MNC Trickle-Down Vs the Indian Torrent

Late last year when I was reporting for this special report for Forbes India on science-led innovation, I spoke to Nirmalya Kumar, professor of marketing at London Business School. His book, India Inside, which talks about the invisible innovation in India, was just been published. I wanted to know how serious and deep were the R&D commitments of Indian companies and why do Indian companies spend such a low percentage of their revenue on research. Research here is in the purist sense: the systematic, creative process that increases the existing body of knowledge, establishes facts, and offers new conclusions.

Prof Kumar’s answer mildly surprised me. In nutshell, he said R&D is a very high risk and high reward game so you don’t have the kind of steady rewards and profitability that the Indian companies are used to already. “So financially there’s no reason to invest in R&D right now because the market is growing very fast, their business model works, why should they get into high risk and high reward game?”

I agree and disagree with him. I believe that research (and development where applicable) is important not only for creating new products and technologies but even for smart  adoption of technologies when they are bought or acquired. Integration of acquired knowledge is better and faster if you have a strong in-house team. (A case in point is the Tata Group, where Tata Motors, Tata Steel and Tata Chemicals have all realized the value of local research after global acquisitions.)

Prof Kumar’s argument was that the Indian ecosystem is being built very well by the MNCs and the trickle-down effect will eventually benefit Indian companies. The industry-academic cooperation in India has gone up in recent past, thanks to  MNCs which have adopted many campuses but he believes Indian companies don’t need to do that. He said his advice to Indian companies would be: “Do not invest your money when someone else is there to take the cost and there will be some spill over effect.”

Why I am recounting this now?

Because in the last few weeks I received several news releases about educational and innovation promotion programs that tech MNCs are known to run. Let’s first sample a few: Last week Analog Devices announced its student design project fellowship Anveshan 2012, a system level design contest for final year electrical and electronics engineering students across the country.

A few weeks earlier Qualcomm and Microsoft said they were collaborating on the third edition of the former’s QPrize competition that was recently announced, to identify the most promising early-stage technology companies in India. Prior to that Lenovo announced that its ‘Do Network’ campaign generated more than 1100 innovative projects from the country that aim to make a difference to society and six out of top 10 were focused on education, and second most popular subject was easing traffic congestion on Indian roads.

In May, Intel said 12 students represented India at its famous International Science and Engineering Fair in the US, the longest running and world’s largest high school level research innovation contest. As much as $3 million award money was up for grabs.

I could cite many more examples but the point I want to make is that the MNCs really know how to prime the pump. By encouraging students, giving awards and fellowships, they not only are contributing to the innovation ecosystem, but also building their brand among the youth, their potential hires, something many Indian companies have much to learn about. The knowledge deficit here is already hurting them.

My colleague, NS Ramnath who tracks IT (and writes a newsy Today-in-Tech blog for this site) says last year one of the top five Indian IT services companies gave 700 job offers in  campus interviews but less than five students accepted it. In a meeting last year, Tata Chemicals MD R Mukundan told me that one of the issues that preoccupies him is how to improve the image of the company so that his company gets good talent.

Appearing cool in the eyes of the young and ambitious is a non-trivial issue, especially for companies that aspire to be global. I often get requests from students seeking help in  internship positions in the MNCs even when, in many cases, they already have offer letters from top Indian companies.

 In that case, I wonder why Indian companies don’t think long term and build their constituency in STEM (science, technology, engineering, and math) community?

In the 10 years that the Indian Institute of Science set up its Society for Innovation and Development, more than 200 companies have come to work with the institute but its administrators are waiting for meaningful engagements with Indian  companies, including the Bangalore behemoths Infosys and Wipro. And why not, it’d be a win-win association. Even if these companies are in the business of providing solutions, systematic research provides great  insight for developing novel solutions.

A company everyone envies is IBM. Manish Gupta, director, IBM Research – India & Chief Technologist, IBM India/South Asia, has numerous examples of how IBM research is able to extract information from their services (which are solutions) to build brand new software products/tools. (More on that in another post.)

Why should India wait for the MNC-trickle down? Why can’t Indian companies engage with STEM community the way MNCs do to create a combined Indian torrent?

In a world obsessed with instant results, maybe some should think long-term, like this Rene Magritte painting – A man looks at the egg, and paints a bird!




11 comments to “MNC Trickle-Down Vs the Indian Torrent”

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  1. Seema — That is a lovely visual you’ve picked to go along with this article.

  2. Without considering the necessary data, the article seems to have been reduced to just one opinion Vs. another. The facts if considered, India including many Asian countries has outrun EU-27, US and Japan in Average Annual R&D Growth from 1996 to 2007 (Ref.

    • Seema Singh says: -#2

      Jaydev: You are right but at the beginning I gave reference to an extensive article that I wrote in March 2 issue. That also includes latest (Dec 2011) data from RDmag and quotes its India head who says he finds it hard to convince Indian companies to invest in R&D. A lot of increased investment in R&D in India is due to MNCs which run some 750 labs in India. The point I am making is not whether R&D is not increasing or not, but how seriously Indian companies take it. If they are serious, they’d make systematic efforts to engage with the pool that fuels this engine. It’s there that I find most Indian companies lacking.

  3. surya kumar says: -#1

    It is quite true that youngsters aspire to work for MNCs rather than the indian counterparts for the very reason that Indian companies are yet to start respecting their hires as the drivers of the company rather than Bonded labourers. One Indian company which I can state out of experience is Mahindra who are genuinely making an effort to change this culture within by encouraging more R&D from their people.

  4. Akshat Rathi says: -#1

    You’ve raised an important point. From my experience as an undergraduate in India (2004-2008), we had a harder time to get MNC sponsorship for our ‘innovation’ competitions than getting Indian companies. But I came from an institute which was built by the Indian chemical industry and thus it was no surprise that those companies still wanted to invest in us.

    You mention programs started by MNCs, but almost all of the good engineering colleges in the country have their own techfest (in one form or the other), Indian companies already have a place to start investing. If they want to, that is.

  5. Achala Pardhy says: -#1

    It is reflected in the society around us when all that most engineering students wishe for is an MBA to his/her resume and finally a job in Finance or Marketing!!!

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