R&D funding
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Performers of R&D
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Are incentives & motivations aligned?
Markets
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Industry, academia, government (publicly funded R&D
institutions)
Cross segment flow
Institutional, legal and regulatory environment
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Industry, government
Factor markets (labour and capital)
Product markets (early adopters)
Important in India: interface mechanisms and organizations
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R&D expenditure of select central
government agencies
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R&D in India by performing sector
2.9
21.6
5
62.5
central government
state government
PSU
private industry
higher education
8
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What is happening in higher education –
changing roles for academia?
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Creation of human capital
 …to provide scientists & technologists of the highest caliber
who would engage in research, design and development to
help build the nation towards self-reliance in her
technological needs…. Pt. Jawaharlal Nehru
Creation of knowledge & intellectual capital
 …to be the fountainhead of new ideas and of innovators in
technology and science…. IIT-Bombay vision statement
(2003)
Creation of wealth?
 Supporting the transition from knowledge creation to wealth
creation
 Technology transfer and new venture creation
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Growth of patenting
IIT's and IISc
Universities & Colleges
200
160
120
80
40
0
1995
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1996
1997
1998
1999
2000
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2002
2003
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Characteristics of filers
1999-2002
1995-1998
Universities
Colleges
Medical institutions
IIT's and IISc
Universities
Colleges
33, 22%
Medical institutions
IIT's and IISc
77, 25%
17, 11%
183, 59%
25, 8%
98, 64%
4, 3%
24, 8%
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From patenting to exploitation of IP
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Some institutions have adopted formal IPR policies, for
example, at IIT-Bombay:
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A few institutions have experimented by creating dedicated
interface structures to work around institutional barriers
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The Institute owns all inventions created with significant use of Institute
resources
Revenue sharing: 30-70 between the Institute and inventor (s)
Now a part of the service condition of all employees
FITT, SID, SINE….
But institutional experience with tech transfer & licensing is limited
Total faculty start-ups are perhaps still in the single digits
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But there are at least some (success) stories & role models to talk about
Ashok Jhunjhunwala’s TeNET group at IIT-Madras
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What are the constraints for the
university system?
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Enabling legislation is necessary, but perhaps not sufficient,
unless other constraints have been addressed
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Role of the Bayh-Dole Act in the US (worked because other elements of
a national system of innovation were in place)
Institutional
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Procedures
An IPR policy is necessary, but not sufficient
Research infrastructure
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Social issues: attitudes, peer pressure
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Doctoral students?
Protecting IP
Institutional view of faculty participation in new ventures: active support,
passive support, resistance?
Difficulties with doing problem-driven, interdisciplinary
research
True early stage funding is still very nascent
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Transformation in publicly-funded
R&D system: example of CSIR
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Council of Scientific and Industrial Research – largest publicly
funded chain of industrial R&D institutes
38 labs, employing 5000 scientists / engineers with 3000
PhD’s/Masters, and a budget of $350 million
Across the breadth of the country, with stakeholders from
MNC’s to farmers; and of varying size: 130 to 1200
Industry orientation
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Contract and sponsored R&D
Focus on commercialization
World-class R&D
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Council of Scientific and Innovative Research
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DRIVERS FOR CHANGE
* INTERNAL
- STAKEHOLDERS PRESSURE
- FINANCIAL STRINGENCY
* NATIONAL
- DEREGULATION OF ECONOMY & TECHNOLOGY FLOWS
- TNCS LOCATING R&D/TECHNICAL CENTRES IN INDIA
* INTERNATIONAL
- WTO : HARMONISATION OF IPR REGIMES
- ICT REVOLUTION
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THE TRANSFORMATION PHASES
PHASE I
(1992-1997)
REPOSITIONING THE
ORGANISATION
PHASE II
(1998-2003)
DRIVING PERFORMANCE
PHASE III
(2004 - ?)
ENHANCING EFFICIENCY
AND EFFECTIVENESS
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PATENTS PORTFOLIO
1400
1240
1200
1083
1000
800
636
600
400
200
515
448
416
414
767
657
990
676
481
727
533
236
341
40
51
75
93-94
94-95
95-96
0
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83
96-97
115
97-98
148
98-99
India
249
169
99-2K
2K-2K1
Abroad
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01-'02
02-'03
03-'04
04-'05
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EARNINGS FROM
COMMERCIALISATION
3500
Rs. Million
3000
2500
2520 2450
2000
1500
2030
2640 2680
2800
3000
2230 2210
1770
1000
500
0
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 200496
97
98
99 2000 01
02
03
04
05
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Mechanisms
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Technology development
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Technology transfer
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Mission REACH
Technology commercialization
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HGT
Academia-industry interaction for human resource
development
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NMITLI, CAR
HGT, PATSER
Innovator support
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TePP
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New Millennium Indian Technology
Leadership Initiative (NMITLI)
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Public-private partnership scheme, 37 projects involving 240
partners (175 public sector and 65 private sector) and a $60
million outlay over a 3 year period
Financial support: grant-in-aid to public institutions and soft
loan (3% interest) to industry partners
Unsecured loan, but with fixed repayment
The on-going projects cover diverse areas ranging from liquid
crystals to decentralized power packs; mesoscale modelling to
nano-material catalysts; microbiological conversions to biotech
molecules; functionalization of alkane to advanced nano-materials
and composites; defunctionalization of carbohydrates to
biodegradable plastics; novel office computing platform to low-cost
horizontal axis wind turbine; and new targets and markers for cancer
to advanced drug delivery system
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NMITLI –Biosuite
Biosuite – a success story !
• Versatile portable software for Bioinformatics- developed for the first
time in India
• Multi-purpose tool for carrying out diverse bio-analysis ranging from
gene-analysis to comparative genomics launched both in US and
India
• Consists of 170 algorithms, 700,000 lines of C++ code, written for
maintainablity and upgradability as hardware and software platforms
change.
• Covers all the major functional areas like sequence and genome
analysis, comparative genomics, 3D structure modeling and analysis
of proteins, biological macro-molecular simulations and drug design
modules
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The CAR initiative and
pre-competitive R&D consortia
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CAR: Core Advisory Group on Automotive R&D, forum for academia/R&D and
industry interaction
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Forum for interaction
Technology road-map
Development of pre-competitive, collaborative R&D consortia
Where might they work
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Capability acquisition in areas of general interest to the industry (catch-up)
Areas that are not in the immediate product development pathway for industry
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Approaches
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Generations ahead (long-term)
Not in core automotive disciplines but in complementary fields or industries with unanticipated
crossover possibilities
Industry-led and academia supported (Japanese)
Academia-led with industry involvement (US)
Regardless…
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Companies collaborate with each other and with academia, and contribute
IPR and know-how created by the consortia is available to all members
Consortia formation process is open
We expect consortia to have upwards of 6-8 members
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Towards a knowledge-based economy
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Spreading the base
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From services to manufacturing and new ventures in high-tech areas
Establishing competitiveness
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In several sectors have gone through one cycle of industrial reform and
restructuring
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Measures of competitiveness
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Automotive & auto components
Pharma
Between 2000-04, 9 Indian companies have bagged the Deming award
In 2004, Indo-Gulf Fertilisers, Lucas-TVS and SRF received the award
Innovation is now the challenge
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Patenting activity
New product launches
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Key issues for policy
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The government as a customer
How do we make public-private partnership work?
How do we leverage and use the publicly funded
R&D institutions?
Ultimately a national system of innovation will be
effective only when there is coherent synergy
amongst different elements
Focus on interface structures, mechanisms and
organizations
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Closing quotes…
‘India-The next knowledge power’:
“The impact of the IT industry on the economy has been enormous….India has
a thriving pharmaceutical industry. And biotech is taking off. The hope among
some senior scientists and officials is that India can short-cut the established
path of industrial development and move straight to a knowledge economy.”
New Scientist, 19 March 2005
‘India-Future Factories’:
“Lately India’s manufactured exports have risen…as multinationals invest
more heavily in India as a manufacturing base. In India, the early players are
interested in the talent pool of chemists, designers and engineers, not lowskilled labour”
- Newsweek, 7 March 2005
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