For a country aspiring to global economic leadership, the 2014 Global Innovation Index (GII) brings bad news for India. For the Index saw the country drop 10 places compared to last year. The Index — published by Cornell University, INSEAD, and the World Intellectual Property Organisation (WIPO) — measures innovation. If the measure provided by the Index is anything to go by, then India ought to close its innovation gap. This is crucial if it is to prosper as it can and should. The world’s top economies are driven by innovation, and India is falling behind. An important part of bridging the innovation gap is for India to improve its intellectual property systems.
Importance of innovation The other BRICS countries all gained ground on the GII. For example, while India fell to 76th, Russia jumped further ahead by 13 spots, placing 49th. The World Economic Forum’s Global Competitiveness Index tells much the same story. India’s Research and Development (R&D) spending is five times lower than that of China. It scores poorly on commercialising R&D from its universities compared to China and South Africa. The per capita number of engineers and scientists remains low, as do patents granted per million of population.
Overall, the Global Competitiveness Report rates “India’s capacity for innovation” as “lower than that of BRICS countries (Brazil, Russia, India, China and South Africa) except Russia.” Falling behind in innovation would mean falling behind as a world leader for India.
Economists agree with the importance of innovation to economic growth and productivity. They had long ago identified innovation as the key to economic leadership — even before Silicon Valley, the Internet, and the biotech revolution happened. In 1957, Nobel-Prize winning economist Robert Merton Solow credited innovation with about 90 per cent of productivity growth in the first half of the 20th Century. Similarly, William J. Baumol estimated that “nearly 90 percent” of the U.S.’s then-current “GDP was contributed by innovation carried out since 1870.”
The wealth of nations in the 21st century is intangible, in the form of knowledge assets. This point was illustrated by a 2006 World Bank study, which compared the stock of wealth among nations. The World Bank study showed that the biggest difference between wealthy countries and the BRICS was intangible capital. While the rich nations had somewhat more physical capital, the majority of their wealth was intangible capital – knowledge, goodwill, and intellectual property assets. It greatly exceeded the intangible assets of countries such as India in magnitude.
How then can India build its intangible capital to take its place among the world’s leaders? It must innovate. And it’s not a question of potential. Instead, it must live up to its potential. By some measures, India is ready to become one of the world’s global economic leaders. It has the world’s largest market in terms of population, one of the factors that helped the U.S. to build innovation industries that dominate world markets.
R&D spending; IPR India’s large population also makes India rich in the most important modern resource — the human mind. People everywhere have the capacity to innovate and create. India’s citizens could lead the world, given the right institutional support. The good news is the World Economic Forum’s Global Competitiveness Index notes that India is top tier in terms of availability of engineers and scientists. Its scientific research institutions are top notch in quality, outscoring China, Brazil, Russia, and most other nations. And India’s R&D spending has been rising steadily in recent years. However, these factors, while positive, may not be quite enough to do the job. India’s R&D spending remains low when compared to most other countries that aspire to economic leadership.
India is not fulfilling its potential when it comes to innovation, and there seems to be a gap between its capabilities and results. One of the challenges holding India back likely is the less-than-full development of its intellectual property system. Innovators and creators need to be able to secure their investment in developing their creations — or they often simply won’t create, and they surely won’t invest in commercialising and bringing products to market.
Research shows that stronger intellectual property rights are associated with a large number of outcomes likely to help a nation bridge the innovation gap. Nations that protect intellectual property file more patents, have more researchers, invest more in R&D, and enjoy more Foreign Direct Investment.
Though India has improved its intellectual property system in recent years, much work remains to be done. Some of the resistance likely stems from the fear that intellectual property is a tool for blocking competition and withholding technology from others. These concerns are understandable in that intellectual property protection has become a bargaining chip in trade negotiations — something that the U.S. and EU demand, for India to withhold until something can be received in return.
However, intellectual property’s primary function is not to block others or promote the interests of foreign companies. Rather, it serves as a tool to spur collaboration and internal development.
It’s time that India saw intellectual property as a tool for its own development. The last month saw the launch of the ‘Make in India’ campaign, wooing both domestic and foreign entities to manufacture and create products in India. Unless this goes hand-in-hand with a relook at India’s innovation ecosystem, the gains will be marginal. With improvement in its intellectual property systems, India can bridge the innovation gap and assume its place as one of the world’s leaders.
(Mark F. Schultz is a Senior Scholar at the Center for the Protection of Intellectual Property, George Mason University School of Law.)
