WP – Learning from Emerging Markets and Small Developed Nations

(Updated 8.3.11)

Working Abstract.

Cases of modern industry policy in successful emerging markets and small, developed nations have varying governance structures that extract and enforce performance and avoid capture …

Placeholder for an abstract to be completed soon.

SYNTHESiST posits that many indigenous innovations do happen in emerging markets today though they are not counted in international community surveys of innovation or are merely labeled as ‘disruptive’ by scholars who have a developed-country or a science bias. Note we use ‘bias’ here not in a malicious sense but in the sense of perspective.

More importantly (this paragraph update on May 8, 2010), countries that successfully developed from emerging markets created indigenous models of social innovation that organized work better and that resulted into huge total factor productivity benefits for the country.

Today, February 8, 2011, I have added Finland (for niche innovation and transition), Norway (for management of oil resources and returns that avided the ‘Dutch disease), and Mauritius (for emerging markets development strategy) as future case studies to be written up in posts.

Developed Nations as past emerging markets

• Denmark, Israel, New Zealand
• Finland
• Norway
• South Korea
• Taiwan
• Emerging Japan (Post-war industry)
• Emerging Germany (Post-war)

Emerging Markets

• China
• India
• Brazil
• Malaysia
• Thailand
• Indonesia
• Vietnam
• Maritius

When Japan was emerging from the ashes of World War II, her rapid progress was attributed by many orthodox economists as merely due to labor price advantage.

Later on, it was established that, in fact, Japan had innovated in new ways of production like the Toyota Production System (that morphed in the West as Just-in-Time manufacturing and in Total Quality Control) that was a major source of her progress.

Likewise from the 1980s, product development using Taguchi loss function, concurrent engineering, Quality Function Deployment and process and control improvement via Kaizen, Pokayoke, SMED and Quality Circles became the foundation of later mainstream trends like lean manufacturing, time-based competition, business process re-engineering, 6-sigma, empowerment and the GE Workout.

As we wrote in a post, Professor Alice Amsden of Massachusetts Institute of Technology in her book on South Korea and its late industrialization categorized this innovation stage as learning-based to differentiate from earlier invention phase in England and the later innovation stage of continental Europe and America.

Being learning-based, innovation in emerging markets have a large social component being focused on the diffusion end of the technology S-curve. Very often they involved new methods of design or of organizing work that result into more competitive or timely products. Quite often, emerging markets achieved this because they start from a zero-base of industry and, thus, avoid legacy systems in the development of this innovative work combinations. As combinations, they are innovative in the original Schumpeterian sense.

In other posts, Professor Bengt Ake Lundvall independently described the low technology, social innovation approach (cultural homogeneity, high trust, sharing of global, ‘explicit’ knowledge) case of Denmark as also learning-based; the culmination of a process of learning by doing, using and interacting (DUI).

Among the current batch of emerging markets, Taiwan and India have emerged to have developed their own innovation formulas.

Again according to Professor Amsden, with Professor Chu Wan-Wen, Taiwan targeted industries organized in networks of firms and supported the networks with research laboratories and purchases of turnkey equipment to jumpstart development around the leadership of technologist-entrepreneurs.

Korean Professor Chaisung Lim, writing about India Tata’s Nano, identified frugal product development – built around technology-enabled rapid prototyping – as India’s contribution to emerging markets innovation. Professor Lim, using Christian Christensen’s model, called the India Tata Nano’s innovation as disruptive.

From what SYNTHESiST posits, given that the Nano sprang from the identified and specific needs of the targeted bottom-of-the-pyramid market and the indigenous innovation of frugal engineering, that the Nano is a true emerging markets innovation.

This Page seeks to develop – using a methodology akin to Kathleen Eisenhardt’s grounded theory from case studies – from the individual studies of diffusion-based, emerging markets-oriented cases that uncounted and/or ‘disruptive’ innovations from OECD literature are true innovations in their own right.

At the moment, I have just linked the individual posts to the summary below. I hope to be able to flesh them out with the community’s help in the future.

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