«RESEARCH Open Access Research and development from the bottom up - introduction of terminologies for new product development in emerging markets ...»
and international inventors. The means of communication in such networks can range from simple Internet blogs, where guests post their newest inventions, to sophisticated networks, where the creative work of local inventors is presented. Owing to its common appearance as a platform for simple communication, grassroots innovation is assigned to a lower level of sophistication.
Frugal engineering/constraint-based innovation and indigenous innovation focus on processes within product development, including the inherent knowledge transfer from developed to emerging markets (Kumar 2008; Moore 2011; Schwaag Serger and Breidne 2007). Indigenous innovation is centered predominantly on the spillover effects of trade and shared R&D activities (Fu and Gong 2011), whereas frugal engineering focuses on product development in general with an eye for potential savings (operational sight) - external knowledge transfer is only one opportunity (Reddy 2011). In this vein, the complexity of inherent processes and interaction is definitely higher in indigenous innovation than in jugaad or grassroots innovation, and a mid-range level of sophistication is achieved.
Frugal innovation and Gandhian innovation involve more perspectives. Owing to the short history of frugal innovation, it cannot be assigned to any one level of sophistication.
Some authors assign frugal innovation to the product perspective (Gupta 2011; Hartigan 2011; Kingsnorth et al. 2011) and others to the process perspective (Woodward 2011), while still others declare that frugal innovation comprises products, processes, and business models (Moore 2011; Prahalad 2006). Therefore, frugal innovation has low sophistication at the product perspective and is in the mid-range for the process perspective and business models.
Gandhian innovation is also novel at the product perspective (designing new products by using and transforming existing technology) and the process perspective (development by establishing R&D networks) and establishes new business models around existing products (Prahalad and Mashelkar 2010). Hence, Gandhian innovation is assigned to low and mid-range sophistication.
Catalytic innovations exist on the product perspective (low price, lower performance), the process perspective (high scaling and replication), and in business models; involve new concepts using unusual resources; and serve new clients, e.g., as in microfinance.
Therefore, catalytic innovation is predominantly assigned to the mid-range taxonomy.
Finally, reverse innovation focuses on product development (as product and process perspective) in emerging markets and a return of new products to developed markets (business model) (Immelt et al. 2009). Hence, its concept includes other terms like frugal innovation, frugal engineering, and Gandhian innovation, and it additionally turns the geographical value-added process upside down by developing products in emerging Brem and Wolfram Journal of Innovation and Entrepreneurship 2014, 3:9 Page 15 of 22 http://www.innovation-entrepreneurship.com/content/3/1/9 markets and spreading them out to the rest of the world. Because of this combination of several concepts, reverse innovation is assigned to the highest level of sophistication.
Emerging market orientation By looking at the market orientation of the types of innovation, we can infer that only some of them serve emerging markets exclusively. Therefore, a classification is accomplished by setting up three levels (see Figure 5). The first is ‘emerging markets.’ Here, emerging markets are treated as the target market (for NPD and sales) - jugaad, indigenous innovation, catalytic innovation, and Gandhian innovation can be assigned to this level. These terms are predominantly narrowed to emerging markets on behalf of local actors (Christensen et al. 2006; Fu and Gong 2011; Kingsnorth et al. 2011;
Prahalad and Mashelkar 2010; Saraf 2009). The second level is ‘international markets.’ This level includes terms that serve both emerging and developed markets - either the concept originated in emerging markets but is applied in both or the BoP is the general focus without a specific sales market direction. Frugal innovation and frugal engineering are based on concepts focused on emerging markets but are also systemized by companies in developed markets. Therefore, both terms are assigned to international market orientation (Gupta 2011; Kumar 2008; Kumar and Puranam 2012; Reddy 2011; Woodward 2011).
Grassroots innovation includes inventions from individuals or social groups without focusing on emerging or developed markets in particular and is assigned to international market orientation (Seghal et al. 2010).
The last level is ‘developed markets.’ Here, the included terms primarily serve developed markets; even if the product was dedicated to emerging markets in the first place, the current intention is to serve developed markets. Reverse innovation, for example, involves emerging markets or the BoP as sources but actually explores opportunities in Brem and Wolfram Journal of Innovation and Entrepreneurship 2014, 3:9 Page 16 of 22 http://www.innovation-entrepreneurship.com/content/3/1/9
the first successes indicate the potential of successful products out of emerging markets and may spark interest in global companies.
Another important fact is that sustainability is an essential part of R&D. Ecological impacts, social unrest owing to negligent handling of resources, and social exclusion have major effects on markets, particularly in emerging economies. In order to ease such effects, concepts such as grassroots innovation indicate the capability of corporate R&D to put sustainable development into practice, especially for people at the BoP.
Implications for theory and practice As discussed in the literature review and the introduced investigation, the terms contain many similar and divergent attributes. On one hand, all the terms are closely connected because of their focus on the BoP. On the other hand, every term is characterized by its orientation for purpose, application area (product, process, structure, etc.), or approach (focus, taxonomy, etc.), which leads to high complexity. The missing classification of terms in the past accounts for the small amount of research done in recent years and the differentiated perceptions produced.
Now, the presented framework supports further research in new paradigms for corporate R&D, particularly in relation to emerging markets. This framework enables scholars to compare concepts from developed and emerging markets, to address studies specifically by using consistent terms, and to advance research into the concepts according to their characterization. Especially in building theories and hypothesis, further Brem and Wolfram Journal of Innovation and Entrepreneurship 2014, 3:9 Page 18 of 22 http://www.innovation-entrepreneurship.com/content/3/1/9 research, on the basis of the delineation of presented terms, can be conducted to comprehend and discuss this matter further. In order to facilitate the future application of the terms and to build common understanding of the terms, we propose below definitions of presented and delineated terms (see Table 3).
In this vein, the investigation of the new approaches contributes to the RBV. As mentioned in the introduction, the RBV is divided into resources and capabilities where resources are the ‘stock of available factors’ and capabilities are the ‘capacity to deploy resources […] using organizational processes, to effect a desired end’ (p.35). However, three of eight concepts remain low in taxonomy without any organizational process or systematic approach and four of eight are rather in the beginning of becoming systematic.
The complex R&D top-down approach is replaced by a simple bottom-up approach through the combination of earmarked assets. Even though that it sounds trivial, the bottom-up approach creates marketable product solutions at a low cost level that usual market participants, i.e. foreign companies, could not reach. Hence, these concepts complement the RBV by adding ecological aspects as resources, i.e., the reintegration of obsolete resources/former technologies of other companies as replacement of missing (own) resources without additional costs. Another aspect is the setting of the civil society, here people at the BoP, as strategic industry factor. In a nutshell, the new approaches complement the RBV by considering the civil society as strategic industry factor as well as using obsolete resources by dint of the reintegration which is missed in the traditional RBV.
In consideration of economic practice, the concepts behind the terms have not been applied commonly in business. In the present investigation, the terms are classified in a distinct manner, and the underlying concepts can be amplified in terms of specifications, functions, and applications. Hence, companies can more easily evaluate the benefits of the presented concepts and integrate them into their corporate environments by bringing these new concepts into agreement with their R&D and business strategies.
For instance in regard to R&D approaches, companies are asked to reflect more frequently former and obsolete product solutions from their own or other companies to gain cost-effective innovations. The lack of past reflection is already known and accomplished in few methods such as ‘lesson learnt’ or learning from expired patents.
AcknowledgementsWe acknowledge support by Deutsche Forschungsgemeinschaft and Friedrich-Alexander-Universität ErlangenNürnberg (FAU) within the funding program ‘Open Access Publishing’ (http://www.ub.uni-erlangen.de/open-access/).
We would like to thank the two anonymous reviewers for their valuable comments which helped to considerably improve the quality of the manuscript. Moreover, we thank Dirk Holtbrügge for his helpful comments on an earlier version of this paper.
Received: 13 September 2013 Accepted: 31 March 2014 Published: 03 Jul 2014
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