Friday, July 29, 2011

Learning - The downfall of Emerging Economy

In an emerging economy, transfer of knowledge and technology from the developed economy  has been given a simple name - Learning
India due to a better political setup (Democracy) as compared to China has had more of knowledge transfer. This has resulted in lower amounts of innovation. Problems are no longer challenging. For growth and development Indian firms with deeper pockets simply buy know-how, get rights for patents, and borrow processes and systems. In the bid to grow quickly and reduce uncertainty (characteristic of the average mind), innovation has not happened. Emerging economies to match their developed counterparts have spent little on research. The result is lack of innovation. Growth in these economies has been a more a contribution of learning rather than innovation. Learning although necessary results in herd mentality. Innovation in emerging economies thus has come from the less resourceful firm. Its been a consequence of challenge. Indian defense expenditure is a perfect example. Failure to build advanced defense systems and over-reliance on western powers has resulted in practically a no-innovation decadence of institutions here. The important point is that the failure to innovate has been due to over-reliance and learning.