Business Perspectives and Research
Reverse Innovation: A Gift from Developing Economy to Developed Economy
Ritu Sinha 1
Abstract In the era of globalization, emerging market economies are surfacing into centers of innovation. These innovations associate with low-cost products like healthcare devices, wind power, micro finance, electric cars and many more. The success of these frugal innovated products enable developed countries to adopt well. Hence, reverse innovation refers to those innovations which are adopted by developing countries first and then by developed countries. These innovative products are a result of cutting edge technology, common sense and ...view middle of the document...
These economies are utilizing their potential by assessing their capacity in terms of research and development and innovative activity. They are showcasing themselves as fast-growing with sophisticated users and making inroads into global markets through a number of distinctive features of competitive advantages. Also, they possess the potential of shaping future global markets as a result of their own prowess in innovation and the complementary resources they have to offer. Globalization has brought both opportunities and challenges for firms in emerging market economies. The intense competitive environment is compelling these firms to innovate, so as to sustain their survival. In other words, under the era of globalization, these emerging markets are surfacing into centers of innovation. These innovations relate to low-cost healthcare devices, wind power, micro finance, electric cars and many more. The role of emerging markets is transforming from being low-end consumer markets to innovation centers. Multinational companies used to launch new products in the developed world and later on sell the stripped-down version of products to developing parts of the world. But now this process is changing its direction in an opposite way. The same multinational companies are designing and innovating to cater to the needs of consumers of developing countries and bring those innovations into the developed countries. This phenomenon is known as reverse innovation propounded by Govindarajan and Trimble in their book titled: Reverse Innovation Create Far from Home, Win Everywhere(2012), where
Prof. Ritu Sinha, Faculty, IES Management College & Research Centre, Bandra, Mumbai, firstname.lastname@example.org
Business Perspectives and Research
they offer a compelling argument for companies to shift their approach towards developing markets. This concept can serve as a guide for organizations to look for innovative products that are conceptualized for the markets which are beyond the U.S. and Europe. The changing dynamics of the global economy is making it mandatory to develop an approach of giving importance to the opportunities occurring in emerging economies and locating the relevant materials, resources and to convert them in profitable business ventures. This calls for sharing of power between head-quarters and regional centers in countries like China and India (inside multinationals). Under such context, the emerging economies will be given more importance and weightage for product innovation happening at these places. These countries already enjoy the advantage of cheap labor, economies of scale and availability of natural resources coupled with frugal or trickle-up innovation. 2. Literature Review Innovation is mostly believed to be “a central driver of economic growth” (INSEAD, 2011: xi) and is the key factor for success of Multinational Enterprises (MNEs; Buckley & Casson, 1976). Zahra and Covin (1994, p. 183) suggest...