The growth of entrepreneurship in India has resulted in a plethora of startups and many large companies in recent years. Yet, the country continues to lag other Asian nations in innovation, according to a new research report.
In contrast, the report shows that Asia has driven a boom in recent years in terms of R&D spending, venture capital funding, academic publications, and patents. The report by Lux Research titled: “State of Innovation in Asia: Key Industries and Players Shaping Asia’s Innovative Ecosystem,” showed that in 2018, China, Japan and South Korea spent a combined $613 billion on R&D, bagging three of the top five spots globally.
Asia as the ‘New’ Powerhouse
While India will have to turn a new leaf to nurture an innovation ecosystem, the report predicts China and South Korea will leverage their robust and diverse innovation portfolios in solidifying their innovation positions regionally and globally. It however forecasts Japan’s innovation status will continue to shrink as the country eventually innovates itself into a corner of specialization as its antiquated innovation strategy struggles to keep pace with regional peers.
Meanwhile Singapore solidifies itself as the pinnacle R&D hub of the world, serving as a living laboratory for the development, prototyping, and testing of cutting-edge technologies in real-life scenarios. As Lux Research suggests, Indonesia, Malaysia, and Thailand will continue to lay the necessary groundwork to be the next global innovation hot spot, with clear potential to be the world’s next unicorn haven.
“2018 was an exceptional year for China’s VC scene, with nearly 1,900 deals at an average deal size of $45 million,” the report said. For example, start-ups in Asia raised $107 billion in 2018, the report said, wherein China dwarfed all others with more than $85 billion alone. With those numbers, the country overtook the US for the top spot globally.
India and South Asian countries such as Indonesia and Singapore have also seen massive uptick in terms of VC funding in the last couple of years. Start-ups in these three countries have together raised $28 billion in the past two years. The flow of venture capital has also meant the steady rise of unicorns from these countries. India has had 19, Indonesia four and Singapore three unicorns between 2017 and 2018.
China had 1.6 million patent applications in 2018, representing a staggering 24% annual growth rate since 2008. In the same period, its share in Asia patent applications rose to 87% from 46%. South Korea saw 8% growth while it was 3% for Japan during the same period.
According to the report, despite having seen more than 10% growth rates over the past decade, India sees minimal patent application activity. A majority of the applications continue to come from locally registered foreign corporations, it said.
The report found that manufacturing beat all others when it comes to innovation in China. “Technologies like robotics and 3D printing are key areas of focus for domestic expertise as the country continues to ramp up its manufacturing capabilities and capacity,” it said. Manufacturing was followed by IT and chemicals and materials. In Japan, chemicals and materials led the wave of innovation while IT far surpassed every other sector in Singapore.
The report’s analysis finds that the center of innovation power is undeniably shifting toward the East as the transition toward a new world order is underway. The rise of Asia innovation is a global phenomenon and ripe with opportunities for everyone, not just the regional players.
“In a time where tech innovation is nearly synonymous with global economic status, China and South Korea’s recent innovation boom has propelled both to the top of the global leader boards,” said Yuan-Sheng Yu, Senior Analyst at Lux Research and lead author of the report.
“While the infatuation with Silicon Valley is still prevalent in innovation circles, we are seeing an increasing interest in Asia, and rightfully so. China and South Korea may be the shining stars of Asia today, but we believe Southeast Asia’s innovation landscape will inevitably lead to the next global boom in innovative ideas and unicorns,” the report said.
India’s innovation gap
The report observes India’s unique problem in lagging in terms of innovation. For example, while India’s government plans to create 100 million new factory jobs by 2022 and increase manufacturing’s share in the economy to 25% during the next three years. But, the Make in India program is yet to generate positive results. And Start-up India, amount to not much more than political exercises aimed at creating a short-term trigger.
There has been a dearth of world-class product being produced from the startup ecosystem. This takes us back to what the founder of Infosys and IT scion, Narayana Murthy, said some time back: “There is not a single invention from India in the last 60 years that became a household name globally.”
He added that India had not produced “any idea that led to the earth-shaking invention to delight global citizens.”
A large proportion of Indian companies just don’t have the policy or resource capabilities to invest in innovation, according to a top World Bank official. But President M Venkaiah Naidu recently said in a public meeting that technological innovation is one of the key drivers to boost economy, and stressed the need for investing more on R&D with focus on enhancing the intellectual capital through radically new approaches. He also appealed to Corporate India to develop a symbiotic partnership with universities and other academic institutions and contribute towards promoting research and development.As the report said, India’s domestic innovation ecosystem will depend heavily on universal adoption of the “innovate, patent, produce, and prosper” spirit or else it will remain a tech playground for foreign players.
If the government is serious about boosting innovation, it should invest in higher education and research, believe pundits. However, in a country where there is systematic assault on premier educational institutions, advancing knowledge and technology innovation leaves much to be desired.