Strategic Research Partnerships in the Indian context: An immediate and compelling need for awareness, data and policy

initiatives

Sreekanth Raghunath Zeus Numerix Pvt. Ltd.,

11, Brindavan Layout, Subramanyapura P.O., Bangalore – 560061

Email: sreekanth.raghunath@gmail.com Ph: +91 9739142852

Declaration: The author hereby declares that the work presented in this paper is his own, and it has neither been published nor submitted for publication elsewhere. Disclaimer: Kindly note that the views presented in the paper are that of the author alone, unless otherwise mentioned, and do not necessarily reflect the views of the author’s current or past employers.

Strategic Research Partnerships in the Indian context: An immediate and compelling need for awareness, data and policy

initiatives. Abstract: With an ever increasing number of new technology innovation ventures coming up in India, it

becomes excessively important to study and implement the means for their survival and

growth. In developed economies, small and medium enterprises having few resources to

invest in research and development tend to pursue Strategic Research Partnerships (SRPs) to

overcome the barriers posed by the resource crunch. Even though this might be true to a

certain extent in the Indian context, there is very little literature available reporting systematic

studies of such activity. This paper aims to highlight the necessity and advantages of

formation of SRPs, the data initiatives needed to establish an accessible knowledge bank

about the performance of SRPs and policy initiatives that could drive such partnerships,

specifically in the context of the burgeoning technology innovation market in India. A brief

review of SRP-related literature based on studies carried out in Japan, EU, USA, and a few

Asian countries is presented, to introduce the uninitiated reader to the concept of SRPs.

1. Introduction The Indian technology innovation marketplace is set to scale new heights, with professional

support system being made available along with venture capital support to deserving

technopreneurs. For example, National Entrepreneurship Network (NEN) proposes to launch

twenty-five hundred entrepreneurs who will potentially create about five hundred thousand

jobs in India by 2014 [TM Eye, 2007]. Availability of venture capital (VC) funding for the

right technology innovations has been on the rise, which recently received a boost due to Dr.

Narayana Murthy’s Catamaran Venture Fund joining the bandwagon of VCs.

However, even in the global context, it has been observed that a high percentage of start-ups

find it difficult to survive the initial formative stages and hence, perish. Across various

industry sectors, the failure rates of start-ups can be as high as 60 % within four years of

starting the enterprise, as shown in Figure 1 [Knaup, 2005]. One of the strong reasons for this

is the lack of an organized innovation ecosystem [Fidelman, 2008]. A few major components

that make up the ecosystem include resources in terms of accessible financial resources,

talented human resources and well-developed infrastructural resources and of course, an

active market where the products/services could be sold.

Figure 1: Failure rates of start-ups in various industry sectors, within four years of starting up.

[Knaup, 2005]

Small and medium enterprises (SMEs) quite often face problems in setting up such an

ecosystem for themselves. One of the means for overcoming the barriers posed by such a

resource crunch is the formation of Strategic Research Partnerships (SRPs), which are

broadly defined as “innovation-based relationships that involve, at least partly, a significant

effort in research and development (R&D)…” [Hagedoorn et. al, 2000].

Most studies conducted, until the early 1990s, to understand the advantages of SRPs and the

indicators of their effectiveness were empirical in nature. Section 2 of this paper reviews

collected data and analysis reported in the last two decades, pertinent to SRPs in various

industry sectors from across the globe. The review also includes researchers’

recommendations on proposed changes to certain government policies that could enhance the

appearance and performance of SRPs. The author strongly believes that this exercise would

set the foundation for further developing a good understanding of the concept of SRPs, before

applying it in the Indian context.

Section 3 discusses the recent developments in the Indian innovation arena and the immediate

need for an understanding of SRPs among the members of entrepreneurial fraternity to boost

the survival rates of the Indian technology innovation ventures. Section 4 discusses the

possible data and policy initiatives that could serve as a catalyst to the growth of a healthy

innovation ecosystem in India, followed by conclusions.

2. Literature Review:

2.1 Categorization of SRPs and their benefits:

Formation of Strategic Research Partnerships (SRPs) is a concept pioneered by the Japanese

commercial research community, which was followed by firms in the USA, several countries

from the EU and a few Asian countries including South Korea and Taiwan [Sakakibara and

Dodgson, 2003]. SRPs essentially involve a shared commitment of resources and risk by a

number of partners, either entirely private or involving public and private players, to agreed

complementary research aims [Siegel, 2000; Sakakibara and Dodgson, 2003].

Public–private partnerships receive some level of support from a public institution and can

take various forms, such as, government subsidies for projects funded by private firms,

shared use of expertise and laboratory facilities, university technology incubators, science

parks, licensing agreements between universities and government laboratories and private

firms and university based start-ups etc. Public-private partnerships are more prevalent and

hence studied more extensively. Private–private partnerships generally take the form of joint

ventures, strategic alliances and networks involving two or more private companies [Siegel,

2000].

Whereas in a private–private partnership, the term strategic could be applied to indicate profit

maximization as the objective, a public–private partnership’s strategic objective would be to

address an innovation market failure and ultimately, enhance economic growth [Siegel,

2000].

Most of the measurement and empirical analysis of innovation until the early late 1980s was

focused on large corporations. However, over the last two decades, compelling evidence has

been provided indicating that smaller firms generate a significant amount of innovation

activity, especially in new and emerging industries [Audretsch, 2000]. Measurement of

research partnerships involving small high-technology firms can be very difficult owing to

the fact that their survival rates are very low, which makes it difficult to identify and track

them over time. Small firms are also notorious for forsaking formal R&D for informal

research, which typically defies measurement. Some firms do not report research and

measuring research partnerships involving such firms becomes even more challenging

[Audretsch, 2000]. Size-inherent competitive disadvantages are the most compelling reasons

that drive smaller firms to develop a strategic partnership, to be able to effectively increase

their scale and scope [Gomes-Casseres, 1996].

Strategic research partnerships have been associated with high–technology R&D intensive

sectors and other sectors where learning and flexibility are important features to remain

competitive [Gomes-Casseres, 1996]. This dominance has been observed over the last four

decades in sectors like pharmaceuticals, information technology, aerospace and defense etc,

as shown in Figure 2. Earlier, such partnerships were dominant in medium–technology

sectors like automotive, consumer electronics, medical equipment and chemicals. SRPs

enable companies to learn from a variety of sources (partners) in a flexible setting

(temporary) of alliances [Hagedoorn, 2000].

Figure 2: The dominance of high-technology companies forming research partnerships

[Hagedoorn, 2000].

SRPs are considered socially useful as they expand the effective R&D resources applied in

innovative investment [Scott, 2000]. Some of the benefits of SRPs reported in literature

include [Mowery, 1998]:

• To enable member firms to appropriate knowledge spillovers, which would otherwise

be lost,

• To enjoy benefits of economies of scale and scope in research,

• To minimize duplicative R&D performed by the members,

• To speed-up the commercialization of technologies,

• To facilitate transfer of knowledge from universities to industry

• To provide access to unique capabilities of government labs.

Some of the other motives behind formation of SRPs reported in literature include

[Hagedoorn, 2000]:

• Sharing of research costs and uncertainty,

• Access to complementary technologies,

• Capture a partner’s tacit knowledge,

• Entering foreign markets, and

• Expand the product range.

2.2 Data initiatives and indicators:

Technology innovation is a sufficiently complex concept, which is impossible to measure

directly, because of interaction of many different resources within and among firms. It is

comparable to measuring the health of a human being, which has no single measure, but

relies upon a range of indicators such as body temperature, skin color, levels of various

components in the blood etc. Similarly, indicators of innovation provide information on

various facets of the innovation process, helping understand the phenomenon better and

assisting formulating the innovation policies [Hansen, 2000].

Organization for Economic Cooperation and Development (OECD) held a series of

workshops from late 1970s to mid 1980s, to bring together individuals working on

developing indicators of technological innovation. The deliberations at those workshops and

further activity in the Scandinavian region, led to the development of a framework for a guide

to collecting innovation indicator data, called “The Oslo Manuals”. Two of them were

prepared within a span of 5 years. The first manual was followed up with a Community

Innovation Survey (CIS), which collected indicator data from over 40000 firms spread across

the EU, based on which a second manual was brought out. This was again followed by

another CIS, probing into aspects such as R&D expenditure and R&D employment statistics,

among other queries [Hansen, 2000]. Readers interested to know more about development of

indicators of innovation are encouraged to refer to this paper by Hansen.

Coming back to the point in focus, research partnership was one of the indicators prescribed

in the manual and the surveys, asking the respondents for a categorical (yes/no) response as

to whether they received government financial support for innovation activities. Although the

term SRP was not used in those documents (manuals or surveys), almost all forms of inter-

firm relationships were included and a question was asked as to whether the firms were

involved in any joint R&D or other innovation projects as well as whether the partnering

firms were from within EU or from US or Japan or elsewhere [Hansen, 2000]. This paper by

Hansen also discusses other innovation indicator surveys conducted in US, Canada etc and

provides tips for response rate maximization.

The US National Science Foundation (NSF) conducted a workshop on Strategic Research

Partnerships in October 2000, where researchers from across the world discussed the various

aspects relating to SRPs. Discussion during the workshop ranged from the need for formation

of SRPs, their economic impact, SRP-related data indicators and recommendations for policy

makers. Several articles cited in the present paper were those presented at the NSF workshop

on SRP.

In order to determine whether the government should promote SRPs, empirical examination

of existing SRPs can be informative. Supporting SRPs is one of the many tools that the

government can use to stimulate innovative efforts. Issues regarding their formation, their

effect on R&D spending of participating firms and their productivity have discussed in

sufficient detail elsewhere [Sakakibara and Dodgson, 2003]. Mapping techniques based on

patent and bibliometric data, international and national surveys, specific databases on

alliances, network analysis and case studies are discussed as some of the effective means of

measurement of performance of SRPs. Emphasis is laid on collection of a lot more amount of

reliable data from within Asia, which could help both policy makers and managers

considering participation in SRPs [Sakakibara and Dodgson, 2003].

Some of the questions that can arise while developing data indicators on SRPs are listed

below and discussed in detail elsewhere [Bozeman and Dietz, 2000]:

• Are SRPs entirely formal research vehicles or do they also include informal

collaborative research?

• When do SRPs begin and end?

• What is the impact of SRPs on aggregate economic growth?

• To what extent does the construct of SRPs conform to various measures and methods

for assessing them?

• How does the international and global nature of SRPs affect their appropriate

conceptualization?

Some questions as part of the data indicator evaluation, which help categorize SRPs are also

briefly discussed [Bozeman and Dietz, 2000]:

• To what degree does the research conducted under an SRP substitute or complement

existing research internal to the member organizations?

• What kind of research is performed as part of the SRP? Is it more or less fundamental,

applied or strategic compared to other research of the member organizations?

• What would constitute indicators of success to the organizations who are part of an

SRP?

• How do or should indicators of SRPs relate to international partnerships and research

arrangements of multinational enterprises?

The above questions and some others that haven’t been mentioned here, have answers that

are very relative in nature, related closely to the innovation ecosystem in which the questions

are posed. Nevertheless, answers to the above questions are expected to provide a clear

perspective while developing indicators about formation and performance of SRPs.

2.3 Policy initiatives:

Public policy has been found to play a major role with regard to innovation in general, and

SRPs in particular. In Japan, Technological Research Associations (TRAs) were formed to

promote R&D consortia and enhance the productivity of Japanese industries. Under this

scheme, participating companies enjoyed several tax benefits, including accelerated

depreciation for expenses on machinery and equipment, instant depreciation and discounts of

property taxes on fixed assets used for R&D activities. TRAs were used as substitutes to

protective policies adopted earlier towards domestic industry in terms of direct R&D

subsidies to individual companies etc. Similar policies were adopted in Korea as well, and

have met success. In Taiwan, due to predominance of smaller firms, Industrial Technology

Research Institutes (ITRIs) have been instituted, which aim at diffusion and application of

research findings [Sakakibara and Dodgson, 2003].

The Bayh-Dole Act passed in the US in 1980, which gives universities the right to patent

inventions generated under federally sponsored research, is not per se a partnership program,

but clearly has had a significant impact upon the magnitude and content of university–

industry relationships [Feller, 2005]. This and many other such key policy initiatives were

discussed at a workshop organised by Case Western Reserve University, reported in detail in

the document titled “Economic Development Through Entrepreneurship – Government,

University and Business Linkages”. However, there are opinions expressed by researchers

that a Bayh-Dole type of an Act might not have a similar positive effect if implemented in

some of the developing countries, for various reasons that have been discussed elsewhere [So

et. al., 2008].

A recent US Office of Science and Technology Policy (OSTP) report titled, “University-

private sector research partnerships in the innovative ecosystem”, presented in November

2008 by the Presidential Council of Advisors on Science and Technology (PCAST) details

many of the policy initiatives adopted by the US government to support university-private

sector research partnerships. The recommendations made in the report laid significant

emphasis on changing policies in relation to R&D tax credit and other tax policies impacting

innovation-related partnerships, developing educational tools about intellectual property and

technology transfer practices and such other aspects.

The Framework Programme (FP) in the EU, into its 7th Edition from 2007 till 2013, is

responsible for framing the policy and providing financial support to research related

activities across the EU. The Cooperation component of FP supports all forms of research

cooperation, including joint research initiatives and international cooperation. A whole host

of policy initiatives and a budget of ~ € 500 billion have been earmarked over the 6 year

period to strengthen research capabilities across the EU.

3. The Indian Context:

Innovation in India is still in nascent stages, if the number of patent applications filed in 2005

by resident Indians, as shown in Figure 3, is to be taken as an indicator of innovation. The

figure depicts the numbers of resident and non-resident patent applications filed, separately,

and the % change in the number of patents filed compared to the previous year. The resident

and non-resident numbers indicate that the Indian resident applications filed are just over 18

% of all the patent applications filed at the Indian Patent Office, numbering 4521 patents

[Courtesy - WIPO Statistics]. This is a significantly small number, compared to the number

of resident patent applications filed by most of the developed economies.

According to studies, companies from developed economies participate in 99 % of R&D

partnerships, with 93 % of them being amongst the US, EU, Japan and South Korea

[Hagedoorn, 2000]. This indicates the tremendous scope for innovation as well as formation

of SRPs in India.

Figure 3: Number of patents filed in various countries including India, in 2005.

During the last couple of decades, the Indian government has attempted to encourage

technology innovation in the country, by means of developing a variety of initiatives, under

the aegis of the Department of Science and Technology (DST), the Department of Scientific

and Industrial Research (DSIR) and the Federation of Indian Chambers of Commerce and

Industry (FICCI). These initiatives include formation of the National Science and Technology

Entrepreneurship Development Board (NSTEDB), Technology Innovation Management and

Entrepreneurship Information Service (TIME IS), with the objective of promoting

entrepreneurs and technology innovators, by means of creating an innovation ecosystem and

several policies favorable to technology innovation.

Non-profit NGOs such as National Entrepreneurship Network have engaged themselves in

educating students about entrepreneurship and innovation and providing useful resources to

future entrepreneurs.

However, very little has been discussed in open literature about the importance of strategic

research partnerships (SRPs) or about policy initiatives supporting formation of SRPs. The

following few paragraphs discuss the Indian data and policy initiatives, as reported in open

literature at global fora, which display slight inclination towards adopting SRPs as a means of

fostering innovation in India.

The Indian presentation at UNESCO South Asian Regional Workshop on Science and

Technology, held in November 2005, included details about findings based on S&T indicator

data collected by Indian DST’s National Science and Technology Management Information

Systems (NSTMIS). The methodology of surveys conducted to collect data is explained in

brief detail, and the difficulties in collecting data including slow response times or no

response, incomplete and/or inconsistent responses are reported with possible remedies.

An Indo-US symposium titled “India’s changing innovation system”, conducted by the US

National Academies of Sciences (NAS) in June 2006 highlighted the need for a structured

approach towards strategically positioning India’s R&D and innovation efforts. Top Indian

policy-makers and scientists are reported to have participated in the symposium and

significant bilateral strategic partnership agreements were discussed. Special emphasis was

laid on formation of global partnerships, which could speed the transformation of new

knowledge into products or processes or services, rather than restricting to partnerships

within their respective nations.

In a 2007 World Bank report titled “Unleashing India’s innovation”, stresses the need for

promoting more collaboration between small and medium industries, and also promote

commercialization and strengthen links between industry, universities and public

laboratories. The activities for such promotion include providing support to technology

transfer offices, creating a patent management corporation, developing technology parks and

incubators, and improving India’s regime for intellectual property rights. The report also

suggests that India should consider creating a Global Research and Industrial Partnership

program to promote advanced R&D and commercialization efforts conducted jointly by

domestic and foreign enterprises.

The Indian National Knowledge Commission’s (NKC) 2007 survey titled “Innovation in

India”, which NKC claims could perhaps be the first in-depth quantitative and qualitative

survey of innovation in India, which includes data collected from a whole range of large,

medium and small enterprises in India. It is reported that SMEs have greater innovation

intensity and firms partnering with government agencies, collaborating with universities and

research laboratories tend to be more innovative.

According to the report, two of the most important external barriers to innovation, as

perceived by both large firms and SMEs are:

• skill shortage due to the lack of emphasis on industrial Innovation, problem-solving,

design, experimentation, etc. in the education curricula

• lack of effective collaboration with research in universities and R&D institutions,

excessive government regulation as well as insufficient pricing power to derive value

from innovations.

It is recommended in the report that there needs to be a synergistic use of cumulative energies

of the industry, the government, the educational system, the R&D environment and the

consumer and that the innovation ecosystem is a complex environment that requires the

coordinated functioning of a number of diverse factors in order to function effectively.

In a draft of the National Innovation Act (NIA) passed in 2008, a chapter on Public-Private

partnerships explains, though in very brief detail, the policy initiatives to be adopted to

promote partnerships for innovation in India. They are as given below (verbatim):

1. The Central Government shall facilitate the establishment of an electronic exchange

or a physical market place for commercialization of information on or the results of

Innovation, including any statutory or non-statutory rights in intellectual property

arising in connection with or as a consequence of Innovation.

2. The Central Government shall facilitate small and medium scale enterprises by fiscal

policy changes or government directions for financial institutions regulated by the

institutions regulated under the Reserve Bank of India Act or as Non Banking

Financial Corporations for developmental finance for facilitating Innovation which

inter alia could provide for concessional rates of interest.

3. Special rules and procedures shall be made for facilitating maintenance of

confidentiality and secrecy whilst promoting transfer or licensing of Innovation for its

commercialization.

The draft of NIA also mentions some of the facilitating measures to be adopted to foster

innovation, including tax exemptions to SMEs for commencing R&D and commercialization,

formation of Special Innovation Zones, and providing other fiscal incentives to promote

fruitful research partnerships and commercialization leading to innovation.

Interested readers are strongly encouraged to refer to the above reports to get more details on

the brief explanations given above.

4. Recommendations and Conclusions:

Going by details available in open literature about global and local trends in technology

innovation and role that SRPs play in improving the performance of the innovation

ecosystem, the author strongly feels an immediate need to spread awareness about the

advantages of SRPs among entrepreneurs and create a national knowledge bank that assists

entrepreneurs in gaining access to necessary resources in this regard. Following are some of

the recommendations based on the author’s understanding of the situation at hand:

• Educating and effectively engaging the entrepreneurs in the activity of data gathering

and dissemination, to achieve response rate maximization and response time

minimization.

• Organize national and international-level workshops to bring together university-

based researchers, industry leaders and public policy-makers, for them share the

knowledge on innovation and the importance of its indicators, and effectiveness of

national and global research partnerships.

• Implement the policy changes and planned facilitations as proposed in the National

Innovation Act 2008, on a priority basis.

• Constantly upgrade the innovation ecosystem, based on feedback received from all

concerned parties.

In conclusion, the author feels that there is tremendous scope for improving the innovation

ecosystem in India and SRPs play a key role in this regard. Data indicators assist

entrepreneurs in making better informed decisions on suitable partnerships, rather than

forming partnerships on an ad-hoc basis and hence the data gathering needs to be more

systematically approached. Policy initiatives need to be reviewed on a regular basis, and any

necessary changes need to put in place as and when necessary.

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