The innovation challenge in India

Cultural Insights — By on December 16, 2009 at 7:30 am

India has made tremendous economic strides in recent years on the strength of its outsourcing businesses, but many Indians fret that the nation will not be able to take the next step forward until the culture develops a more innovative nature. The NY Times just ran an interesting business feature on this topic.

Even as the rest of the world has come to admire, envy and fear India’s outsourcing business and its technological prowess, many Indians are disappointed that the country has not quickly moved up to more ambitious and lucrative work from answering phones or writing software. Why, they worry, hasn’t India produced a Google or an Apple?

Innovation is hard to measure, but academics who study it say India has the potential to create trend-setting products but is not yet doing so. Indians are granted about half as many American patents for inventions as people and firms in Israel and China. The country’s corporate and government spending on research and development significantly lags behind that of other nations. And venture capitalists finance far fewer companies here than they do elsewhere.

Why the disconnect between a culture that can be business oriented, but perhaps not very innovation oriented? Many observers, including Indians themselves, believe it is a matter of culture.

“The same idea, if it’s born in Silicon Valley it goes the distance,” said Nadathur S. Raghavan, a investor in start-ups and a founder of Infosys, one of India’s most successful technology companies. “If it’s born in India it does not go the distance.”

Mr. Raghavan and others say India is held back by a financial system that is reluctant to invest in unproven ideas, an education system that emphasizes rote learning over problem solving, and a culture that looks down on failure and unconventional career choices.

And the challenges come not only from a culture that is not accustomed to risk-taking, but also from a culture that is traditionally and heavily based on relationships.

In the United States, Israel and elsewhere, the initial, or seed, capital for many start-ups comes from rich individuals known as angel investors. But most rich Indians prefer to invest with family members or close friends because its considered safer and provides assurance that the lender will be able to borrow from relatives in the future.

If you’re interested in understanding more about these cultural differences there are a few good books out there, including Speaking of India by Craig Storti.

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